How to choose a financial advisor in Canada

The terms “financial advisor” and “financial planner” are often used interchangeably. Whichever you end up using, you’ll want someone who can help you create a detailed plan, one that makes sense for your needs and goals.

“How a doctor creates and shares their diagnosis is more important than the medication,” says Adam Chapman, a Certified Financial Planner (CFP) and founder of YESmoney in London, Ont. “If their diagnosis isn’t accurate, what they prescribe won’t help. The same goes for financial planners.”

With that in mind, here are some helpful ways to evaluate a potential financial advisor.

What type of advisor fits your needs?

Picking the right type of advisor is probably the most challenging part, according to Chapman. It mainly comes down to what you want help with and how much support you need.

You can hire an advisor for a single task or for ongoing assistance. Advisors can help you with a wide range of financial planning, insurance and investment needs, including specific goals and challenges. “Maybe you’ve experienced a significant life change or transition—for example, you’re about to retire, or you’re going through a divorce—or you want to know what you could be doing to improve your financial position,” says Chapman.

Think about how much of the work you’d like to handle yourself:

Option 1: The advisor helps with creating a plan, and then you stay in the driver’s seat and execute it. Not everyone wants to do that—you’ll need the know-how, time and maybe even confidence, depending on what’s involved.

Option 2: You decide you’d rather not execute the whole plan yourself, and your financial advisor helps with that as well.

First, what questions you should ask a financial advisor

When you meet with a prospective financial advisor for the first time, your gut instinct might be to tell the advisor what you’re seeking and ask if they can assist. However, if you’re looking for a truly objective financial advisor, you’ll have to approach the meeting differently, says Chapman.

Before sharing a lot of details about yourself, he recommends asking the advisor these questions, in this order:

1. “Who is your ideal client?”
2. “How do you help your ideal clients?”
3. “What common problems do you help your ideal clients solve?”
4. “Who do you not work with?”
5. “How do you get paid?”

If the advisor can clearly answer these questions, the answers don’t raise any red flags, and the advisor takes the time to explain things, then you’re probably a good fit. It also helps if you like the person.

The fifth question is important when working with any financial professional, says Chapman. Whether it’s an accountant, a mortgage broker or a financial advisor, ask them, “Who pays for your services?” Ideally, you want the answer to be “You.” This provides the highest likelihood that there won’t be any outside influence on, or any conflicts of interest in, their advice. For example, if an advisor gets a commission from selling you certain investments or insurance packages, or for recommending a specific mortgage, that could be a conflict of interest.

How to do an advisor background check

Before you hire a financial advisor, you’ll want to do your homework. This involves doing a background check and confirming credentials.

Financial advisors should have at least one professional designation, such as Certified Financial Planner (CFP), Chartered Life Underwriter (CLU) or Registered Financial Planner (RFP), among others. You’ll want to verify with the appropriate issuing body or bodies that the advisor is in good standing. “It means they have paid their membership dues and attested they completed all continuing education requirements,” says Chapman.

Furthermore, if the financial advisor sells investments or insurance, you can check with the industries’ regulatory bodies to ensure they’re licensed. These organizations can also tell you if the advisor has been disciplined. For investing, use the online tools of Canadian Investment Regulatory Organization (CIRO) and Canadian Securities Administrators (CSA). For insurance, check with the regulator in your province or territory—for example, the BC Financial Services Authority (BCFSA).

Your advisor might also be willing to provide references from existing clients—just keep in mind that these are the ones who are happy with their work.

How to find a financial advisor

You’ve decided that you want to work with a financial advisor, and now you know how to evaluate candidates. What next?

You can find potential advisors through an online search or referrals from family and friends. You can also check with the organizations that regulate each designation.

MoneySense also has a handy resource: the MoneySense Find a Qualified Advisor Tool. All advisors listed in the tool are active members of the Financial Planning Association of Canada (FPAC) and have at least one recognized financial planning designation. You can search for advisors by location, specializations and more.

A couple of weeks should be enough time to interview prospective advisors and make your final decision. Try not to rush the process. The steps listed above are important because it’s your livelihood and financial future we’re talking about. Working with the right advisor could mean the difference between an early retirement and having to work past age 65.

Read more about advisors:

• 7 questions to ask your financial advisor
• How financial advisors can help at different life stages
• Watch: Tips for choosing a financial advisor
• How to figure out your investment fees

About Sean Cooper

Sean Cooper is a personal finance journalist and mortgage broker in Toronto. His articles have been featured in publications such as the Toronto Star, Globe and Mail and Tangerine’s Forward Thinking blog.

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