The following is excerpted from the guide Selecting an Advisor produced by The Mutual Fund Dealers Association of Canada (MFDA).
If you are saving for retirement, selling a business, receiving an inheritance, or win the lottery, you are in need of a financial advisor. Getting a referral from a family, friend, financial institution or Internet search is only a first step. Since you and your situation are unique, you should educate yourself with some information to determine whether an advisor is right for you and how to get the most from your relationship with an advisor.
The first meeting with an advisor should be about sharing information and ensuring that you and the advisor are a proper fit. You should not hesitate to meet several advisors to find the one that is best for you. You should never feel that you need to make any financial decisions or commitments, or that you need to open an account, at your first meeting. Use the first meeting to discuss your goals and objectives and ask any questions you may have. Below are some examples of the types of questions you may want to ask an advisor when you first meet. It may be a good idea to take notes so you can recall what was discussed at a later date.
Inquire about the advisor’s experience and qualifications and select an advisor that fits best with your financial service needs and level of investment knowledge. A person with $15,000 to invest may require a different level of service than someone with $250,000 to invest. You should also consider that the cost of service may vary from one advisor to the next depending on their qualifications, experience and service provided. You should understand the meaning of any titles or designations that the advisor uses. A useful glossary of financial certifications and their meaning can be found at iiroc.ca/investors/understandfincert
All advisors are either agents or employees of a dealer. You may notice the dealer’s logo and name displayed on signage at the advisor’s premises and on the letterhead of various documents. Knowing about the dealer is important because the dealer is responsible for supervising the activities of its advisors, sets various policies and procedures which its advisors are required to follow, and approves the securities that advisors can offer. Ask questions about the dealer such as how long it has been in business and how long your advisor has been with the dealer. Ask whether the dealer is a member of a self-regulatory organization (“SRO”). SROs are regulatory bodies which regulate dealer and advisor conduct, monitor compliance with rules, conduct disciplinary hearings and require dealers to be part of a protection plan to cover client losses in the case of a dealer insolvency.
Not all dealers offer the same products or services to clients. Ask the advisor about the dealer’s range of investment products and whether the products offered are limited to proprietary or “in-house” products. Use this information to help determine whether the products and services offered by the dealer will meet your needs.
Not all advisors offer the same investment products and advisory services. For example, some advisors may offer comprehensive financial advice beyond investments, such as tax advice and estate planning. Think about your financial needs and discuss them with the advisor to determine whether the range of products and services offered by the advisor is right for you.
Investment advice is never free and it is important that you understand how much the advisor is compensated for services, how this compensation is paid and how much it will cost you. All these factors can vary and may depend on the services provided and the qualifications and level of experience of the advisor.
Once you have found an advisor that you believe you would like to work with check the advisor's registration and disciplinary history. In order to trade and advise on securities, advisors must be registered with the relevant securities regulatory authority of the Province or Territory in which you live. You can check whether an advisor is registered at: aretheyregistered.ca
If an advisor’s name is not found in the database or is not registered in your Province or Territory then he or she cannot advise on or offer you securities. You should never do business with an advisor who is not properly registered.
You should also check to see if your advisor has been disciplined by an SRO or other securities regulatory authority. If an advisor has a disciplinary history it will appear with the advisor’s registration information when you perform the registration search through aretheyregistered.ca
You can also perform Internet searches on the advisor which may reveal relevant information on the advisor’s background, such as any disciplinary hearings which are on-going.
In order to make the most of your relationship with your advisor you should understand both your own and the advisor’s responsibilities. All dealers and advisors are required to abide by securities rules and regulations, and the requirements of their SRO. One of the most important requirements under the rules that you should be aware of is the advisor’s obligation to make investment recommendations that are suitable for their clients by performing a suitability assessment.
Inform your advisor whenever there has been a material change in your circumstances. Any change should prompt an update to your Know Your- Client Information and will require your advisor to perform a new suitability assessment which may result in your advisor recommending changes to your investment portfolio.
Review all your account statements and trade confirmations. You should receive an account statement at least quarterly and a trade confirmation for every purchase or redemption of an investment product. Account statements tell you valuable information about the investments you are holding, their performance and the costs you pay for the investment. Contact the dealer’s compliance department directly if you do not receive account statements or trade confirmations, or if the information on a statement or confirmation is inconsistent with your records.
Additional information is available online at mfda.ca/investors/investor-education
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About the Author
John Niekraszewicz (Nick-ra-shev-itch) BMath, FCSI, CFP, FMA is the Certified Financial Planner responsible for the AHIP Association Health & Dental Plan provided by JVK Life & Wealth Insurance Group. John is also the Principal of JVK Life & Wealth Advisory Group, specializing in Wealth & Estate Planning. John welcomes your questions and can be reached at 1-800-767-5933 or firstname.lastname@example.org