The dos and don'ts of choosing the right advisor 17 · Thursday, May 17, 2012 OAKVILLE BEAVER · www.insideHALTON.com O ne of the most important decisions you will make is choosing an investment advisor. Today we are going to offer some suggestions on how that can be successfully done. Start with the mindset that you are the boss, you determine what skills and characteristics you are looking for and then you search for the right person. Treat the process as a job interview. You are going to hire an advisor to help you successfully reach your financial objectives. It is that simple. But many people who are looking for an advisor lack the confidence they will do it well. There is good reason for this insecurity. They may have tried it before and it hasn't worked out well. You thought the advisor you selected was going to provide the type of assistance you needed, but in reality they often didn't. If at first you don't succeed, try again. First, like any job interviewer, you need some basic screening. Start with designations; there are far too many to cover here, but a good starting point is the CFP (Certified Financial Planner) designation. This should be the minimum qualification you seek in an advisor. This financial planning qualification generally covers topics like retirement planning, insurance, estate planning and investments. Notice I said `generally.' The CFP does not make an advisor an expert in any one of these areas, but shows they have some knowledge of these topics and how to put it all together. This is a great first-level screening tool. Next, if you want someone who has greater training in the investment arena, a CFA (Chartered Financial Analyst) or CIM (Chartered Investment Manager) designation would fit the bill nicely. These are more rigorous, investment specific designations; a great complement to the CFP. Now, designations are only a starting point. Someone with 15 initials after their name on their business card isn't necessarily a good fit for you. You need to decide if they are someone you would want to work with. This is where the interview really begins. Dollars & Sense By Peter Watson The problem with many advisor selection interviews is that the advisors talk too much instead of asking you to first explain what you are trying to achieve and then learn more about you. Most of the interview has to be about you. It is your financial future; you are the one who is ultimately in charge of your financial success. Therefore, the meeting should be focused on you and your needs. A common mistake occurs when the conversation quickly shifts to specific investments or investment strategies. Yes, the investments are important, but they are only a means to an end. First, your objectives need to be discussed and understood. Ask for the advisor's method used to learn about you and the process you would go through if you were a client. Find out what initial targets should be established. For example, how much capital do you need in order to achieve the desired cash flow during retirement? What is the target return on your investments to ensure your capital has the required amount of growth so you do not run out of money during your lifetime? If you are still working, what is your target savings rate each year and what is your target return on investments in order for your portfolio to grow to the desired amount? Perhaps your most revealing question is, if you select this particular advisor, how many meetings you will have before they will actually make specific investment recommendations? If the advisor is confident they can give specific investment recommendations during the first meeting or two that should be a warning to stay away. The reason is that your financial future is important and before specific recommendations are made there needs to be financial planning work done to understand and quantify your financial objectives. You should expect a written Investment Policy Statement outlining the strategy of the investment portfolio. Important issues need to be highlighted, such as the targeted distribution of assets between stocks and bonds, cash flow, tax issues, and other matters that will affect your portfolio. Finally, ask what the total fee will be for the entire service? How will you see the breakdown of charges on various aspects of the service? How and when will the fee payment request be presented to you? Be concerned if the advisor is vague and if fees are hidden or based on transactions. You may not be an expert on the technical aspects of investing, but you are an expert at identifying what is important to you. Find an investment advisor who will talk about you and then is able to build a plan tailored to your specific needs. -- Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI. Coronation Park Sunday, May 27, 2012 10:30 am Registration, 11:00 am Walk 5 km route Register now online at www.schizophrenia.on.ca Many thanks to our generous sponsors: