“Are you taking good care of my investment accounts?” This can be another awkward question to ask your advisor. After all, what are the odds they’re going to say no??? Even Bernie Madoff probably said something like, “Ahhhh … don’t worry about it.”

Maybe the real “No Dumb Question” goes more like this: How can I tell whether you’re taking good care of my investment accounts … and what happens if you’re not?”

Fortunately, the vast majority of financial professionals are on the up-and-up.

But unfortunately, there will probably always be the occasional, Bernie-like bad apple in the barrel to spoil things for everyone.

That means the government, the custodians where your accounts are held, and all reputable financial advisors must join together to protect your accounts against malfeasance and, to a point, insure against the damage done if it does occur. Your own watchful eye is important too! Want to know more? Stick around for my next two sessions of “No Dumb Questions.”

Unfortunately, scandals happen in the financial industry … High-paid sports heroes bilked of their winnings. Widows of modest means ripped off by their own family members. Even the wisest among us are vulnerable. In the US, the late, great Nobel Laureate and Holocaust Survivor Elie Wiesel and his not-for-profit Elie Wiesel Foundation for Humanity were two of Bernie Madoff’s countless victims.

“Psychopath,” “thief” and “scoundrel” were a few of the choice words Wiesel used to decry Madoff’s fraud. On the other hand, Wiesel also remarked that “something very beautiful” happened when the news broke. Small donations flooded in from across the country to begin rebuilding the Foundation’s coffers.

In many ways, Wiesel’s experience is fitting. We really shouldn’t lose faith in humanity. The vast majority of us are honest and kind to one another … not just in the financial world, but wherever you go. And remember, the media tends to only spread sensational news, so the worst scandals may seem far more pervasive than they actually are.

Applying these sentiments to your financial well-being, odds are high that your investment accounts are – and will – remain safe and secure in a financial industry that has built up strong defenses against the rare “bad apples” in the cart.

But … that doesn’t mean the bad elements don’t exist, or that we should turn a blind eye to them. To stave off malicious intent, we still have to remain on guard for those times when an otherwise effective system may fall off the rails.

The Canadian Investor Protection Fund, or CIPF, is one of your most important safety nets. The good news is, you don’t have to pay for or do anything to be automatically covered by this national “insurance policy.” As long as your money is held at an IIROC-regulated investment dealer – which most of the institutions are – your cash, securities and most other investments are protected.

Who pays for the coverage? It’s funded by the IIROC member institutions where your money is being held.

But there also are some caveats. Aren’t there always???

First, CIPF is only there to cover your losses if the institution holding your money becomes insolvent. It will NOT protect you if, say, you’re a victim of fraud, or you invest in a losing venture, or an advisor steers you wrong. For these sorts of abuses, you’d need to turn to our legal system. And CIPF has limits. I encourage you to go to their website to understand them.( is there a youtube video on this?)

All this begs two more questions: What is your investment advisor doing to help safeguard your assets, and what can you do as well? That is the subject of Part 2, that you can read here.