Finding the right financial planner is critical to your financial health, but since professional advisors use numerous titles to describe their job, it’s easy to get confused. To determine what type of advisor you need, it’s best to start by understanding each role’s credentials, designations, and typical scope of work.
Decipher the Titles and Credentials
When choosing who you’d like to manage your money, start by thinking about what type of help you are looking for and who can best assist you. Some common roles include:
- Financial Planner: Works with you to create a detailed budget and financial plan. They generally have a CFP (Certified Financial Planner) designation.
- Investment Advisor: Sells mutual funds, stocks and bonds. They must complete training and be registered with a provincial or territorial regulator.
- Portfolio Manager: Manages and maintains your investment portfolio. Advisors who do stock analysis and portfolio management sometimes have a CIM (Canadian Investment manager) or CFA (Chartered Financial Analyst) designation.
- Wealth Managers or Wealth Advisor: Has a total view into your financial and life situation, as well as an understanding of your goals, limitations and needs. We often refer to wealth advisors as being “holistic” since they are fully integrated and offer comprehensive solutions regarding every aspect of your wealth management. The accreditation for a Wealth Advisor is RR. Some have a CFA or CFP or CIMA. Many holistic wealth advisors have additional designations such as FEA (Family Enterprise Advisor) and are able to assist with issues around estate planning, family businesses and succession. Wealth advisors go beyond your portfolio and take into account life events and family dynamics. As the relationship develops they can become financial confidantes or even “wealth whisperers”.
How Do They Get Paid?
Though it may vary based on the person, a stock broker typically charges a commission for each transaction, a financial planner generally charges an hourly rate, and a wealth advisor often takes a percentage of assets. The latter is the preferred model because there is no conflict of interest as both the advisor and the client are on the same side of the table and are highly motivated to maximize the performance of the assets.
Whoever you choose to work with, it’s important to determine if you’re getting independent advice. For example, if someone is working for a bank there is a possibility they may be incentivized to sell a particular mutual fund or recommend a specific credit card. Ask your advisor about their vested interests to understand their impartiality.
Why Is A Holistic Advisor Preferred?
Today, people need the services and advice of a holistic wealth advisor more than ever because our lives are more complex. Clients rarely just need insurance, or just stock transactions, or just a financial plan. Instead, they need someone who has a view into all of these things and can guide them at every step. For example, baby boomers often find themselves sandwiched between helping their children and dealing with their aging parents as well their own retirement planning, so they need advice at both ends of the spectrum. Meanwhile, millennials are dealing with job security and reduced pension prospects, so they need holistic, integrated advice at an early stage.
There’s No “I” in Team
The structure of your advisor’s team is important. Look for an advisor who has specialists in different areas and is able to provide the depth of service you require. You are not only trusting your advisor, but also their team to provide advice in specialized areas such as insurance, planning, taxation, and money management.
Is It Time To Make the Switch?
Life is simpler when you are younger and you may only need advice on straightforward issues such as “Do I contribute to my RRSP or pay down my mortgage?” but, when things get more complex and life events occur (having kids, inheriting money, going through career transitions, caring for aging parents, acquiring additional property, dealing with complex taxes, retirement planning), that is when you will need an advisor who has a more holistic approach.
As needs become more complex, your wealth advisor can supply solutions that are more sophisticated and integrated.