Episode 5: Your Finding an Advisor Questions Answered

Welcome to the Retire Ready Podcast, the podcast that helps Canadians prepare for all that retirement brings. I am your host Scott Sather, Founder, President, and Financial Planner at Awaken Wealth Management, and Portfolio Manager with Awaken Investments of Aligned Capital Partners in Regina, Saskatchewan. Thanks for joining me today. Today’s episode is part 4 of a 4-part series on financial advice and what to look for in an advisor. Today we’re going to answer your questions. A big thanks to those who have shared their questions with me, you can as well if you have any suggestions for topics or guest speakers for the podcast or just general questions, by emailing me at info@retirereadypodcast.com.

The 4 questions that I’ve been asked the most from this series on Finding an Advisor are:

1. What’s the difference between an advisor and a planner?

2. What is a Real financial advisor?

3. What is a Fiduciary again?

4. How do I fire my existing advisor?

Those first 3 questions are kind of intertwined, but we’ll try and work through them.

So, just before we jump into the questions, I want to add a couple of caveats to what I’m about to say.

First, there are a lot of good advisors and planners out there and there’s also some bad ones too. The point of this series has been to give you the tools and resources to help find the best advisor for you, your family, and your situation.

Second, I’m going to interchange the words Advisor and Planner throughout this episode so please don’t be confused by it. I’m going to address the differences between the two titles right away here and that should serve as to who you should be looking for to help you.

Lastly, fit is everything. What I mean is, when working with an advisor or a planner, you need a fit in their personality, the services being offered, and how they do business. You don’t have to work with someone that you’re not comfortable with. I know many Canadians who deal with the revolving doors of advisors at the banks that are just given an advisor. And what I mean by revolving door is that many bankers, like most others, want to further their career along, and these advisors move up the ranks, career wise, first starting in those lower positions at the bank with the end goal being that they look to join the commercial banking team, or financial planning, or private banking, or even the wealth management units of the bank. This leads to a lot of turnover at the branches, hence, the revolving door- your advisor one month, might not be in that’s same position next month. This turnover in advisors, however, results in bank clients getting used to this experience and just dealing with whoever available or they’re assigned to the next time they need something or come in for advice. Many are accustomed to continually having to reintroduce themselves and their financial situation to new advisors. To that I say STOP!

You should be the one to decide who to hire as your advisor. It’s your money and the decision is yours as to who you trust to work with. You deserve to be able to develop a long-term advisor/client relationship with someone that you enjoy working with. So take the necessary time, the same you would with your doctor or your accountant, to find an advisor that works for you. Don’t just settle with the person you’re given because chances are there could be someone else who fits you better.

Okay rant over.

So, Question 1- what is the difference between an advisor and a planner?

This is kind of a loaded question as up to this point the title has been very interchangeable. When I look at my time at the bank, the financial planner role was the next step up from the financial advisor position. If I go back to my time in the wealth management side of the bank, which is the majority of my 26-year career, with that usually being the next level up for those bank branch financial planners, the investment advisor was and is the starting title. Meaning once you had taken the necessary courses to be registered and licensed, your starting title is Investment Advisor. Even if you have a Finance or Economics degree, you still start as an Investment Advisor. Those Investment Advisors that take additional education and courses and that spend enough time advising clients to earn a designation were then able to change or upgrade that title. For example, taking a financial planning type course or earning that designation could allow you to use the Financial Planner or Wealth Advisor title. However, few used the Financial Planner title as it could be confused with the bank branch financial planners, and Wealth Advisor just sounds a bit more special- right? On a side note, most of the Financial Planners at the bank level are required to get a planning designation to use that title, so many already have that additional education above the Investment Advisors. So, coming back to what I was saying, I would kind of lump Financial Advisors and Investment Advisors together in that they are typically not as experienced and have not taken or added any significant courses or designations to be able to use the Financial Planner or Portfolio Manager titles. But even that doesn’t fully explain it as some of those advisors have spent their whole career without adding any designations or changing their title- they actually may have lots of experience but just not looked at getting more education or designations. Now in provinces like Saskatchewan, Ontario, New Brunswick and most recently Manitoba the regulators requirements in using the Financial Advisor or Financial Planner are requiring that the Financial Planner title has a higher standard required with more advanced courses needed vs the Financial Advisor needing basically the entrance exams to the industry.

So, to answer the question, in my opinion, a Financial Planner should be the better option for you over a financial advisor, as they have invested in a higher level of education to be able to use that title and therefore should be providing you more value on the planning side- one of the places we said in Episode 2 that an advisor can provide value. Again, as long as there is a fit between you and that planner.

That leads nicely to Question 2: What is a Real financial advisor or real financial planner? Or more specifically why am I adding Real in the front of those titles?

So, we discussed this in Episode 2 where we talked about if you needed a Financial Advisor and how regardless of who you are working with you really want a Real Financial Advisor or Real Financial Planner- the difference being the Real Advisor or Planner is focused on you and helping you build a plan to reach your goals- not just selling you a product. But I can see how this can still be a bit confusing so I’ll try and sort it out a bit more here.

First off, I take the title Real Financial Advisor and Real Financial Planner from Carl Richards, the author of the Behavior Gap and The One-Page Financial Plan. Carl has created a whole Society of Real Financial Advisors that meet to talk about ways to be better advisors, to make sure people know they exist, and to help their clients identify what matters most to them. They want to build you a plan that will walk you through not just today but well into the future. The biggest difference is that they aren’t just trying to sell you some products. In fact, they won’t invest your money until they have a plan out together for you. They want to take the time to really know your situation and what’s important to you to ensure the advice the are giving you fits. These Real Planners will take you through a process to ensure they have all the information they need to put that plan together- remembering that we also said the plan is usually outdated before the ink dries so making sure they continue to update it on a regular basis and it being the center of where all advice, whether it be investment, tax, retirement, you get the idea, comes back to. It’s not a “okay we did the plan now let’s go invest your money” it’s a “we’ve done the plan and that’s why we’re investing your money this way”. The focus should be more so on the Why vs the How- realizing that how you’re going to meet that goal is still very important. The Real Advisor is working for your best interests and letting you know of any conflicts of interest. They’ll be up front about how they’re compensated and what fees your paid.

That’s a great segue to our next question-

Question 3: What is a Fiduciary again?

I mentioned Fiduciary in our first episode and gave a brief description. Most would think that their advisor has to act in their best interest but here in Canada that isn’t the case. There are times when the advisor is in a position of having to be a fiduciary but the standard set is just suitability. That is, your advisor only has to do what’s suitable. As long as what they recommend or advise is suitable, it’s ok. That’s how we end up with huge fees in the investment products- Canada having some of the highest fees in the world according to Morningstar. It’s also how we end up with advisors recommending high commission insurance products to retirement savers instead of contributing to their RRSP or TFSA as has been noted in the news lately and that regulators have stepped in to crack down on. If we go back to episodes 2 and 3 I talked about the titles and designations that you should be looking for, that being the title of Financial Planner with the CFP or Certified Financial Planner designation and a Portfolio Manager with the CFA Chartered Financial Analyst or the Chartered Investment Manager otherwise known as the CIM- and in an ideal world, someone who has both those titles. Now, I’m not saying that to toot my own horn, as I do use both the Financial Planner and Portfolio Manager titles, but by working with someone with these titles you should know they are working as a fiduciary for you and looking out for your best interests. I assume when you go looking for advice you want someone who is going be a Fiduciary, that being someone who must act in their client’s best interest. That is what we want right? You don’t want someone making decisions on your finances that are putting themselves or the company they work for ahead of you. So, when we talk about those titles, Financial Advisor or Financial Planner, both could be great in what they do but by going the that next level and looking for a Fiduciary or someone who holds those designations, you have a better chance of finding that “real financial advisor”. Someone who puts you first. So if you find yourself meeting with an advisor and they start recommending products or solutions before getting to know your story and circumstances, you have a pretty good idea you’re talking to the wrong person. That real financial advisor would be taking the time to get to know you, why money is important to you, and what the purpose of your savings and investments are- whether that’s retirement or financial independence or leaving a legacy for the next generation, knowing the Why matters.

So you can see now how a Real Financial Advisor and a Fiduciary are almost one in the same. Now you may find the odd Fiduciary that isn’t real advisor but the Real Advisor is always wanting to act as that Fiduciary or in your best interests.

Ok let’s cover that last question:

Question 4: How do I fire my existing advisor?

This is a good question and one that probably isn’t talked about much. For the clients that I work with, those families that are planning for retirement or are already in it, most were working with an advisor or another firm before moving to me. So first I would reiterate what I said earlier- it’s your money and you deserve to be able to develop a long-term advisor/client relationship with someone that you enjoy working with. So, if you feel you’ve outgrown your current advisor or you’ve realized they’re not a real advisor and acting in your best interests or the services being offered aren’t sufficient for you anymore, I don’t think you should feel bad for looking for someone that’s a better fit.

Here in Canada, it’s relatively easy to make a switch, with the new advisor being able to handle the onboarding and transferring of accounts. They will have new forms for you to review and sign and they will handle the transferring of all your accounts- RRSPs, TFSAs, RESPs, non-registered accounts. Just about any account you have can be transferred other than active pensions and some group retirement plans, just by completing and signing a simple transfer form. This form will allow the transfer of those accounts to happen in cash or, in many cases, if the advisors firm can hold your existing investments, in kind resulting in no tax consequences or having to liquidate those current investments at that time- this can be advantageous so that you’re not out of the market during the transfer. Your registered accounts, like your RRSP or TFSA, would still remain in those account vehicles through the transfer- so there’s no issue with there being any tax consequences with the transfer. Once the in-kind transfer reaches the new accounts with the new advisor, you can then transition over to the recommendations they’ve made. Typically, many firms, especially those pesky banks, will charge a transfer fee, quoting the administration needed to facilitate the transfer but these will sometimes be picked up by the new advisor or their firm.

You don’t have to contact your former advisor, but I would recommend you do as they will likely reach out to you anyway. They’ll try and find out why you’re making the switch which can be good for them, so that may be able to get feedback on ways to improve or good for you, as sometimes that new place may not be all it’s cracked up to be.

For example, I’ve had a few times over the years where a client was sold on the grass being greener over at a new advisor, only to have that conversation on why they’re leaving and finding out that the new advisor was selling them on some things that weren’t true. The new advisor was comparing apples to oranges or hadn’t actually disclosed all the fees that the client would have to pay or even that the fees weren’t transparent, and the client would never really know. By having the conversation is allowed them to make a more educated decision and actually decide to keep their accounts where they were. In the case that comes to mind, the client, a divorcée that never looked after the finances in their prior relationship, was sold by an insurance advisor of higher returns or no fees. Upon reading the transfer form I was able to look up the destination funds that the new advisor was recommending only to see that the cost of the new higher returning fund was actually twice as expensive as her current portfolio. I’m a huge fan of transparency so this client had noticed my fees coming out of her account and the new salesperson she was talking to sold her on a fund that had done better in hindsight, but it was due to taking on a lot more risk. She was also sold on the idea not seeing the fees- but there is no free lunch in investing, just because you don’t see the fees doesn’t mean they’re not there. I told her that the fees were actually twice as much as she was currently paying but they were hidden inside the fund so she wouldn’t see them. After that conversation she decided she liked the transparency and wasn’t quite as risky as the new advisor had thought she was so kept he accounts with me.

Often your former advisor will try keep your business so, if you’ve done the homework and understand why you’re making the change, just let them know that. They understand as, again, that’s where most new clients come from, another advisor.

Ok so to recap everything, it’s relatively easy to change advisors, ideally you want to look for a Fiduciary, who looks out for your best interests. Someone who is a Real Advisor and isn’t just selling you a product but focuses on building a plan before they’re investing your money, so generally speaking a Financial Planner.

I think that that covers our topics today. Again if you have general questions or would like any retirement related questions answered on future podcasts please email us at info@retirereadypodcast.com . Be sure to subscribe and give us a review on your favourite podcast player. You can also subscribe to the Wake-Up semi-monthly newsletter by visiting the Awaken Wealth site, which is awakenwealth.ca.

Be sure to check back in two weeks for our next episode where we’ll have our first guest speaker on to help us wrap up this section on finding an advisor.

Thanks again for joining us today and I look forward to seeing you back for the next episode.

Thank you for listening to the Retire Ready podcast. To subscribe to this podcast or to learn more please head on over to awakenwealth.ca forward slash retire ready podcast.

Investment services are provided through Awaken Investments of Aligned Capital Partners Incorporated an approved trade name of Aligned Capital Partners Inc/ACPI. Only investment related products and services are offered through ACPI or Awaken Investments of ACPI and covered by the Canadian Investor Protection Fund.

Tax planning, financial planning and insurance services are provided through Awaken Wealth Management Ltd.  Awaken Wealth is an independent company separate and distinct from ACPI or Awaken Investments of ACPI. Awaken Wealth are not licensed tax professionals and you should consult with your tax advisor before acting on any recommendations. Investments and investing strategy should be evaluated based on your own objectives, listeners of this podcast should use your best judgment and consult a financial expert prior to making any investment decisions based on the information found in this podcast.

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