How to Talk to a Financial Advisor

For many Canadians talking to a financial advisor ranks somewhere between a visit to the dentist and the death of a beloved family pet. Having the right advisor in your corner can be hugely beneficial to both your financial success and your piece of mind. Learning how to talk to a financial advisor should reduce your discomfort and help turn it into a rewarding experience.

Practice radical transparency. Make sure you bring up all questions that come into your mind. Contrary to widely held folk sayings, some of your questions may be stupid. A good advisor will make you feel good about yourself and give you the kinds of answers to all your questions that make you feel more confident. Remember, you are the client. It is not up to you to impress them; they should be trying to impress you.

You also need to give them all the info they need to properly advise you. If you’re not sure something is relevant, share it and let the advisor determine if it’s important information. They should be skilled in helping you share the things that are important, but they’re not mind readers, so volunteer information as it occurs to you.

Expect radical transparency. When you ask your advisor how they get paid they should tell you precisely. They are definitely aware of how they’re being paid, after all. If they begin talking about how they get paid by doing a good job for you and having you refer new clients to them, or other obtuse answers of that nature, this is a great big warning flag. Don’t be afraid to pay for advice, it can be a great investment in your success, but you should understand how it works.

In discussing how they’re paid, look for potential barriers to getting unbiased advice. If someone works for an insurance company and is insurance focused you may have a challenge to get advice on debt, cashflow, or long-term investment planning. If the advisor works for a company that manufactures financial products, their solution can only be as good as the company they work for. Understand what you’re paying, and what you get in exchange.

Some questions that you ask may have nuanced answers, so be prepared for complexity. If you don’t understand, say so. It’s the advisor’s job to explain things to you so you can understand, that is the most important part of their job. If they cannot do this for you, maybe you should be looking for another advisor.

Experience is important. How long has the advisor been giving financial advice and to what kind of client? You do not need a grizzled veteran of the dot com bust of ’99 to get good advice, but if you have someone on their first day on the job you should have follow up questions. Once you understand the background of the person you’re talking to, what supports do they have in place? Are they on an island with a month’s supply of food trying to make it on their own while their co-workers watch, or are they part of a real team working together to help you? The less experienced the advisor the more important you understand how closely they work with a team.

Credentials are a good sign. People who aren’t committed to doing good work seldom exert the time and effort it takes to get credentials. Ask them to explain what each of their credentials is, how they got it, and what it says about them to their clients.

Fiduciary is a word that gets thrown around a lot. In a legal setting it indicates the highest standard of working in the client’s best interest. It is the highest standard of care for a professional. In the investment world the basic standard is suitability, “Is this a suitable investment for a client?”

When an investment advisor takes the necessary steps to become a Portfolio Manager they are often held to a fiduciary standard. A Portfolio Manager has an increased responsibility to the client because they have a greater freedom to act on behalf of the client. While many clients think that advisors can make changes to their investments whenever the advisor thinks it appropriate, the fact is that many advisors cannot make any changes for the client without express permission, sometimes even a signature. Finding a Portfolio Manager that you can work with means they will document your situation in a very detailed way and then be able to act on your behalf within those limits.

Trust is the whole game. Find someone you think you can trust, verify they know what they’re doing by talking about the topics laid out here, and you have the best chance of success.

Download our guide: Making the Most of Your First Meeting with a Financial Advisor