Things to Consider when Choosing a Financial Advisor

Everyone has heard the horror stories of celebrities or even regular folks who choose a financial advisor and then end up losing their life savings when that person ends up being a complete fraud or simply incompetent in money management. Using your brother in laws cousins’ uncle simply because of the family ties is another method that typically ends in disaster as well. And with the advent of the internet and companies who try to persuade you that you can simply do it yourself (with their nifty software of course and oh yeah… a small upfront fee!) there is a seemingly endless well of advice for those looking to manage their money in the most secure and profitable way possible.

Having said that there are some ways to ensure that the person or firm you choose to help you are the right ones for you. The absolute first thing you should know and understand is exactly who is representing you or potentially representing you. The world of finance is second only to the world of intelligence agencies in the use of acronyms to describe the varying types of financial wizards. There are CFA’s (Chartered Financial Analysts) CFP’s (Chartered Financial Planners) CHFC’s (Chartered Financial Consultants) CIM’s (Chartered Investment Managers) as well as myriad of other designations that could make the list even longer. The biggest problem is that most people do not know what the heck most of the designations stand for or what the holders do! The ability to become confused is exceptionally high and that is why you truly need to educate yourself on what you need and who can provide the solutions before you ever write a cheque or sign a contract for services.

The best place to start is to determine exactly what sort of help you require. Are you interested in entering the stock market perhaps? Then you would attempt to seek out someone skilled in that arena such as a stock broker or investment planner. If you have a broader or more generalized plan like whether to put funds into an RRSP or something of that nature you will want the services of a Financial Planner who specializes in those areas.

You will also need to determine exactly how your planner makes his or her money. Are they a commissioned sales person for a specific investment house or do they get paid by simply helping clients build a sound financial plan? The key is knowing if they have a vested interest in any of the financial products they may try to sell you for the obvious reason that they may well have a skewed sense of priorities if that turns out to be the case. Another very big question to ask up front is if they work by fee or by commission as this can be a very large factor in determining what their motives may be in selling certain products.

As with anything important you need to do your homework and ask as many questions as it takes to make you 100% comfortable with the service and the products. If it feels wrong it most likely is and if it sounds too good to be true it ALWAYS turns out to be so in the end!

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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant


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