Anyone that’s not comfortable managing their own investments may want to hire a financial advisor. While it’s a great step to help you reach your financial goals, choosing the right advisor requires some groundwork. That’s because the type of advice you’re seeking and how much money you have available to invest could determine the type of financial advisor or planner that you should seek out. Here’s where to start.
Figure out your goals first
Before you seek advice blindly, you’ll want to consider what your goals are. Some of the most common reasons people seek out professional financial advice include:
· They want to invest their money
· They want their current financial situation assessed
· They want to minimize their taxes
· They’re looking for help with estate planning
The reason you want to determine your goals is that that the services financial advisors provide will differ. You want to work with someone that specializes in your needs. That said, there are many advisors that can provide different financial planning strategies that will address your goals.
It’s also worth noting that the amount of money you have available to invest will also be a factor when determining who you can work with. If you’re just starting off your investment journey, you likely won’t have as much access to specific professionals compared to someone who has a significant portfolio.
Understand the type of professionals you could be working with
In Canada, financial advisors, and financial planner are often used interchangeably. However, just because the terms are used loosely, that doesn’t mean the qualifications are the same. The reality is that in some provinces, anyone can call themselves a financial advisor.
Generally, you’ll come across professionals with the following titles:
· Financial planner: This type of advisor will typically have certified training that would have taken years to complete. Their goal is to help you create a plan that will reach your end goal.
· Financial advisor: These professionals help you manage your money and will also have credentials similar to a financial planner. That said, since there’s loose regulations around the title, some advisors may only have enough certification to offer you investment products from their employer.
When selecting a financial advisor, you want to check if they’re registered. You also want to see if they have any complaints against them from the governing organizations. Finally, ask them exactly what their credentials are and what that allows them to do or offer you.
Finding a financial advisor
The first place to find a financial advisor is through your own network, such as your families or friends. Even though an advisor may have a glowing recommendation, you should still do your due diligence and interview them. This gives you an opportunity to see if they’re a good fit for your needs.
If you don’t have any recommended advisors, you could try one of the following:
· Your financial institution. Most banks and credit unions will have advisors available on-site that can recommend you investment products. That said, these advisors will often only be able to offer you products sold by their employer.
· Investment firms. There are various investment firms that employ licensed advisors that can help you start investing.
· Robo advisors. Although you may get limited human interaction, robo advisors can help create an investment portfolio that automatically invests on your behalf.
What to prepare when you meet a financial advisor
Before you start reaching out to your financial advisor, you’ll want to make sure your information handy. Some things any potential advisor will want to know include:
· Your age
· Total annual income
· Your monthly expenses
· Any assets you own
· Any outstanding debt
· Your family situation
· Your investment goals
· Your risk tolerance
· How long you plan on investing
While talking to any financial advisor, you’ll want to ask your own set of questions to determine if they’re a good fit for you or not. Somethings you should ask include:
· Their education and qualifications
· How long they’ve been with their current employer and where else have they worked
· What products and services are they allowed to offer
· What their investment strategy and philosophy is
· How are they paid for their services (salary, commission, or fees)
· What their plan for you is
· How often will they meet and/inform you about your portfolio
· Can they explain their investment strategy and recommended products to you in plain English
Choosing the right advisor
In the end, it comes down to who you connect with and is willing to take you on. If you’re new to investing, you likely only get access to advisors at the branch level, who can only sell you bank products. There’s nothing wrong with this relationship - it’s just unrealistic for investors to expect expert level advice if they’re only investing $50 a month. However, if you have a sizeable portfolio, you’ll have access to more professionals. This benefits you since you can potentially negotiate your fees and see which offers a plan/strategy that makes sense for you.
Regardless of your situation, you want to pick a financial advisor that has a plan that’s based on your investment goals. They’ll be able to go over their strategy and explain why it makes sense for you. You also want to pick someone that’s transparent. They should have no problem telling you how they get paid, if they make a commission off any products they recommend you, and what your overall costs will be.
Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. As a completely self-taught, do-it-yourself investor with no formal training, he makes money easy to understand for all Canadians. His specialties include personal finance, budget travel, millennial money, credit cards, and trending destinations.
Barry Choi is a paid spokesperson of Sonnet Insurance.