Why work with a financial advisor
Managing your investments can be difficult. You may not be comfortable investing on your own. A professional financial advisor or planner can help you.
They can create a detailed financial plan that includes:
- assessing your current situation
- determining your present and future goals and needs
- giving advice on the financial products that are right for you
- reviewing and updating your investments periodically
Choosing the right advisor depends on what help you need. If you need specialized advice, look for an advisor with expertise in that area.
Meet with several potential advisors. Choose one that you're confident has the experience, expertise and credentials to help you reach your financial goals.
Who qualifies as a financial advisor
The terms financial advisor and financial planner are used broadly. These terms don’t always mean that a person has specific qualifications, expertise or certifications. In certain provinces, anyone can call themselves a financial advisor or planner.
What sets some advisors apart from others are education, training, experience and qualifications. There are many designations for advisors. For financial planners, there are 3 common designations: Certified, Personal and Registered Financial Planner. There are different requirements for each designation. Ask your financial advisor about their education. This will help you determine whether they have specialized training to help you reach your financial goals.
Use this glossary to learn more about the different financial certifications.
Differences between a financial advisor and a financial planner
Afinancial advisoris a general term that can apply to anybody who helps you manage your money. This could include an employee of your financial institution, a stockbroker or an insurance agent.
Afinancial planneris a type of advisor who helps you create a plan to reach your long-term financial goals.
Financial planners may offer you a variety of services, such as:
- help you create a budget
- identify ways you can save money on your taxes
- help you plan your retirement
- provide estate planning advice
Certain financial planners limit the services they offer to specific areas.
Check if a financial advisor is registered
By law, sellers of mutual funds, stocks and bonds must complete training and be registered with a provincial or territorial securities regulator.
Use the National Registration Search to check whether an advisor is registered.
Check if there has been any disciplinary action against a financial advisor
You can check for complaints or disciplinary actions through the following organizations:
- Investment Industry Regulatory Organization of Canada (IIROC)
- Canadian Securities Administrators (CSA)
- Mutual Fund Dealers Association of Canada (MFDA)
- Better Business Bureau
- Autorité des marchés financiers (Quebec province)
Paying your financial advisor
You pay financial advisors in different ways, depending on the type of service they provide.
For example, you may pay:
- an hourly fee if they help you create a financial plan
- a commission or a trading fee if they buy a stock for you
- a percentage based on the value of the assets they manage for you, also called management expense ratio
If you plan on working with an advisor, it's important to know:
- what kind of services they provide
- the cost of the services
- how you pay for the services
While most advisors aim to give good advice, some may be influenced by outside factors. For example, advisors paid by commission have an incentive to encourage you to invest where they will earn more. Those on salary may have an incentive to promote the products and services their employers offer.
Where to find a financial advisor
Where to find a financial advisor will depend on the type of advice you need.
Banks, credit unions and caisses populaires
These institutions have staff who can help you understand and buy certain types of investments. For example, term deposits, guaranteed investment certificates (GICs) and mutual funds.
They can also help you open or contribute to a registered savings plan. For example, a registered retirement savings plan (RRSP) or a Tax-Free Savings Account (TFSA).
Stockbrokers and mutual fund dealers
These are licensed individuals who can help you buy or sell investments such as stocks, bonds or mutual funds.
They can also help you open or contribute to a registered savings plan.
Insurance companies
These companies have employees licensed to sell investment products such as mutual funds, segregated funds and annuities. Insurance companies also offer various types of insurance products.
Independent financial planning companies or consultants
These companies or consultants can offer advice or may be registered to sell financial products. Some charge you a fee. Others are paid by the companies whose products you buy.
Questions to ask a financial advisor
Ask questions to help you decide whether a financial advisor has the right qualifications. You also want to determine if they would be a good fit to help you with your investments. Take notes and compare the responses of all the advisors you meet. Take your time, you don’t need to make a decision right away.
Ask the financial advisors about the following:
- their education and professional experience
- their certification or designation
- how long the firm they work for has been in business
- how long they have been with the firm
- if they’re registered with a securities regulator
- what products and services they offer
- how they’ll help you reach your goals
- if they’re paid by salary, commission or other fees
- how often you'll meet
- how they’ll inform and update you
- references from previous clients
- how they decide on appropriate investments for their clients
- are they licensed to sell any other products
- have they ever been disciplined by a regulator
- have there been any restrictions, terms or conditions placed on their registration approval
- are they currently under investigation by securities regulators in Canada
What type of information will my financial advisor ask for
Your financial advisor may ask for the following information to create a financial plan:
- age
- total annual income
- estimated net worth
- if you have any dependents
- monthly expenses
- amount of income tax you pay
- investment knowledge and experience
- investment goals
- when you’ll need access to money you’ve invested
- risk tolerance
Resources on financial advisors
Advisors belong to professional groups in their industry.
The following industry groups can be good places to start searching for more information on the industry:
- FP Canada
- Financial Advisors Association of Canada (Advocis)
- Institute of Advanced Financial Planners (IAFP)
- Investment Industry Regulatory Organization of Canada (IIROC)
- Mutual Fund Dealers Association of Canada (MFDA)
- Portfolio Management Association of Canada (PMAC)
Related links
- The basics of investing
- Setting savings and investment goals
- Savings and investments: know your rights
- Financial Goal Calculator
