More investors are looking to invest online through discount brokerages — and, ironically, they may be looking to their financial advisors for advice.

About one-third, 34%, of Canadians are either investing online or thinking about it, according to a new BMO InvestorLine Inc. survey. At the same time, 45% of all survey respondents said they wanted more investment knowledge and 33% were concerned about investing without adequate advice.

The question, of course, is who will investors turn to for this advice? At present, the answer to that question appears to be the media. The InvestorLine survey found that when it comes to seeking investment direction, six out of 10 online inves-tors turned on the TV or opened their morning newspaper.

However, as online investing becomes even more mainstream, more investors may turn to financial advisors. And there are strong business reasons why you should — and should not — help.

On the plus side, there is an opportunity to build a relationship with a new client or to cement an existing relationship. Sharing information is also an opportunity to increase sales.

“By providing information and insight, financial advisors offer value-added service,” says David Thompson, a business consultant with Halifax Global Inc. in Nova Scotia. “Investors may be asking about online investing, but that opens the door to discussing their investment needs in general.”

Mike Himmelman, an investment advisor with Citadel Securities Inc. in Halifax, always answers that knock on his door: “You’re in a very competitive world. I’m not about to turn someone away.

“This is not a threat,” he adds, “It’s complementary.”

And as regulators prohibit online brokers from discussing suitability, “that may be something [investors] want to talk over with their advisors. We do not give advice; we give information,” says Connie Stefankiewicz, president and CEO of BMO Inves-tor-Line

Today’s investors, especially baby boomers, often have complicated portfolios — and equally complicated questions to accompany them, says Tom Hamza, president of the Investor Education Fund in Toronto: “The complexity of the advice [people] will need is substantial. It will involve inheritance and retirement. They’ll look to advisors for an overarching set of skills. These will be the advisors who thrive.”

Caution is required, however. That’s because, depending on the nature of the questions asked — and the advice given — advisors could be at risk.

Says Jane Smith, president and CEO of Beacon Securities Ltd. in Halifax: “There is a question of liability.”

Labelling advice as “unsolicited” is not enough, she stresses: “If it turns south, it could be another family member who questions the investment and the advice.”

Advisors and brokers are also constrained in what they can and can’t say. “I would strongly recommend,” says Stefankiewicz, “[that advisors] be cautious in giving advice to a client who is investing online, given the regulatory requirements.”

Himmelman, a certified financial planner, recommends aiming for high ground and neutral territory: “I would tell them what’s good about [an investment] and what’s bad about it, from my experience.”
@page_break@For advisors, discussing online investing may also raise another question about their own vested interests. “We’ll be perceived as being conflicted,” notes Smith. “I’m flattered when people ask me questions but, theoretically, why wouldn’t I say, ‘Invest with me’?”

Investors who dip their toes into the online market have a range of questions they may want answered. These include account information and market data, mutual fund and stock research, market analysis and educational services, says Caroline Phémius, a media relations advisor with Desjardins Group in Montreal, which has its own online brokerage division, Disnat.

Much of this information is available online, notes Jack Rando, director of capital markets with the Investment Industry Association of Canada in Toronto: “Not only do the [online] brokerages offer speedy execution of transactions, but they also offer several things at the touch of a few buttons, including up-to-date stock research and market commentaries, charting of securities, ‘alerts’ to notify you when one of your securities hits a specified price point [and] asset-allocation tools.”

Discount brokerages are also reaching out to investors and potential investors. Says Phémius: “Disnat presents around 300 investment seminars or webinars every year across the country.”

There are three types of investors who use discount brokerages, says Smith: the person who wants to invest money for the long term; the individual who wants to invest aggressively; and the decidedly active investor who enjoys controlling at least some of their investments.

Some, or all, of these investors will also be clients — or potential clients — of financial advisors. It’s not an either/or situation, says Thompson: “Many investors have both a financial advisor and an online account. There is competition, but there is also room for both.”

The onus is on the financial advisor to provide value, however. In the absence of that value, clients will look elsewhere — especially if “elsewhere” is less expensive and equally comfortable.

“What’s spurring the interest [in online market access] has a lot to do with cost and with the perceived lack of value from their existing advisor,” says Smith. “After the last downturn, people thought, ‘I can lose money on my own, why do I need to pay an advisor to do that for me?’”

That advisor fee is usually higher than what an online brokerage charges — in some cases, considerably. “Commissions have come down steadily in the online brokerage environment,” notes Rando. “Today, executing a stock trade online for $10 or less is common place; whereas, 12 years ago, that would have been almost unthinkable.”

Investors are also at home in the online environment and are becoming even more comfortable, notes Stefankiewicz: “The next generation of investors are online for everything they do. This is how they do business.”

New investment tools are also empowering the online investor, notes Phémius. Disnat GPS, for example, allows subscribers to see the trades of a portfolio manager and get the information on why those trades were made.

Still, she points out, “Online in-vest-ment is not for everyone. Some of the advantages of online investing are also its disadvantages. As discount brokers don’t provide any advice, making your own investment decision takes knowledge and time. Whether you dedicate an hour a day or a week to your investments, you have to be willing to spend some time on your portfolio management.”

Or, investors can turn to someone who can help them make those decisions. IE