Many investors have trouble finding a good financial advisor but by asking a few important questions, I believe you can increase your chances of hiring one of the good ones and also be more sure that they are the right fit for your needs.
The initial meeting with an advisor involves you explaining your situation to them. Once they know more about you, it's your turn to see if they are a good fit for you. Not all advisors are able to offer the services you need so it's important to work with someone who matches your needs.
Start by asking "Do you have experience in dealing with financial situations like mine?" Financial advisors choose the type of business they do. Some will specialize in retirement planning, some will focus on small cap, higher risk stocks and some may concentrate more on bonds and GICs. This makes it especially important to ensure that the advisor is not just knowledgeable in
the area that you require, but specializes in your situation.
You should inquire as to why they became a financial advisor? In any business, you want to deal with people who are passionate about their profession. Look for that passion when they answer this question.
It's a good idea to ask "What services can you provide me and how will my account be managed?" You need to know if the advisor needs to call you every time they make a change in your portfolio or if the account will be managed on a discretionary
basis (which means they make the decisions for you). Will they charge commission or will it be fee based? Can they provide you with a financial plan, insurance or new issues?
To learn more about the client servicing, ask how often you can expect to hear from them or their team? Within our office, clients are personally met with twice a year to review their portfolio and performance. In between these meetings, we schedule phone calls to get an update on their situation and also provide a market update and general overview of their portfolio. In our opinion, we believe that meeting once a year isn't enough.
Be sure to ask "What do you do about a losing investment or stock?" This might be the most important question as it relates to risk management. You don't want to hear that they don't worry about it because it always bounces back or that they never choose a bad stock. Nobody has a
perfect batting average so you need to understand the process that they will implement so that your portfolio is protected. After every bull market comes a bear market and you need to make sure you are prepared.
And the final question to ask is "What percentage of your net worth is in these investments?" You
want your advisor to have skin in the game. A good response is to hear that all their liquid investments are in the same things you are going to be. This makes sure they are on the same page as you are.
Lori Pinkowski is a portfolio manager and senior vice-president, Private Client Group, at Raymond
James Ltd., a member of the Canadian Investor Protection Fund. This is for informational purposes only and does not necessarily reflect the opinions of Raymond James. Lori can answer any questions at 604-915-LORI or [email protected]. You can also listen to her every Friday on CKNW at 5:35 p.m.
