This week, the Financial Planning Standards Council (FPSC) and the Institu québécois de planification financière will host Canada’s third annual Financial Planning Week. In honour of Financial Planning Week, we spoke to Tamara Smith, Vice President of Marketing and Consumer Affairs at the FPSC, about choosing the right financial planner.
“Within Canada, most provinces don’t have regulations for who can offer you financial advice and who can call themselves financial planners,” says Smith. So if you want to eliminate the “buyer beware” factor when it comes to choosing a financial planner, you’ll have to do a lot of the work yourself. Here are three tips.
1. Ask the right questions
Friends, family, and other professionals (say your lawyer or accountant) can be good sources of referrals, but that’s only the first step. Before you choose a financial planner, Smith suggests interviewing three to five candidates, and going into each interview prepared.
Start by asking the following questions:
- What is your educational background?
- What are your qualifications? What designations do you hold? What professional associations do you belong to?
- How much experience do you have? What’s your specialty or area of expertise? Who is your typical client?
- What services do you provide? What additional services are offered by your office? Who else in your office will I be dealing with?
- What’s your approach to working with clients? How will you communicate with me? How often will we meet? When we need to communicate, will I most often deal with you directly or with someone else in your office?
- How are you compensated?
- Are you regulated by any regulator or other organization?
- Does your designation mean that you have to abide by a code of ethics?
2. Do your research
“Before you even interview [anyone], do your homework,” Smith says. “People feel more empowered if they have some financial literacy.” At the very least, spend some time learning what a financial plan is and what financial planning means. Understanding these terms and building some basic financial literacy will help you go into each interview prepared and ready to assess your potential planner’s answers.
Smith says that you should do your homework after the interview, too. Double-check everything you’ve learned. If a financial planner tells you they’re regulated by a certain regulator, check their standing with that regulator. If they tell you they have to abide by a certain code of ethics, look into that code. Make sure you understand what the code requires and what happens to violators.
“You don’t just want to think [someone] is working in your best interest, you want to know,” says Smith. Many organizations have codes of ethics, but a good code of ethics is supported by an efficient complaints channel and a strong enforcement process.
3. Watch for warning signs
Perhaps one of the biggest warning signs is a feeling that the potential financial planner isn’t a good fit for you, yet it’s a sign that many people overlook. Smith says you’ll want to find someone you can build a relationship with.
Keep in mind that a financial planner is someone who will help you through the good and the bad. You’ll need to be very honest about your finances. You might not want to talk about your past financial mistakes, but the more your financial planner knows, the more they’ll be able to help.
You’ll also need to be comfortable disagreeing with your financial planner or telling them when you don’t understand something. “If a planner is speaking above your level of financial literacy, it’s appropriate to tell them to slow down and ask question. You should never feel intimidated,” says Smith.
Other warning signs may be more obvious. Be wary of anyone who won’t:
answer your questions fully and completely,
offer references, or
provide information in writing (such as letters of engagement and contracts).