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Adviser Secrets

Is your adviser a good one? Add to ...

Financial advisers take a lot of heat in the media. However, the industry wouldn't exist if there wasn't a need among Canadians for help and advice to sort through the financial wilderness.

You may be wondering whether your financial adviser is really a good one? In today's column, I will help you to answer that question.

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Here are five signs that you have a good financial adviser:

1) Your adviser takes the time to explain things and educate you to the level that you desire.

Finances can be complicated. While some people may not even want to understand what you are investing in or the details of a product you are committing to, most investors want some degree of knowledge. People get frustrated when they feel they weren't told key details about fees, risks and the implications of changing their minds. They also feel frustrated when they are made to feel too awkward or intimidated to even ask a question.

Your financial adviser should make you feel comfortable, so that you feel welcome to ask the questions that will help you understand the key issues. That is an important first sign of a good adviser.

2) They sometimes offer advice that doesn't benefit them financially.

This isn't always easy to figure out, but essentially it comes down to whether advisers are willing to offer advice that will not make them more money. For example, an investment adviser might recommend leaving some money in a high-interest savings account rather than putting it into the market if you have a major purchase coming up within a year. Or it could be an insurance adviser recommending a lesser amount of insurance or advising against certain coverage that you asked about. It could be a lender recommending you borrow a lower amount than you are qualified for.

These are the truest signs that an adviser is putting your interests first. If you find this in your advisers, they are worth holding on to.



3) Your adviser has an ability to offer you the full range of financial products.

When it comes to investments, you want to be with someone who can offer more than just mutual funds or segregated funds - especially if they are all from one company. This is often determined more by the firm you choose than the adviser. If you have more than $150,000 to invest, you want to be with someone who at least has the ability to offer ETFs (exchange-traded funds), individual stocks, bonds and preferred shares. In the insurance world, you want someone who has access to many different insurance companies. In the mortgage world, you want someone who has access to many different lenders.

You stand the best chance of finding good performance and good rates if you are able to shop the market for the best products out there. When your options are limited, the odds of getting the best outcome are very low.

4) Your adviser can intelligently help you with a broad range of financial questions, including pensions, taxes, insurance and estate issues.

People's lives are complicated. You may be focused on investments at one point, but if you have a health plan at work, you may want advice on what to opt for. If you lose your job, you may need advice on severance packages, tax implications, or what pension plan to choose.

If you have a personal tax question, an insurance policy that you don't understand, or want to be sure that your will is set up properly, can your financial adviser help you?

You deserve an adviser who has the sophistication to deal with the various questions that you have to deal with. If they can't answer the questions, they should be able to get the answer or have partners who have that expertise. It simply doesn't make sense to pay full fees for an investment adviser who can't help you beyond selling a product.

5) Your adviser believes in a financial discipline and is comfortable disagreeing with your opinion in a respectful manner.

Everyone deserves to be heard, but if you are paying for expertise, you should on occasion be challenged in your opinion. An adviser who resembles a waiter and simply says, "May I take your order?" is not providing advice. If your adviser agrees with every suggestion you have, then you should simply be doing it yourself.

A good adviser will temper your enthusiasm in good times and keep you from jumping off the ledge in bad times. They will not be afraid to tell you what they think you should do. It doesn't mean that they ignore you and your ideas, but that they remind you of your bigger goals and help to ensure that you stay with a plan.

I have not mentioned investment performance on this list for a reason. Some of the best advisers can suffer from poor investment performance over the short term, and some of the worst can look very good at times. In my opinion, a good financial adviser is one to keep for the long term regardless of short-term investment performance. If they fit within the five criteria above, then over the long term, they will almost assuredly lead you to a better financial future.

If you can't see your current financial adviser in most of the five scenarios on this list, then it is time to start looking for a better one. They do exist.

Next week, we will look at how to go about finding one.



Ted Rechtshaffen is president and CEO of TriDelta Financial Partners, a firm that provides independent financial planning advice. He was vice-president of business strategy at a major Canadian brokerage firm and found that the interests of the client were often not aligned with the interests of the adviser or the interests of the company.

This is part 11 in a series that looks inside the financial services industry at what advisers tell their clients and - more importantly - what they don't.





Other articles in Ted Rechtshaffen's Adviser Secrets series:

  • Part 6: Do you want to protect your lender or your family?
  • Part 7: You can be too rich
  • Part 8: Your company pension plan: Demand a great deal
  • Part 9: How taxes affect your financial health
  • Part 10: How much can you afford to give?


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