One Simple Test For Your Financial Advisor

I doubt very much you’re asking your financial advisor enough questions, and are worse off because of it. I think I’ve got a handle on why – let me see if any of this rings a bell:

You don’t have enough time: It’s tough to commit time to an appointment when there are so many other things crying out for your attention, let alone committing to another appointment if you don’t feel right about the first one. You’re also deeply polite and don’t want to take up too much of the advisor’s time.

You don’t have enough confidence: Heck, this is why you’ve got an advisor in the first place, because that person across the desk from you has more experience and is probably smarter than you, right? If you ask questions, they’re going to think you’re an idiot.

You aren’t rude enough: Asking a financial advisor why he’s recommending a particular fund or portfolio feels kind of aggressive. Pressing him for answers to your actual questions until you get them isn’t the way you were raised.

You don’t know enough: How will you evaluate the truth or accuracy of what you’re told if the whole reason you’re asking questions is because you don’t know the answers?

Am I right? At least in part? It’s really, really difficult to head into a meeting with a financial salesperson, knowing that you don’t know very much about investing, knowing that what happens to your savings is important, knowing that time is limited, and feeling as though your only two options are to ask questions about things you don’t understand until you understand them or to nod politely and buy whatever you’re sold.

Related: Steak knives, yes. Financial advice, maybe not.

That person across the desk from you might be the perfect financial advisor for you, but you can’t know that until you start asking questions, and I’ll warn you: a terrible advisor might sound an awful lot like a good advisor to someone too intimidated to ask.

Over the years as both a financial advisor at the bank and now as an advice-only planner, I’ve devised a very simple test to separate the wheat from the chaff: The best way to tell the difference between a good financial advisor and a bad financial advisor is to literally test their patience by scrutinizing fund documents right there in front of them while they wait.

You are paying – indirectly, often, but still paying – for this advice. Bad advisors forget that all the time, and start believing that you’re paying for their expertise rather than their assistance. If you get any sense that you’re wasting their time with your careful questions and document scrutiny, you’re getting a pretty good signal that you’re just a money delivery system and should probably run to your nearest T2033.

So this is what I want you to do:

1. Ask about any term that you don’t understand: this includes MER, risk premium, value, forward P/E ratio, trailing returns, interest-rate risk, Andex chart…anything. Bring the conversation to a screeching halt anytime you hear something you don’t understand.

2. Ask to see the Fund Fact Sheet for every single investment you already own and every single investment that’s being recommended for you. Actually read each one of them, right there in the office, spread out beside each other. Look at the Management Expense Ratio and Total Expense Ratio, and figure out how much you’ll pay annually for the amount of money you have (or will have) invested. Look at the top ten holdings, the asset allocation, and the management style. Ask any question that occurs to you.

3. Zero in on the performance in the last ten years. If there isn’t a benchmark listed on the Fund Fact documents, ask your advisor to show you how the funds performed compared to other funds with similar holdings or strategies on

4. Ask what job each fund is meant to do in your total investment portfolio and why each one in particular is there instead of any number of other funds that could be in its place.

Related: Would you benefit from working with a financial advisor?

I can’t promise that this one set of questions will result in an immediately deeper investment knowledge or a magically better portfolio, but I dearly hope that it will prompt you to start asking your own questions, to evaluate the quality of the advisor by their willingness to have open dialogue, to grow in confidence until you get answers (or research your own), and to commit to an investment strategy, fund, or portfolio with your eyes open and your critical thinking skills engaged.

Sandi Martin is an ex-banker and fee-only/advice-only financial planner at Spring Personal Finance who specializes in working with regular folks who suspect their money might be a bit of a mess. She lives in beautiful Muskoka with her husband and three children, and works online and by phone with clients across Canada.

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  1. Kurt on February 26, 2015 at 2:31 pm

    Hmm… Based on this, our next meeting is going to be way more fun Rob. Oh wait, I already know I have the right advisor.

    • Echo on February 27, 2015 at 11:04 am


      #5. Ask what kind of beer he’d like to drink.

  2. Neil Murphy on February 26, 2015 at 2:53 pm

    From an ex portfolio auditor try these out…

    1. Ask the advisor if the current manager is responsible for the long term returns.
    2. Spend a lot of time asking questions about that pesky risk section in the prospectus.
    3. Ask your advisor on the spot to write down on a piece of paper their rules for buying selling and security selection.
    4. Ask for a benchmark that you can measure the advisor against and tell him it’s not going to change.
    5. This one’s fun. Ask for an accounting in writing of all the fees you are paying in total and secondly how much is getting paid to the firm and the advisor, in dollars not percentages

    I could go on but you get the idea.

  3. Cyrel on February 27, 2015 at 2:55 am

    Nicely said! The tips are very straight to the point.

  4. Daniel @ SaveWithDan on February 27, 2015 at 7:00 am

    Perfect timing, Rob. I’ll use some of these tonight 😉

  5. Tracey H on February 27, 2015 at 10:04 am

    This makes me realize what an excellent advisor I have! I’ve asked these questions and more and always get patient, thoughtful answers. Also ask how your advisor is paid. Mine gets most of her money as a salary from the company (very unusual, I suspect). All of the fees I pay are transparent (and now tax-deductible now that I have private counsel with the company). My MERs have always been low and are now lower now that I’ve hit a key investment amount. Also, the company has mailed or emailed apologies when results are far off the benchmark with an explanation of what happened and what they’ll do to prevent that going forward.

    • DIANE on February 27, 2015 at 10:33 am

      IF SO, WOULD YOU MIND SHARING THE NAME OF YOUR ADVISOR PLEASE. I AM 62 AND OFTEN WONDER IF I AM DOING OK. IF YOU ARE NOT IN OTTAWA, well then, I will just have to find a financial advisor, here in this city

      • Tracey H on February 27, 2015 at 10:54 am

        Sorry, Diane, I’m not. And this is a specialized investment company (you have to be related to a doctor in order to invest with them)–if you are, you should be able to figure out the company and they’re across the country.

  6. kcowan on February 27, 2015 at 12:29 pm

    I think a clear statement on how much each of the players gets paid should be a good start.

    • Neil Murphy on February 27, 2015 at 12:41 pm

      I think the statement starts with “If you’ll look closely, you’ll see there’s nothing up my sleeves.”

  7. canadianbudgetbinder on February 27, 2015 at 2:26 pm

    This is great. We meet once a year for about 2 hours with our advisor to go over everything. He’s never rushed us out the door and explains anything we ask. I will however try and add in a bit more next time so I’ll be printing this out and reviewing it later on for our next visit.

  8. david toyne on February 28, 2015 at 10:11 am

    Sandi, great piece. I cannot get over how inert so many people are wrt their investment portfolios. Just a little bit of time can save thousands annually with go forward compounding the icing on the cake. Someone said this to me – “inertia has its own momentum”. Indeed.

  9. Dave on March 4, 2015 at 12:00 pm

    the supreme smugness bordering on arrogance of the article, and comments from Neil Murphy are impressive. you are the True Greats of the advisory business. your salemanship for your own business interests are deftly sly and i imagine, quite effective.

  10. Patricia Gass on March 6, 2015 at 3:36 pm

    Great post Sandi. So much truth and funny too- would love to see the reactions from many unsuspecting advisors to your questions! In my own view, one of the tests of a great advisor is to explain financial concepts in understandable language for their clients. Not always easy but very important!

  11. Mattie on March 25, 2016 at 1:32 pm

    Ask the advisor if they mind sharing there personal year end statements for the last three years… this one is fun.

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