With the recent release of the CRM2 mandating investment advisors to disclose all investment fees to their clients, there are some questions you should absolutely be asking your advisor to make sure you're working with someone who has your best interest in mind.
If you're currently looking for an advisor, or are wondering if your advisor is helping you make the most out of your savings, here are three qualities you should look for in a financial advisor.
He or she is a fiduciary
A fiduciary acts in your best interest at all times, and always puts your interests before their own. Fiduciaries recommend investment portfolios that align with your goals and keep costs low to help you maximize your savings. They are open with you about the management of your portfolio, and ensure your portfolio is always aligned with your investment goals. They don't receive any commissions from the funds they recommend to you, and in turn, you are aware of the costs on your investments.
If an advisor withholds information from you, earns a commission on the products he or she sells you, anhd only recommends funds that are from the same company, regardless of the fund's relevance to your goals, these are red flags that your financial advisor is not working in your best interes.t
He or she does not overcharge you
Part of working in your best interest includes making sure you are not overcharged for the services you receive and the products that make up your portfolio. The total cost of investing includes advisory fees, fund management expenses, and trading fees - but if these costs exceed 1.50% annually, you may be overcharged. Of course, higher costs are expected if your advisor provides you with additional services such as financial planning. But if he or she avoids discussion about the costs on your portfolio or how much he or she is compensated by working with you, make sure to dig deeper to figure out what fees you are paying.
He or she is qualified to be an advisor
Currently in Canada, professional designations are not mandatory for financial advisors. But this doesn't mean you won't find a financial advisor that is qualified to provide you with financial advice. When doing your research, it's important to make sure your advisor has both a professional designation that supports his or her role, and that he or she is registered with the appropriate regulatory body.
There are different professional designations that focus on different areas of financial advice, such as CFA, CIM, or CFP designations. Advisors in Canada are generally registered with the provincial securities commission, the Investment Industry Regulatory Organization of Canada, or the Mutual Fund Dealers Association.
To find out if your advisor holds the right professional designation and is registered, ask for his or her business card and look for the aforementioned designations. To see if he or she is registered with a regulatory body, check out the Canadian Securities Administrators website.
Ensuring you are working with a qualified financial advisor that has your best interest in mind is an important piece in achieving your financial goals. Do not hesitate to ask questions to make sure your savings are being managted in the most effective way.
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