Choosing a financial advisor is a high-stakes decision that affects your retirement savings and can be costly down the line if you want to switch. Personal finance expert Bruce Sellery shares a list of things to look for when choosing the right one for you.
1. Advisors are not all the same. What do you look for?
Qualifications:
MFDA: At a bank branch, advisors might have their mutual funds licence.
CFA: Chartered financial analyst.
CFP: Certified financial planner. This is the designation that I would be looking for because I think the big value to a financial advisor is financial planning.How much do I need for retirement? Can I afford to renovate my kitchen?
Compensation:
Commission: Earns a commission on what they sell you.
Fee-based: Earns a fee based on assets you have with them.
Fee-only: Charge a fee for a service, like a massage therapist. This is my favourite model because it is very clear what you’re paying for. But it is out of pocket and people like to feel like the advice is “free”.
Quality: Same as any other service industry. Some are great. Some aren’t great.
3. Where do you start?
Friends and family: Ask for a referral.
MoneySense Approved: A new service from MoneySense Magazine.
Advisors get screened:
Qualifications check
Client survey.
Phone survey.
They pay a fee to apply and for their membership.
Search:
Search “Find an advisor” and MoneySense.
Input Postal code and Assets.
4. What do you ask?
This is the step people skip. Flattered that an advisor will take them on, versus, “I’m buying a service”. Interview based on the criteria that you deem to be important. My list is different from other people.
If you have an advisor already, listen up and score your advisor on this.
Criteria:
Communication: In a way that works for me.
Advice: Provides advice and doesn’t just sell products. Some advisors spend a lot time in RRSP season selling the latest mutual fund. I want someone who offers advice on how to get a handle on my money.
Holistic: Works on all your goals. Advisor gets paid on investments, not paying off your mortgage. But I want someone who can think holistically.
Accountable: Holds you accountable for what you say you want.Personal trainer will hold you accountable.
5. What service can you expect?
Varies widely.
Advisor: How many clients do they have? How much support?
Assets: If you have $10K you aren’t very profitable for them. If you have $1M you are, and so can expect more services.
6. What do you do if your partner is reluctant?
Get meet one or two and see if you can find a click.
Core issueS: What is the issue behind the issue? Communication in relationship? Power.
7. When does someone not need an advisor?
Not like a dentist. Everyone needs to go see a dentist. Not everyone needs a financial advisor.
A. You pay for it. Is it worth your money?
B. Willing / interested to do it yourself.
C. Simple situation:
Pension: Defined benefit pension. You are aggressively paying down your mortgage.
Young: Saving for down payment.
