When you are ready to choose a financial advisor, know where to start can be confusing and potentially overwhelming. These are the ten areas that I would focus on in order to proceed with confidence.
Certifications indicate professional learning and, in most cases, a commitment to quality advice. There are many certifications that financial advisors can hold. Internationally recognized designations include: CERTIFIED FINANCIAL PLANNER® (CFP), Chartered Financial Analyst® (CFA) and Trust & Estate Practitioner (TEP).
CFP indicates the ability to provide big-picture financial planning advice on savings, spending, debt, government programs, benefits, insurance and investing. Some alternatives include RFP, PFP, Pl. Fin. or Ch.F.C.
CFA indicates the ability to research and recommend stocks and bonds and create optimized portfolios. This is a demanding training program on the level of a university masters program. CIM is a shorter program with a similar focus.
TEP indicates the ability to advise on wills, trusts and inheritance of estates. Those who hold it often practice family law or use insurance strategies to organize passing assets to the next generation.
The CFP program requires three years of industry experience. That seems like a reasonable time to learn how to understand and advise clients.
More experience is often better, as long as it includes variety. However, even an advisor who is new to the industry can advise well with mentorship from a senior advisor.
If you want specialized advice, you’ll want to work with an advisor who focuses on that area. Some common areas of focus include: family savings and investing, corporate planning, retirement income, family estate planning, corporate succession planning.
Not everyone needs specialized advice. When you begin saving and investing, most of the benefit will come from your ability to save. Then, as you accumulate wealth or your situation becomes more complicated by acquiring assets (business, cabin, property in the US) or family dynamics (divorce, remarriage, step-children), you will benefit from working with an advisor who has relevant skills and experience.
4. Check for disciplinary action
It never hurts to double-check that the person you intend to hire is properly registered and is clear of disciplinary action.
For MFDA (mutual fund) advisors: https://mfda.ca/investors/check-an-advisor/
For IIROC (stock & bond) advisors: https://www.iiroc.ca/investors/knowyouradvisor/Pages/default.aspx
CSA (national) registration list: https://www.securities-administrators.ca/nrs/nrsearchprep.aspx
CSA disciplined list: https://www.securities-administrators.ca/disciplinedpersons.aspx?id=74
5. Service commitment
How many client families will your advisor be serving? There are only limited hours in the day and week and month, so you can imagine that your advisor can only meet with as many clients as they have time for. Think about how often you want to communicate by email or by phone, how often you expect to meet for a review and whether attending presentations is valuable to you.
The financial advisor you choose should have a communication style that suits you. To illustrate what to look for, think of another professional you would ask for advice. In my case, it’s my optometrist, and I would want her to ask a lot of questions and check for understanding before writing my new prescription.
7. Personal connection
There is no specific way to measure the answer to: do we get along? When discussing money, especially larger amounts, it’s normal to be emotionally invested. An advisor should set you at ease and ideally inspire trust and confidence.
Markets go up and down and this is the person who will be your ally to help you reach your goals despite market downturns and difficult moments. You may want a robot to manage your investments, but a person you trust can help make good decisions under stress.
Some people prefer to work with an advisor who has a professional office where they can meet. Some prefer the familiarity of a branch in the neighbourhood. And some people want their advisor to come to them. There is no right answer, just make sure that you are clear about this up front.
9. Code of Conduct
Most financial advisors are honest and hard-working. Many professional organizations have a code of conduct that advisors must adhere to. Employers also have professional standards. You can expect that your advisor will respect your privacy and hold your information in the utmost confidentiality.
10. How they get paid
There’s no right or wrong way to get paid. Certain products, such as life insurance, pay commission. Some advisors don’t sell products and directly charge their clients a flat yearly fee. More and more advisors follow a middle way where they charge a fee as a percentage of assets. Above all, they should be willing to explain how they get paid and why it’s in your interest.
It’s always okay to change your mind. If you’re working with an advisor and you’re not comfortable or if you find someone better suited to help you, it’s okay to move. It’s part of doing business and your former advisor shouldn’t take it personally. You could let them know your decision and, if you feel comfortable, explain your reason. But it’s usually enough to meet with the new advisor, choose to hire them, and ask them to handle the transition.
The Government of Canada has a similar list in point form: https://www.canada.ca/en/financial-consumer-agency/services/savings-investments/choose-financial-advisor.html
The Ontario Securities Commission has a shorter list of six tips: https://www.getsmarteraboutmoney.ca/plan-manage/planning-basics/financial-planning/choosing-a-financial-planner/
This article presents good ideas. The difference between a good idea and good advice is: understanding your personal needs and your unique situation. I am an active financial planner in Calgary, AB and currently accepting new clients. If you would like advice based on your needs and situation, get started here. To receive more good ideas to your inbox, sign up now.
This article is copyright. For permission to reprint or reuse this article, please contact firstname.lastname@example.org.