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Choosing a financial advisor

search The Canadian Financial Advisor Directory

Taxidermist. Lawyer. Personal trainer. Dentist. Mechanic. Very few people can claim to be an expert at more than one profession. Even those few who profess to be truly multitalented will concede that they are specialists in one area or another. Whether you are seeking advice regarding faulty brake lines, dentures, or contract law, you should always look for a specialist in the field.

Ideally, your financial advisor is someone who is an expert in the fields of personal finance and investing. Research has shown that many investors who pursues an independent investment strategies frequently make poor investment decisions and succumb to impulse buying. Your financial advisor understands, and can explain to you, the fundamentals that drive companies and ultimately influence "the market." The role of your financial advisor is to develop, monitor, and adapt a comprehensive investment plan that reflects your personal financial profile and your investment goals. When selecting your financial advisor, follow the same procedures as you would if you were hiring an accountant or a lawyer.

The most important questions to ask yourself when meeting a prospective financial advisor are: Do I trust this person? Am I comfortable with their personal style and investment philosophy? Do I respect their opinion? Have they the experience and the knowledge to accurately supervise my investments? These are concerns that only you will be able to resolve.

The best way to address these issues is to meet face-to-face with your prospective financial advisor. Most advisors use the first meeting to get to know their clients. This is your opportunity to get to know them. The questions that follow will help you develop a better understanding of your financial advisor's style.


What is your educational background and experience?

Ideally, you are looking for someone with a significant amount of experience. Try to find someone who has counseled clients during both the good times in the market and the bad. Advisors who have experienced market fluctuations understand their significance and know how to handle them. In some cases, the person's education will compensate for a lack of practical experience.

What types of products are you licensed to sell?

This is important to know right from the outset, as it will define the types of investments and the plan the advisor is likely to recommend. If you think that you may want to purchase stocks or options sometime, look for an advisor who is licensed to act on your behalf.

How often will you meet with me to review my financial plans? And, how available are you to answer my questions?

Select a financial advisor who is willing to meet with you regularly, perhaps once every three months. In general, the amount of time your advisor spends servicing your account will be governed by the amount of money you invest and the types of investments you make. You need an advisor who is willing to take the time to explain your investments, in as much detail as you require. You also want someone who you can easily understand, so that you get all the information you need, without wasting your time.

What is the process you follow to build a financial plan? What is your role and the role of your assistant?

The longer advisors have been in the business, the more likely they are to have assistants who will handle some aspects of your business. There is nothing unusual about this practice, but it is a good idea to know before you start dealing with an advisor. Ultimately, however, your advisor is the one responsible for investment decisions and directing the long-term development of your portfolio. Assistants are frequently responsible for carrying out the daily administrative requirements of your account.

How are you paid for your services?

Advisors usually earn a commission for every investment they buy or sell. Certain investments pay advisors more commission dollars than others, usually because they require a higher level of service. For more details on mutual fund charges, consult the prospectus that pertains to the mutual fund you plan to purchase.

What do you need to know about me?

During your first meeting, financial advisors will be looking for as much information about you as you are looking for about them. Look for someone who listens carefully, asks specific questions, and understands what you are saying. The advisor is going to need to know your personal income and your long- and short-term financial goals. They will also ask you questions to determine your level of investment knowledge and experience and learn how comfortable you are with different types of investments.

Choosing the right financial advisor can be as important as choosing the right doctor. Take your time making your selection; good research will always bring big rewards. One of the best places to start your search is by asking friends for recommendations. Encourage your friends to tell you their experiences, both good and bad. Their comments will help you even, if you select someone other than the advisor they recommend.

Other possible sources of information are your lawyer, or your accountant. Many professionals have formed alliances with others in complementary professions, and therefore will be able to offer some suggestions. In the final analysis, it is up to you to make a selection that you are comfortable with and that you believe will advance your financial goals.


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