Financial ‘advisors’ - the good, the bad, and the needed?

[81MC]

So, we’re FAR from rich. Like, normal middle class type ####, except we maybe carry less consumer debt than normal and have a couple months of expenses worth in horse#### accounts. I dealt with some stupid money stuff a while ago, but we’re in a decent spot now.

Wife really nails it, including ESPP and cash holdings, me just sort of trying to avoid falling into last mistakes.

For everyone’s sanity, rather than me harping in about moving money out of a merger 0.5% big-bank account endlessly, we’d like to meet with a financial advisor.

But, how’s that work? One time consultation fee? Commission on services? I don’t think we’re at a place where a full-time or ongoing thing necessary, but wife would feel better if an expert could tell her options rather than my bullish opinions.

What do you guys do? Naturally, sitting down with a bank salesman by any other name turns me right off.

I know there’s a few in the business in here, feel free to hit me up privately if this is your bag.

Cheers, thanks for the thoughts.

[Locke]

I deal with lots of Financial Advisors in my line of work.

PM Slava. Seriously.

[Izzle]

You're probably looking for fee-only financial planners. Look for ones with a CFA or CFP designation. They're a fiduciary and not glorified salespeople like you get at the banks.

Here's a list to get started if you want to shop around:
https://www.valueofsimple.ca/links/d...only-planners/

[MoneyGuy]

Slava is your man.

[Slava]

Thanks to the guys who dropped my name here, I really appreciate that!

Im a little bit biased in agreeing that you should stick to advisors with a CFA/CFP because I have both. But Izzle makes a critical point to me because a Portfolio Manager has a fiduciary duty. It’s appalling to me that some people have fought vigorously against a best-interest standard in Canada, but that’s another discussion.

I also wanted to publicly answer a couple of your questions here though. One is that you shouldn’t be paying for an initial meeting. At that point, you don’t know the person you’re meeting, they don’t know what your situation is and what you’re looking for. I understand that’s a slice of the advisors time “given away”, but it’s just part of the business.

As far as fees, I’m a fee-for-service advisor. There could be some who operate on commission at this point, but it seems to be dwindling to me.

[flamesfever]

I think it's prudent to work with a financial advisor, as your wealth increases. However, I also think it's important to develop your own investing expertise along the way. Many people spend enormous amounts of time and energy developing their skill set in order to make money, and spend very little time learning how to invest the money they earn. A good example are many of the highly skilled professionals who generally earn more than the average person, e.g. doctors. dentists, engineers, etc.

[Slava]

Originally Posted by flamesfever

I think it's prudent to work with a financial advisor, as your wealth increases. However, I also think it's important to develop your own investing expertise along the way. Many people spend enormous amounts of time and energy developing their skill set in order to make money, and spend very little time learning how to invest the money they earn. A good example are many of the highly skilled professionals who generally earn more than the average person, e.g. doctors. dentists, engineers, etc.

I guess this is one approach, but that’s the point of hiring a professional. I feel like most of my clients are professionals and small business owners (or both), and they have other things on the go as opposed to learning my profession.

[DoubleF]

Originally Posted by Slava

I guess this is one approach, but that’s the point of hiring a professional. I feel like most of my clients are professionals and small business owners (or both), and they have other things on the go as opposed to learning my profession.

I think the issue is that sometimes, people don't know what questions to ask and then their advisor is poor in guiding the client in that regards to the point the client thinks the advisor is useless. Individuals that know what questions to ask indeed do not need an advisor and can self develop skills.

Some advisors don't like clients that ask questions because they don't like answering the questions. But without knowing the bigger picture at times, how can they accurately advise if clients don't ask and they don't clarify? I've had to tell clients on occasion to contact their advisor to clarify, because AFAIK, that advice is valid, but not for the client's specific situation.

It's extremely rare I find clients happy with an advisor who navigated them around some idea that was valid, but didn't fit the client's situation (but they do exist). I've had to tell clients talk to their advisors about some of the advice they gave which seemed incorrect and it was nothing but pushback even when it was obvious it was wrong (ie: the idiot who said putting money into an RRSP doesn't affect the contribution limit, and I'm pretty sure he was mixing up the idea that you can decide not to fully claim the RRSP contribution in the year of contribution).


RE: Small/Medium business clients, were you the one who brought up IPP in a different thread?

TBH, many business owners likely aren't aware they exist to even ask about them. Many advisors aren't doing the right things to to feel confident in even bringing them up in conversations to recommend them. I think many underestimate the major gap between those that know, that's that don't know and those that know what they don't know.

[Paulie Walnuts]

I think Banks have muddied the word Financial Advisor. All they really do is sell bank accounts, and invest your money on a pre programmed list of investments.

If you are going to pay for a service, it's not just about your investments, its about guiding you through your entire financial plan. That includes tax planning, estate planning, retirement planning, short term and long term goals, planning for your kids education.

[MoneyGuy]

Yeah, I hate banks. A family member is high up in RBC. We don’t talk about this.

[Locke]

Originally Posted by Paulie Walnuts

I think Banks have muddied the word Financial Advisor. All they really do is sell bank accounts, and invest your money on a pre programmed list of investments.

If you are going to pay for a service, it's not just about your investments, its about guiding you through your entire financial plan. That includes tax planning, estate planning, retirement planning, short term and long term goals, planning for your kids education.

Yeah...I've dubbed Banks as 'Training Wheels.'

If your Financial Advisor works for a Bank they're accumulating some experience and thats about it. They're very limited.

[Paulie Walnuts]

Originally Posted by Locke

Yeah...I've dubbed Banks as 'Training Wheels.'

If your Financial Advisor works for a Bank they're accumulating some experience and thats about it. They're very limited.

I worked at a bank. They have hired cashiers to be Financial Advisors with no previous experience in finance or education.

It was comical to see of them explain what an MER is.

[Locke]

Originally Posted by Paulie Walnuts

I worked at a bank. They have hired cashiers to be Financial Advisors with no previous experience in finance or education.

It was comical to see of them explain what an MER is.

Without getting into the gritty details, I am always hesitant to recommend a bank for Financial Advice. They sell their own products and thats pretty much all their people know.

I've seen it all.

I've been burned by recommending Financial Advisors to clients in the past. Its an industry that had almost no barriers of entry and almost any Tom, Dick or Harry could just slap up a shingle, call themselves an advisor and start pissing people's money away.

Its why I'm comfortable recommending Slava. I do his taxes and I talk with him. Despite being a filthy Spurs fan *spits on floor* I have conclusive proof that he knows what he's doing and he works for his clients, not his 'Bank.'

[pseudoreality]

Many moons ago I met with a bank advisor to see if they could facilitate me buying shares in an employee-owned company through a TFSA. She had the most blank look on her face, and said real slowly, "m-u-t-u-a-l f-u-n-d-s?" I was like no, explained it again, and she's like, "I don't know, that sounds a lot like mutual funds."

Now just before Christmas an advisor from company who's name is the opposite of moon-death called my wife. She had some mutual funds in an account that was set-up by a former employer in a company-matching RRSP program. Anyway, this guy built her a plan and gave her a 10-page report with a bunch of fancy graphs. On closer inspection, he obviously just plugged in some numbers into some internal software program to generate the report, but he has no understanding. The report made no sense. It says things like her monthly retirement expenses are estimated to be $1000/month and she is currently on track to meet 156% of her saving needs, but if she follows his advice (presumedly buying expensive mutual funds) with a modified plan, she can do 23% better! His proposed modified plan doesn't even have her retiring early or spending more, just having more money left over when she dies.

If you want some free advice, I suggest checking out the Canadian Couch Potato and Canadian Portfolio Manager websites.

[Slava]

Originally Posted by DoubleF

I think the issue is that sometimes, people don't know what questions to ask and then their advisor is poor in guiding the client in that regards to the point the client thinks the advisor is useless. Individuals that know what questions to ask indeed do not need an advisor and can self develop skills.

Some advisors don't like clients that ask questions because they don't like answering the questions. But without knowing the bigger picture at times, how can they accurately advise if clients don't ask and they don't clarify? I've had to tell clients on occasion to contact their advisor to clarify, because AFAIK, that advice is valid, but not for the client's specific situation.

It's extremely rare I find clients happy with an advisor who navigated them around some idea that was valid, but didn't fit the client's situation (but they do exist). I've had to tell clients talk to their advisors about some of the advice they gave which seemed incorrect and it was nothing but pushback even when it was obvious it was wrong (ie: the idiot who said putting money into an RRSP doesn't affect the contribution limit, and I'm pretty sure he was mixing up the idea that you can decide not to fully claim the RRSP contribution in the year of contribution).


RE: Small/Medium business clients, were you the one who brought up IPP in a different thread?

TBH, many business owners likely aren't aware they exist to even ask about them. Many advisors aren't doing the right things to to feel confident in even bringing them up in conversations to recommend them. I think many underestimate the major gap between those that know, that's that don't know and those that know what they don't know.

Yeah, I probably brought up IPPs, because in the right situation (which is a constant point in this business), they're such a fantastic tool. I've implemented them for clients and seen first-hand how awesome they are.

I hate to say this because of how cocky it's about to sound, but there are a bunch of things that I do that "run of the mill" advisors wouldn't do. A frustrating thing is that while a bunch of us have the same or similar titles, the experience and education can be worlds apart. So someone who just wrote the simplest online test to sell mutual funds in a bank branch might be a financial advisor, or senior financial advisor whereas I have the CFA, CFP and CAIA designations along with nearly two decades experience and my titles are marginally different.

[Slava]

I've had some DMs (which are more than welcome!), but thought that I would put out a few things about financial advisors/planners in general. Just to answer some things in case others are wondering, but didn't want to ask:

- meeting with a financial advisor at the outset is generally free. I can't think of anyone that I know who bills by the hour or expects payment for that initial consultation. For me personally, I keep that initial meeting pretty casual and want to know what you're doing/trying to do, explain what I do and how I do it and kind of take it from there. I can't speak for everyone in the industry, but it's purposefully non-committal with me.

- these days, advisors seem to charge a fee for service or some will be fee-only. A fee for service is where you pay a flat percentage based on the overall assets you have with the advisor. Fee-only planners will do a financial plan and give advice, but they don't handle the implementation of that plan. Oftentimes, they'll refer you to someone for the investments/insurance and things like that. I would say the average fee through an advisor is going to be around 1-1.5%. Generally speaking, the fee percentage decreases as you have more under management with the firm. A quick note here, is that this is the advisor fee. If they, (I don't use them, so I'm talking of other advisors here), have you in mutual funds and managed money then you will have MERs on top of that fee. For a lot of mutual funds, this will mean a cost of somewhere in and around 2-2.5%.

- Financial advisors are more than just someone who invests on your behalf. They can do that, of course, but also help you with estate plans, tax plans and overall financial planning. They can help you with your small/medium business, and have significant impact there. Depending on your situation, they can help you with fairly complicated strategies (like the Individual Pension Plan mentioned above), or things like an RCA (Retirement Compensation Arrangement) if that's applicable.

- Probably the number one question I get asked though, is "will we have enough?". People are concerned about their retirement and maintaining their standard of living. A good advisor can work with you through that situation and give you a solid guideline. But much more than that, a good advisor should be able to provide good data for you on the structure of that retirement income, what the taxes look like and how feasible this all is. They should also be able to help with other goals and plans (funding educations, funding vacation properties and other spending goals you might have). Continued monitoring and review of these plans is necessary and it's not something that you just "set and forget".

I think that covers most of peoples initial questions off the top of my head, but if I've missed something, feel free to ask here or send me a PM.

[Nufy]

How common is it to change FA's ?

[DoubleF]

Originally Posted by Nufy

How common is it to change FA's ?

Nothing against Slava or the industry, but probably not common enough.

I just had to talk someone out of some kind of idiotic trustee set up scenario with their advisor at BMO. I asked if BMO was going to deal with everything. I asked them to clarify because IMO it makes no sense that the BMO group would be able to get access to other banks/investment accounts, insurance and assets to do trusteeship... plus it sounded like a weird conflict of interest to me.

"I clarified, and they only do the BMO stuff. The other stuff would be handled by others. Is this normal?"

Yeah, they're selling you a #### package of stuff they should basically be just doing for nearly free (ie: rollovers, transfers, statements as of date of death etc.). I mean, perhaps this program makes it less of a hassle of getting POA or authorization changes to a trustee via will (after death), but they shouldn't be charging a lot for this like a percentage of the assets held by BMO. That's stupid.

At least his heart was in the right place to reduce headaches for his children... but man, some of the #### that I'm hearing places are pulling is getting ridiculous.

[Slava]

Originally Posted by Nufy

How common is it to change FA's ?

Originally Posted by DoubleF

Nothing against Slava or the industry, but probably not common enough.

I just had to talk someone out of some kind of idiotic trustee set up scenario with their advisor at BMO. I asked if BMO was going to deal with everything. I asked them to clarify because IMO it makes no sense that the BMO group would be able to get access to other banks/investment accounts, insurance and assets to do trusteeship... plus it sounded like a weird conflict of interest to me.

"I clarified, and they only do the BMO stuff. The other stuff would be handled by others. Is this normal?"

Yeah, they're selling you a #### package of stuff they should basically be just doing for nearly free (ie: rollovers, transfers, statements as of date of death etc.). I mean, perhaps this program makes it less of a hassle of getting POA or authorization changes to a trustee via will (after death), but they shouldn't be charging a lot for this like a percentage of the assets held by BMO. That's stupid.

At least his heart was in the right place to reduce headaches for his children... but man, some of the #### that I'm hearing places are pulling is getting ridiculous.

It doesn't offend me in the least, but I guess it depends on which side of the fence you're on. I think that people switch advisors, but I see that switch more as "from the bank to a financial advisor" more than anything else. I have definitely seen people switch advisors though, and it does happen for a multitude of reasons.

I can't say that people should switch more often, but I do think that having a second opinion on things is useful. I think that what complicates that is that it's too easy for the advisor providing that second opinion to throw a lot of hindsight bias in there.

[Locke]

Originally Posted by Paulie Walnuts

I worked at a bank. They have hired cashiers to be Financial Advisors with no previous experience in finance or education.

It was comical to see of them explain what an MER is.

My Intern's mother works for a bank. The things he saw run through my office from Banks that he then went home and told her about....it'd make your blood run cold.

I genuinely fear for the future of our finances as people trust banks more and more as they get worse and worse.

One day...I shall write about..."The Galactic Saga of...Attempting to Cash a Cheque!"

Which is probably the closest I've ever come to genuinely wanting to burn a Bank to the ground.