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Canadians often turn to financial advisors for investment advice, but experts say choosing someone to help manage your money is about more than just promising returns in the stock market.
“What you’re looking for is someone who’s not just going to invest their money,” Jason Pereira, senior partner and financial planner at Woodgate Financial, said in an interview. Yahoo Finance Canada.
“What you need is someone who can explain what you’re doing with your money in your life plan and make sure it’s working for you.”
Choosing a financial advisor may seem like a difficult task. Here’s what Canadians need to consider when hiring.
Financial advisor vs. financial planner
There is no difference between titles like financial advisor and financial planner. The key is to check whether the advisor you choose is properly accredited and backed by an accredited body.
The basic qualification is the Certified Financial Planner (CFP) designation. There are approximately 17,000 he CFP professionals across Canada. You can check his certification at CSA Group’s website and see if there are any disciplinary actions. The Financial Planning Association of Canada also has a membership directory listing its designations.
Given that investment advice is often an important part of an advisor’s service, there’s no harm in checking out a potential advisor’s history. The Canadian Securities Administrators database allows interested customers to check the disciplinary history, if any, of anyone selling securities in the country. Canada’s Investment Industry Regulatory Authority also issues an annual enforcement report.
However, there are certain titles that can be misleading depending on the specific financial services you need. John Webster, president of Queensberry Securities, says one example of this is the title “senior financial advisor.” It may indicate that they have been in the business for a long time or have experience dealing with elderly people.
Find someone whose specialty fits your needs
Jan Russell, president of Russell Wealth Planning Group, says many people turn to financial planners for advice on growing their wealth, but working with an advisor is about more than just making investments. talk.
“We always like to start with people’s goals and objectives, because we think that really influences not just how people invest, but how they deal with their financial future in general. Because I feel it,” he said in an interview. Yahoo Finance Canada.
As with any profession, different financial advisors may have different areas of expertise that are more appropriate for them, such as family wealth, retirement, or elder care.
Pereira says it’s important to find someone who can explain their knowledge of your specific situation, such as a student, retiree or new homeowner, rather than a generalist. You also don’t have to limit your search geographically.
“We live in a digital world,” Pereira said.
“It’s nice to want someone nearby. But the reality is you might end up settling for someone who isn’t as good as you could get elsewhere.”
Beware of returns that sound too good to be true
Potential customers should also be wary of unrealistic promises regarding investments.
“You certainly don’t want someone who makes promises that they can’t keep. Anyone who says this stock is guaranteed to double is not something you want to trade,” Webster said.
“If someone says there is no risk in investing, there is. It’s just hidden somewhere else.”
Pereira recommends looking for an advisor who is “plan-focused.” They need to be responsive, proactive, and able to show samples of their work.
“At the end of the day, it’s not about profit, it’s about planning. No matter what anyone says, you can’t control the market,” Pereira said.
Russell also notes that if an advisor doesn’t have an investment philosophy (which they explain to all potential clients along with a risk tolerance questionnaire), that could indicate a “red flag” in their approach to financial planning. said.
“It’s a long-term relationship,” Russell said. “Some people will get you in the door just because they’re good at sales. But that doesn’t mean they’ll provide decent service long-term.”
Beware of fees and hidden costs
Pereira said he would also consider cost transparency. Customers need to understand not only overall fees, but also investment product costs and account transaction fees.
After all, financial advisors will charge a fee. This could be built into the product itself, billed as a separate advisor fee, or a flat fee based on a percentage of assets under management. If the cost exceeds your current economic situation, it’s probably best to stay away.
Russell says it all goes back to “understanding what you’re trying to accomplish,” building a trusting relationship between client and advisor and ensuring that advisors “don’t get too involved in other things to the point that it becomes just a transaction.” “To prevent it from being dispersed across the board,” he says. To them. “
Even if trust and honesty have been established in the client-advisor relationship, you need to ensure that it is a relationship that can last for years.
“This should only happen two or three times in your life, because at some point the advisor retires,” Pereira says. “So the reality is, if you do this right, you’re going to be with this person for decades.”
Nicholas Sokic is a freelance journalist based in Toronto.
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