Finding a Financial Advisor, Part 1
While I’m passionate about DIY investing and believe that most people can learn to invest on their own, the reality is that, for whatever reason, most Canadians don’t have the interest and/or inclination in DIY planning and would rather hire a financial advisor. As I get a number of questions on how to find a financial advisor, I decided to find out for myself how easy or difficult it is to find a “good” one.
I started my search by doing a bit of reading – the Mackenzie Financial website has a lot of useful information. In her book, Spend Smarter, Save Bigger, author Margot Bai devotes an entire chapter to getting financial help (Chapter 16, deceptively titled Easy Investing Alternatives to Grow Your Savings Faster). Preet Banerjee, himself a financial advisor, has written many posts (kinds of financial planners, selecting a financial planner) on the topic of financial advisors on his blog.
The type of financial help you can get is limited by the size of your investment accounts. Unfortunately, most financial planners will only consider accounts around $200K (or more) and until you reach that threshold, you’ll have to turn to mutual fund salespeople or banks or mutual fund companies. The best option may be investing directly with a low-fee mutual fund company that also offers consultation on portfolio construction and investment strategy such as Phillips, Hager and North (minimum $25K) or Leith Wheeler (minimum 25K).
Assuming that you satisfy the account minimums to hire a financial planner, the first thing to do is to figure out what you are looking for in an advisor. For example, I would want an advisor to develop an overall plan and strategy for our current goals – early retirement, kids’ education, insurance planning – and handle the implementation details myself. A fee-only planner, who charges on an hourly basis, would be my first choice. Others might have different requirements but whatever the degree of involvement, I would suggest that we bear ultimate responsibility over our finances.
The good news is that there are plenty of financial advisors. So numerous, in fact, that you can throw a rock from your front yard and have fairly good odds of hitting one, which is not surprising considering that the barrier to entry into the profession is fairly low. Therefore, I decided to narrow down the field and look only for advisors with a Certified Financial Planner (CFP) designation. A CFP certification doesn’t guarantee you that the planner will be competent but the odds seem to be fairly good (as I’ll explain later). You can search for certified planners through the CFP website. I found 140 planners within 5 km of my postal code and 340 within 25 km.
From the search results, I picked five names after eliminating planners who were associated with mutual fund or insurance companies. Four of them belonged to the wealth management arms of the big banks and one worked for an independent firm. In future posts, I’ll share my notes from talking with the short-listed planners.
Note: Thanks to everyone who entered in The Intelligent Portfolio giveaway. The winner, picked at random, is Tob.