The financial planning support an advisor provides can help investors reach their goals. Because an advisor can play such an important role, it’s critical to choose the right person. The answers to these eight questions can help you select an effective partner who can guide your preparations for a financially secure future.
1. Could you tell me a little about yourself?
It’s perfectly acceptable to ask advisors to talk about themselves. After all, you’ll be sharing plenty of information with them about your hopes and dreams. This ice-breaker can help you decide if an advisor is someone you feel comfortable with.
2. What kinds of clients do you work with?
Asking advisors what their ideal client looks like is a great way to see if you’re going to work well together. Can you recognize yourself in the advisor’s description? Does it sound like you have similar personal and financial philosophies?
3. How many other clients do you have?
Does the advisor work with a small group of a few dozen clients and know everything about each one of them, or a large group of hundreds of clients managed with the help of a team of other advisors? There are pros and cons either way, but getting a sense of an advisor’s business model will help you predict how much attention you’re likely to get.
4. Can you tell me about a time you helped a client?
Good advisors should be able to tell you a story about a goal they helped a client reach – for example, getting out of debt, financing a child’s education or buying a dream home. Excellent advisors who have their clients’ best interests at heart will have many detailed success stories to share with you.
5. How are you registered?
In order to buy and sell investments, advisors must register with the Canadian Securities Administrators; its website makes it easy to do a National Registration Search lists any disciplinary actions against advisors. In addition, investment advisors generally belong to either the Investment Industry Regulatory Organization of Canada or Mutual Fund Dealers Association of Canada. It’s also worth asking advisors if there is protection for investors if their firm becomes insolvent – usually offered through either the Canada Investor Protection Fund or MFDA Investor Protection Corporation.
6. How are you compensated?
This should be something that is easy for any reputable advisor to answer. Today’s advisors work within different fee and commission structures, so there’s not necessarily one right answer. But if advisors ever offer a service free of charge, it’s worth asking how they earn their revenue so you can figure out if they have any conflicts of interest.
7. How will my information be protected?
Cybersecurity is a serious issue, so ask what measures are in place to protect your personal information both within the advisor’s office and when it flows into any software and information systems the advisor uses. It’s important to know your data will be safe and who takes responsibility for keeping it secure.
8. How will decision-making work?
You should clarify with your advisor the process for account and investment decision making. This can vary between advisors and account type.
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Please note that only advisors who are qualified and approved financial planners can provide financial planning advise. Please check with your advisor.