Compliance obligations of investment dealers and their individual financial advisers (i.e. registered salespeople) have ramped up over the past decade.Brad Wynnyk
People ask me all the time if the fees they pay their investment advisers are fair. I'd rather address whether they're getting fair value for the fees they pay. Here are four factors to look in gauging whether you're getting good value or overpaying;
1.) Do you have an investment policy statement?
An IPS, as they call it in the advice business, is a document that sets out your needs and objectives as an investor. Among the things an IPS address are risk tolerance, asset mix, rate of return goals and time horizon. Having these details spelled out provides some assurance that your adviser is exactly in tune with your needs.
2.) Do you have a financial plan?
These plans can be brief or encyclopedic, but they should all result from an exploratory process where the adviser guides you through a lengthy conversation about your current financial situation and where you want to end up. The finished financial plan is the guide that gets you to your destination – it should set out what you've accumulated to date, how much you need to save and how you're going to invest going forward. There may also be a discussion of the changes you'll need to make in your saving and investing as you age.
3.) Are you and your adviser using the financial plan?
The advice business understands that there is going to be increased scrutiny on fees, and that providing financial planning is a way to justify those fees. The question to ask about your financial plan: Was it done simply so your adviser could tick off a box on her must-do list for new clients, or is it treated like a map that has to be pulled out on a continuing basis so you know where you're going?
4.) Is your adviser a listener and an explainer?
The low-value adviser talks at you in the language of the financial industry – stocks are equities, bonds are fixed income, losing money is volatility. The high-value adviser asks a lot of questions, considers the answers and relates to you in a way that adds to your understanding and confidence. You won't walk out of a high-value adviser's office thinking of five terms you have to google when you get home.
Rob Carrick