1) Is the financial advisor or their firm affiliated with a bank, insurance company or a financial institution?
The answer you are looking for is “No”. If they are, they may be under pressure to sell you in-house products “manufactured” by the institution. This could leave them with the dilemma of recommending what is best for you versus what is being promoted by the institution. Look for an advisor who is truly independent and whose firm is also independent. They are more likely to work in your best interest and give you unbiased advice and recommendations to suit your goals and risk tolerance.
2) Is the organization a CIPF member?
The answer to this question should be “Yes”. CIPF stands for Canadian Investor Protection Fund. A firm’s membership in CIPF protects your accounts for up to $1 million in loss protection for each account of a specified type should the firm become bankrupt. If the firm does not have CIPF coverage your account may be covered for as little as $5,000 regardless of how much you have invested.
3) Is the financial advisor a “full service” advisor and do their licenses allow them to recommend all products currently available?
A full service advisor will have a full “securities license” and a “level-2” life insurance license. These licenses are issued only to advisors who have passed certain industry exams. It is to your advantage to work with an advisor that has earned these designations because they have access to any type of investment products and are not limited only to those for which they are licensed to deal in. Depending on your financial goals and strategies some investment products may have significant advantages over others. Be sure to ask the advisor if they have both – a securities license and a level-2 life insurance license.
4) Is the advisor also a shareowner of the company they represent?
Advisors who own shares will have a direct line of communication to management to help influence company policy in the interest of their clients. Share ownership also demonstrates their belief in what the company stands for.
5) Will the financial advisor with whom I initially engage continue the relationship and manage my portfolio?
In dealing with a financial advisor they should prepare a financial plan that will map how to achieve your goals and make sure that your needs are protected. The person who prepares the plan should be able to implement it and track the progress on an ongoing basis. If the person responsible for your account is constantly changing there will be a loss of continuity. This can result in a lack of intimate knowledge of your portfolio which may lead to some of your goals or needs not being attained.
6) Does the advisor have at least 5 years experience, and planning designations such as the PFP or CFP?
It is advantageous to work with an advisor who can recommend suitable strategies in growing or declining markets. An advisor who has actively spent 5 or more years in the business will have had experience in a declining market. Much of your wealth can be lost by selling at the wrong time or by missing buying opportunities when they arise. Advisors with their PFP or CFP designations have passed extensive courses on financial planning and will have the qualifications to construct a proper financial plan. This may involve the expertise of an outside professional such as your accountant or lawyer. A securities license ensures the advisor keeps up with their continuing education or face suspension and fines.
7) Will the advisor prepare a detailed written financial plan for me?
This answer should always be yes. An advisor who claims the ability to advance your overall financial position must be able to prove how by setting out a plan in writing. The advisor should be able to tell you what is achievable and what is not. The plan should be organized and presented to you in writing in a way that you can clearly understand. A financial plan is far more involved that a 15 minute risk assessment followed by a recommendation of what financial products are a good buy at the time. Depending on your present circumstances and your goals it may take a few hours and several meetings to properly complete. |