Hello everyone, and welcome to the Retiring Canada Podcast. In today’s episode, we're going to discuss 10 questions to ask when hiring an advisor.

Specifically, we are going to cover:

- The first place most people start when choosing an advisor

- The risk of not doing your own due diligence

- The 10 questions to ask when hiring a new advisor or evaluating your current relationship

- The key takeaway from this list

- A few action items for you to consider

When most people hire a financial professional, they ask around. They speak with their friends and family and ask, “Who helps with your money?” Most often, the people they seek guidance from are the ones they believe to have the financial stuff figured out.

And this makes sense. If the people you trust seem to trust this financial professional, why shouldn’t you as well?

Admittedly, in the financial service profession, this is how most advisors attract new clients. If you asked your current advisor how they get clients, I am certain they will tell you referrals are the key driver of their new business.

If you're lucky, you might even get the cheesy sales pitch on the “three ways they make money.” If you have heard it before, you know what I am talking about.

At the end of the day, the reason why referrals work, not only for the advisor but also for the prospective client, is the transfer of trust.

Trust is the foundation of a lasting relationship, especially when that person manages your livelihood.

But spoiler alert, just because that advisor is a nice guy or nice girl doesn’t mean their services are a good fit for you and your family. And that trusted friend of yours who you think is really smart in their respective field who gave you a referral, doesn't have a clue how the financial system works.

Why am I saying all this? Because YOU are the only one responsible for you.

I have heard countless stories of people who were referred to a quote-unquote advisor, and it ended up being a bad fit, not as advertised, and at worst, losing nearly everything in a real estate scam.

Now, I know that is on the extreme side of the equation, but I think it highlights the importance of doing your own due diligence. I still believe that referrals and testimonials are great social proof that the person you are considering entrusting with your nest egg is normal and that people like them. But at the end of the day, if you get bad advice, invest in a risky investment you don’t understand, or don’t receive quality education and advice from your advisor, the person who referred you won’t be there to bail you out.

Do your own due diligence.

So today, I'm going to give you a peek behind the curtains of any firm you may be considering entrusting with your financial future and arm you with the questions you should be asking.

Number 1: Are your recommendations truly in my best interest?

Imagine going to your doctor with a concern about your heart, and before running any tests, the doctor tried to sell you a pacemaker. The doctor then explained that you needed to act today before prices went up. Later, you learned that the doctor was paid extra to promote this particular brand of pacemaker. While absurd for the medical profession, this scenario closely resembles much of the investment world.

At the very least, you should be working with a CFP professional who is bound by a Standard of Professional Responsibility and/or a Portfolio Manager who has a fiduciary duty to act in their clients' best interests.

Having these designations and titles goes beyond letters on a page and translates into a higher standard of care and responsibility that puts the client's best interest above that of the advisor.

Further to this point, I believe that Canadians need to look past the big banks and publicly traded wealth management firms for independent firms who act outside of the sphere of shareholder interests.

Now admittedly, I was at one of these big-box firms for over 10 years before leaving for independence, so I have seen both sides of the equation and stand to benefit if Canadians seek independent advice.

Now, I am not suggesting that the advice received from these banks and large wealth management firms isn’t good advice. I am suggesting, however, that these large publicly traded companies are built on a foundation of shareholders first, not clients. So, while the advisor you work with may be doing their very best for you, and I believe that, behind the scenes, the board of directors is looking for ways to maximize profits. Often at the expense of... you guessed it, the client.

Here is an easy test to see if shareholders come before you. Have a look at the top left of your investment statement and note the institution you work with. Now look down at the investments. Do the first few letters of your investment start with the institution's name?

I know this first question is incendiary and might make you feel a bit uncomfortable about your current situation, but these are the facts, and you should know what you are getting yourself into.

Question number 2: How often will I hear from you?

Setting expectations is crucial in any relationship, but especially in a relationship where someone is getting paid for a service.

Our firm utilizes a client service standards document that clearly outlines what can be expected when working with us. Our client service standards outline meeting expectations, contact frequency, response time, planning commitments, specialized services, and more. We also staff our team with multiple advisors and support staff that are well equipped to promptly handle any client request, urgent or otherwise.

When you meet with a prospective advisor, ask them for this document. It will go a long way in managing your expectations and gaining a deeper understanding of the value you will be receiving in return for the fees that you pay.

Next question to ask: Will your recommendations be focused on one area, or comprehensive in nature? In other words, will we need to find another advisor for advice in other areas?

Now, there is nothing inherently wrong with working with an investment-only firm or insurance-only advisor if that's what you are looking for, but at the very least you should know this before starting a professional relationship.

For our clients, we serve as a single point of contact for all their financial needs. As CERTIFIED FINANCIAL PLANNER® professionals, this includes coordinating every aspect of their financial needs. Each of our clients experiences a comprehensive approach that will help them get organized, simplify their finances, and create a sustainable retirement portfolio and income for life.

As needed, we will also coordinate with your accountants, lawyers, and other professionals.

If your desire is to have a comprehensive approach, be sure to ask the question.

Question number 4: How many clients do you serve and how does their situation compare to mine?

This question will help give you a sense of the advisor's business structure, their workload, and who they primarily work with.

In my professional opinion, service and expectations may begin to waver once an advisor has over 100 client households. If the advisor is savvy, uses technology well, and has sufficient support staff, this number could rise.

You will also gain an understanding of the types of clients they work with and if they are similar to you.

The majority of our clients are retired or close to it. So, we tend to focus most of our energy on the investment, tax, income, and legal issues related to retirement.

Question number 5: Do you have the knowledge and experience necessary to successfully navigate the complicated financial planning and tax world to achieve my financial goals?

This one will give you some insight into their education and experience. At the very least, if you are looking for a qualified advisor to manage your complete financial livelihood, you should seek the advice of a Certified Financial Planner. This individual should have a strong understanding of all areas of personal finance and can help put the pieces of the puzzle together to help you meet and exceed your financial goals.

If you are looking for someone with an enhanced knowledge of investments, the Chartered Financial Analyst and Chartered Investment Manager designations are strong designations to look for in a prospective advisor with a particular strength in investment management.

Question number 6: Where do you keep my money and how can I see it?

This is an important one to ask, especially if you are working with a smaller independent firm. You’ll want to be sure that your investments are held at a reputable custodian.

If the money is being held directly at the firm you are working with, and not with a custodian, you will want to take extra care, as this is a higher risk arrangement.

Our independent firm utilizes National Bank Independent Network, which oversees over $305 billion for over 1 million investors across Canada.

Question number 7: Will you help me solve any and all financial problems I may encounter?

This question builds off of number 5 to dig a bit deeper into what services are offered and what support structure the advisor has in place.

I think it's important here to note that a strong support system goes a long way for the advisor you work with.

No one knows everything, even your professional advisor. So inquire about their professional network, the other advisors or mentors on their team, and their access to advanced financial planning resources for out-of-scope scenarios.

If your advisor says, “I don’t know – but let me find out for you,” this is a good thing.

If your advisor is overconfident and can't spot their own weaknesses or gaps in knowledge, there is a chance bad advice can be given in order to save face.

Question number 8: Do you work as a team or as a solo practice?

It is extremely important to work with an advisor you trust and feel comfortable with. After all, he or she is going to know everything about your financial situation.

But if that advisor works alone, what happens when he or she retires? What happens if he or she passes away unexpectedly or just outright leaves the business? All that work you’ve done together to build a financial plan based on your goals and dreams will evaporate, and you will be back to square one.

If you are already retired, this could be very stressful, not knowing where to turn.

If you are working with a standalone advisor, I think it’s worth asking the question, what is your succession plan?

And I don't mean, who will they simply hand you off to. I am saying, what structures have they built to ease the transition for you to work with this new advisor?

It may seem a bit intrusive asking the advisor about how their business functions, but how they choose to build or not build their business succession, among other systems, will have a direct impact on you and your finances.

Question number 9: What will be my total investment expense, how much will you be compensated, and where can I see this in writing?

Understanding your fees is critically important to the long-term success of your financial goals. In Episode 25 of the podcast, I discuss in detail advisory fees and the value you should be receiving in return.

It only makes sense to hire a financial advisor, or any professional, if the services they provide exceed the fees being charged. In other words, the time and effort saved, plus the tax savings and potentially increased investment returns need to exceed the annual fee you pay.

Furthermore, the underlying investments you own will have their own expense, separate from the advisory fee in most cases, unless you are buying embedded mutual funds.

Be sure to ask the potential advisor for a detailed breakdown of their fees, potential investment fees, and their investment philosophy. You can check ours by visiting Fundamentalwealth.ca.

Lastly, number 10: Do you have a clearly defined process for becoming a client?

Understanding the process for becoming a client should be easy to follow and not guesswork on the part of the person seeking advice.

We pride ourselves on our process that offers massive value before entrusting us with a penny of your nest egg.

If you want to learn more, I encourage you to click the link in the description.

Now, I know there are other questions out there that could be added to this list, but I think this list equips you with the tools needed to evaluate a potential relationship with our firm or any other firm you may be considering.

If you are interested in a physical copy of this list, along with more details on our firm's specific answers, I encourage you to download the guide. The link is in the description.

I think the key takeaway from today's episode is to ask business-related questions to your advisors, which will give you insight into how they operate their business, unearth potential conflicts of interest, gaps in education or experience, and potential risks you normally wouldn't think about, like the future retirement of your advisor.

Okay, so that will do it for today! Here are your action items for today's episode:

First off, if you have an advisor you’re not particularly satisfied with, for whatever reason, in your next meeting ask a few of these questions. It’s not to put them on the spot or make them feel uncomfortable, it’s to ensure you and your family's financial future is secure.

Next, do your own research and due diligence if you are looking for a new advisor relationship. Getting a referral from a friend or family member is a great start, but at the end of the day, the advisor you choose to hire falls on your shoulders.

Lastly, the public perception of financial advisors is polarizing at best, and often they get cast in a very negative light whenever a news headline or hidden camera expose gets released. Couple this with the lack of consistent regulation across Canada regarding who can call themselves a financial planner or financial advisor, and you have a recipe for an industry that is extremely difficult for a consumer to navigate safely.

Use this podcast and guide as a starting point to help you sift through the noise. If you are happy with your advisor and feel they are doing a fantastic job for you, let them know. It's the greatest compliment an advisor can receive and will surely make their day.

Okay, that does it for today’s episode.

For the links and resources discussed, please check out the link in the show notes or visit retiringcanada.ca.

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And hey, when it comes to your retirement, don’t take chances.

Make a plan so YOU can retire with confidence.

All comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy, facts and figures are not guaranteed, the content is not intended to be a substitute for professional investing or tax advice. Please seek advice from your accountant regarding anything raised in the content of the podcast regarding your Individual tax situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment planning.