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youngandthrifty writes about how to find a good financial advisor and avoid getting burned by them.

In my limited five year foray into personal finance, I have encountered many a financial advisor. Some that work directly for the banks, some that work for wealth-building personal finance companies (usually requiring you to have lots of assets before they even take you on), and some that work for smaller financial firms.

They all seemed very nice to me, some of them more pushy than others. I share my experience with the three financial advisors when I first started my interest in personal finance in a previous post. They had varying knowledge on finance advice, it seems. It also seems very difficult to navigate the personal finance industry, it seemed that even those IN the industry didn’t seem to understand it. How I came about finding them is an interesting story too. For the most part, they found me, and not the other way around.


One financial advisor told me that he wouldn’t get any commission from my buying the mutual fund. I trusted him 100% but later on found out that a 3.45% MER was deducted from my mutual fund contribution annually. It’s really difficult to figure out who to trust with your hard earned money. Finding a financial advisor that you can really trust can be an enduring process to say the least.

You want someone who you can depend on and know that they’re not there to gouge your wallet and reap commissions and MER’s off you, but that they’re there to support you in growing your wealth and be accountable for a sagging and lack luster portfolio, if any.

Here are some tips on how to find a good financial advisor:

  • Don’t choose a friend or relative or family friend– if things go sour, or you want out, you may feel obliged to stick it out with them just out of guilt.  Not taking action because of guilt= bad thing.  Unless you feel comfortable telling your friend/relative/family friend that you’re not happy with the way your money is going, I would stay away from this
  • Know what type of financial advisor they are- Certain financial advisors make money from commissions when they sell you a mutual fund, and other financial advisors charge a fee for service (so you will receive non-biased information)… but usually these financial advisors deal with HUGE portfolios.
  • Make sure you feel comfortable with them and can trust them... meet them in person a few times before you hand over your money for them to invest with
  • Make sure they understand your short term, medium term and long range goals and help you with them (e.g. that they don’t encourage you to lock your money in an investment for five years when you know you might be needing to withdraw the money soon for a down payment).  This example should give you red flags that your advisor isn’t there for your best interests

I hope those tips help you.  Personally, I choose to go at it alone- at least if I want to blame someone, I can blame myself and I am accountable for my own actions.  No one cares more about your money than you!  I still have a small amount left with a financial advisor (because I am locked-in with said mutual fund until 2012), but I cut most of my ties with financial advisors by switching to BMO Investorline from Investors’ Group and more recently, closing one of my RRSP accounts by using the Home Buyer’s Plan.

Readers, have you had good or not so good experiences with your financial advisor? Did you end up sticking with the same advisor even though in your perspective, they weren’t handling your hard-earned money that well? If so, why?

Article comments

Rishika says:

In addition, when you speak with an advisor, make sure they focus on the services and strategies they can offer you, rather than the products they can sell to you.

John says:

I’ve had financial advisors for over 20 years. I grew up in an era where old pops said you deal with the bank and that’s what I did. When it came time for investments you dealt with the big firms. They were all about financial advising and every one of them got paid with my money. The bank sold me their products and the firms sold me the stuff that they had “on the shelf”. I mostly lost money over time. I don’t think much has changed over the years, advisors, planners, they all get paid with your money. The message that I have is, don’t be a victim and be very confident that you have many choices on who you hire to help you. In addition, be prepared to change without delay if things don’t seem right. It is just not possible to trust a so called “advisor” when they are also linked to selling you an investment product. That means if you need help, you’re going to have to see an independent planner, coach and pay them your money up front. I think it’s more than likely that you can do it yourself. Write up a budget, write up a plan, set you goals. If you need help, choose a planner that is not getting any kick back from any investment. Stay away from banks. Stay away from the brokerage firms. Use robo’s get the best rates for everything.

Kyle says:

Couldn’t agree more John!

Lisa Patel says:

Finding good financial advisor is really a very hectic task. You can find so many advisor, but finding a person with good skill become necessary if you want really want to manage the financial flow your company or business efficiently. By the way that was a great coverage in the article.

Cindy Tesler says:

I agree that it is important to choose a financial advisor that you can trust since it’s your money on the line. You also mention choosing someone that you can depend on and know that they’re not going to gouge your wallet and reap commissions. I think it’s a good idea to choose a financial planner that comes with great reviews so that you know that you’re getting a great planner.

Frank says:

I’m a Financial Planner with one of the big banks and if you have the mindset to do it yourself than go for it. Doing it yourself requires discipline as many investors tend to make knee jerk decisions and end up only hurting themselves. Unless you are a passive investor than it also takes up a lot of your time. Not to mention you have to turn to google for advice.

Fee and commission based planners can provide the advice piece that so many people over look. Although choosing the right investment is important, it’s not the only aspect of advice. Planning involves other decisions like income splitting, TFSA’s, emergency funds, etc

Kyle says:

Frank, what is a good reason to choose a commission planner versus a fee-only planner?

Ozgun Intepe says:

I am a Financial advisor. I built my practice based in Honesty, Integrity and Great Client Service. At the end of the day, I would like to be in this business next 30 years. I agree that there are bad apples in any industry. I agree with some of you that we need to ask the right questions to financial advisers. Overall, a trusted financial advisor can offer you better results than DIY.

Kyle says:

That’s just not a correct statement Ozgun. Trust in the wrong financial advisor can yield very poor results. If I’m as well educated as a financial advisor, why isn’t DIY much better for me? I’ll say it again, no one cares about your money more than you do.

Michelle S says:

Five years ago, I gave up trying to handle my own investments and I truly believe that it was the best decision I have ever made. I would have never been able to weather the financial crises without a true professional handling my accounts. There are GOOD advisors out there that truly care about their customers and not just making money for themselves. xxxxx xxxxx has been very upfront with me on fees, is available when I have questions, has taken time to discuss my concernsand has been a true professional to work with.

Teacher Man says:

Michelle, thanks for the comment, I had to edit the name simply because we don’t allow personal advertising here on the site. I’m glad you found a solution that works for you, but why wouldn’t you have been able to handle the financial crisis? Simply leave your account alone and read a study that shows you’re better off leaving the money in nearly all of the time!

Great tips! Never had an experience with a financial advisor, but I know some colleges offer their services for free to students. They mostly focus on more basic issues, though.

young says:

@femmefrugality- Thanks for reading them! That’s pretty awesome! I didn’t know some colleges do that- that would be a good way for a student to get practice experience. Kind of like student hair cuts or massages! I should look into it.

Mike says:

Thanks for the comment…my advisor was a full blown financial advisor….I had him both ways – first on a commission basis then changed to fee based……or rather he had me…..in both cases I foolishly trusted him. No one has a crystal ball but there is usually some indicators to warn of a coming storm. Looking back I really believed he changed his commission based service to a fee based service to hide the large loss in my portfolio to the eye’s of his superior’s at RBC. Changing my portfolio made it looked like we started new – it didn’t carry the loss over from my commission based statements – beautiful. If it sounds like I could never again trust anyone with my money…..you’re right on Baby!!!

young says:

@MIke- I hoe you were able to give feedback to this guy’s superior. It sounds pretty awful- I would be very angry too.

Mike says:

I agree with DIY Investor…..don’t expect anyone to care more than you about YOUR money. Do your homework and do it yourself. For near 20 years I stupidly relied on a financial advisor……I would had been better off to throw my hard earned money under a mattress. A financial advisor is all about sales and commissions…nothing more.

young says:

@Mike- I think it depends on what kind of financial advisor you have. Those that aren’t just mutual fund salesmen are actually quite good and they probably care (because you pay fee for service, versus commissions). It’s all about trust, baby!

DIY Investor says:

It interests me that so many have found that their best advisor is themselves. This in fact is what I promote. I would say however that it is important to read and learn how to do it yourself. It’s not just a matter of investing in low cost funds. The location of investments , asset allocation, and portfolio rebalancing are all very important. One thing a good advisor does is make sure that emotions don’t negatively affect the investment performance.

Good post and helpful tips.

I used to have someone (many, many years ago) that used to help me understand mutual funds, but I wouldn’t consider them a financial advisor. More sales. Since then, I haven’t had anyone help me with my financial affairs, fully self-taught and still lots to learn, LOTS but I wouldn’t have it any other way. That’s just me. Not everyone is passionate about personal finance. For that reason, they need someone they can trust. Financial advisors can play a role, but like any professional, you need a good one and good people are hard to find.

Fox says:

Great post. I don’t have an advisor and never had one, but finding the right one would be difficult I think.
If I were to choose one, I would go with the fee option advisor, as the ones with a comission are in it for them selves, as much as you, but than again, mostly anyone in sales is, that being said, I am sure there are some that exist, which are far few and between. Good Luck finding one though!

I really believe that most financial advisors want to act in their clients’ best interest. Most don’t enter the industry with the intent of screwing people.

High mutual fund MERs make it almost impossible for the mutual fund investor to stay even with the market, let alone beat it. Because of that, mutual fund investors (and the advisors who recommend those funds) are doomed to underperform the market.

That is why I’ll never use a financial advisor.

The value a good financial advisor can provide is that of a detached third-party perspective on your situation. As a fee-only financial advisor I am biased, of course, but I suggest looking only at fee-only advisors. It is not true that all fee-only advisors deal only with clients with vast sums of money. Here in the US NAPFA is the largest professional fee-only organization. Many of our members provide hourly as needed services. Here is a link if you or any of your readers are interested http://findanadvisor.napfa.org/Home.aspx

MoneyCone says:

I also find asking the advisor what his commission is helps. It is my money, I think I have a right to know.

But agree with you, no friends or relatives!

SavingMentor says:

My father is an investment advisor at one of the big five banks’ investment divisions. Although I agree with some of the statements here that many financial advisors are just glorified salesmen; I do know that my father genuinely cares about making money for his clients and he’s about as honest and helpful of a person you could hope to meet.

He took care of my investments for years before I knew much of anything about investing and did a good job. Since then, I closed my accounts with him just so I could go out and try and learn a little bit about it myself and it has been an interesting journey for sure.

I also know that my father, even with all his experience, doesn’t know everything about investing, I don’t think anyone really can. But, I know his clients are a lot better off than if they attempted to manage their money themselves.

Unfortunately, he would never even look at smaller accounts such as mine if I wasn’t family. Like everyone, he only has limited time and needs to be selective in the work he takes on. Anyone looking for a good advisor without much cash built up will probably need to find someone younger who is still actively building their client portfolio.

All that to say that there are good advisors out there, but they can be hard to find. youngandthrifty’s advice is definitely useful to get people thinking carefully before they trust someone else with their money.

young says:

@savingmentor- thanks for sharing your perspective. Man I love blogging and discussions it generates! I agree, for those that are happy to entrust they money to a financial advisor and would rather not be so actively involved with their money (which is likely the majority of people, I would think), an advisor would be better than putting your money in a GIC for example.

Kathy Waite Fee Only @ Eureka Investor Guidance says:

Saving Mentor. I am 46 and for 20 years worked in the same system your father did. There are some well intentioned advisors but ultimately the system is to make money for shareholders not clients. My 25 year old son experienced institutional style investment management in university with their endowment . Made me look at ETFS and index tracking more. I realised for most of my families this was a way for them to keep what they make 0.25 % mer not 2.6% mer and in 2011 changed to fee only to teach DIY. My son ” Your Investment Manager” in Saskatchewan but covering Canada offers fee only investment ( IIROC ) for a flat fee per month for those who do not wish to DIY.

I have a financial advisor and I am happy with him although I don’t invest much through him anymore. One benefit of a good financial advisor is for estate planning in general and contacts for accountants and lawyers.

When it comes to investing, if you don’t have much money (i.e. less than 250K) to invest, you won’t really have the big guns. You’ll end up having to pick between mutual funds advisor. This is the most disappointing aspect of that industry for me. For the most part, they are mutual funds salesman and the tools are built around mutual funds.

I have yet to find someone that can put a plan in place that include stocks. Not that you have to start all out with stocks but at least provide a plan to deal with equities.

young says:

@passive income investor- that’s an excellent way to put it- mutual fund salesman. Or mutual fund advisor. I think changing the name slightly would help with the confusion surrounding fee for service advisors
And those that primarily sell mutual funds.

Excellent advice. I agree with retirebyforty that most of them are just salesmen (in my experience anyway). I did however come across a fantastic advisor when I was seeking one out for my folks. He was a fee-based advisor and offered some very sound investment advice and prepared a stellar portfolio. Maybe that’s a better way to go?

Or if you have the time, DIY and take advantage of the excellent network of the financial blogging world!

JT McGee says:

The best financial advisor is an index fund. 😛

young says:

@jt McGee- agree!!

Debbie says:

Your article has some good starting points for people considering a financial advisor. We would also suggest the following:
1. Get everything in writing from the prospective advisor. If they are not willing to provide you with written documentation about how they are compensated (and any conflicts of interest they may have), run for the hills. Anyone not willing to disclose their fees has something to hide.
2. Don’t put much emphasis on referrals. Who will give you a bad referral?
3. Don’t hire an advisor solely on their location to you and/or their personality. Hiring someone because you like them can get you into trouble (think Bernie Madoff).
Consider checking out http://www.paladinregistry.com as a source of pre-screened, documented financial professionals who offer full disclosure to clients on their backgrounds, education, and compensation. They are all Registered Investment Advisors (RIAs) and are acknowledged fiduciaries. Don’t be afraid to ask probing questions of your financial advisor. It’s your money, after all!

Echo says:

When I worked in the hotel industry they had an employer matching RRSP program, but in order to take advantage of it you had to invest through HSBC.

When I met with the advisor there to set up my account it was obvious she had little clue about investing and only knew how to sell her own limited range of mutual funds (a global fund, a balanced fund, and a fixed income fund is what I had to choose from). The MER was ridiculously high for any of the options.

Needless to say, I was glad to transfer that portfolio over to TD Waterhouse after I changed careers and become a DIY investor.

young says:

@echo- thanks for sharing your experience. I agree with all the other posters to try and avoid the commission based advisors. It’s not that they’re out there to get your money, it’s just that they have so little to choose from (the selection of mutual funds).

I worked with a few financial advisers when I first started and left disappointed. Most of them are just salesman that will sell you products that will make money for them.

I am a DIY investor now and it’s working out much better than previously.
I will try Vanguard someday, I heard good things about them.