Skip to main content
self-directed investing

The key is to working with a financial advisor is finding the right fit, experts say.Getty Images

When you talk to a financial advisor, what kind of advice should you get?

Even many do-it-yourself and robo-advisor services offer clients the option of consulting an advisor as an add-on. There's still something to be said for talking to a human sometimes, and good advice can help your portfolio work better.

Whether it's a full advisory relationship or an occasional consultation, what should you expect?

"Personally, I think 'advice' is a generic term that can mean anything an advisor or a client wants it to, or thinks it does," says Markus Muhs, a full-service investment advisor in Edmonton with Canaccord Genuity Wealth Management.

He recommends that people who seek a full-service advisor – if they choose that route – should look for financial planning and portfolio management.

"These are two specific functions that an advisor may do. Most do both, but concentrate more on one than the other, and this is where sometimes there can be a mismatch between advisor and client. Good communication needs to happen between an advisor and an investor to ensure they're on the same page," Mr. Muhs says.

"Many clients who want an advisor are looking for holistic financial planning," says Neville Joanes, chief investment officer at WealthBar Financial Services Inc., a Vancouver-based robo-advisor that also lets clients consult a live advisor.

"They might have questions around retirement projections or estate planning. For instance, is now the time to sell a family home in retirement?" These are the kinds of questions that – at least for now – artificial intelligence can't solve.

Advisors should be able to offer suggestions on more sophisticated issues, Mr. Joanes adds.

"Maybe the client is looking for particular solutions, like a diversified portfolio of exchange-traded funds, a clean-tech portfolio or maybe something more exclusive with the potential for a greater return. An advisor should be able to show them the different options."

A robo-advisor can easily handle "things like assessing risk tolerance, selecting an appropriate portfolio or generating retirement projections. But then our financial advisor focuses on providing specific insights," Mr. Joanes says.

What if you come to your advisor with an investment idea that the advisor considers, well, stupid?

"I think an advisor should go as far as they can go in being candid, even if it means risking the client relationship," Mr. Muhs says. "Ultimately, such advice is core to what an advisor does, and if the client still doesn't want to follow it, then they might just not be good, salvageable clients."

Clients should also look at the credentials of advisors to determine what kind of advice they're qualified to give. "Ideally an investor would be well served to seek out an advisor who has a proficiency in both financial planning and portfolio management."

The most widely recognized financial planning designation is the certified financial planner (CFP), offered by the Financial Planning Standards Council, Mr. Muhs says.

This certification "demonstrates that an advisor has not only passed a comprehensive examination process but also adheres to continuing education requirements and professional standards."

An additional designation called chartered investment manager (CIM) signifies that the advisor has proficiency in managing investments and may obtain a portfolio manager title.

Portfolio managers can handle discretionary portfolio management – you give them your money and they make the decisions. They're held to the highest regulatory standards in Canada, Mr. Muhs says.

"The key is to find the right fit. There is no one size that fits everyone," says Darren Coleman, author of a book called Recalculating and portfolio manager at Coleman Wealth, Raymond James Ltd. in Toronto.

"First, assess the level of service and advice you may need. Do you just need some advice on investments that fit you, or would you like your portfolio to be fully managed and tailored?

"Are you looking just for an investment advice relationship, or would you benefit from a more robust plan that includes building roadmaps to achieve key financial goals in life?" Mr. Coleman says.

"Also reflect on your current level of wealth and savings. If you're just starting out or starting over, then focusing on a few key fundamentals is all that you need. If you have a more complicated situation, then getting professional advice can make a huge difference to you."

Good advice comes with a price. "In all cases, costs matter. Don't go with the cheapest and also don't spend more than you need," Mr. Coleman adds.

Make sure both you and your advisor understand the relationship, says Sandra Foster, financial author and president of Headspring Consulting Inc. in Toronto.

"After talking with the advisor, be prepared to enter into an agreement that outlines the advisor's role, how often you will meet, what you should expect, your own role, as well as the cost of the advice or planning package you have selected."