Know yourself, know your financial adviser – whether that’s somebody at your financial institution or a full-time planner.
The bad news is while we might recognize how little we know about investing, insurance, taxation, estate planning and the rest, most of us know even less about ensuring we have advisers more interested in our well-being than their commissions or other sources of income.
And the bad news is, like in any business, the advisers themselves vary in ability from expert down to well-intentioned but unqualified to the crooks – who, unfortunately, tend to have a longer shelf life than you might think, if a recent United States study is indicative of what could also be happening in Canada.
The Market for Financial Adviser Misconduct study of 1.2 million advisers between 2005 and 2015 found seven per cent were disciplined for misconduct – and one-third of those were repeat offenders, usually preying on the wealthy, elderly and less educated.
Given that it can take years before you know whether financial advice was sound, how do you protect yourself from inexperienced or dishonest advisers?
Any or all of the following guidelines can help:
- History. How long has the adviser been with how many firms?
- Qualifications. What relevant and verifiable education and training has the adviser had? Membership in and designations from professional organizations?
- Track record. Ask for evidence of past advice given – and the results, both good and bad. Ask to contact long-term clients if possible; while you will obviously be referred only to satisfied clients, always ask: “If there were one thing s/he could improve on, what would that be?”
- Chemistry. It must feel right to deal with the individual; there should be a good fit. For example, if you are a novice, the adviser should take an approach that makes you feel comfortable and not reluctant to ask questions.
- Own portfolio. The adviser should be willing to disclose how s/he manages his/her finances – and the results.
Mike Grenby is a columnist and independent personal financial adviser; he’ll answer questions in this column as space allows but cannot reply personally. Email [email protected]
