An effective relationship with a financial advisor requires that you share your goals, dreams, fears - and a lot of very personal financial information. For that reason, trust and compatibility are essential starting points.
"You have to feel very comfortable sharing information and working with that person," says Michael Walker, vice president, RBC Branch Investments. "Financial planning is not just about the money or the numbers. It really has to start with what is important to the individual."
Tom Hamza, president of the Investor Education Fund, says it's an important decision that a lot of people make without actually comparing the various options available to them.
"Don't go with the first person you see. Interview various candidates: understand not just what kind of people they are, but what their qualifications are, what sort of resources they have, how they would take you through a financial plan, and what their investment strategy would be," he advises.
A good way to get to know a financial advisor better, he says, it to have them look at your portfolio or situation and begin to make recommendations. "Having them do a little bit of work is often a good way to find out what they're like. Comparison shop for qualifications, strategies and style."
To put together a list of potential candidates, Robert McCullagh, vice-chair of Advocis, the Financial Advisors Association of Canada, suggests asking friends, lawyers and accountants you might work with, community associations you belong to, and family and colleagues for recommendations.
"At your workplace, pension providers or group insurance providers may provide access to a financial advisor. Professional associations such as Advocis and the Financial Planners Standards Council provide tools on their websites to find advisors located in your area, as well as comprehensive information on questions to ask when choosing a financial advisor."
Success is rarely achieved by accident, so it is important that the advisor you choose be able to article a disciplined approach to the planning process, says Mr. Walker.
"They should be able to describe to you how you will work together to understand and meet your goals. Here at RBC, for example, we use a five-step approach, focusing on the primary areas of life: family, health, home, lifestyle, work, mind and spirit, legacy and, if applicable, business. Once we understand what is important to you in those areas, we can work through the numbers and put a financial plan in place to help you achieve those goals. "
Depending on the strength of the referral, says Mr. McCullagh, it may be wise to check with the advisor's professional association to ensure they are licensed and are members in good standing. If the advisor is independent, errors and omissions insurance can be important if an error in advice occurs.
Working with an organization you trust can also provide peace of mind, says Mr. Walker, something that was vividly illustrated in 2007 when news emerged of the failures of a slate of U.S. financial institutions. "You want to make sure you're working with a company with a solid financial reputation and prudent financial and risk management practices. Do they keep their own house in order?"
In the final analysis, the most important questions in deciding on an advisor, says Mr. Walker, are simply, "'Do I trust them? Has this person taken the time to understand my short- and long-term financial goals and designed a plan that's right for me?' Whatever happens in the market or in your life, it's important to have a plan in place so you can feel comfortable you're going to achieve your goals and dreams, whether it's retirement, owning a home, a child's education. It's never too late to develop that plan."
A relationship with a trusted professional can also be an important element in succeeding as an investor.
"With what's gone on in the investment markets, you can get caught up in what's happening minute by minute and lose perspective on what you're working to achieve in your long-term plan. Working with a professional and having a plan in place helps you deal with those ups and downs," says Mr. Walker.
Choose an advisor wisely, and sooner than later
It is always the right time to seek out professional financial advice, says Robert McCullagh, vice-chair of Advocis, the Financial Advisors Association of Canada. "Whenever you're ready to focus on building success in your financial life, the right advisor can help you achieve your goals."
"It's almost like a job interview, and there are important questions to ask," says Michael Walker, vice president, RBC Branch Investments. "What kind of accreditation and licensing do they have? What kind of continuing education do they participate in? Will they provide a plan? How often will you meet? How are they compensated?"
For a list of questions to ask of a potential advisor or for more information on choosing the right advisor, visit InvestorEd.ca, FPSCCanada.org, and/or Advocis.ca. To find advisors in your area, visit FPSCCanada.org, and/or Advocis.ca.