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7 more things to ask your financial planner

Posted by on Nov 15, 2011 in Moneyville, Retirement | 0 comments

By Sheryl Smolkin

Read this article and comments at Moneyville.ca 

In recent weeks and months market volatility has caused many investors to lose sleep, but having a plan and working with a professional can alleviate some concerns.

According to the recently released TD Waterhouse Financial Planning Poll, 75 percent of Canadians with a financial plan or investments feel at least somewhat confident in their savings and investments. And 76 per cent of those who worked with an advisor feel that, because they did, they worry less about market volatility.

An earlier blog included 10 tips for choosing a financial planner. Here are 7 more detailed questions the Financial Planning Standards Council suggests that you add to your list when you interview prospective financial advisors:

1. What experience do you have?
Ask how long the planner has been in practice, the number and types of firms with which he has been associated, and how his work experience relates to his current practice. Inquire about what experience the planner has in dealing with people in similar situations to yours and whether he has any specialized training. Choose a financial planner who has at least two years experience counselling individuals on their financial needs.

2. What services do you offer?
The services a financial planner offers will vary and depend on her credentials, registration, areas of expertise and the organization for which she works. 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, bonds and mutual funds, or who give investment advice, must be registered with provincial regulatory authorities and may have specialized designations in these areas of expertise.

3. What is your approach to financial planning?
The types of services a financial planner will provide vary 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 she develops or refer you to others who will do so
4. Will you be the only person working with me?
It is quite common for a financial planner to work with others in his organization to develop and implement financial planning recommendations. Financial planners often work with other professionals, like lawyers and accountants. You may want to meet everyone who will be working with you.

5. How will I pay for your services?
Your planner should disclose in writing how he/she will be paid for the services that will be provided. Planners can be paid in several ways:

Commission: The planner 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 such as an insurance company. 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 in a product.

Salary: The company for which the planner works pays the planner a salary. The planner’s employer may get its revenues from fees paid by clients or in commissions paid by clients making a purchase, or by the suppliers of financial products.

Fee-for-service: Planners 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 would be 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
6. How much do you typically charge?
Although the amount you pay the planner depends on your particular needs, the financial planner should be able to provide you with an estimate of possible costs based on the work to be performed. Such costs would include the planner’s hourly rates or flat fees, or the percentage he would receive as commission on products you may purchase as part of the financial planning recommendations.

7. Could anyone besides me benefit from your recommendations?
Ask the planner to provide you with a description of her conflicts of interest in writing, for instance, 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.

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