Connolly and McNamara

Choosing an Investment Advisor

December 2014

Managing your investments is a complex process that can be time consuming if you are doing it on your own. Many investors choose to engage an investment advisor to oversee their investment portfolios and to assist them with recommendations pertaining to retirement, children's education, or emergency funds. As choosing the right investment advisor for you is important, we have compiled a list of questions for you to ask a potential advisor to help you determine if the fit is right for you.

What are your qualifications?

The term 'financial planner' is not a regulated term; anyone may call themselves a financial planner.

It is important to determine the professional credentials that the advisor holds. The Certified Financial Planner (CFP) credential is recognized internationally as the mark of a competent, ethical, professional financial planner. The CFP designation means that the advisor must adhere to a professional code of conduct including mandatory time spent each year on professional development.

What experience do you have?

Experience is an important consideration when choosing an advisor. It is important to know how long the advisor has been in practice, the different firms they may have been associated with, and how the experience relates to their current practice. It is also important to determine if the advisor has experience with people in similar situations as yours. For instance, an investment advisor that has experience with high net worth individuals may not be the best advisor for you if your assets are less than $250k.

What services do you offer?

The services offered by an investment advisor will vary depending on the organization and the credentials of the advisor. These may include assessing your insurance needs, trading in securities and mutual funds, preparing detailed planning documents, etc.

How will I pay for your services?

Your investment advisor should detail in writing how they will be paid for services provided. The most common method of remuneration is either commission or fee for services. Commission based remuneration may be a flat fee per transaction, a percentage of products purchased and sold, or a percentage of assets invested. A fee for service is generally based on an hourly rate for actual time spent. Both are often negotiable.

How much do you typically charge?

An investment advisor should be able to provide you with an estimate of fees based on the financial planning recommendations presented.

Could anyone besides me benefit from your recommendations?

Ask the advisor to provide in writing a description of the conflicts of interest, such as any business relationship with, or ownership in a company that supplies financial products sold by the planner or the planner's employer.

Are you regulated by any organization?

It is important to note that an investment advisor who sells financial products such as insurance, stocks, bonds and mutual funds must be registered with provincial regulatory authorities. You should enquire if they are in fact registered.

Who has custody of the assets I am invested in?

An investment advisor does not normally hold your assets, rather they are held through an investment dealer or trust company. By using a third party to hold assets, the investment advisor does not possess the assets. The third party dealer or trust company is required to provide directly to you, regular reporting of transactions made on your behalf. This is confirmation that the investment advisor is investing funds appropriately.

"Be quick to question when the only statements you are provided are from the investment advisor."

Can I have it in writing?

Ask the investment advisor to provide you with a written agreement detailing the services to be provided. Keep a copy of this document in your files.

"Most importantly, be concerned about someone who is evasive in answering your questions, refuses to provide a written agreement, or only offers proprietary investments (which are not transferrable if you need to change advisors)."

It is always a good idea to verify their professional designations and license status with the applicable organizations.

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