To invest with confidence you need to understand what makes sense to you. The role of the Investment Advisor (IA) is to help you find your own investment style, to take advantage of the markets and the best investments for those markets. But first you need to choose an Investment Advisor that you can trust and work with. While it is hard to tell when an advisor is genuine and we want to believe what they have to say, there are some ways that you can learn to protect yourself when searching for an Investment/Financial Advisor. Whatever your needs, retirement planning, children’s education, buying a home, or simply not having the time or expertise to get your finances in order, working with your IA can be a helpful step in securing your financial future.
Letting go
There are times when you feel that you are no longer important to your current advisor or the relationship has taken a turn and you are seeing signs that could be affecting the performance of your portfolio. Signs to look out for: The advisor does not return your phone calls, in fact you never hear from your advisor; never addresses your concerns; makes you feel stupid when you do make contact: compare/check the performance of your portfolio, it should at least be in line with the benchmarks. How much contact did you have during market volatility? A good advisor would have made sure that you were ok and that the portfolio was still within your risk tolerance.
Once you have made the decision to move, the actual process is very straight forward. The new advisor will open up the account and have you sign a transfer form. I always think it is a good idea to let your current advisor know that you are thinking of moving and the reasons why, because sometimes it could be a simple communication problem that was not addressed or expectations on either side were high and simply not met or unachievable. If clients do not address the reasons for leaving then the current advisor will never know what the problem is and can never correct it going forward.
Some people may be uncomfortable or do not wish to talk with their current advisor then your new advisor should take care of everything for you. They will forward the transfer form and liaise with the organisation for a smooth transition. There may be some transfer charges from the departing institution, don’t be shy to ask if your new advisor is willing to pick up the charges.
Let the search begin
Asking family and friends who have a good advisor is a good place to start; if this is not a solution then you should interview several to find the one that is a right fit for you and your style. Listed below are some questions you should ask in your search.
Questions:
What experience do you have?
How long has he/she been in the industry? Which companies have they been with; if they have moved a lot, why? It is fair to say that a 24 year old is not going to understand the needs of the High Net Worth client, nor will they know enough about estate planning. Something has to be said for experience. Advisors that have experienced the market crashes have learned from those, or at least we hope so!
What qualifications do they have?
The term “financial planner” is used by many financial institutions. IA’s with firms that are members of the Investment Dealers Association (IDA), or now known as IIROC (Investment Industry Regulatory Organization of Canada), tend to have a securities license which covers mutual funds, bonds and equities. They would also have the Options License for option trading. Some of these would even be insurance licensed. They are known to be full service advisors. Most advisors will have their credentials displayed in the office; if not, you can always call the local registration body (www.nrd.ca) to confirm your advisor’s qualifications. If they refuse to divulge this then walk away.
What services do they offer?
This can all depend on the planner and the qualifications they have and areas of expertise. Generally financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses, or give investment advice unless they are registered in the province(s) of the clients they are serving. Some planners offer advice but do not sell the products, but rather refer you to someone who will implement the portfolio. Buyer beware, this is your money we are talking about.
Ask how is the planner compensated?
This could be a salary; fees based on assets under management; combination of fees and commissions; commissions by a third party. Some planners only charge once the assets are under their management, so they may not charge for proposals or second opinions. Most advisors these days are leaning towards a flat fee, this removes the conflict of interest which can occur with commission based advice, where the advisor could be churning (buying and selling) to make money to pay bills, the flat fee removes that conflict.
These are some of the issues to be aware of when you are searching for an Investment Advisor. Below are additional questions that you should be aware of.
- Any conflict of interests?
- Have they ever been disciplined for any unlawful or unethical actions? This information may be available on the website.
- Ask for the services that they will provide. Depending on the size of your assets some advisors will have a service plan, so that the client knows up front how many calls or meetings they will have per year. Most advisors will meet with their clients at least once a year, which tends to be the norm.
- Ask who else is on the team? Some advisors may have a junior partner that could be looking after you once the deal has been done.
- What kind of an advisor they are? Some could be too cautious or too aggressive. Make sure they are a good fit for you
- Ask how they will handle a mistake that has been made. Some advisors may pass it on to the client and say “it happens, no one is perfect.” If the advisor has made the mistake then they have to absorb it, not the client.
On a final note, if it is too good to be true, then it probably is.
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