Selecting a Financial Advisor

Courtesy of Dynamic Mutual Funds, Posted 09 Oct 2015

There are thousands of financial advisors in Canada, each with their own unique process and way of operating. All financial advisors selling investment products must be registered with the provincial securities commissions. Most advisors are registered to sell either mutual funds only, or mutual funds and stocks and bonds. Many registered financial advisors will also provide comprehensive financial planning, sometimes for an extra fee. You need to determine your needs before you decide what type of advisor you need. For example, do you simply want someone to help you choose investments or do you want to work with someone who will develop a financial plan for you and then help you to execute that plan? Are you interested in protecting your family through insurance? Do you want help in planning for the day when you will pass on your wealth to your family? Are you interested in looking at ways to reduce your taxes? Many advisors can provide you with guidance on all these issues; while others have experts they rely on while quarterbacking your financial advice.

How do I choose?

As with most service-oriented businesses, the best way to find someone to help you through the financial maze is through word of mouth. Ask friends, family and colleagues about the person who gives them financial advice, if the advice has helped them meet their goals and if they recommend their advice.

What do I look for?

There are lots of questions you can ask a potential advisor to help you find the right one for your circumstances. First and foremost however is to look for someone who is committed to the profession. You will want to know about credentials and experience as well as their efforts to enhance their advice through continuing education.

Questions to ask:

Here is a list of questions to ask and what to look for in the answers you receive:

What is your background?
Many advisors have gained valuable experience from another profession before becoming a financial advisor. An accountant or lawyer or successful businessman could bring a different perspective on certain financial issues. Someone who was in your business previously may bring valuable insight into your needs. On the other hand, if the advisor attended business school, he has received invaluable knowledge throughout his education.

What experience do you have?
If you are looking for an investment advisor, you want to ensure that any advisor you choose is knowledgeable about both up and down markets. If you are looking for a financial planner, you will want to ensure the advisor is well versed at putting together effective financial plans for people like you.

What kinds of clients do you serve?
You want your advisor to be experienced in helping people with similar needs to your own. Does the advisor concentrate on a certain type of client (profession, income level, age group)?

What products and services do you offer?
You will want to know what types of products the advisor is licensed to sell and what additional services are offered. If you are looking for a financial plan, ask to see a sample so you will be aware of what you will get.

What designations do you have?
If you are looking for financial planning assistance, ask if the advisor has their Certified Financial Planner designation. A CFP has met minimum standards in education, experience and ethics.

Can you provide references?
If you haven’t been referred you will want to talk to clients who have similar needs to your own to ensure service has been satisfactory.

How often will I hear from you?
You will want to know ahead of time how often your advisor will want to meet with you to review any changes to your circumstances or your investment objectives or strategy. Ask how the communication will take place. Do you receive regular emails, mailings or phone calls? How often will face to face meetings take place?

How do you select investments?
Find out their investment process. Ask if they used managed solutions, mutual funds or individual securities likes stocks and bonds. How do they evaluate and choose a portfolio manager to manage their money?

How are you paid?
There are different ways financial advisors are paid. Be sure you understand how this advisor is compensated for the advice he provides and the products he sells you.

Who else works with you?
Many advisors work with a team and after the first meeting you may deal with an associate advisor most of the time. Ask about the advisor’s team and roles of each person in the team. Your advisor may also have a great network of professionals that he can refer you to for other needs such as legal or accounting help.

What is the background of your company?
Each advisor must work for or be sponsored by an investment dealer. Dealers are required to meet certain minimum standards including ensuring minimum capital reserves and compliance standards in order to maintain their registration. You should ask about the background and track record of the financial advisor’s dealer.