What To Look For In An Investment Advisor

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What should Canadian investors be looking for in an investment advisor today?

How important are titles, credentials, personality and values? How do you handle bias? What is the #1 important thing individuals can do to make smart investment choices?

These are some of the questions that one ask themselves when looking for an investment advisor.

Investment Advisors, Planners, and More

The Investment Industry Regulatory Organization of Canada reportedly has at least 67 different designations for regulated professional roles. Some seem very similar; like advisor, adviser, or financial planner. However, these roles can be very different. For example; a financial planner may help formulate a broad plan with various types of investment recommended over your lifetime. Like commercial real estate, stocks, gold, and a personal residence. A mortgage advisor would just advise on mortgage loans, though may be more of a salesperson than a consultant. An advisor at a firm like Edward Jones may just recommend stocks and funds. A CPA can help advise on tax savings and show you how to structure things in the best way for the lowest tax liability. You may need several of these professionals when it comes to financial planning. Just know the role each should play.

Bias

In an ideal world, Canadian investors would find a completely unbiased advisor who really understood every type of investment and opportunity, and that advisor would make completely unbiased recommendations. In reality that is virtually impossible. Even when there are not personal financial perks for them to recommend one product over the other, everyone has their own preferences and worldview.

What we need is an advice committee that takes the time to understand our personal needs, wants, goals, and unique situation, and most importantly to make recommendations based on our best interests. It’s possible to get pretty close to that. Just understand any bias that is there, and weigh that in your decisions.

Expertise

Expertise is essential. What most people don’t need is someone who is too green or detached, to advise blind diversification into cloudy investment products, just because they don’t know what works, or how it works. It’s important to know the qualifications of those you are speaking with and relying on. What their proven track record is, and what type of experience they have. Do they take a hands on approach? Do they have in the field asset management experience? Have they put their own money on the line in the same types of products? These are just some of the questions you may want to know to determine if their expertise matches with your investment goals.

Self-Educate

Canadian regulators urge investors to self-educate before choosing an advisor. The Ontario Securities Commission has a helpful website with tips, so check before you invest. Furthermore, the Canadian Securities Administrators website has tips on what the different distinctions are for dealers and managers selling different kinds of investments. They provide a list of registration types which is broken down by ‘firm’ and ‘individual’ registration names. Further, each registration type includes details of what they do. This list is a good start to understanding your advisor qualifications, the products and services they are selling, and from here you should be able to form the right questions to ask.

Second Opinion

Get a second opinion. Talk to your own tax accountant, family lawyer, and experienced family members and get their input. Maybe they’ll spot something you missed, or encourage to take advantage of the opportunity. Just be sure to equally weigh their bias when making your final decision.

Summary

Finding a trustworthy investment advisor can sometimes seem like a challenge. Try to educate yourself, utilize the online resources that are available, consult others you trust, know their values to help recognize bias, and know what type of advisor you need to obtain your investment goals.