Good financial advice can be hard to find, but does every Canadian really need to hire their own financial planner?
Everyone has some form of assets and liabilities, but it's the complexity of their personal balance sheet that should be a determining factor, says Moshe Milevsky, an associate professor in finance at the Schulich School of Business at York University.
If your financial situation is as simple as putting aside money for retirement and aggressively paying off your mortgage, there's not necessarily a need to bring in another party, he said.
However, for many Canadians, going solo on your financial future probably isn't worth the risk, suggested Eric Kirzner, a professor of finance at the Rotman School of Management in Toronto.
"I do like the idea of avoiding an adviser, but I'm still in the old-fashioned camp of leaving that for a person who knows enough about finance," he said.
In an ideal world, every Canadian would take a college or university course to broaden their knowledge of personal finance, Kirzner said.
"They would learn how to pick less-expensive investment products that do the same things as other products," he said.
"They'd avoid certain types of investments that financial advisers love to sell which are more in their interest than their client's interest."
For example, some exchange-traded funds cost less to operate than mutual funds that do the same thing, Kirzner said. Some structured products with guarantees can be replicated with stocks and treasury bills that have a combined lower cost structure.
However, getting Canadians enthused about their finances is an uphill battle.
"A lot of people spend less time choosing a financial adviser than they do researching the purchase of a new vehicle," said Greg Pollock, president and CEO of Advocis, an organization that represents Canadian financial advisers and planners.
"That new vehicle loses value when you drive it off the lot. When you're choosing a financial adviser you're choosing someone to assist you with your financial management for maybe the next 20 to 30 years."
Beginning the hunt for an adviser can be one of the hardest steps, but a little preparation can go a long way.
Consider that anyone can label themselves a financial planner, which means that paying attention to their credentials is essential. Not all advisers are alike and, depending on their certification, they can offer a variety of services.
One of the most important designations to look for is CFP, or certified financial planner, listed after their name which means they adhere to the international standards that include continuing education to maintain their certification.
Other designations recommended by Pollock include the Chartered Life Underwriter (CLU) for estate planning, Certified Health Insurance Specialist (CHS) and the Chartered Financial Consultant (CFC) which has advanced training in wealth accumulation and retirement planning.
Advocis hosts a handy resource for Canadians looking to get some traction in their hunt for an adviser: www.ouradviser.ca. The website covers many of the basic questions that can get the wheels rolling, and provides search engine to gather a list of advisers in your area.
Once you've selected a few candidates, Pollock suggests writing a list of questions with your specific needs in mind.
Ask the advisers about their investment philosophies, how they perceive your financial needs, and from there gauge whether you feel they're attuned to your expectations. If their answers don't feel right to you, look for a different person to work with.
"You should ask, as a client, how your financial adviser is paid," Pollock said. "Not only that, it should be disclosed in writing."
Financial advisers generally make their money through either commissions or hourly service rates. Both have their pros and cons, and depending on how much money you're planning to invest, you might find that one of the options better suits your goals.
For example, an adviser's flat fee may run $500 to $1,000 to craft a financial plan or they may charge an hourly rate. However, if you're only investing $10,000 it would probably make more sense to pay an annual fee of one per cent or commission-based fees. If your assets are much higher then a flat fee might sound like a more reasonable approach.
While commission-based advisers are commonplace, some have levelled criticism on their approach, suggesting they come to their clients with a bias for certain investment products with a higher payout.
Pollock suggests that isn't necessarily the case, and that a good financial planner will take a more professional approach.
"There is room for a range of advisers out there," he said.