Back in the day when I was delving into investing my money with financial advisers (read: over 7 years ago) I dealt with my fare share. One of the most prominent experiences that I can recall from my interactions with financial advisers is the one with Investors Group. I remember feeling nervous, unsure about the $10,000 I worked hard to save 10 years ago. I remember being sat down, offered a glass of water, and given a investment risk profile questionnaire to. Then I remembered the adviser's colleague coming into the room to do a joint presentation on leverage and why I should borrow money from them to invest in more mutual funds. I remember asking if there was any cost to my investment, and they said “no” (except there really was, the high Management Expense Ratio which they neglected to tell me about). When I went back to ask why I was actually losing 5-10% of my investment, they said the markets were bad (which I think was the case, but still, an update would have been nice).
Here are some ways to see whether you can trust your financial adviser or not.
Do They Have Schmoozy Salesperson Written All Over?
It is hard to describe this and quantify this so that it is not subjective. But you know, the schmoozy salesperson feeling. You feel a general unease around them, they are perhaps smiling a bit too much, or making too much direct eye contact with you. They are trying a little too hard, or looking a bit too confident and arrogant. Do they try to make that sales pitch a little too much, without offering you the benefits and risks so that you can make an informed decision.
Just like your doctor, your financial adviser really should provide you with the information (the pros and cons, the current known information) for you to make a decision where you can invest your money. They aren't supposed to be biased (well, they technically are when they are selling you mutual funds that they will get paid with) but you would hope that they at least give you full disclosure of what you are getting yourself into. After all, it is your hard earned money.
What Are Their Credentials?
Check out their card. What are their credentials? What kind of course did they take to become a financial adviser at XYZ financial institution? I hate to be ageist, but how old are they? Do they invest in the same products themselves?
I talked to a financial adviser once from TD who was really honest and who I could trust even though he was young (looked to be about my age). He shared with me how he and his wife saved $200 a month towards their travel fund, and how he himself had TD e-series accounts even though he shouldn't technically recommend them since he doesn't get commission on them.
Do They Try and Sell You Stuff?
When you sit down with them, are they immediately trying to sell you their products? What kind of investment products are they trying to sell to you? If you tell them you're not interested at present, or that you would like some time to think about what they are offering, how do they react?
How Long Have You Known Them? What is Their Client Base?
What kind of clientele do they have? How long have you known them? If you have known them for a few years it is easier to develop the trust. If you have known them through a referral then it is also easier to develop that trust. Referrals are better because someone you trust trusts them, and that says a lot.
Of course, technically most financial advisers that are NON-FEE based and are mutual fund salespeople have an inherent bias to their interaction with you, however, some are better than others. If you want to eliminate any bias then you can consider using a FEE-BASED financial adviser for your investments. However, most Canadians are a bit hesitant to shell out money for this. Alternately you can take the risk and go DIY like me. Here's an old post on how to find a good financial adviser.
Readers, do you trust your financial adviser? What led you to trust them and what led you to distrust them?