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What the answers mean
For the last two months, we’ve been going
over a set of questions that investors should consider asking a
potential new advisor when they’re thinking of making a move from
their
current one. Studies show that about 10% of investors are currently
preparing to make that switch. It’s a big move and one that
shouldn’t
be taken lightly and certainly not rushed.
To
that end, here are some of the questions we’ve offered, followed
by potential answers: |
Adena Franz
Portfolio
Manager
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General background
Tell me about
yourself. How long have you been a financial advisor?
It’s a tough business and you’re looking for someone with
the ability to work through market ups and downs. Look for an advisor
with a minimum of five years’ experience at a reputable firm.
What did you
do before you became a financial advisor? What made you decide to
pursue this as a career?
An advisor’s passion for working with people and their money is
key. Listen carefully to their motives and their vocabulary will tell
you how focused they are on their clients’ interests ahead of
theirs.
What kind of
qualifications do you have? Tell me more about those qualifications.
What do you typically do each year to stay current?
A committed advisor is continually upgrading their skills through
complementary studies and continuing education requirements. Every
advisor must have, at the very minimum, successfully completed the
Canadian Securities Course followed by the Conduct and practices
Handbook Course. Thereafter, expect to hear the names of several other
courses such as Wealth Management Essentials, Investment Management
Techniques, Portfolio Management Techniques, and Derivatives
Fundamentals Course.
General approach
Do you
typically complete financial plans for clients like me? What would be
covered in this plan? What would the process be to develop this plan?
Expect an extended answer to this question that focuses on what you
want. In Quebec, only a financial planner registered with the Institut
québecois de planification financière can offer and
charge you for a plan. It’s a detailed process that may take
several weeks and typically provides a roadmap for your financial
future, including investment projections based on your objectives,
ideas on handling risk and protection with insurance, and future cash
flow needs. A good, solid plan is invaluable because it helps investors
stay on track.
Investment philosophy
and your portfolio
What’s
your investment philosophy and process? In your experience, how
is this different from other advisors?
Here you’re looking for how your money will be invested, both
inside and outside a registered plan. Preferably the answer is
balanced, that is, giving information from which you can learn without
technical jargon. It’s important you understand and like what you
hear because a disciplined approach will help you through tough times.
If you prefer low risk and conservative returns, then you won’t
be thrilled hearing about high returns involving risk. Finally,
there’s nothing worse than getting a rattled answer when markets
are crumbling and everyone’s losing their heads.
The advisor’s approach to investing doesn’t need to be
entirely unique. It must, however, suit and convince you that the
advisor is capable of doing what they say they will do (integrity).
What kind of
changes would you recommend in my current portfolio? Tell me more about
your reasons for these changes. Which of my current holdings would you
suggest we retain?
Any changes should reflect what you’ve told the advisor
you’re looking for. An example is enough growth to support a
retirement in 20 years, or ways to help finance a child’s
education, or how to consolidate and reduce debt. Equally important for
changes are the reasons for keeping securities. Do the reasons make
sense to you and how much would they cost?
Communication
How often do
you typically meet with clients like me? How long do those
meetings last? What do you cover in those meetings?
Besides regular month end statements, you should hear about annual
face-to-face meetings and at least two such meetings during your first
year. If you’re the kind of person who prefers daily e-mails and
regular phone calls, make sure to mention this as some advisors with
set service schedules may not accommodate your request.
Compensation
What would my
annual fee be if we worked together, including fees charged by money
managers?
You’re looking for a list of all fees, even the ones you
don’t see. For example, mutual funds pay trailer fees to advisors
for servicing clients. The advisor should be clear about what they are.
You should see a fee schedule in order to compare it with the
competition. Are the fees deductible and negotiable and will you
receive a list of all fees paid at the end of the year? Especially
important is to understand how and when the fees are calculated.
You’re looking for transparency in the answer to this and all of
the above questions. Next month we will deal with the answers to the
second set of questions. In the meantime, we’d love to hear your
story about finding your advisor and how it’s working out. Please
send your e-mail to ptria@3macs.com,
or write us at MacDougall, MacDougall & MacTier Inc., 1010 de la
Gauchetiere Ouest, Montreal, H3B 4J1.
Adena Franz is a Vice President and Portfolio Manager at MacDougall
MacDougall & MacTier Inc. She can be reached at 514-394-3771. The
information contained in this article is for general information
purposes only. It does not account for specific investment objectives
or the financial situation of any person reading it. Opinions expressed
are those of the author and do not necessarily represent the opinions
of MacDougall, MacDougall & MacTier Inc. Investors should seek
professional advice regarding the appropriateness of investing in any
securities discussed or recommended here and should recognize that
statements regarding future prospects may not be realized.
 MacDougall, MacDougall & MacTier Inc.
The Franz
Group
1010
de la Gauchetiere Ouest, Suite 2000
Montreal,
Quebec H3B 4J1
www.3macs.com
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