5 common mistakes when working with an advisor

Chris Ambridge

By Chris Ambridge, Transcend

Special to the Financial Independence Hub

Canadians are often faced with complex and nondescript investment products that can be overwhelming.  As such, most people need professional advice. With personal recommendations as one of the most common forms of referrals, selecting the right advisor should also be based on qualifications, fees that won’t gouge, and the advisors autonomy to act in the best interest of the customer.

However, many people are now spending a significant amount of time surfing the web and seeking advice online, where it can be difficult to distinguish expert advice from the inept.

In Canada, 96% of registered advisors are “dealing representatives,” which means they are salespersons not legally required to look after your best interests. On the other hand, just over 4,000 advisors are registered in categories where they must act as true fiduciaries and are legally required to deliver clients advice that must be in their best interest. While there are many financial advisors who look after their clients in the same way as true fiduciaries and deliver exceptional support and guidance, there are a whopping 118,000-plus advisors who do not have to adhere to such standards.

As an investor in search of an advisor, your goal should be to find the right person to help you reach your future financial goals. While you can correct a poor choice down the road, you would have wasted valuable time and may have actually suffered financial setbacks. It is therefore paramount you avoid the following mistakes:

Mistake #1

Don’t fall for the opening pitch. No matter how enticing the discussion and no matter how obvious the initial set of benefits are, chances are you are only seeing one side of the equation. No one wants to reveal their warts, especial right off the bat. So take your time to establish a rapport with the advisor. Trust comes with knowledge and clarity so make your first appointment about gathering information and creating a connection.

Mistake #2

If investments and products are the first subject of conversation before attempting to build a profile of you and your family, take a pass. Remember you are looking for someone that can give you personalized advice and not a canned spiel or off-the-shelf solution. If the advisor starts talking about investments before understanding your fears then you should think twice.

Mistake #3

If the advisor starts spouting off jargon or buzz words, look to the nearest exit. Like most clients it is not your life long ambition to be fully versed in all things financial. You have a real life, with other priorities that require your focus and energy. After all isn’t that why you are seeking out an advisor in the first place? So demand straight talk without the mumbo-jumbo.

Mistake #4

Seek out a written and understandable set of recommendations. An unintelligible proposal is bad, but no proposal is even worse. Remember you want to avoid the sales pitch pressure. What better way to do that than having something tailor-made for your circumstances and then have the time to mull over the material before making a decision. It should be comprehensible, straightforward and written in plain English.

Mistake #5

You should be the one talking, not the advisor. Too often sales-first advisors talk too much and cannot be interrupted because they are pushing their agenda. Instead, they should be asking you questions; listening to your responses and providing concise answers given your requirements and needs. Verbal diarrhea should make you sick.

Your task is simple. Avoid falling for these mistakes. Ask yourself: “Have I experienced any of these mistakes?” If your answer is either “yes” or “I’m not sure” then perhaps change is necessary. Just remember you should never assume everything will be okay. Don’t assume it will be better down the road. Don’t assume your advisor understands your goals because you may find that only one of you is actually in it for the long haul.

Chris Ambridge is President of Transcend & Chief Investment Officer of Provisus Wealth Management, a portfolio manager launched in 2007 that manages over $450 Million in assets for private clients. He began his investment career in 1987 as a Financial Analyst at IBM Canada, and worked in investment counsellors and private client investing in Canada and abroad. After returning to Canada he became Head of Investment Management Services for First Asset Advisory Services in 2003. Chris has an MBA from the University of Windsor and is a Chartered Financial Analyst.

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