What you should know about your advisor

Cathy Duval |

What you should know about your advisor

What is your advisor's "background”? You give him the investments accumulated during a lifetime, thus it is important that you are comfortable with the experience and credentials of the person guiding you.

What questions should you ask?

I have copied below extracts of an article published in the Globe & Mail last May 29th: "What you need to know about your financial advisor" which I found highly interesting.

When you start a new business relationship with a financial advisor, the latter has to fill out a "know your client" form. An important part of his role is to get to know you, more precisely your financial objectives, your time horizon, risk tolerance and weather you have the financial capacity or not, to invest in investments such as stocks.

In this article, the author has compiled different questions in three major categories. With each question, I have indicated the "optimal answer" he suggested and I have also taken the liberty to answer each question myself in order to allow you to compare.

Salesman or financial advisor?

1 – Is he a full time investment advisor or does he also occupy another employment unrelated to investments?

• Optimal answer: Full time advisor
• Cathy: Full time investment advisor

2 – Does the firm that employs him hold sales contests or other such incentives?

• Optimal answer: No
• Cathy: Absolutely not!

3 – What is the principal mode of financial remuneration of the advisor?

• Optimal answer: Here, the author gives three points for the advisor paid by way of a flat % fee based on assets under management and gives 0 point to an advisor paid transaction fees.
• Cathy: Unless otherwise instructed by a client I work solely with a flat % fee based on assets.

4 – Does the advisor explain to the clients the total costs incurred by them (either apparent or hidden)?

• Optimal answer: Yes
• Cathy : Yes, I give as much information as possible on this aspect of investments selection because it has a great influence on the investment approach we will choose. My goal is to provide my clients with the most cost-efficient high quality investments.

5 – Does the advisor recommend mostly investments managed by his employer?

• Optimal answer: No
• Cathy: No, NBF is currently the biggest independent investment advice firm in Quebec and as advisors, we do not have financial incentives or pressure to use National Bank investment products.

Experience & credentials

1 – What portfolio management designation does the advisor have?

• Optimal answer: as per the author, the CFA designation is the "golden" standard but certain other designations also demonstrate expertise.
• Cathy: I have been a CFA charterholder ever since 2004.

2 – Does he hold an options trading license?

• Optimal answer: Yes
• Cathy: Yes

3 – What financial planning designation does he hold?

• *Optimal answer: CFP, RFP, CLU, and many others.
• Cathy: I have completed a diploma in financial planning at the UQAM (2002) & also the CFP (Certified Financial Planner)
• Also, NBF has a team of experts available to help our clients with regards to financial and fiscal planning.

4 – Does he have an insurance license?
• Optimal answer: Yes
• Cathy: Yes, and please do not hesitate to contact me if you would like a second opinion on this matter.


Services offered to clients

1 – What type of follow-up does he offer his clients?

• Optimal answer: A meeting face-to-face annually on top of a few phone calls during the year, depending on market fluctuations.
• Cathy: I invite all my clients to meet me at least once a year and I contact them as often as the markets warrant. My goal is to be as proactive as possible when it comes to letting my clients know what is going on and if changes are needed.

2 – How many people are part of his team?

• Optimal answer: It is preferable to have at least two people in order to have more points of contact.
• Cathy: We are at all times two people: either Nadia (currently maternity leave) or Lynne as well as myself.

3 – What type of financial plan does he give to his clients?

• Optimal answer: A plan that encompasses a budget, a retirement plan, and an estate plan that takes into account fiscal aspects.
• Cathy: I prepare for my clients retirement plans and other plans based on their specific needs.

*CLU (Chartered Life Underwritter), RFP (Registered Financial Planner) & CFP (Certificed Financial Planner)