Selecting the right financial advisor can be a daunting task, especially when you’re unfamiliar with what they can do for you. With this guide, you’ll gain an understanding of how financial advisors differ from other financial experts, how you can prepare to work with one, how you can ensure you’re getting the most out of the relationship, and more.
What is a financial advisor?
If you’ve never had a financial advisor, or are looking to establish a new relationship with one, you probably have some questions. So, let’s start with the obvious. What is a financial advisor? A financial advisor is a trusted professional with whom you or your family benefit from building a long-term relationship, and can rely upon for insightful financial advice. Typically, they provide financial guidance through life’s major stages, and work alongside you to understand your personal wealth goals, risk profile, time horizon, and estate planning objectives. Then, they help to develop strategies that align with those goals. The best financial advisors will look at your financial situation holistically. Think of them as a resource that simplifies financial complexity.
Financial advisor vs financial planner
Both financial planners and financial advisors need to work together in order to achieve optimal results for you. A financial planner centres their recommendations on your wealth plan and the different scenarios that matter to you, but also has a more holistic toolkit to support the wealth plan achievement — lending solutions, Will and estate planning, business succession and transition planning advice, tax planning, philanthropy, investment solutions, and more. Financial advisors also need to be planners; however, they take it a step further by ensuring successful execution on the plan.
Financial advisor vs accountant
Your financial advisor will often work in partnership with your accountant to build a strong team of trusted experts. With expertise specifically in the area of tax planning, your accountant’s skills are complementary to the skills of financial advisors, who take on broader wealth strategies. This synergy helps to ensure you are making the most of your wealth creation for retirement, your legacy, and community causes. If you’re a business owner, the partnership between your financial advisor and accountant is even more important given the nuances of entrepreneurship and business succession and transition planning.
Wealth manager vs financial advisor
A wealth manager is an investment specialist who oversees the development of an investment portfolio in order to meet client investment objectives and time horizon. They ensure the client’s capital is put to the best use to achieve strong returns with the client’s objectives at the center of the strategy. A financial advisor is often also a wealth manager, however financial advisors look beyond the investment portfolio to the other elements that are critical to a client’s wealth management journey.
How can women investors benefit from a financial advisor?
In contrast with men, women often value different approaches to planning and have different investment philosophies. Although both men and women can benefit from having a strong relationship with a trusted financial advisor, their realities can be different. One financial reality that’s unique to women is the fact that they tend to live longer than men. Today, it’s not unusual for a healthy woman to live well into her 90s. Additionally, women now choose their own path in life to a much greater extent than they had in previous decades. Some marry, some don’t, and some may divorce. Some choose to have children, and others choose not to have children. Some aspire to leave a legacy for their grandchildren, while others aspire to ensure philanthropy plays a key role in their legacy. And, as women are now more educated than ever before with even higher earning potential than men, all of these elements create opportunity and bring more complexity when it comes to identifying the many different choices that are available to them.
Women investors can benefit from a financial advisor who can help them weigh their options to create financial clarity. Most importantly, for many women a financial advisor can save time. “As a working woman with young children, I definitely do not have time to do solid investment research and construct a portfolio. It’s just never going to happen. Because of this, I value having a financial advisor who does that for me and allows me to focus on the important things in my life,” says Rebecca Tascona, Head, B2C (Business to Consumer) Platforms Strategy and Operations.
How should women prepare for working with a financial advisor?
When it comes to choosing a financial advisor, the first step is reaching out to your network in order to understand the experiences of people you trust. When you’re ready to meet with a financial advisor, go in with a list of important aspects that you want to address, in addition to your relevant financial documents. The best financial advisors will often provide you with some pre-meeting questions to prepare for your initial discussion.
Tascona encourages having a clear understanding of “your current situation, including earnings, savings, and equally important: how you spend.” She says that, “Your financial advisor will benefit from knowing about your responsibilities, as well as your aspirations. Do you have insurance? Do you have children? Are you a caregiver to elderly parents? Do you have a Will? A power of attorney? When and how do you envision your retirement?” As Tascona points out, all of these are important questions to think about in advance in order to know how to achieve the wealth that will fulfill your individual needs.
Are financial advisors worth it?
When determining whether or not the costs associated with engaging a financial advisor are worth it, make sure that you first clarify your own needs. Most Canadians are not investment specialists. They may excel in their own professions and be experts in their fields, but they generally do not have strong financial acumen or a deep understanding of wealth management rules and tax treatment.
Studies have shown that financial advice is accretive to one’s investment results. Financial advisors spend years getting accredited and maintaining their professional designations and wealth management expertise. As a result, you’re paying for expert advice in an area you’re less familiar with, which drives better decisions and financial outcomes — all the while saving you time. “At the end of the day, I believe it instills a sense of confidence knowing that your financial affairs are well taken care of,” says Tascona.
When working with a trusted and successful advisor, the results after fees should always be well-justified by the long-term achievement of financial objectives. The financial services industry has become increasingly transparent and competitive; however, it is always prudent to conduct sufficient research on fees before entering into a long-term relationship with a financial advisor. The fees and services should be well-explained and understood, and anchored in a strong commitment to communication.
How to find a financial advisor
Choosing the best financial advisor is one of the most important financial decisions you can make. It can have a meaningful impact not only on your portfolio returns, but more importantly, your peace of mind when it comes to important wealth decisions. There are many ways to find the expert that’s right for you, such as consulting friends, family and colleagues, as well as researching financial advisors in your local community who produce thought pieces that resonate with you.
If you’re still unsure of how to find a financial advisor, you can also do an online search by simply typing in “financial advisor near me,” and reviewing their online profiles. Once you’ve sourced a few options, you can reach out to local leaders at wealth management firms to let them know that you’d like to meet with potential financial advisors. It’s generally recommended to interview a few candidates so that you can assess personality fit. Being as transparent as you can with your financial advisor on your goals is critical, but equally important is expressing how you like to stay informed so they can build a wealth plan that addresses your goals and communication preferences.
Changing your financial advisor
If you’re unhappy with your financial advisor, it may be time for a change. The best financial advisor should be viewed as an asset to your trusted advisor circle, along with your accountant and lawyer. If you’re unsatisfied for any reason, allow for an honest and open conversation with your financial advisor to identify the underlying causes of dissatisfaction. The problem could relate to their communication or investment style, or maybe you have unfulfilled expectations. In any case, an honest conversation can help to solve the problems you’re facing before you resort to changing your financial advisor.
In some instances, the financial advisor may share solutions to address your concerns so that they can resolve the problems you’re having. Other times, the relationship really isn’t a strong match and seeking a new financial advisor may be the best course of action. Although this change should not be taken lightly, if the issues cannot be addressed and resolved with agreeable compromise, reflection, and due diligence, then changing your financial advisor should not be delayed.
People work hard for their savings and investment capital, so it’s imperative that you feel like you’re getting value from the relationship with your financial advisor on a personal level. “One of the most profound things I saw through the pandemic was how many clients wanted to ensure their wealth professional was doing okay — clients held them in that high regard, which is the ultimate compliment and why our wealth professionals take so much pride in their work,” reflects Tascona.
Questions to ask a financial advisor
There are many questions to ask a financial advisor, however the number one question women should ask before beginning to work with one should actually be directed at themselves: What is your relationship with money? Once you have a full grasp of this and can articulate it, then it’s time to find a financial advisor who respects that feeling and can incorporate it into the relationship and the advice that they give. You should develop questions to ask a financial advisor based off of this so that you can ensure you’re on the same page. For example, many women have anxiety about not having enough money, no matter how successful they are in their career. In this case, they should look for a financial advisor who understands this perspective and aims to address it. This could manifest in them communicating portfolio results in a timely manner, demonstrating proactiveness when markets are doing well, and providing downside risk protection when things are more volatile. At a minimum, an annual review of your wealth plan achievement is an excellent opportunity to review performance, as well as ask questions and share important information that may result in different decisions.
For more information, please speak with your BMO financial professional.
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