QUESTIONS TO ASK
People seek help from a financial planner for a number of reasons: planning
for retirement, finding the best way to finance a new home, saving for children's
education or simply to get help putting finances in order. Working with a
financial planner can be a helpful step in securing your financial future.
Finding the right planner is extremely important because your choice will
almost certainly affect your financial future. The following questions will
help you interview and evaluate financial planners to find one who is right
for you. Your goal is to find a competent, qualified professional with whom
you feel comfortable and whose business style suits your financial needs.
Question: What are your qualifications?
Answer: Many people offering financial services and products are
also asked for financial planning advice. However, financial planning is
a detailed, complicated process. It requires hands-on experience and a
strong technical understanding of topics such as personal tax planning,
insurance, investments, retirement planning and estate planning — and
how a recommendation in one area can affect the others.
Ask the planner what qualifications they have to offer financial advice
and if they are a qualified planner. Ask what training they have successfully
completed. Ask what steps they are taking to stay current with changes
and developments in the financial planning field. Ask whether they hold
any professional designations including ones specific to financial planning.
The Certified Financial Planner (CFP) designation is recognized internationally
as the hallmark of the competent, ethical, professional financial planner.
For more information on the CFP designation visit www.cfp-ca.org.
Question: What experience do you have?
Answer: Experience is an important consideration in choosing any
professional. Ask how long the planner has been in practice, the number
and types of firms they have been associated with, and how their work experience
relates to their current practice. Inquire about what experience relates
to their current practice. Inquire about what experience the planner has
in dealing with people in similar situations to yours and whether they
have specialized training. Choose a financial planner who has a minimum
of two years counseling individuals on managing their finances.
Question: What services do you offer?
Answer: The services a financial planner offers will vary and depend
on their credentials, registration, areas of expertise and the organization
for which they work. Some planners offer financial planning advice on a
range of topics, but do not sell financial products. Others may provide
advice only in specific areas such as estate planning or taxation.
Those who sell financial products such as insurance, stocks and bonds
and mutual funds, or who give investment advice, must be registered with
provincial regulatory authorities and may have specialized designations
in those areas of expertise. For a helpful list of Acronyms and Designations
used in the financial services industry and their meanings, visit www.cfp-ca.org
Question: What is your approach to financial
planning?
Answer: The types of services a financial planner will provide
varies from organization to organization. Some planners prefer to develop
detailed financial plans encompassing all of a client's financial goals.
Others choose to work in specific areas such as taxation, estate planning,
insurance and investments. Ask whether the individual deals only with clients
with specific net worth and income levels and whether the planner will
help you implement the plan they develop or refer you to others.
Question: How are you compensated?
Answer: Your planner should disclose in writing how they are paid
for the services they provide. Planners can be paid in several ways:
- COMMISSIONS: The advisor is compensated if you purchase financial products
to implement a financial planning recommendation. In some cases the commission
is paid by the suppliers of financial products.
In other cases you pay the commission, for example, if you buy shares
of a publicly traded company. Commissions are usually a percentage of
the amount you invest.
- SALARY: The company which employs the planner pays them a salary. The
planner's employer may get its revenues from fees paid by clients or
commissions paid by clients making a purchase, or by the suppliers of
financial products.
- FEE-FOR-SERVICE: Advisors paid on a fee-for-service basis may charge
an hourly rate, set a flat rate for a specific service or be paid a fee
based on a percentage of assets or income.
In some cases compensation is a mix of fee and commission. You should
also ask if the planner or organization receives any benefit other than
commission, such as advertising and promotion subsidies from suppliers
of financial products.
Question: How much do you typically charge?
Answer: While the amount you pay the planner will depend on your
particular needs, the financial planner should be able to provide you with
an estimate of possible costs based on the work performed. Such costs would
include the planner's hourly rates or flat fees or the percentage they
would receive as commission on products you may purchase as part of the
financial planning recommendations.
Question: Is the advisor regulated by any organization?
Answer: Financial planners who sell financial products such as
securities and insurance or who provide investment advice are regulated
by provincial regulatory authorities and may also subscribe to a code of
ethics through a professional association. Others who are members of the
accounting and legal professions are usually members of professional bodies
that govern their fields. Planners who hold the CFP designation are subject
to disciplinary proceedings of Financial Planners Standards Council. It
is a fair question to ask if they have ever been the subject of disciplinary
action by any regulatory body or industry association. You can verify the
answer by contacting the relevant organization. Ask the financial planner
whether they subscribe to a professional code of ethics such as the Certified
Financial Planner Code of Ethics. You can view the CFP Code of Ethics in
full at www.cfp-ca.org
Question: Could any one besides me benefit
from your recommendations?
Answer: Ask the planner to provide you with a description of their
conflicts of interest in writing. For instance, if there is any business
relationship with the companies or ownership interest in any company that
supplies financial products sold by the planner and the planner's employer.
Question: Can I have it in writing?
Answer: Ask the planner to provide you with a written agreement
that details the services that will be provided. Keep this document in
your files for future reference.
For more information, contact:
FINANCIAL PLANNERS STANDARDS COUNCIL
1600-505 University Avenue
Toronto, ON M5G 1X3
Phone (416) 593-8587
Fax (416) 593-6903
E-mail inform@cfp-ca.org
Web site www.cfp-ca.org
CFP and Certified Financial Planner certification marks are used by FPSC
under license agreement with the CFP Board of Standards, Inc.
