4 ways to know if a financial advisor is right for you

March 10, 2016

Any relationship must be built upon mutual respect and open lines of communication, especially when it comes to money. So is your financial advisor right for you? These hints will help you decide.

4 ways to know if a financial advisor is right for you

Any relationship comes down to the connection between two people, but having mutual respect and open lines of communication are especially important when it involves your money. Here are some key considerations as you decide whether your potential (or current) advisor is the right fit.

1. Be open

Transparency is key to the advisor-client relationship.

  • Any new partnership should begin with an open discussion of what you’re hoping to get out of that relationship and what the advisor can provide.
  • In Canada, new regulations that started being phased in mid-2015 are allowing both sides to take the conversation to a new level.
  • The changes, implemented by the Investment Industry Regulatory Organization of Canada (IIROC), are meant to create greater transparency about the performance of investment products and the fees charged by the advisor.

2. Be clear

There’s a lot of emotion tied to investing because it involves not only a person’s money, but often their life savings.

  • If something goes wrong, clients can get scared and cast blame, or be angry about the choices their money manager made.

That’s why it’s important to be clear up front about:

  • Your risk tolerance and your goals.
  • What you’d like out of your advisor when times get tough.

In turn, it’s the advisor’s responsibility to:

  • Ensure a client’s expectations are realistic.
  • Outline what services the investor can expect and the level of returns that are possible.
  • Explain the types of investments the client is buying.

3. Keep talking

Even if you think everything is clear from the start and have confidence in the abilities of your advisor, the two of you need to keep talking. Why?

  • Goals may change, markets can drop, and decisions will have to be made that can lead to disagreements, even if you both started out with the best intentions.

4. Trust your instincts

If you’re not comfortable with the way your money is being managed, or the way you are being treated, don’t be afraid to walk away.

  • Some issues may be worked out, but it’s possible your two personalities just don’t fit together.
  • In that case, you may be best parting ways and finding an advisor with whom you have a better connection.

Taking a closer look

Whether you’re in the market for a new financial advisor or want to make sure you have the right person in charge of your financial future, communication is always key.

  • Be open, clear, and willing to listen. At the same time, if you truly don’t think the person will give you the level of service you need, don’t hesitate to keep looking.

Smart Tip provided by The Financial Pipeline. Founded in 1996 by a group of portfolio managers, The Financial Pipeline is dedicated to providing financial knowledge and education to anyone and everyone with even a passing interest in finance. Our motto, “Financial Information For the Rest of Us,” speaks for itself.

The material on this website is provided for entertainment, informational and educational purposes only and should never act as a substitute to the advice of an applicable professional. Use of this website is subject to our terms of use and privacy policy.
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