Matthew W. Taylor Discusses Financial Advisor Negligence, Private Investments and Investor Protection on Rational Reminder
Matthew Taylor recently joined Ben Felix and Cameron Passmore on the Rational Reminder podcast for an in-depth discussion about financial advisor negligence, fiduciary duties and emerging risks facing Canadian investors.
The conversation examines what investors should consider both before retaining a financial advisor and after concerns arise about the advice they have received.
Matthew explains that an investment loss alone does not necessarily establish negligence. The strength of a legal claim will often depend on the available evidence, including whether the advisor properly understood the client, investigated the products being recommended and assessed whether those investments were suitable.
“There’s what people know, and there’s what people can prove,” Matthew says in the episode.
He identifies several circumstances that may warrant closer scrutiny, including:
- portfolios that do not reflect an investor’s individual circumstances;
- highly concentrated positions;
- unexplained or unauthorized trades;
- excessive transactions that appear to generate commissions;
- limited communication after an account has been opened;
- recommendations that are not reconsidered when the client’s financial or personal circumstances change; and
- a failure to distinguish between an investor’s willingness to accept risk and their actual financial capacity to withstand it.
Matthew also explains how Canadian courts determine whether an advisor owes fiduciary duties to a client. The analysis may include the client’s vulnerability, the degree of trust and reliance placed on the advisor, the discretion exercised by the advisor and any professional standards or representations that apply to the relationship.
A significant portion of the discussion addresses the growing availability of private investments to retail investors. Matthew examines the risks associated with these products, including complex ownership structures, layered fees, limited financial information, manager-determined valuations and restrictions on redemptions.
As Matthew notes, an investor may believe that money will be available when needed, only to discover that a private fund has suspended or restricted withdrawals. Advisors recommending these products should consider whether clients understand the liquidity risk and whether their financial plans can withstand delayed distributions or an extended lock-up.
Matthew expects the expansion of private assets into the retail market to produce more litigation. Unlike institutional investors, individual investors may not have access to sophisticated due diligence, detailed information or the same ability to absorb an illiquid or unsuccessful investment.
The episode also covers securities class actions, pension-fund oversight and the legal and regulatory challenges created by financial influencers. Matthew explains why investors should consider the source of online financial content, potential financial relationships and whether the content crosses the line from education into promotion or advice.
Listen to the full episode, “What to Know Before (and After) You Hire an Advisor,” on YouTube, Spotify or Apple Podcast.
Matthew W. Taylor co-leads Sotos Investor Protection Group, where he represents investors in disputes involving investment losses, unsuitable advice, professional negligence and financial misconduct.
If you have suffered investment losses and have questions about your legal rights, contact Harold Geller by email at hgeller@sotos.ca or by phone at 416.863.5603, or Matthew W. Taylor by email at mtaylor@sotos.ca or by phone at 416.572.7315.