How to set yourself up for success with the right one…
Be as Diligent as you would be Buying a Used Car
This is not meant to strike down financial planners in any way. They are all people, not used cars. And although some of us would rather buy our own stocks, something we advocate heavily here at Stocktrades, sometimes we don’t have the time. So, if you’re looking for a financial advisor, there are some things you need to go over prior to hiring one. And although most will have your interests and goals at the top of their list, some may not.
Not all of them are good people…
The situation of looking for a financial planner can be approached in the same way as purchasing a used car.
“I worked really hard for my money, and I need a used car that is going to last. I don’t want to end up with something that is going to cause me a bunch of trouble and cost me more money that it was worth.”
You work really hard for your money. You want to find an advisor that is going to put you first.
What do Bad Advisors do?
Here are a few red flags that could signal that someone might not be the greatest choice to work with when looking for a financial advisor:
- They don’t put your interests first. Some financial planners are compensated for the sale of certain products such as mutual funds which they push on their clients.
- Really difficult to get a hold of, or wont return your calls or emails. Most people wont harass their advisors normally. If you are paying someone for financial advice then it should be expected that they attend to your questions and concerns. Advisors are busy no doubt, but you shouldn’t feel ignored.
- They aren’t open or inclusive with communication. Honesty and clear communication are keys to this relationship.
It is important that your specific needs and goals are attended to in your financial planning. The point of seeking assistance is to do everything you possibly can for your unique situation to make the best of your finances.
If it feels like you are being sold, take some more time and explore other firms or independent planners until you find one that makes you feel comfortable and takes your goals into consideration.
Once you are in with an advisor there can potentially be significant costs to switching advisors later depending on what your finances look like. Finding a good one from the beginning is pretty important.
Financial Planner Points
Here are 3 things that your financial planner should be discussing with you:
- Who you are.
- Where you are now.
- Where you want to be.
The whole regime is based off of this information. Be sure these things are kept in the forefront throughout the relationship.
There are many things your financial planner should be asking you about. This information can help them make the actions necessary to benefit you in the best way possible.
They will ask you about your personal life:
- Where you live?
- Do you have kids?
- Marital status.
- Do you have any other dependents?
They will need details about your current investments and financial situation:
- RRSP, TFSA.
- Do you have a pension?
- Savings accounts.
They will also need information regarding any insurance you have. Any tax records will be looked over. Your will and estate should also be items of conversation.
You should prepare a list of questions to ask your prospected financial planner. This will help you gauge their ability to answer your questions and give you satisfactory answers to those questions.
Questions you might ask a potential financial planner could include:
- How do you get paid? It is important that this information is transparent. Advisors that are paid via commissions for products they sell won’t be one your side as much as advisors that operate solely off of the fees from their clients.
- What are your qualifications? Check which designations are recognized by federal financial regulatory authorities.
- How will our communication work? This should be your chance to see how often you can communicate with your advisor. Set a plan of meetings, or phone calls etc.
- What are your fee structures? Get to know what you’ll be charged for their service. Collect this data for everyone you meet, then you can judge which is the best fit for the best price.
- What is your investment philosophy? Your views should be relatively inline with your advisor’s views in order to avoid a conflict later on in the relationship.
- Who acts as your custodian? The custodian is the brokerage that will hold your investments. It is necessary that they have one, as it allows you to be able to double check information about balances/gains/loses via the brokerage’s platform.
There are oodles of questions you can ask your advisor. Do some research and create your list of questions this way you can narrow your search of advisors. Request that the entire interview be recorded in some way, such as in writing.
Not all financial planners are bad. It is up to you to take your time, be careful in selecting someone to work with. Don’t rush it just wait for the right person who is going to put your needs and goals first!