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Most financial advisers make their living through commissions on the sale of investments, which means they face a conflict: Whether to recommend what offers the highest compensation or what's best for the client.

There other concerns about whether the financial industry has its clients' best interests at heart. Many advisers are too busy to give all their clients proper attention. High mutual fund fees undermine the gains of investors who already face low returns because they're investing conservatively for retirement.

Want to retire early?

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There's wide agreement that Canadians will need help to make the right financial decisions about retirement, but no common front on how to provide that help. Industry people believe financial literacy is a key.

How can you work with an adviser to achieve your retirement goals? What should you look for when choosing an adviser? Are there signs that indicate that your adviser might not be a good fit? Do you need an adviser, anyway?

The Globe's personal finance columnist Rob Carrick took your questions.

Rob Carrick has been writing about personal finance, business and economics for close to 20 years. He joined The Globe and Mail in late 1996 as an investment reporter and has been personal finance columnist since November 1998. He is the author or co-author of four investing books, including Rob Carrick's Guide to What's Good, Bad and Downright Awful in Canadian Investments Today, which will be published this December.

Questions and answers from the discussion

Brian: Is there a difference between a "financial advisor" and a "retirement planner"? I'm in my early-40s and looking for assistance on preparing for retirement. I'm not necessarily interested in meeting with someone to tell me what I should be investing in, but rather someone who will take a wholistic look at my household income, savings, pension(s), etc. and see how we can best meet our retirement goals.

Rob Carrick: Brian, what you're looking for is what every financial planner/adviser should be offering. Planning first, investments second. That's in the ideal world. In the real world, selling products takes precedence for many, many advisers. So much so that there may be no planning at all in some cases. Here's what I suggest you do: ask friends, business contacts, relatives and co-workers if they have an adviser who they can recommend not for the investment returns they've achieved, but rather for the comprehensive financial planning they've done. Failing that, stop in and talk to advisers in your neighbourhood or around your place of work. Ask them what type of financial planning they offer and see what they say. If the conversation turns to investments, walk away. You're looking for someone who will interview you and then produce a comprehensive financial plan. One thing you should know is that it's quite possible you will have to pay for this plan, either through an hourly or flat rate. If not, the cost of the plan may be built into commissions charged on any investments you end up buying. Mention you want a financial plan, and ask how much it will cost.

Rob from Ottawa: My experience with the front-line staff of the Big Six banks has been that they will push their own line of investment products and nothing else. And the average Canadian does not have over $500,000 in an investment portfolio to qualify for advice with the back-room 'wealth management' staff at the same banks. I seem to be part of a growing trend which relies on discount brokerage firms (BMO InvestorLine, TD Waterhouse, etc) and on-line retirement planning and asset allocation tools to manage my own destiny. I need to be convince that a retirement planner can offer me more. Thanks much.

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Rob Carrick: Hey, homie. Maybe it's time we all stopped relying on the banks as our default provider of financial services. What are banks good at? Making money for shareholders by selling products to clients. If you deal with front-line bank staff for financial products, you get what they've been told to push. And don't go giving too much credit to the back-room wealth management geniuses at the banks (assume you're talking here about their private client and full-service brokerage divisions). These people may have nicer offices, but they work on the same principle as the front line staff, which is to say they are expected to generate revenue. Lots of people are going the self-directed route these days. I am working on my annual ranking of online brokers and have been talking to the people who run these firms. Business is way, way up. A major reason: dissatisfaction with conventional investment advisers. I don't know how many people will stick it out as DIY investors and how many will realize they need help. I guess it all comes down to whether DIY types can generate the returns they need to reach their financial goals. If you don't know how much you need or how much you're making, that's a sign an adviser might be of use.

Mitch P: What should I look for in a planner/advisor? Which is better suited to put together a long term plan?

Rob Carrick: Mitch, right off the top I think we have to clarify some terms. Oh, wait. That's impossible because advisers themselves have done nothing to clarify what it is they do exactly. There are investment advisers out there, financial planners, financial consultants, wealth advisers and blah, blah, blah. There is zero standardization of terms, and zero commonality on the services provided. Where does this leave you, the client? In a position where you have to interview any prospective adviser to see what services he or she offers. Now, let's talk credentials. I think a CFP, or certified financial planner, is a good brand. CFPs should be pretty well trained and they should provide a full financial plan for you. There are many other credentials and I wrote a column ( not too long ago that rounded them up and explained them. Here's a chart that went with the column:

Emphasis on Financial Planning

  • CFP Certified Financial Planner: becoming the standard for financial planning
  • PFP Personal Financial Planner: focused on banking, less stringent than others
  • RFP Registered Financial Planner: less common, but well-established
  • CLU Chartered Life Underwriter: insurance-focused financial advice focused on estate planning
  • Ch.P. Chartered Professional Strategic Wealth: financial planning for high-net-worth clients
  • FMA Financial Management Adviser: similar to, and superceded by, the Ch.P.

Emphasis on Managing Investments

  • CFA Chartered Financial Analyst: one of the most demanding financial industry designations
  • CIM Canadian Investment Manager: high-end portfolio management


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  • FCSI Fellow of the Cdn Securities Institute: a senior designation stressing continuing education

Leena: is it too late to rescue/make retirement plans at age 70 while still working full time? How would one go about making retirement/investment plans at this late date?

Rob Carrick: Leena, it is never too late. Retirement planning is the same process, no matter what age you are. The only difference for you is that you're in a different stage of life than most people asking this question. First thing you need to do is find an adviser. I've covered off some ways you can do this already, but I feel most comfortable in telling you to try for recommendations from friends, contacts etc. I know I've just slagged the banks, but if you're looking to expedite your search for advice you can ask to speak to one of their in-branch planners. These people have proper training -- moreso than frontline branch staff -- and should be able to help you decide how much you have and how much you'll need to live on once you stop working. That's the heart of the matter.

Barb: I am 63 with a locked in pension fund worth about 78000 and plan to convert it to a LRIF in Jan 2010. I plan to withdraw the 50% allowed and roll most into my unused RRSP room, leaving me with 15000 plus my part time earnings to live on. I have substantial other RRSP's and GIC's for retirement purposes. I do not plan to take my Canada Pension until 65. Am I doing the right thing?

Rob Carrick: Barb, I would like to be able to give you a big, resounding Yes or No, but I can't. I'm not a financial adviser, just a humble personal finance columnist who doesn't presume to offer personalized financial guidance to people. The fact that you've thrown this question at me suggests that you don't have an adviser. it also tells me you should probably see one. What I suggest is that you try to find a fee-only adviser who will charge you an hourly or flat rate to evaluate your situation. Ask around -- more and more advisers are doing this, although the overall number is still small.

David from Ottawa: Hi Rob, Every adviser seems to claim that he is focused on what is best for clients. How can you ensure that your adviser walks the talk? Everyone pretends that they are adviser, but they immediately start selling products.

Rob Carrick: Hi David, the very term adviser suggests advice, even while many advisers provide zero guidance other than a list of mutual funds to buy. How do you find the true adviser who puts clients first? I just suggested to Barb that she seek out a fee-only planner -- one who charges an hourly or flat fee for financial advice and doesn't make money from selling investments. This is the way of the future, and a topic I'm going to be writing about shortly. That said, there are very few fee-only planners in the world, which means you have to make your way through the ranks of commission-based advisers and fee-based advisers (charging 1-2% of your assets per year). The way to find out how client-focused an adviser will be is to interview him or her carefully before you sign on as a client. Here are some guidelines that I included in a column I wrote a while ago on how to find an adviser that puts you first:

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  • 1) Is comfortable with speaking to clients about fees and commissions: Evasiveness on this topic is a warning signal.
  • 2) Has good communications skills: Talks in everyday language and provides clear explanations for what little jargon gets used.
  • 3) Asks questions: Displays curiosity and interest about you as a person.
  • 4) Makes time for clients: Replies promptly to inquiries and doesn't make clients feel like they're imposing on a busy person.

Ian: I happen to work at the investment arm one of the Big Six Banks and one of the things that I take pride in, is the ability to offer the right products for the right clients, regardless of whether or not those products belong to my bank. As for revenue generating, I always disclose my fees.

Rob Carrick: Ian, glad to hear from you, and congrats on taking pride in doing right by clients. Now, how do we clone you? Seriously -- I think we need to instill this attitude among all advisers. Only when this happens will providing financial advice become a true profession.

Andrew: Hello, My partner and I are in our late 20s and newlyweds. I am doing a phd and he is working. He earns a good annual income and I have a very generous scholarship, which pays just a bit less than he does, but I don't pay tax on any of it. We don't have any debt, nor any major assets (just savings). As it stands, we just use term deposits or high interest savings account, as well as TFSA's, as our saving vehicle. We are financial novices and are wondering what steps we can take right now to save for our future (retirement, house, and the odd holiday overseas). We aren't sure where to start to get information- whether a financial advisor is useful for us at this time, whether to start putting money into RRSP's or focus on deposit for a house, as well as what percentage of our money we should be saving and how to diversify. We are wondering if you can please offer advice to us on how to get information to get on the right track for our future. Thanks!

Rob Carrick: Andrew, I'm happy to see a question like this. It sometimes seems to me that there's a view of financial planning as something for the 40 or 50+ set. In truth, starting your planning in your 20s is smart because it puts you on an easier path than if you pick this stuff up late. If you and your partner are financial novices, you can either build up some financial knowledge yourselves or find an adviser. He or she can help you map out where you are, financially, where you want to go and what you need to do to get there. I should add that the advice industry is biased against young people like you who don't have a lot of money to invest. You'll need to find an adviser who takes the long view of you, your partner and your collective earning potential. Suggestion: see if your parents or relatives have a good adviser who might take you on.

Sandra: I recently inherited a portfolio of stocks. I felt the stockbroker had done a good job managing the stocks prior to inheriting them so I have just continued to leave them with him. He lives in another city. I am nearing retirement and would like to have some advice on whether I will have enough to live on with my various sources of income. Does a stockbroker do that or do I need a financial adviser?

Rob Carrick: Sandra, stockbroker is a term we don't see much anymore in the financial industry, even though it describes what many so-called advisers actually are. Here's an idea: consult a financial planner about your various sources of income and whether they will be enough and leave your stocks with your broker. If the planner suggests some changes in your investments, tell the broker and have her or him work with you to put them into effect.. You already have investment advice and you seem happy with it. Now, you need financial planning help.

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A reader: When interviewing or meeting a financial adviser for the first time, what top three questions would you ask them?

Rob Carrick: Beauty question.

  • 1.) What services do you provide: Sure, investments. But what about a financial plan...if there is a plan, will it be written down...what about debt management, tax and estate planning, insurance, charitable giving...?
  • 2.) How are you compensated: commissions through the sale of investments, a fee of 1-2 per cent of assets per year, or flat/hourly fees...there's no perfect're primarily looking for frank, open disclosure.
  • 3.) What are your credentials? don't settle for a bunch of acronyms...ask what they mean and what the adviser had to do to earn them
  • bonus question: Ask for references. Any reputable adviser will have them ready to go.

Gerry Hawkins: What would you suggest as a guideline for how many is too many with holdings ( funds / bonds/ ETFs/... ) in a RRSP portfolio?

Rob Carrick: Gerry, I'm trying to focus here on questions related to dealing with adviser, but I'm answering your query because it calls to mind a sign of a bad adviser. First off, there's no right answer to the question of how many holdings there should be in an RRSP portfolio. As few as three or four can make sense if you use mutual funds or ETFs, and there can also be a couple of dozen holdings if you own individual stocks. Bad advisers can't make up their mind what they want to do, they're afraid to miss out of things, they're too susceptible to new, unproven products and they've never seen a trend they don't want to jump on. For this reason, they may stuff one or even two dozen mutual funds in a client's account. That's too many.

Alex: Hi Rob, can you summarize what parts or sections you would expect to see in a comprehensive financial plan. Thank you.

Rob Carrick: Alex, a financial plan should start with your current financial situation, including investments, home and any other assets, as well as debt, taxes paid. Then, it should list your goals and expectations, ie: send my kids to university, retire at age 65 with a certain lifestyle, leave a set amount of money to my kids when I die. The other part of the plan is the map that shows you how to reach your goals. It should look at managing debt and taxes and, of course, how much you need to invest (and the rates of return you'll be needing to meet your goals). One key point: your plan should evolve, just as your life does. Good advisers re-visit the plan regularly.

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Dirk: My comment is to do with the notion that there's a conflict of interest between financial advisers and their clients. I think it's more accurate to say that there can be a conflict of interest if the adviser merely considers the short-term. I would suggest that if an adviser thinks in terms of developing and cultivating their clients' wealth, rather than in terms of what those clients are worth in commission right now, then there is no conflict of interest: increasing a client's wealth benefits them as that is more wealth to direct towards the client's goals, and increasing a client's wealth benefits the adviser as the client has more assets available for investment. The problem comes, as I see it, in thinking that a financial planner is selling, either a product (investments, a financial plan) or a service (financial planning and management). Really, the financial adviser, the financial planner is buying: we are renting our client's capital in exchange for a net benefit to them (whether that's in products, services, or a combination). Charging a flat rate consultation fee charges the client before providing them with value, and no one in their right mind would put down money before seeing a product or service in action unless they have a very deep and justified trust in the provider. This brings me to my question: Would you agree that, as a stopgap measure until financial literacy is widespread, it's important for prospective clients seeking financial planning to shop around in order to get some grasp of the motivations driving the advice of financial salespeople?

Rob Carrick: Dirk, thanks for the comments and question. I think we may differ in our views on conflicts of interest, but your point about clients' need to accept some responsibility is right on. The adviser-client relationship works best when both parties are engaged. I understand that many clients have an adviser because they know nothing about investing and aren't interested. But you simply must put some effort into trying to understand what your adviser is doing. Part of that, no question, is to understand the motivations of financial sales people. A simple way to do this: ask for a detailed list of all fees and commissions associated with an investment, and then ask to see how they compare with competing choices. An adviser arguing the merits of a product should certainly be able to discuss the cost angle.

Rob Carrick: Thanks for all the questions, everyone. I happen to think we're at a crucial point in the business of financial advice, so this discussion was timely. If you take one thing away, let it be that advisers are supposed to advise about your big-picture financial situation and not just sell you investments. If you're just getting the sales pitch, you're missing out.

<iframe src="" scrolling="no" height="650px" width="600px" frameBorder ="0" allowTransparency="true" ><a href="" >How to plan your retirement with an adviser</a></iframe>

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