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Veteran wealth manager Betty Tomsett says a face-to-face meeting with a prospective financial adviser is a good place to start. (Fred Lum/The Globe and Mail/Fred Lum/The Globe and Mail)
Veteran wealth manager Betty Tomsett says a face-to-face meeting with a prospective financial adviser is a good place to start. (Fred Lum/The Globe and Mail/Fred Lum/The Globe and Mail)

Portfolio Strategy

The art of evaluating your investment adviser Add to ...

A veteran investment adviser’s take on her peers is that one-quarter aren’t doing the job right.

“Seventy-five per cent of the people in the industry are well educated, professional in their manner and in the services they offer,” Betty Tomsett said. “It’s the other 25 per cent of the industry that just drives me crazy.”

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What’s the problem? “The service levels, the experience and the knowledge,” said Ms. Tomsett, director of wealth management at Richardson GMP Ltd., and an adviser since 1986. In a portfolio strategy column last October, Ms. Tomsett offered a blunt insider’s take on Related contenthow to interview a prospective adviser . Here, she offers her views on how to tell if your adviser is one of the good ones or not.

Ms. Tomsett suggests asking these questions:

Does my adviser keep in touch with me?

Ideally, there should be a full review of your portfolio at least once a year, with additional contact depending on market conditions. “In a bull market, advisers can be a little less frequent in their communications because things are going well,” she said. “When markets become more challenging, then greater communication is required.”

Ms. Tomsett’s advice to clients who haven’t heard from their advisers in more than a year: Call to set up an appointment. “Some clients are hesitant to get on the phone to arrange a meeting,” she said. “They feel that the responsibility is on the adviser to arrange it, which it is. But in markets like we’re seeing today, advisers can get caught up in the day-to-day events. The important thing is that the meeting happens.”

If you’re wondering how to phrase your meeting request, Ms. Tomsett suggests the direct approach. For example, you might say you’re feeling uncomfortable about your investments and want a meeting to review them.

Do I believe my adviser is well informed about the markets and economic events?

Before the next meeting with your adviser, prepare some questions designed to generate a discussion of market conditions. “Ask the adviser, how are you feeling about the markets or what’s generating the changes in the market? Whatever the adviser says, it gives some insight into the depth of knowledge that they have.”

A more practical approach is to say you’re going to be renewing your mortgage soon – where does your adviser see interest rates going? Grade your adviser’s answers by how clear, thorough and well reasoned they are. Also, note whether the adviser wallows in technical jargon or offers a wishy-washy view that suggests he or she doesn’t know enough to take a strong position.

Do I have confidence in my adviser’s ability to guide my investments?

The performance of your investments is a major consideration, but Ms. Tomsett warns that clients have to be realistic. If the stock market is down 15 per cent and your diversified portfolio fell 2 per cent, then your adviser has done well enough.

Another issue to examine is whether your adviser revisits your risk profile from time to time. Bear markets have a way of waking investors to the realization that they’re not as tolerant of risk as they thought they were several years ago, when the markets were steadily rising.

One indicator that an adviser is doing a thorough job is if he or she insists on drawing up an investment policy statement for you. These statements formalize a client’s risk profile and investment objectives, and Ms. Tomsett said they are becoming standard for new accounts.

Is the relationship with my adviser professional and one of mutual respect?

Let’s start with the meetings you have with your adviser. Are you being rushed, or is your adviser showing an interest in you by asking questions? “Probing questions suggest [an adviser]cares, that they respect the relationship and that they want to ensure the client is comfortable and happy,” Ms. Tomsett said. The meeting should be with your adviser and not one of his or her associates.

Ms. Tomsett’s acid test for a client’s compatibility with an adviser: “After you’ve had a conversation with your adviser, do you feel good when you get off the phone? If you don’t, you have to ask yourself what you’re uncomfortable with. Were you not being heard? Was the adviser in any way being dismissive?”

You may come out of the process of evaluating your adviser thinking you’re in a good situation. If not, you must choose between trying to fix the relationship or ending it and finding another adviser. If you’re not ready to give up and you believe your grievances to be fair and realistic, then schedule a meeting with your adviser to raise your concerns. “It’s important to go face to face with the adviser,” Ms. Tomsett said. “If the adviser doesn’t know, he can’t fix it.”

If you’re feeling intimidated, she suggests bringing a spouse or friend for moral support and drafting an informal script laying out what you want to say. A second-best approach is to send an e-mail that lays out your concerns. However you reach out to your adviser, indicate that you feel the relationship isn’t working and then cite examples. Wrap up by asking your adviser what can be done to repair things.

Ms. Tomsett said there are two possible outcomes from a discussion like this – your adviser may work with you to improve things, or she may politely suggest you find another adviser who is better suited to your needs. Yes, advisers do sometimes fire their clients.

Prefer to just end the relationship with your adviser rather than trying to work things out? It’s actually quite painless. Just find a new adviser and ask to have your account transferred. “The old adviser does know the account is being closed out, but there’s no involvement needed by the client.”



__________

An agenda for a meeting with your adviser



Adviser-client meetings should happen at least once a year, says veteran wealth manager Betty Tomsett. Here's what she suggests as topics for discussion:



*Any material changes in your personal or financial life



*The performance of your investments



*A full portfolio analysis



*A reassessment of your risk profile and asset mix



*A discussion of any additional services required, such as retirement analysis, insurance needs, charitable giving



*Your adviser's view on the markets

Follow on Twitter: @rcarrick

 
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