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.

You can read Parts 2 and 3 of this series here and here.

This article has 23 comments

  1. Hi CC

    I think you will be in hot water for some of the (true) comments in your post; people don’t like to hear that there is a ‘low barrier to entry’ in their ‘profession’. I agree that investors that use FP’s should only use those that charge hourly fees – paying ongoing fees years after the initial advice is ridiculous, and will have a massive impact on the return achieved. Also, I have found that most advisors tend to focus on ‘average’ results, e.g. in retirement planning they will use the ‘average’ life expectancy and the ‘average’ return of asset classes to estimate the required investment – this is obviously not a good way to plan for the worst case scenario. I find it surprising that people who have managed to diligently save 25k (or more) don’t have the interest or confidence to manage their own money, but in such a case making use of an FP is certainly better than plodding along aimlessly.

  2. Thanks for the mention CC – looking forward to the rest of the series!

  3. Canadian Capitalist

    NN: Personally, I found it more difficult to evaluate the advisors I talked to compared to the effort involved in learning to invest. Even if you found an advisor who you think will be a good fit, you are still in a caveat emptor situation.

    It is hard to find fee-only advisors. Even the advisors who said they do fee-only planning mentioned that only a few clients opt for it. Since the demand is low, the supply is limited as well.

    Since I believe that staying disciplined is the hardest part of being an investor, an advisor could potentially add value. Of course, you wouldn’t want a performance chaser as an advisor but how do you tell if your advisor is one. It comes back to having some knowledge of investing. Then, if you did have that knowledge, you’d want to do most of the investing yourself!

  4. There are so many different types of financial planners, it’s really wise to decide what you are going for in advance and then try to pick one who is well certified, with a lot of experience in your area. Eliminating the mutual fund specialists was smart imo. ETF’s have much lower fees.

    I would also look for someone who is willing to give you access to their own research. After all, it’s your money, and you deserve more than a passing explanation as to why it’s going one place vs. another based on their advice.

  5. Perhaps I am stealing your thunder for a future posting (and I apologize if I do) but why would you put your life savings in the hands of a person you find on the internet, CFP or no CFP?

    Word of mouth referral is, by far, the best way to find any professional. Perhaps you can write a post on what to ask for when you seek a word of mouth referral- its just not “is this IA good?”

  6. TMW … I agree with you with respect to referrals. I think that a great place to start would be with your accountant. They have just completed tax reporting season and in doing so would have been in contact with a lot of advisors. While it is still fresh in their minds, they can tell you who are the ones providing top quality service, advice and returns.

    Ask the accountant about the quality of the reporting the advisor provides. Also ask how quickly he/she responds to requests from the accountant. Are lost documents, duplicates, errors etc. dealt with quickly? Remember, the same level of service that the investment advisor provides should extend to the other advisors (lawyer, accountant, banker) that the investor deals with.

    Since most investors will be meeting face to face with their advisors annually for a detailed review (with more regular contact done by phone or email), I don’t think that proximity to your house should near the top of your screening process. Besides, if you ask, most advisors are happy to come to you for that annual meeting.

    If you are going to be using the internet as part of your search process, take a quick look at the advisor’s website before calling. It might help save you some time.

  7. One option for those of you out there who are pharmacists or physicians is MD Management or their division, Stratos Wealth Management. For pharmacists like myself, Stratos Wealth Management offers comprehensive fee-based financial planning at $250 a year for full investment advice and $900 a year for full financial/estate planning. Those are the minimums as it’s based on a percentage of assets under management, but there is no minimum, and you don’t even need to buy your funds through them if you still pay the yearly fee for the advice. I am considering them right now and the guy I am talking with is big into index funds and ETFs which is a positive for me. As well, he is a CFP, RFP, and a Certified General Accountant. He has been there for 21 years, which sounds great. I am considering him after feeling like my guy at Edward Jones, who although I like very much, isn’t so much a financial advisor as he is a mutual fund salesperson. Also, if you are a pharmacist AND a member of the Canadian Pharmacists Association, you have access to Stratos Wealth with a hefty discount on their fees. Check it out.

  8. When I said “there is no minimum” I meant no minimum initial portfolio. Like I said, you don’t even need to buy your funds through them.

  9. I just don’t see how anyone with an interest in managing his/her own money, and a high school education, can consider paying another for regular investment advise. There is a proliferation of information that is available at no cost – I seriously doubt that any particular FP could conduct research that would give an advantage to his/her clients, and the calculations necessary to estimate the appropriate capital allocation are so easy? For smaller portfolios the options are rather limited in any event, and as your portfolio grow I think the occasional services of a good tax consultant may be more beneficial.

  10. Canadian Capitalist

    First, I should clarify that I’m not looking to hire a planner. I’m checking out what is available out there. It’s a good point that referrals from friends and relatives should be added to list of potential candidates. I also agree that proximity doesn’t matter. I point that out to show that there are plenty of advisors available.

    Tony: That’s a great tip. Let us know how it works out for you.

    NN: I believe, like you do, that investment advice isn’t worth paying for. Asset allocation is so important that if an investor can’t or won’t do it themselves (it is amazing how many, otherwise educated and smart people, have no interest in managing their portfolio. For someone with a $200K portfolio learning to manage their portfolio could save $4K per year!), they should be willing to pay someone to get it done. Then there are other areas like insurance, wills and estates and taxes that *may* need expert advice.

  11. I agree that if all your advisor does is sell you mutual funds you likely could do as well yourself with etf/index funds. That being said, a true advisor will be able to assist his clients with all aspects of their finances. This includes risk management (insurance), tax efficient investment options, budgeting/credit counseling, estate planning, tax analysis etc. That’s what I do and my clients appreciate the service I provide.

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  15. I have read most of the comments here to date.

    We live in a world where everyone is becoming more and more specialized. As tax laws and business regulations grow more complex daily, and as various aspects of modern living become more complex as well. Living has become more complicated of late. Higher levels of divorce and more double income families, some with one pay cheque and one business owner, and the growing demographic numbers of “empty nesters” wanting to nurture their nest egg into their old age, etc., ad infinitim…

    I think the biggest reason one would hire a financial planner is that “you don’t know what you don’t know”. It is that simple.

    I am a business owner, with five kids, a working wife, and many pursuits other than work, and I already spend more than enough hours trying to understand the applicable regulations and processes that are required to run my business to turn a profit without going to debtors prison or tax jail. I don’t have time to also be a financial planner.

    What I can be is an active participant between my CMA (Certified Management Accountant) and my CFP (Certified Financial Planner).

    My approach is based on the fact that my CMA would be the expert on tax laws, my CFP the expert on what investment approach will work best for me in the long term. Together, all the bases are covered.

    And I still have time to be an expert daddy, with a little time to be an expert yachtsman the odd weekend.

    -George Biggar

  16. I think you can find an advisor on the internet and many have done just that. However, it is very important to do you due diligence. Just because a financial planner has a CFP does not make him competent. Ask for references.

  17. I am having a great deal of difficulty with Etrade Canada/ScotiaiTRADE in that they have double reported portions of my income for the taxation years 2005 through 2008. I have asked for a clarification in order to clear up the confusion with CRA and I am getting huge resistance. Has anyone else had this problem?

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  20. I agree with Galen. Always ask for references – good financial advisors will be happy about this. It will be an opportunity for them to showcase their happy clients. Good advisors will have clients over the long term.

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