There is no feeling like knowing all your finances are in order, that all your ducks are in a row. How can you expect to live a relaxed, minimally stressed life if you’ve got money to worry about? Choosing a financial advisor is a tough decision because you want someone you can trust to take care of your money, and you. Remember that the relationship you have with a financial advisor is a mutual relationship. You need to communicate effectively, and not leave everything up to them. Make smart decisions regarding your finances, your advisor will be there to guide you.
Sometimes the credentials and titles a financial advisor can be confusing and inexplicit, but still, that hasn’t stopped an increasing number of investors from recruiting financial advisory services. A 2016 study by the Canadian Securities Administrators found that 56% of respondents were working with an adviser, up from 43% at a decade earlier.
A panel of experts set up by the Ontario government have given a checklist of three essential steps to take before hiring a financial advisor:
Check Their Registration
According to Marian Passmore, director of policy for investor advocacy group FAIR Canada, securities regulators will only register firms and individuals if they are properly qualified, so make sure you check a financial advisor’s registrations. She notes that if more people had done that, they wouldn’t have lost their money.
CSA’s AreTheyRegistered.ca is a great place to start. It allows you to search for any financial advisor and check if they are licensed. It also allows you to see if the person you are searching for has ever been disciplined for misconduct.
Ask About the Products and Services They Have to Offer
It’s important that as a consumer, you understand that not every financial advisor offers the same products or services.
For example, most investment advisers are licensed by either the Mutual Fund Dealers Association or the Investment Industry Regulatory Organization of Canada. But while most MFDA-licensed advisers deal only in mutual funds, IIROC advisers can also offer other products including stocks and exchange-traded funds.
There are many distinguishing features between a variety of financial advisors, and sometimes, investors will have a hard time seeing the differences. Someone could have 20 credentials, but they aren’t specific.
You want a certified, reputable financial advisor that will take YOU into account while sorting out how to handle your money.
Assess the Cost
Because financial advisors can be paid in different ways, make sure you understand how they’re paid (salary, commission, a flat fee…etc), how much their services will cost, and how this will influence the advice they give you.
If an advisor is paid by commission for every product they sell, they might try to sell you more than you need. Remember that hiring an advisor is to help you manage and save money, not lose it. Keeping fees and other investment costs low is one of easiest ways to help your savings grow.