A good financial planner is immeasurably valuable. They provide punctual, relevant investment advice and help you to achieve financial independence. They are there to guide you as you build additional income and met long-term financial goals.
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The article explores the services offered by financial advisors and planners, how can you benefit from their services and how are they compensated. It wraps up with tips on how to find the right professional for you.
Financial advisors: what do I need to know?
- A financial advisor can work for a financial institution or be independent.
- A financial advisor's job is to help you make the most of your investments.
- Financial advisors are usually paid either by the institution that employs them or through commissions on the transactions they make.
- Most major banks and many insurers in Canada offer financial advisory services to their clients.
What is the role of a financial advisor?
A financial advisor plays a number of important roles for clients who seek their advice. They provide:
- Assistance to individuals and professionals to manage their financial assets
- Recommendations and advice on financial investments or good portfolio management
- Daily monitoring of the financial markets and the evolution of the main investment products
- Purchases and sales of financial products on behalf of its clients.
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How to find the best financial advisor
Depending on the type of assistance you need, there are different ways to find a financial advisor, including:
- Banks and credit unions: they generally have qualified employees capable of steering you toward investments that suit your investor profile. These advisors are trained to help you buy different assets and set aside savings for the future.
- Brokers and mutual fund dealers: These are people who help you buy and sell assets such as stocks, bonds or mutual funds. They can also help you open an investment or savings plan.
- Insurance companies: Insurance companies also often have employees who are licensed to trade various investment products including mutual funds, segregated funds or annuities on behalf of their clients.
- Independent financial planning companies and consultants: Finally, there are also independent companies and consultants who are licensed to give advice and buy and sell financial products. Some of these advisors charge you a fee and others are paid directly by the companies through which you purchase the products.
Who are the best bank financial advisors?
The best financial advisor is someone with whom you are comfortable working, who listens well to your needs and answers your questions.
Below is a non-exhaustive list of the most popular financial advisors in Canada:
- BMO financial advisors: BMO Financial Group is a financial institution with a long history in the marketplace. It is one of the main banks to provide its clients with professional financial advisors.
- CIBC financial advisors: Canadian Imperial Bank of Commerce (CIBC) was founded in 1961. CIBC prides itself on having a history of helping people, businesses and communities in Canada and around the world with their financial and insurance needs.
- Edward Jones financial advisors: Across Canada and the United States, Edward Jones Investments is on leading financial services firm. It serves 8 million clients and employes more than 19,000 financial advisors.
- National Bank financial advisors: National Bank of Canada offers comprehensive financial services to individuals, including a recognized financial advisor service.
- RBC financial advisors: The Royal Bank of Canada is the largest financial services company in Canada. It offers a wide range of financial services and extentive financial advising.
- Scotiabank financial advisors: The Bank of Nova Scotia is Canada's third largest bank. Its financial advisors work with you to develop a financial plan that evolves with you.
- Sun Life financial advisors: While it is best know for life insurance, Sun Life Financial is a major player in investment management. It's financial advisors will help you balance today's wants with tomorrow's needs.
- TD financial advisors: TD Bank is present in both Canada and the United States, offers the services of professional financial planners and wealth management advisors.
However, as mentioned above, there are many independent financial advisors, sometimes specialized, who are just as qualified.
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How do I get a financial advisor at my bank?
Would you like to have a financial advisor working at your existing bank to guide and assist you with your investments? Your bank may offer this service!
Generally, banks that offer financial investment services have specialized and professional investment advisors on staff. To start working with one of their financial advisors, you can generally make a request:
- By e-mail
- By phone
- By making an appointment online
- By making an appointment in a branch
Financial advisor vs. financial planner: what are the differences?
The terms financial advisor and financial planner are widely used throughout Canada and can refer to a number of levels of expertise, qualifications and accreditations. Because of this, the terms are often used and understood interchangeably. Legally speaking, outside the province of Quebec, the profession is unregulated. This means that in most of Canada anyone can call themselves a financial advisor or planner.
With that said, you can think of a financial advisor as a person who manages money for you, possibly in the short term. A financial planner, on the other hand, connotes a long-term relationship with someone who will help you obtain long-term financial goals.
When you find a financial advisor you want to work with, ask them about their qualifications and certifications. The best financial planners, and those with a fiduciary duty, are more likely to use the titles Certified Financial Planner, Personal Financial Planner or Registered Financial Planner. They will have a relevant educational background and certifications to share with you.
In Quebec, the title financial planner is reserved exclusively for people who have received training in this profession. These individuals have several obligations, including:
- To have obtained a certificate from the AMF or Autorité des Marchés Financiers
- Be a member of a professional association with which the AMF has concluded an agreement.
Why use a financial advisor?
When you do not have enough knowledge to manage your investments independently it makes good sense to use a financial advisor to guide your investments.
A qualified financial advisor or planner will help you draw up a detailed financial plan to guide you toward the best investments. This plan will take into account:
- An assessment of your current financial situation
- Defining your personal needs and goals
- Providing advice on the financial products that are right for you
- Regularly reviewing and updating your investments
Choosing the right advisor for the help you need is essential so always make sure that the advisor you choose is able to guide you through the specific investments you are looking for.
The main advantages of using a financial advisor are:
- Investments are chosen for you according to your profile and financial goals
- Regular re-evaluation and balancing of your portfolio to maintain its performance
- Returns that are often higher than with self-directed investments.
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How to choose a financial advisor?
Choosing a financial advisor can be tricky, especially since you need to consider not only the advisor, but also the bank or insurance broker he or she works with.
Here are some tips for choosing the right financial advisor for you:
- Personalized advice: your financial advisor should be able to adapt to your investor profile and objectives to your specific needs and offer you a personalized service.
- A clear and transparent strategy: A good financial advisor must be able to set up a clear strategy while being able to make your investments evolve over time.
- Regular support: your advisor must also regularly review your financial situation with you and accompany you over time and through major life changes.
- Tech-savvy: Financial experts have numerous, innovative technology at their fingertips. A good advisor knows how to use them to access great information and the most profitable investments for you.
- An adapted management method: your advisor's decisions must be explained in a rational way and based on real strategies and not on personal biases.
- Transparent fees: management fees can be unclear because they are included in the brokerage fees of the bank or broker for whom he works. Be sure to ask about the cost of services up front.
Before choosing a financial advisor, learn about the different savings vehicles and investment assets available by reading our guide to investing in Canada.
How much does a financial advisor cost?
The cost of working with a financial advisor varies greatly depending on the type of services offered. Here are some costs that could apply:
- A commission on the purchase of shares or other financial securities
- Fees on the assets managed by the advisor, a percentage corresponding to the management fees is applied.
- Finally, if you need a custom financial plan by your advisor, an hourly rate is often available.
Before working with an advisor ask about the type of services offered, the cost of these services and how the advisor is paid.
Remember that while the vast majority of financial advisors are good and honest professionals, there can be some bad actors. If an advisor is paid on commission, he or she may encourage you to invest in a certain way in order to earn more income. Conversely, a financial advisor who works for a bank or broker in exchange for a salary may encourage you to buy products and services from the organization he or she works for.
Is it better to choose an independent financial advisor?
You can choose between an independent advisor and one who works for a particular bank or broker. There can be significant differences between these two types of advisors in terms of products and services available.
The first difference is how advisors are paid. Advisors working for banks or brokers are paid a fixed salary, sometimes with bonuses on sales, while the independent advisor, a fee-based financial advisor, is almost always paid through commissions or fees.
It is understandable that the independent advisor will have a vested interest in making sales to generate his or her own income, whereas the salary of the advisor working for an institution will not change even if he or she makes no sales. Similarly, financial advisors have to build their own network (often linked to good investment performance recommendations), so they have a strong interest in maximizing the returns on investments made.
However, an independent advisor will often have access to the majority of products offered on the market but only according to their respective titles:
- A financial security advisor will offer you insurance products or segregated funds
- A mutual fund advisor will offer you mostly mutual funds
- A financial planner will not allow the sale of financial products.
All advisors, whether independent or not, have access to a limited product offering. While the independent advisor has access to all products, he or she does not always take the time to study them all and tends to focus on the products he or she knows best or the products that pay the most.
What questions should I ask a financial advisor?
Before choosing a financial advisor, there are several questions you will want to ask to make sure they meet your needs. Here are some of the most important questions to ask:
- What are their qualifications? Find out beforehand what qualifications they have to offer advice or sell investment product. Ask what credentials they hold (Certified Financial Planner, Chartered Financial Analyst, etc).
- Is the advisor registered with a regulatory body or is the organization they work for registered? Check to see if the advisor or their firm is registered with a provincial securities regulator or other such organization.
- What experience does the advisor have? Ask your advisor how long he or she has been in business and what experience he or she has. You can also ask them how long they have been with the company and if they have experience with specific products.
- What products and services do they offer? Ask the advisor if they are able to offer several types of products such as stocks, bonds, mutual funds or exchange-traded funds and if they specialize in certain types of products. Find out if they offer only one company's products or other products as well.
- Who are their current and regular clients? Ask if the advisor focuses on one type of client or if they have other clients with the similiar profiles to you. You can also find out how long they have been working with their clients and what results they have been able to achieve for them.
- What is their investment strategy? Ask the advisor if he or she buys and holds more secure products with long-term returns or if he or she implements a more frequent, or even daily, investment strategy to make faster gains, but with more risk.
- How are they compensated? Does the advisor's compensation consist of a salary or do they get paid exclusively through commissions or fees? Find out if the advisor charges a fee or commission every time you buy or sell a product. Also find out if they charge a flat fee based on an hourly rate, an annual rate or a percentage of the assets.
- How do they want to help you? Finally, ask the advisor how he or she plans to support you, how often you will be in contact, or how often he or she will work on your investments. Make sure that the advisor can be reached if you need advice and that he or she will be your only point of contact.
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