Q&A: Finding a financial advisor
Question: I have been reading Gordon Pape’s books The
Retirement Time Bomb and Sleep Easy Investing. Both books recommend
a financial advisor. Has Gordon published any papers or articles on how to find
a qualified financial advisor? Most advisors are with a company and have a vested
interest in selling their products. – Cheryl V.R.
Gordon Pape responds: Like everyone else, financial advisors have to eat so
they have to be paid for their services. You can do this by using a fee-for-service
advisor and paying the hourly rate, which should eliminate any potential conflict
of interest (but be sure the planner doesn’t also sell products). Or you can
use an advisor who sells stocks, mutual funds, and other securities and pay
All good advisors recognize that the key to building their business is to serve
their clients well and to make money for them. But there have been cases where
advisors have pushed people into bad investments in order to generate higher
commissions and fees for themselves. Obviously, you want to avoid such people
and you should always be on your guard against these practices.
In my book Get Control of Your Money, I included a brief section on
choosing an advisor. Here it is:
You will be constantly told to consult a financial advisor before making any
investment decision. This is good counsel, but only if you find the right advisor
— someone who is on the same wavelength, who will spend time helping you, and
who will not try to sell you securities that are not appropriate to your needs.
You will have to do some research to find such a person, and there is likely
to be some trial and error involved. </P
The best way to begin your search is to talk to family and friends. If anyone
in your circle already has an advisor that they have confidence in and are willing
to recommend, you’re more than halfway there. Otherwise, you will have
to do some scouting around. There’s a search feature on the website of
The Financial Advisors Association of Canada that may help; you’ll find
it at www.advocis.ca/content/find-ad-form.aspx
You should interview three or four prospective advisors before making a decision.
Among the questions you should ask are
* What are your professional credentials?
* Do you specialize in a particular kind of investing, such as income
* Can you provide me with references?
* Will you show me a sample report?
* Will I be dealing with you directly or with an assistant?
* How often will we communicate?
* What do you charge?
* What is your position on leveraging?
If you already have an advisor, the Canadian Securities Administrators has
a checklist for assessing his or her performance. You’ll find it at www.csa-acvm.ca/html_CSA/news/financial_advisor_07.htm.
The website also has suggestions for choosing the right advisor.
Do you have a money question you’d like to ask Gordon Pape? Please visit this page to find out how. Then check our website every week to see if it was chosen for a response. Sorry, we cannot send personal answers.