Working With The Right Financial Advisor

When I was growing up, my dad used to do his own car maintenance – changing the oil, spark plugs and air filter, and flushing the radiator. He taught my brother how to do these chores so he could save money.

Now vehicles have become a lot more complicated and not many people do their own maintenance any more. You can go to an inexpensive Minute Lube, or the costlier dealership to have your vehicle serviced.

Similarly, saving and investing has become more complex. At one time choosing where to invest was simple. You went to the bank for a savings account, term deposit, GIC, and Canada Savings Bonds every October. If you were a little more flush you could purchase stocks and bonds from a stockbroker.

Times have changed. You now have almost unlimited investment options which is great, but it can also be more complicated – and sometimes intimidating. Also, managing investments for future retirement years has become a personal challenge as fewer work places are providing guaranteed monthly pension benefits any more.

The Do-It-Yourself Approach

As a consequence of the breakdown of trust in our “financial experts” and the new reports showing individual returns and fees, there has been a big movement to the do-it-yourself model of managing investments.

Some people feel like they are the best captain of their ship and, in this information age, you have unlimited access to information about specific funds and companies, market trends and more. Most banks and credit unions have discount brokerage departments. You can manage your own accounts and pay smaller commissions than you would with an investment advisor.

This works well for some, but it leaves many people who are already stretched with life’s responsibilities feeling even more stressed and unable to move forward with their finances.

If you need help with financial planning, or don’t want to manage your own investments, there are a lot of different advisors to choose from. You may decide that the added cost associated with an advisor is worth the money. It’s all about whether you are getting good service and value.

To pick the right financial advisor, you have to match your needs to the advisor’s services, and make sure you’ll be able to work well together.

Working With The Right Financial Advisor

Help! I Need Somebody

So, how do you choose a financial advisor? Before starting your search, figure out what type of advice you’re looking for and what you expect from your advisor. The best way to get financial advice is to be very clear on what your goals and challenges are and what problems you need someone to help you solve. You need to be comfortable with this person and be able to have honest communication.

Bank Branches: This is a good place to start if you haven’t invested before and have a small amount to invest. Banks have licensed mutual funds representatives that will help you build a mutual fund portfolio of their own bank funds. In-branch financial advisors can do a simple financial plan. Most have a CFP or PFP (the Institute of Canadian Bankers’ version of CFP) designation.

Fee-only Financial Planner or Money Coach: This may be the ticket if you need guidance and advice on how to better manage your day-to-day finances. A money coach will help you clarify your goals and create a system to help you get out of debt and start a savings program. They do not sell investment products, but rather provide unbiased planning, education and investment strategy advice. There is a perception that young people who most need this type advice are the least able to pay for it. However, at this stage finances are the least complicated and a financial plan can be relatively inexpensive. It also makes a great gift for a graduate or newly married couple.

Robo-Advisors: Relatively new in Canada, these companies provide low-cost, low minimum online investment services. They use algorithms to create an asset allocation based on your age, goals, risk tolerance, and other criteria you plug into their web interface. The portfolio is automatically managed and rebalanced for you. All you do is set up your contribution amounts.

Related: Wealthsimple Online Investing Review

Fee-based Financial Planners: This is the typical wealth manager model. Sometimes called “fee-only advisors” but their fee is a percentage of assets under management rather than for devising a financial plan. They usually are paid commissions for buying and selling particular investments. Most are licensed to sell a wide variety of mutual funds and sometimes individual stocks and bonds as well. There may be a steep threshold (minimums of $500,000 or more are common) to get some advisors to take you on as a client.

Brokers or Investment Advisors: It used to be that most stockbrokerage companies were owned privately. Now all the major banks have in-house brokerage operations and there are relatively few independent brokerage companies. Generally, brokers, or investment advisors as they are now more commonly called, work with clients who have at least $100 – $200K. They research, advise and process investment trades on your behalf. Some investment advisors also provide financial planning services.

Investment Counsellors or Private Investment Managers: These deal with clients who have at least $500K and sometimes more. They offer highly specialized and personalized investment management services to their clients and they typically charge a percentage of the value of the investments that they manage on your behalf. Keep in mind that some of these advisors work in very specialized areas such as currency or commodities trading or private equity. Others specialize in working with clients in particular industries.

Questions to ask potential financial advisors

Once you have decided what type of financial advice is best suited to your needs, the next step is to find an advisor who had the right experience and credentials. Look also for someone that you trust to be open, respectful and non-judgmental.

Here are some questions to ask.

  • What are your qualifications?
  • Do you have a minimum investment or net worth requirement?
  • What are the fees for your services and any products?
  • How are you compensated?
  • What products and services do you offer?
  • How often will we meet and how much contact will we have?
  • Will I be working with you or with your assistant?

Final thoughts

“…we must oversee our own affairs with our own eyes and not trust too much to others. Trusting too much to others’ care is the ruin of many.”         Benjamin Franklin

When it comes to managing your money, you are the best person to be in control of what is happening to your investments. You may not need a financial advisor. However, there are many reasons why you might want some assistance:

  • It can be a daunting task to manage your own investment portfolio.
  • Financial information at the company water cooler, in the newspaper, or on the Internet may be old, biased, or just plain far off the mark.
  • Many of us simply do not have the time, the business background, or the expertise to study markets as well as a profession financial advisor.
  • As your investments grow, you may become ready for a professional to take a more hands-on approach and guide you as you manage your portfolio.

Financial advice from an expert – the right one – can be beneficial to your bottom line and peace of mind.

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  1. rhonda on June 7, 2017 at 5:48 am

    I enjoy reading your articles.I often come away with at least 1 piece of information that I did not know before.
    You may have written about retiring without a inflation protected portfolio…..but I would love to read your advice on a single woman retiring on just under $300,000.I am 66 years old,renting my dwelling, and will look at working part time starting January 2018.I am still working, but it is equally the social aspect, the money,and my intense fear of inflation.Thoughts?

    • boomer on June 7, 2017 at 12:56 pm

      Thanks Rhonda. Inflation protection is an important topic. It doesn’t seem like much when inflation is reported as 1.2% but it erodes your spending power over time. When I complain about prices my husband is fond of saying – “It’s not 1985 anymore.” I’ll come up with some suggestions in a future post.

      • Rhonda Caplan on June 7, 2017 at 7:10 pm


  2. Gert on June 7, 2017 at 9:06 am

    “Here are some questions to ask” Though some questions might seem reasonable and straight foreword, I wonder what the right answers are to these questions? I ask because I imagine these questions are commen and will likely yield the same, or typical, answer from anyone in the financial assistance world.

    – What are your qualifications?
    – What are the fees for your services and any products?
    – How are you compensated?
    – What products and services do you offer?
    – How often will we meet and how much contact will we have?
    – Will I be working with you or with your assistant?

    • boomer on June 7, 2017 at 1:13 pm

      Hi Gert. Fair enough. Here are some possible answers:
      1. Anyone can call themselves a financial adviser with no qualifications (except Quebec) but you need a license to sell any securities. So, for financial planning look for CFP and something like a CIM to manage your portfolio. There are myriads of designations and all those letters look impressive when they fill up a business card, so ask what they mean.
      2. Fees and compensation can be – hourly or a flat fee that you pay when the work is done; hidden in a mutual fund MER (that is, the actual dollar amount is taken before returns are shown); commissions on purchases; percentage of assets managed (both these models come from the cash in your portfolio), or some combination of the above. None of them is wrong. You need to know what and how much.
      3. Depending on licensing, some advisers can only sell mutual funds (from their own company or sometimes from other companies as well) and others are licensed to sell stocks, ETF and other investments such as options. Here it depends on what you want for your portfolio. If you want stocks there’s no point in dealing with a mutual funds salesperson.
      4. You should meet at least once a year to update and review. If there is any change in your situation or market conditions you should at least get a phone call.
      5. Because time is limited, most advisers will focus on their high net worth clients and shuffle off those with lower assets to an assistant. This is not necessarily a bad thing, but you should know who you will be dealing with.

  3. Devin on June 7, 2017 at 12:12 pm

    Have you considered doing a follow-up article at some point on Investment Counsel? I have been interested in exploring that option, but the firms tend to be almost reclusive and operate mainly on referral with very little public information available. If your social circle does not include people already involved in this space it’s hard to know where to begin.

    • boomer on June 7, 2017 at 1:13 pm

      Hi Devin: Thanks for your suggestion. I’ll see what I can come up with.

  4. RUSS on June 7, 2017 at 6:36 pm

    @Devin. In case you haven’t come across this site, the Portfolio Management Association of Canada might be helpful to you.

  5. Owen @ PlanEasy on June 8, 2017 at 1:39 pm

    Love the idea of giving a fee-only financial planning package as a wedding gift or graduation gift!

    In particular it would make a great wedding gift. Typically income/expenses are combined at that stage. There are large costs with wedding/honeymoon. Buying a house could be on the horizon. Kids maybe? Paying for some financial advice after getting married is a great gift.

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