Some advice about your bank’s advisers: Some of them are just salespeople with a fancy title.
Responding to the stress their customers are feeling these days, banks are talking a lot about how their advisers can help. But the term adviser, typically spelled in contravention of Globe style as advisor, is often a marketing term designed to lower your defences. You may get advice, but you almost certainly will get a sales pitch to buy products or investment management services.
Challenge the use of the word adviser every time you see it by asking these 10 questions:
What are your credentials?
Ask someone who refers to themselves as an adviser what specific advice or planning designations they have earned, and about the courses, exams and continuing education required. For financial planning, there are three serious designations: certified financial planner, or CFP; registered financial planner, or RFP; and personal finance planner, or PFP. The investment side has many – ask for details.
What else do you have for me besides investments?
Advice encompasses picking and managing investments. But the value of this narrow scope of advice has to be weighed against the fact that you can buy a fully diversified investment portfolio in a single, neat package for a very low cost via asset allocation exchange-traded funds. Real advice starts with an examination of where you are financially and where you want to be.
What products do you offer?
If it’s just in-house funds and other investment products, you’re dealing with a sales machine.
What about fees?
If your adviser is anything but relaxed and forthright in discussing fees, you likely have a salesperson on your hands. Look for an accounting of what you’ll pay for advice, and for the investments you’d buy. True pros will tell you the fees, then explain the value you’re getting in the form of continuing advice and assistance. It’s not just how much you pay – what you get for the dollar counts, too.
How much facetime will I have with you?
An adviser can’t be effective without speaking to you directly now and then.
Where are you on GICs?
Virtually risk-free returns of more than 5 per cent are available from guaranteed investment certificates right now, but they don’t pay nearly as much in commissions that mutual funds do. Watch out for GIC badmouthing, but be open to hearing about GIC negatives like heavy taxation in non-registered accounts, a lack of liquidity if you need to sell before maturity and the likelihood that GIC rates will fall in the years to come.
Don’t you want to hear about how much I owe?
It’s arguably unethical to get people investing without first asking how much debt they carry, particularly at a time when borrowing costs are as high as they are now. Not a dollar into investments until your credit card balance is paid off.
Don’t you want to hear about my kids and parents?
The reality of financial planning in the 2020s is that parents are commonly providing financial support to adult children, including five- and six-figure amounts to buy houses. At the same time, elderly parents are being supported, too. Advisers and planners will want to know what your commitments are to family; salespeople will nod politely if you raise the subject.
What do you think about health care costs?
Any discussion about retirement income must include the cost of medical and dental care not covered by provincial or federal health insurance. An alert planner might also raise the possibility of either higher taxes to support health care in the future, or more privatized services that will be paid for out of pocket.
What do you want from me?
A true adviser or financial planner wants you as a co-pilot in managing your money, which means asking questions; providing updates on your life; and following through on commitments on spending, saving and investing. A salesperson will minimize your role in hopes you’ll pay up and pipe down.
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Rob Carrick