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retirement and rrsps

Preet Banerjee, a personal finance expert, is author of the new book, Stop Over-Thinking Your Money! Follow him on Twitter at @preetbanerjee.

With the RRSP deadline of March 3 looming, many Canadians will be meeting with their financial advisers, or perhaps looking for one. But how do you know you have the right one?

The question is more nuanced than finding the right family doctor or lawyer. To be either of those, the practitioner must have completed many years of specific full-time schooling. But to call yourself a financial adviser in Canada, you could have little more than a few weeks of self-study – or you could have decades of education, experience and deep planning expertise under your belt.

To a fair extent, there is a correlation between how much you already have invested and what your options are. An adviser who is trusted with millions of dollars invested for an average client isn't going to give a newbie investor the time of day.

Still, good advisers can be found, regardless of your financial position. Some advisers may specialize in working with people who are starting from scratch. Their value may be greatest as the person who motivates you to start taking your finances more seriously. They may not have the cheapest products, or deepest tax-planning expertise, but these are not top-priority issues for beginner investors.

For example, high-fee mutual funds sold with a deferred sales charge are often criticized. But someone who is encouraged to start investing $50 per month might pay the equivalent of $10 in fund fees in the first year. If they collapsed their investment at the end of the first year, they would face a redemption fee of about $30. The relative fees might be high, but in absolute terms, the cost is still low.

Had they instead put money into a DIY rock-bottom-cost index fund, they would pay closer to $1 in fees for that first year. You might argue that setting up a DIY couch-potato portfolio is relatively easy, but most people simply won't do it on their own. So, the question becomes: What value am I getting for the fees I'm paying?

A newer investor with little money isn't paying much and, realistically, has to rein in his expectations of what he can get.

For example, you're not going to get hours of number crunching and meetings to discuss complex estate issues, but you don't need it, either.

An adviser who encourages saving money and sets up your basic insurance policies is about as good as you can expect or need.

But once you've been saving for a while, the fees start adding up. Accordingly, so should your scrutiny. You're worth more to advisers, and conversely, you can start being pickier.

At any asset level, you will want an adviser who puts an emphasis on financial planning. The investment aspect is important, but the goal of retirement is a multi-decade process.

Between now and then, there are many more financial goals, or risks, that need to be addressed. Guidance or implementation of most of the following are more important now: disaster-proofing your finances with life and disability insurance, emergency funds, budgeting and debt management, education savings for children, tax planning and more.

There is no perfect checklist out there that will guarantee you will end up with the right planner. But a few simple guidelines can help. Do they focus on planning as opposed to product sales? And are they transparent and willing to discuss fees and costs? The certified financial planner (CFP) designation should be high on your list. A good sense of candour, as opposed to a song and dance routine and slick sales stories, is also desirable.

Finally, take the time to interview multiple candidates. Over a lifetime, some people will pay more in financial fees than they spend on renovations. Interviewing three contractors and checking references seems like common sense, but it's rare to do the same when working with financial advisers. There are lots of great advisers out there. It's worth the time to find them because there are a lot of duds too.

Follow Preet Banerjee on Twitter at @preetbanerjee