Finding fee-based planners

Zoomer | August 21st, 2008

Many Canadians are feeling uneasy about their investments these days and some
would like to get an unbiased second opinion about their holdings. Unfortunately,
the financial planning industry does not make it easy for them.

Every month, I receive several questions from readers wanting to know where
they can get objective advice from an expert who doesn’t have a vested interest
in selling products. Here’s one example from Alberta reader Linda F.:

“Are there financial planners who, for a fee (not commission), will review
your financial status and develop a plan for the future? I have my RRSP with
RBC Dominion Securities but get the feeling my investments are being made because
of the commissions and are not necessarily to my advantage. The last five investments
lost money immediately and continue to fall. It also cost me money to pull out
of the investments. I realize no one can read the future but am I not paying
that commission to have them make adjustments based on the present conditions?
Obviously, I am not impressed with the return on my investments this year.”

The short answer to Linda’s question is yes, of course there are fee-for-service
financial planners who will perform a complete portfolio analysis. They typically
charge by the hour although you may be able to negotiate an all-in fee for your
review, although it won’t be cheap. For example, Toronto-based Second Opinion
Investor Services, which accepts clients from across the country, charges a
flat $1,800 for a comprehensive portfolio review. However, if the portfolio
is large and complex, that may be cheaper than paying their hourly rate of $250.

Unfortunately, it is not easy to find such fee-for-service planners. Advocis.ca,
which is the website of The Financial Advisors Association of Canada, offers
a “Find an Advisor” page at http://www.advocis.ca/content/find-ad-form.aspx
however it does not allow you to screen for fee-based advisors only.

The same frustrating situation applies when you use the “Find a Planner”
feature on the website of the Financial
Planners Standards Council . When I asked a Council spokesperson about this,
she admitted that finding a fee-for-service planner is “challenging”.
The reason for this, she explained, is because the Council “can’t favour
one type of planner over another.”

Obviously, there are some internal politics at work here but the end result
is very annoying for investors. For example, a random search in the Toronto
area produced more than 1,100 entries within a 25-kilometre radius. You can
click on each name for more information and there you’ll find details about
their practice. Look under the heading “products licensed to sell”.
If the line below says “none”, the person is a fee-for-service planner.
Of course, it would be simple to write a small piece of code that would bring
up only those names on demand but the Council can’t, or won’t, do it.

The website of the Institute of Advanced Financial Planners (IAFP) does allow
you to search for fee-based planners in your area, although only those with
an RFP (registered financial planner) designation are included. The link is
http://www.iafp.ca/findaplanner_detailed.php.
It brings up a formidable-looking screen that appears at first glance to require
a lot of data entry. However, all you really have to do is choose a city or
region and then click on “100% Fee” in the “Compensation”
box. If you want to fine-tune the search, use some of the other boxes, such
as “Specialization”.

The best source I could find for specific information on fee-for-service planners
was an article by Duncan Hood that was published on the Canadian Business Online
website in March of this year. He did some exhaustive research into the subject
and has compiled a list of dozens of fee-for-service planners from across the
country. Each entry includes such useful details as their areas of specialization,
hourly rate, academic and professional qualifications, areas served, address,
e-mail, website, and phone number.

You may also find a minimum account size however you should take that with
a grain of salt. Many fee-for-service planners will work with accounts of any
size if you are willing to pay their hourly rate. Call and ask. The link for
the article is here.

Finally, you may also find some ads for fee-for-service planners in the Yellow
Pages. Look under “Financial Planning Consultants”. But make sure
you understand all the costs and know exactly what you’ll receive in return
before you make any commitment.

This article originally appeared in the Internet Wealth Builder,
a weekly e-mail newsletter that provides timely financial advice from some of
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