Need a Financial Advisor? It’s as Easy as 1,2,3

In the 70s, in my “home ‘ec” class we learned rudimentary cooking skills and how to thread a sewing machine. In other words, lots of “home”, not much “‘ec”. It’s no wonder that so many of us have little-or-no financial literacy.

When it comes to getting financial advice, it’s hard to understand the differences between the various professionals willing to offer it to us. For example, what’s the difference between a “financial planner” and a “financial advisor”?

Commonly, a financial advisor is trained in investment products like securities, (stocks, ETFs and mutual funds), debt instruments (bonds and loan products), derivatives (options), and insurance (life insurance, segregated funds and annuities).

On the other hand, a financial planner, which is what I do, specializes in cash flow analysis, retirement projections, ways to minimize risk and on tax strategies. She’ll help you figure out how much you can afford to spend, set up plans for saving, investing, debt and risk management so you can enjoy your optimal life and make the most of your income. Financial planners consider your financial situation from two vantage points: the 30,000-foot level overview and then a granular cash-flow view.

In most parts of Canada, just about anyone can hang up a shingle and claim to be a “financial professional”. If you happen to live Quebec, lucky you. The province requires the Certified Financial Planner (CFP) qualification for those offering financial planning. The Financial Planning Standards Council (FPSC) is working to make this professional standard Canada-wide. In the meantime, here are some key questions to ask your financial professional to ensure you’re getting the quality advice you deserve:

 

  1. Ask for a list of your professional’s current designations.

If your “financial planner” is not a CFP* (Certified Financial Planner), don’t ask for planning advice.

If your “financial advisor” doesn’t have her CIM* (Chartered Investment Manager) or CFA* (Chartered Financial Analyst), designations, don’t ask for investment recommendations.

* Beware of lapsed credentials! Proof of current accreditation insures that your professional has kept up with his or her continuing education and ethics requirements.

 

  1. Fees: Ask what the fees are and what they cover.

Most financial advisors charge an “assets under management” (AUM) fee, calculated as a percentage of your portfolio’s value. This fee structure distinguishes genuine advisors from those who are strictly product salespersons.

Retirement projections may be included in the services your financial advisor provides. However, for a deep-dive into your current and projected financial opportunities and constraints, it’s best to work with a financial planner who is independent of your financial advisor. A thorough financial plan will cost you between $2,500 – $6,000, more if you run a business. In my humble opinion, a thorough financial plan, reviewed regularly, is the kick-in-the pants to start saving and the reassurance to proceed confidently in your financial decisions.

 

  1. Ask for current references and cross-reference these people on social media.

A true professional will allow you to talk to actual clients. Be prepared to ask tough questions like, “was the service worth the fee, or “did you feel comfortable asking questions?”.

Just like you wouldn’t want me to immunize your child, you shouldn’t ask your paediatrician for financial advice. For the right advice, go to the right professional.

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