Make Sure to Stress-Test Your Financial Advisor!.

Whether you use an investment firm or rely on the services available at your local bank, a lot of us have someone we commonly refer to as our “financial advisor”. It’s a generic term, but it usually equates to the person who “handles our investments”. However, the reality is that their level of professional training, experience, and the scope of services they offer varies greatly.

Some of us only rely on an advisor to invest our TFSA or RRSP and meet with them very infrequently, or simply review the statements that show up in the mail from time-to-time. Others depend on their advisor for a lot more than buying mutual funds and seek advice on retirement planning, tax strategies, saving for a home, and many other issues.

Regardless of the scope or frequency of the service your financial advisor provides, it doesn’t change the fact that you are putting a lot of trust (and a lot of cash!) in their hands.

Accordingly, you should be extremely carefully with your decision. Despite the considerable consequences of their job performance on your future, a lot of us spent more time choosing a mobile phone plan than the expert who manages our life savings. A good advisor is an invaluable resource for those of us who don’t have the time or specialized knowledge to manage our finances on our own. However, depending heavily on an advisor also means that you owe it to yourself to carefully review their service on a regular basis.

The main problem with evaluating a financial advisor is lack of knowledge. While it is easy to judge something familiar like a restaurant and decide if we will return, it’s a lot more difficult when it comes to a financial advisor.

Another factor clouding the issue is the confusing hodgepodge of names — (certified) financial planner, financial advisor, financial coach, money coach, etc. In general, financial advisors usually focus on investing while a financial planner takes a more holistic approach that may include retirement planning, estates, or other more complex issues. The Enriched Academy Financial Coaching Program goes one step further.  It adds in an education component, so you not only get expert advice and a comprehensive plan, but you also learn to manage your own finances — for life!

There are lot of options for financial advice and it isn’t always clear what each one does, so how do you decide which one is right for you?

A good place to start is to dig into the fees you are paying and what sort of returns you have been getting. You can also evaluate their service on a more basic level — Do they offer all the products and services you require? Do they keep in contact and remember you and your situation? Do they readily and clearly answer your questions…. even “prickly” ones about annual returns and fees? A good advisor should pass your “stress-test” with flying colours.

Your main considerations for choosing financial advice should be how much knowledge and time you have, and the degree you would like to be involved. You could leave it completely up to someone else, and even though they may have a fiduciary duty to act in your best interest, it’s too much of a leap of faith for most of us. We work hard for our money and most of us want to assess for ourselves whether it is being managed effectively and within our expectations for risk and return.

Educating yourself and using a self-directed (DIY) approach puts you in complete control and offers much lower cost, but it can be too daunting for some. In addition, some issues like tax planning can be highly specialized and demand expert level knowledge and experience.

Enriched Academy is committed to an unbiased approach and the choice is up to you, just make sure you do your homework and figure out which option works best for your situation.