Advertisement
Canada markets close in 4 hours 34 minutes
  • S&P/TSX

    22,187.65
    +80.57 (+0.36%)
     
  • S&P 500

    5,254.71
    +6.22 (+0.12%)
     
  • DOW

    39,759.82
    -0.26 (-0.00%)
     
  • CAD/USD

    0.7388
    +0.0015 (+0.21%)
     
  • CRUDE OIL

    82.54
    +1.19 (+1.46%)
     
  • Bitcoin CAD

    96,609.34
    +2,694.66 (+2.87%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • GOLD FUTURES

    2,233.70
    +21.00 (+0.95%)
     
  • RUSSELL 2000

    2,125.82
    +11.47 (+0.54%)
     
  • 10-Yr Bond

    4.1940
    -0.0020 (-0.05%)
     
  • NASDAQ

    16,403.21
    +3.69 (+0.02%)
     
  • VOLATILITY

    13.04
    +0.26 (+2.03%)
     
  • FTSE

    7,972.75
    +40.77 (+0.51%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     
  • CAD/EUR

    0.6834
    +0.0029 (+0.43%)
     

Here's what you should be looking for in a financial advisor

Financial planner
[Make sure you find someone who’s got a plan that works for your lifestyle/Getty Images]

Picking a financial advisor can be a daunting experience. Most people aren’t even sure what to look for. All they know is they want someone who isn’t going to mess up their chance for a comfortable retirement. When you think about it, it’s one of the biggest decisions you make, since the quality of your advisor can affect your quality of life for decades. So it’s important to get the right fit, and make sure you find an advisor that will take your best interest to heart, rather than just offer cookie-cutter advice that leaves you short of cash when you really need it.

Here’s are pointers to finding the right advisor for you:

Figure out what you’re looking for

Do you want someone to simply manage your investments, or do you want someone who can take a bigger picture approach of your spending needs, financial resources, and then give you coaching on how to apportion your spending?

ADVERTISEMENT

“People realize their money has more to do with than just investments,” says personal finance consultant Preet Banerjee.

“They also need the right amount of insurance to protect their lifestyle. Do they have an estate plan, do they have their will and powers of attorney. Have they thought about how to manage their taxes?”

Also, it’s not a completely one-size-fits-all industry. Make sure your advisor has an idea of how to tailor a plan to your specific needs, says Ryan Gerstel, an investment advisor and portfolio manager at CIBC Wood Gundy.

“An entrepreneur, for example, is more likely to have an uneven cash flow, different debt levels, different tax planning options than someone who’s a salaried professional,” he says.

Also consider that some planners are licensed to sell only some products, such as mutual funds. They may be right for some, but perhaps not you.

Play the field

This should be obvious, but many people take on the first person they meet. For someone who’s going to be the guardian of your financial well being, you should see at least one or two other options, shouldn’t you?

According to Banerjee, while some people seek out an advisor, others are ‘pulled’ into the industry, often with a referral from a friend, meaning they don’t shop around. This can be a risk for one of the biggest decisions of your life.

“You would at least spend as much time getting two or three quotes from a contractor who’s going to redo your kitchen, but a lot of people do not actually do that when it comes to deciding how is going to be in charge of their financial advice,” he says.

Follow the money

For advisors, compensation can dictate behaviour, so you need to know how the guardian of you finances is paid. Traditionally, investment advisors received commissions based on the financial products sold to their clients. There’s an obvious conflict of interest here, because your advisor is incentivized to sell you things even if they’re not the best move for your portfolio. These days, the trend is shifting more to a fee-based system or a combination fee and commission. Also ask if the firm has sales quotas. Make sure you know who your advisor is really working for.

Do your homework

One of the dirty little secrets of the financial advice industry is that pretty much anyone can call himself or herself a financial planner. There isn’t any board that regulates the title. But there are bodies that do recognize certain qualifications, and you’ll likely want to see some evidence that your planner has done more than just read “Investing for Dummies.”

Check to see if your planner has his CFP (Certified Financial Planner) or PFP (Personal Financial Planner). Both have certain requirements, but as I said, they aren’t necessary to actually be in the business.

“Continuing education. Look for a planner that’s improving their skills, keeping up with changes in the landscape,” says Gerstel. Also, see who else works closely with the planner. Does she have easy access to an accountant?

“The planner can act as quarterback, but they should also have these experts that they’ve built over time,” he says.

Also check out past performance, look for references, and use Dr. Google. You never know whose name might pop up on a message board.

Make sure honesty is a policy

It’s tough to establish trust in just one meeting, but it’s important to find an advisor who will be comfortable giving bad news, as well as good. Avoid advisors that seem uncomfortable with the questions on compensation, or offer unrealistic promises on returns.

“If you’re thinking this looks overly aggressive, there might be some red flags there,” says Gerstel.