You shouldn’t hire just anyone to manage your investments. Use this framework and these questions to interview investment professionals (including digital providers) before you commit.
What is your background, credentials, and who are you governed by?
Designations may mean that your adviser adheres to certain ethical codes while education and experience in the industry can also lend credibility.
What is your philosophy with managing or advising on my money?
Every adviser should ask you to complete a KYC (know your client) intake form ensuring investment decisions are tailored to your needs and goals. Investing isn’t a one-size-fits-all solution, which is why your adviser should take a keen interest in your unique needs.
How do you suggest allocating assets between registered and non-registered accounts for someone in my situation?
Registered accounts such as the RRSP and TFSA allow you to save money on taxes. Non-registered accounts contain investments that may benefit from favourable tax implications for dividends and capital gains.
Do you only suggest domestic investments or are you comfortable advising on investments from other countries?
We live in a global world. A balanced portfolio will have investment exposure to Canada as well as other countries.
As my portfolio grows, how does your strategy evolve?
Typically, a smaller portfolio benefits from the diversity a low-cost fund or ETF (exchange-traded fund) offers, and with larger portfolios diversity can be achieved by owning multiple individual stocks and bonds. This can cut down on fees (typically a mutual fund charges higher fees) and your investments can be tailored very specifically to your objectives.
Will you review and continue to develop my financial plan as life changes?
In addition to an annual meeting, the adviser will likely want to see you if you have significant life changes like marriage, divorce, children and large purchases.
Do you also offer estate planning (including wills and insurance) to help me build a comprehensive financial picture?
Some advisers will offer other benefits, be sure to ask! Keep in mind if wills and insurance are offered, there will likely be fees (and adviser compensation) associated with these products.
How many times will you call me each year? How many times can I call you? Will you call each time we make a change to my accounts, or can you act on my behalf (also known as having discretionary privileges)?
Some people want or need more contact while others are comfortable getting statements and only having an annual meeting. Be honest with yourself as well as your adviser about your expectations and know this can change!
If I have a problem with you, whom do I call?
The first step is to speak with the adviser directly if there are issues, however, having a contact for escalating issues is important.
Adviser compensation (super hot topic right now)
Are your fees a per cent of total assets under management or dependent on the investment? What is a typical annual return for a client after your fees (and inflation) are covered?
Advisers should be able to break down, and be specific, about their fees. This is important as over the long-term investments should not only grow to cover fees and inflation, they should also increase to ensure your money is working for you. At the end of the year, if your money has only grown enough to cover fees and inflation, you have taken all the risk and reaped very little reward. There are difficult years though, so remember this before making a decision with only a year or two of information, especially during challenging economic periods.
Is your compensation dependent on the investments I buy?
Ensure you know if your adviser makes a premium or fills a quota by putting you in certain investments; they should be transparent about this when asked.
Reference check (don’t skip this step!)
Can I contact references?
If active clients are willing to speak with potential clients, it can signal that the adviser is confident and open.
Ultimately, if an adviser can answer all your questions in a satisfactory way and you still have a lingering feeling that it’s not the right fit, move on. You have to trust this person as your financial future depends on them.
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