As discussed in my column last week, proper financial planning includes a relationship with a financial planner who will work alongside you in this process. Once you decide to work with an advisor, the next step is to find one. You'll find that there are plenty of choices when it comes to advisors, and not all advisors offer the same services or have the same expertise.
Most importantly, when searching for a competent advisor, you need to be able to recognize whom you can trust. To many people's surprise, financial planning is not regulated in many provinces. However, not everyone who refers to himself or herself as a planner is qualified; many so-called financial planners are licensed to sell products but have little to no financial planning training or expertise. Scandals like the Ponzi scheme perpetrated by Earl Jones in Montreal have clients asking more questions than ever about their advisors credentials - as they should be. Generally speaking, most hard-working accredited advisors welcome the opportunity for a hard line of questioning from clients.
As a result of the lack of regulation it is up to you, the consumer, to ensure the planner you choose is indeed trained, certified and held accountable in providing financial planning advice. The Financial Planning Standards Council (FPSC), which administers the Certified Financial Planner (CFP) designation, offers a guide titled "What You Should Know Before Hiring a Planner." In the guide it offers some of the following questions every client should ask their advisor:
What are your qualifications? Ask what their qualifications are to offer financial advice and if, in fact they are a qualified planner. Ask what training they have successfully completed. Ask how they stay current with the fast paced changes in the financial industry. Do they hold any designations related to offering financial advice? Choose an advisor that is committed to professional development and has the qualifications to prove it;
What experience do you have? Experience is important when choosing any professional. Ask how long they have been in practice and the number and type of firms in which they have been associated. Also ask what experience they have working with clients like you. Choose an advisor who has at least two years of experience working with individuals on their financial needs;
What services do you offer? An advisor's service offering will depend on their credentials, registration, areas of expertise and the organization in which they represent. Your advisor should be someone who's free to recommend whatever product is most suitable for you, and not tied to a specific company with a limited amount of in-house products. Choose an advisor that can provide the unbiased services you may be looking for;
What is your approach for financial planning? Ask if the advisor has a process for bringing on new clients and a financial planning process. Ask about the level of service you can expect and how many clients they already work with. Choose an advisor that can provide effective answers to these questions;
How will I pay for services/how do you get paid? The three most common methods of compensation are salary, commission and fee-for-service. Choose an advisor that thoroughly explains how they are compensated for the services they provide and are willing to disclose it in writing;
Are you regulated by any organization? Advisors who sell products such as securities and insurance are regulated by provincial authorities and may also subscribe to a code of ethics through a professional association. As an example, certified financial planners are listed in a directory at www.fpsccanada.ca. Choose an advisor after you verify they are members of a known regulatory body and/or professional association;
Can I have it in writing? Ask the advisor to provide you with a written agreement that details the services they will provide (often referred to as an engagement agreement). Choose an advisor that is willing to put their promises in writing.
Shea Sanche is an independent certified financial advisor with Raymond James Ltd. in Thompson. His column normally appears every third Friday. You can contact him with suggested topics or questions by email at [email protected]. Consult with a financial advisor or tax specialist before making financial decisions. Raymond James Ltd. is a member of CIPF.
