Expert Advice on Selecting the Best Financial Planner for Your Needs

This episode is dedicated to helping you find the perfect professional for your situation. We dive into the world of financial planning designations, such as Certified Financial Planner (CFP), Qualified Associate Financial Planner (QAFP), and Chartered Investment Manager (CIM), to help you identify which credentials to look for in a potential advisor.

Navigating the complexities of financial planning fees and location preferences can be overwhelming, so we break down the differences between fee models to help you make a more informed decision. Plus, we share valuable questions to ask prospective advisors, ensuring you find a specialist who aligns with your goals and values.

 Whether you're looking for a planner with expertise in a specific area or simply seeking unbiased advice, this episode will guide you toward finding the right financial planner for you and your situation. 

Transcript

Speaker 1: 0:09

Hello and welcome back to the Canadian Money Roadmap podcast. I'm your host, evan Neufeld. Today's episode comes from a listener question and it's all about some questions you can ask and things that you should be aware of when you're looking for a little bit of help from a financial planner Right off the get go. I do not want this episode to come across as a sales pitch for working with me. Specifically At this point in time, as I'm recording this, i'm not currently taking on any new clients, and so I will probably reference some things that I do and in my own experience here, but please do not take this episode as a sales pitch to come work with me. This was coming from a listener who was asking some questions about what it would look like to work with a financial planner and some things that they should be aware of when looking for one, so I'm going to answer all of her questions in order here. I'm going to read the email out and answer her questions one by one, give my personal take on a few things and hopefully leave you with a few tidbits of information for those of you that are either currently working with a financial advisor, and some good questions that you can ask and a better understanding of how they operate, or if you are looking to work with one in the future, these are some things that you can be looking for. So this email comes from Bailey, and Bailey says I haven't. I'm very grateful for your work on your podcast. It's been a great resource for me as I work towards financial stability, security, literacy and, eventually, wealth. Bailey, that's very kind of you, thank you very much. I've become interested in exploring independent financial planning and investing outside of a big bank because I've not been satisfied with the service I've received from two of the major banks that I've had investments with in the past. I've been satisfied with the returns overall, and so that's less of the issue. However, you've given me hope that there are intelligent, knowledgeable folks out there working independently that I might be able to work with instead, where I could have a more enjoyable and personalized experience. So this leads me to my question What do you recommend I look out for when looking for a financial planner? There are some things more specifically that I'm wondering about Bailey. This is a very well-worded email here. This is like a perfect script. Okay, question number one what designations are important to look for? She writes I know there are CFPs like yourself, but I've also seen other designations like CIM, fsci, ris and EPC. Okay, so I'm going to answer this one before moving on to the next one. So the first designation that she listed there was the CFP. So that's the certified financial planner designation. If there was anything that you look for just as a default in the industry, this would be a good one to do. The CFP program has changed over the years and it has gotten increasingly more difficult and stringent to be able to apply for the designation. Now you need to have a four-year degree before you can apply for it. That wasn't an issue for me, as I had that already, but there are some people that kind of got started in the industry and then applied. After the fact It's no longer available to people that haven't gone a four-year university degree And then you have to have three years of work experience in the field before you can get the credential as well. That's pretty robust, and the core curriculum for the CFP is very, very comprehensive, and so you know that someone that has their CFP designation especially currently, because the program has changed and has become much more comprehensive So someone who has one recently, even in the last five years or so, you'll know that they are up to speed on a variety of different topics. That doesn't mean they're an expert at every topic, because if you're not working daily with things like trusts or really specific issues around the legalities around estate planning or unique circumstances with dependents and disabled children in situations of divorce all these different things that can get really, really complicated That doesn't mean that CFP is going to be an absolute expert in every single thing. However, you know that they have a really good handle on the pillars of financial planning for Canadians. Now one thing to keep in mind if you are spending any time online looking at Twitter or anything like that the CFP designation exists in many countries, including the United States. However, those of us that are CFP professionals in Canada do not have the credentials to operate as a CFP professional in the United States, so our certification boards are different and our programs are different, because everything about our financial systems are different. I know of a couple of people that are CFPs in both countries, but that would be exceedingly rare. If you're looking at someone who's giving financial advice, say, on Twitter, and they have a CFP in their handle there, make sure you're taking a look to see if they're actually a Canadian CFP and if that information is going to be relevant to you. So the CFP is probably the main designation that you would want to look for there. Very recently there's been a new designation from the same governing body called FP Canada Financial Planning Canada which is the QAFP, that's a Qualified Associate Financial Planner. This used to be the kind of the first phase of the CFP. So now if someone is starting from scratch, they have to get their QAFP designation first and then the CFP. So if you see someone that has a QAFP designation, this one is very, very new. However, they have gone through the rigorous education program to be able to get that credential, thank you. However, the CFP requires more years of experience, more formal education and a little bit more on the side of actually implementing the advice, as opposed to just a good handle on the technical side of financial planning details. So QAFP would be a good one to look forward to, especially if you're just starting out and you don't have a lot of significant complexity. Bailey mentioned other designations like the CIM. So that is a Canadian designation, but that's a Chartered Investment Manager. So if someone is managing investments for you and they have a CIM designation. That is a pretty high level investment designation that might allow them to do a few more things, like offer discretionary portfolio management. If you don't know what that means, it's probably not super relevant for you necessarily, but the CIM is a high quality designation for people that are managing investments. Not too many people have it, or it's far less common, but it's just on the investment side and not necessarily on the financial planning side. Truth be told, bailey, the other three that you mentioned I'm not familiar with, so I had to look them up, but they appear to be a little bit more esoteric in terms of the specifics of those designations. So the challenge that you're indirectly highlighting here is that there's so many designations in our industry that it's tough to really know what's what. So, without muddying the waters too too much, if you are looking for someone who's a financial planner in Canada, i would say the CFP, qafp, and another one is the RFP. That's a registered financial planner that's offered by a different governing body. It's a little bit different, a little bit more niche, so you won't see that one as often The PFP or personal financial planner. You'll most often see that designation from someone that works at a bank. It's not as robust as the CFP, but it is much better than someone who just has their license to be able to sell mutual funds and ETFs and other investments. Question number two Bailey asks I'm based in Toronto. Is it wise if I pick someone who is located in Toronto, or at least in the province as well? So for me I would say that really depends on what you prefer and whether that person actually can operate in Ontario. And so the way our industry works is that if you're looking for someone to manage investments for you, you actually have to be registered in each individual province that you have clients in. At this point in time, i have clients in BC, alberta, saskatchewan, manitoba and Ontario. I've had a few other clients elsewhere in the past and then they've moved and whatever the case may be, but right now that's how I operate. So if I had a prospective client that I wanted to work with and say Nova Scotia, i would have to get licensed over there and do that. There are many people that stay closer to home or less comfortable with operating in a virtual way, and so if you see somebody online and whatnot, they may or may not be able to work with you based on how they are registered. Now, in terms of preference, if you're okay with a virtual engagement, no, you don't have to work with someone who's based in Toronto or even Ontario. The main differences from province to province would be things related to a specifics of taxation, and that information is widely known. So most CFP professionals would feel pretty comfortable doing financial plans for most people in any province based on the software and information that we have available. But I won't speak for others, i guess, so you can just ask them. However, if you'd like to work with someone in person, yeah, i'd recommend taking a look at someone who is in your city or your province. Three, this is a big one. You might be getting a little bit more than you bargained for here. What types of fees should I expect? He writes. I have seen people who manage investments, in addition to simply planning slash advice, who charge a 1% fee. I've seen people who offer advice and charge anywhere from 750 to 3500 for a financial plan. What is reasonable by the hour or by the product slash package being offered? Okay, a lot to unpack here. Unfortunately, the fee thing is confusing, and it's confusing for a few reasons, because things have changed over the years, but certain eras of fees have not necessarily disappeared, and so there's just a lot of confusion about what's out there, especially about what's available in the United States versus what we have here. So many times you'll hear language of fee based, fee only, fee for service. If you've ever heard of these, they for most people they mean the same thing. Some people they use the terms interchangeably with other things. From my perspective, this just simply means that you won't be charged based on transactions. So the old school brokerage method of you buy a stock and you pay me at whatever a certain percentage as a commission, that is not what fee based, fee only or fee for service means. Okay, so that would be something called commission based or a traditional brokerage. It's less common, but there are still people out there that are doing that. I wouldn't necessarily recommend that, because the incentive for the broker in that case is to churn and to recommend something new and to chase the shiny object, because that's the only way they get paid. Alternatively, someone who is fee based, fee only, fee for service, that doesn't necessarily mean, like I said before, that it's a one time fee. This could be something more typically would be based on assets under management And so it depends on how much you have invested with them is how much they get paid. You reference So 1% fee. Actually, here in Canada the average fee is actually quite a bit higher in many cases. In the US There can be a little bit lower just due to the fact that the cost of operating this kind of business in Canada is much higher And so much of that cost ends up trickling down to the end client. That doesn't mean that people won't charge 1% or even less, but on average you might expect to see a little bit higher than 1%. Even Now, what many people offer is kind of a sliding scale, so the more you have, the less you pay, just because at some level the actual complexity of managing, say, 3 million versus 5 million is probably not that different And so many times the fee gets reduced depending on different brackets of how much investment you have with that person. Now you've also mentioned something about charging for a financial plan. This is where I've used the language of advice only, and I borrowed that from Jason Heath from Objective Financial Planners out in Ontario, and this is how his firm operates and I offer that as a service that I do. But in that case that would just be for a financial plan and there's no investment management or recommendation involved in that. That would be helping people come up with a strategy for building their retirement portfolio, assessing their insurance, taking a look at their estate plan, maybe coming up with a retirement income strategy, maybe even business transition all these different things that could be offered, depending on what that person is looking for. So unfortunately I can't really give a range because it all depends on the complexity that you might have in your financial life. For someone that's just starting out, i have offered a service in the past that takes a look at assessing kind of your retirement goal, what kind of pace you're on currently, and then what kind of system to build to get you there. So it's pretty high level financial planning and I'm able to systematize it such that it doesn't take too too many hours to do So. I have charged just under $900 for that service for me personally. But for some people that need a little bit more assistance with getting closer to a retirement date and coming up with really specific strategies of what to do, i've charged over $4,000 for those kind of plans as well. So really big range there, but also that type of financial planning is pretty rare in Canada. Yes, there are some of us that offer that, but there aren't nearly as many as you would find in the US, or is what perhaps the US media might make you think is actually available here in Canada? I don't know too many advisors that charge by the hour. I'm sure they might be out there I know of some in the states for sure but that would be much more rare as well for me if I'm just thinking about that for myself. If I'm coming to a planner with a specific problem and hoping for a specific outcome, i would want to pay a specific price and know it upfront, instead of being sent to bill for hours that you don't really have an audit trail for anything like that. It's like I don't really like the lawyer model for that either, and also, there's a lot of times we have questions and I don't want to be starting a clock for somebody It just wouldn't be able to answer it and have clear expectations upfront. Yeah, so anyways, i don't charge by the hour. I've never offered that service, and so that way I'm able to kind of systematize what I can offer and keep prices straightforward. So yeah, to answer this question what types of fees should I expect? If you're wanting specific investment advice and someone to manage your investments, you should probably expect to pay in that ballpark of a 1% fee, sometimes a little bit more, sometimes a little bit less, depending on who you're working with and what size of portfolio you have. And if you're looking for a project based financial plan, if you're just getting started somewhere in the realm of that $1,000, seems completely reasonable to me based on what I've had to charge and what I've seen out there. But if you're someone that needs a little bit more complexity and more specificity and you're getting closer to retirement you need to make decisions on pensions and all these kind of things Yeah, that $3,000, $4,000, $5,000, based on the complexity, might be reasonable in that case. Oftentimes, if you want both investment management and financial plans, some people won't charge for the plan if they're also managing investments for you. But that would be a question to ask and I'm going to get to that next year. Number four, bailey asks what are some questions you recommend asking to see if someone might be a good fit? Well, the first question. Well, this probably shouldn't be the first question, but it could be a question you ask. I'll just relate it back to the previous question How do you charge and how much? So this person, whoever you're communicating with they should be able to tell you what services they offer and what they charge for each of them, and that should not be a scary question for them to answer. That should be pretty well straightforward and an easy to answer. In my experience, no one asked me to work for free. People just want transparency, and so if you ask that that should not be a scary question. If they give you any sort of hesitance or fear or let's talk about that later or something like that It's like that might be a bit of a red flag maybe, but probably don't lead with that, because you want to know so many other things about the person and the services they offer before worrying about what they charge, because it probably won't make sense based on what that person actually does for you. So what are some questions that you could ask to see if someone might be a good fit? So first one what services do you offer? So maybe that person I referenced, jason Heath before his firm does not offer investment management at all. They don't offer insurance sales at all, but many firms do So if you're looking for someone to manage your investments, hopefully they can offer that. If you're just looking for a standalone financial plan, maybe they don't offer that. Being as clear as possible with what you're looking for makes it easier for the person you're communicating with to let you know if they actually offer that. Next question you could ask do you have a niche or a specific type of person that you typically work with? So if you are someone that has a bit more of a unique circumstance, you could look for a planner that works with those people. I know of someone that specializes in working with midwives. I know someone that specializes in working with doctors. There's all sorts of unique specialties out there and many of those people will advertise that specialty or that niche client that they work with online So you can search for it and that could be something that's interesting for you. However, if you are a lawyer right out of law school and the person you're communicating with deals mostly with optometrists looking to sell to a private equity firm in the next five years, say, okay, this person probably could help me, but their area of specialty is something completely different, maybe that might not be a good fit for you. There are many of us who are for lack of a better term generalists in financial planning. But if you're looking for someone that works with someone that is in a situation like you maybe someone who works in tech and has equity compensation or something like that there are financial planners that work with all sorts of different niches, so you could ask if they have that. This one's a little bit of a leading question. You can phrase it however you want, but I'm also borrowing some of these questions from a book that I read recently, called The Laws of Wealth by Daniel Crosby. I recommend it to anyone to read it, but one of his points here talks about how behavior management or an advisor gets most of their value from actually keeping people from making major mistakes. I've talked about that with my colleague, stephen Gunther on the podcast before. You can scroll back and try to find that episode. But the question that Daniel Crosby suggests that you could ask a prospective advisor is how will you keep me from being my own worst enemy? That's like whoa. There's a lot of self-awareness that has to come with asking that question, because a lot of people coming to a financial advisor is how quickly can you answer my orders or things like that. So if you are looking for someone who offers behavioral coaching and things like that, that would be a great question to ask. Or even something along the lines of, say, my well-diversified portfolio was down 20%. What would you recommend I do in that moment? If I called you panicked, how would you respond? You might get some unique answers. I've never been asked that before, but that could be an interesting one to plan for in advance of that thing happening. Here's a big one. So if you're working with somebody or hoping to work with someone to manage your investment specifically, you could ask them what is your investment philosophy? And that could go a variety of different directions, but I would say work with someone that has a similar philosophy to you. If you prefer a passive or a factor-based strategy, work with someone that has that as a general part of their investment philosophy. If you're someone who likes a really active approach, then you can find an advisor that has that philosophy too. I have my preference and my philosophy. I'm not going to say which one is good or bad or what you should do. Necessarily, i would have a recommendation if you came to me, but you would probably be surprised at how many people have different philosophies than you and what the general prevailing feeling is that you might see online. Yeah, we see all kinds of different philosophies from prospective clients for sure, and so finding an advisor that matches your own investment philosophy will be a really great way to help with that previous question of keeping yourself on a good track by behavior management, because if you're already on the same page with the investment philosophy, it becomes so much more likely that you're actually going to stick with that investment that they are implementing for you. Another question here that you could ask is how often will we communicate? I hear so many times that people don't hear from their advisors ever, and that's probably not great unless that's what you want, because I also have clients that I try to get a hold of and I can't get a hold of them. So if you don't want to communicate, i guess that's fine, but one to four times a year is really common. So, just for reference, some of my clients I meet with twice a year. Some I meet with once a year, but I also do a weekly podcast and I do a quarterly newsletter and some things on top of that too, for people that max out their TFSAs every year. We communicate with them early in January At the end of the year with tax slips. We communicate with people on that. Sometimes they're a little bit more mass communications, sometimes more personal. But kind of depends on what you want. But meeting any frequency between annual and quarterly would be quite common. To me. Quarterly just seems like a lot Like you're not going to your dentist every three months And hopefully not that much in your life has changed that much. They actually want to meet that often. But maybe that's just the millennial in me not looking to add more meetings. But if that's what you like, maybe find a financial planner that likes to meet on a much more frequent basis. Last one that I thought I'd volunteer here comes back to kind of how do you charge and how much? but I Think it's worth asking if, especially here in Canada again It's a little bit different than the US but does your compensation change based on the investments you recommend? So there might be Situations where there are firms that offer their own investment funds. So if the branding on the sign matches the branding on the investment, there is a chance that that person is either compensated more or they receive different benefits for offering that advice Or offering that recommendation for that specific fund. In some cases Maybe not. I think the question is worth asking, though. In my case here, the investment dealer that I work with, sterling Mutuals. We do not have any specific products of our own and so my compensation does not change whether I'm working with dimensional or fidelity or Vanguard or Anything else, which is nice. So there are independent firms like ours out there. For sure. There are many Great ones. I won't vote for anybody else, But an independent firm likely won't have that issue, and some of the firms that have their own proprietary funds. That advisor may or may not use them anyways. So it's just worth asking the question, i think, if their compensation changes based on that. There are a few other firms, and I'm not gonna name them. I don't I don't want to be that guy, but sometimes Advisor compensation can be based on whether you bring on other advisors to the firm. This is kind of like a multi-level marketing type strategy, and these firms are out there, and in Canada in particular. These might be ones that you might want to avoid, because the incentive for the advisor is not necessarily aligned with Providing you with the best advice. That's more aligned with Bringing people in to become Investment advisors to other people. To me that probably wouldn't be the most reliable place to go for unbiased financial advice. Okay, next question from Bailey. Here She says Should you ask for proof of credentials or proof of past success? Good question. I would say you don't actually need to ask for proof of credentials because so many of the credentials You can actually look up on your own and see publicly. So for myself, having a CFP, you can go to FP Canada and you can search for anybody that has the CFP designation And you can see if I have any sort of disciplinary action in my past. I have not. You can look all sorts of those kind of things. But also if that person is registered to offer investment advice, you can search something called the national registration database or the national registration search And you can just search their first and last name and if they are Proved to to sell and manage investments on your behalf, they will show up on there and you can see where they are registered, what provinces, what firm they deal with. Any other names They might go by. For me It's. It's listed as ensign Baxter wealth management. That's the name of our office here in Saskatoon. So yeah, you can actually look that up. In terms of asking someone about Proof of past success, i guess I would probably want to ask you what do you define as success? If you're looking for someone that's had a really Interesting and unique investment strategy that happened to work really well in 2020, it's like I'd be kind of leery on on that kind of thing, but if you're looking for a success in terms of similar people to you having a really great experience working with this person as an advisor, you could ask for reviews. I have a few clients that have generously offered reviews of me and I've put some of those on my website. That would be Totally fine in terms of things like media mentions and whatnot. The vast majority of those are actually paid for by the advisor themselves. So I was featured in a magazine in 2021 as named as one of the rising stars of the wealth management profession, and to be featured in a certain way within the magazine I actually would have had to pay a few thousand dollars, and it makes me look a little bit more important than if I would have just showed up on the list and things like that, and so even to be able to use the the logo that I was put on this list. You have to pay for it And, yeah, i've been asked a number of times to write some articles, but I would have to pay to do it. So, like past success or past media exposure and things like that, i'm just a little bit leery on that. I would say, if they have a podcast or a blog or a Twitter account or LinkedIn presence, just take a look there and see what kind of advice they offer And maybe they're tone of voice and whether they're generous with free information or all sorts of things that you can look up based on someone's online presence. If they don't have an online presence, it's tougher to evaluate who they are, of course, but that doesn't mean they're not good. It just makes it tougher. Finally, the last question that Bailey asks here are there any risks of not working with a big bank? For example, rbc has promised me in the past that when I'm ready to buy a host or condo, they'll be able to get me the best mortgage rate because my investments are with them. Is that true? Are there certain protections in place I should look for? This is a good question And unfortunately, the answer is maybe, and it maybe depends. I would say likely. Not, i don't want to assume here, but if you are a person that's just starting out or has a just call it a smaller investment portfolio, i would say the amount of pull you would have at a bank to negotiate a lower mortgage rate is probably pretty low because that bank is actually going to make a whole lot more money on the mortgage itself than on the investment portfolio. So because we have freedom of movement and you can transfer your investment portfolio from advisor to bank and wherever you want to go, my suspicion is that the bank probably doesn't want to give you a real rock star deal on that mortgage If you can just move your money the next day. So I would say I'd be skeptical. And things like a mortgage you can shop around and use a broker. Mortgage broker, i think, is a great professional to work with, because in some cases, even if you want to deal with RBC directly and you could go to a mortgage broker and you can get an RBC mortgage from a broker, and because they represent so many mortgages through their brokerage that they would actually probably be able to negotiate a better rate than what you could by having an investment account with them. I don't want to say because every bank is probably different, but I would say are there any risks of not working with a big bank for an investment management or financial planning? I would say no. I said there are lots of risks of working with a big bank. The big one is conflict of interest and that you kind of working with someone within a sales culture. The person you are working with at the bank has a sales goal and they have a manager that makes sure that they reach that sales goal. And what are sales? Well, it's investments, it's credit cards, it's mortgages, it's lines of credit, it's insurance products, it's whatever. Add independent firms perhaps, like ours and many others that I know. That is not the case. I do not have a manager that has a sales goal for me. I have no one breathing down my neck trying to squeeze out another penny from every client unnecessarily. So the relationship that you've experienced in the past, bailey, and maybe many others that I've spoken with working with someone at the bank you mentioned the lack of personalized care, attention and answers. It's because they work on a really high volume basis and they can't necessarily do that And it's a bit of a revolving door of people that are working there, so you're probably working with a different person every time who doesn't necessarily know you. An independent financial planner probably has a little bit more skin in the game. They're trying to build a brand and a business for themselves, as opposed to building the brand of RBC or TD or whatever the case is, and so I would hope that you'd be able to have a bit of a better service expectation from someone who's independent. But yeah, in terms of risks of not working with the big bank, i don't necessarily see them. You don't get any sort of additional protections or anything like that. Some niceties, like sometimes if you have your checking account and your investments and your line of credit, whatever, all under the same roof Yeah, that's kind of nice, like I get that. But in terms of objective financial planning advice, i would like to say that I would like to be able to recommend a lot of these and objective investment recommendations and actually having a variety of investments to be able to recommend. Yeah, you're probably not going to get that at a big bank, so that would be something to consider there. Okay, this episode ended up being a little bit longer than anticipated here, but hopefully that answered a few questions If it created more questions in any of those categories, please feel free to reach out. I would be glad to answer those for you. Thank you for all the questions here and I hope it was valuable for you and anybody else that was listening. Thanks so much for all of you who have made it this far and continue to listen every single week. I really appreciate you being here and we'll see you next week. Thanks for listening to this episode of the Canadian Money Roadmap Podcast. Any rates of return or investments discussed are historical or hypothetical and are intended to be used for educational purposes only. You should always consult with your financial, legal and tax advisers before making changes to your financial plan. Evan Neuveld is a certified financial planner and registered investment fund advisor. Mutual funds and ETFs are provided by Sterling Mutuals Inc.