5 things your financial adviser isn’t telling you

If you understand how they operate, you have a better chance at finding one that’s right for you

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From the November 2014 issue of the magazine.

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(Getty Images)

(Getty Images)

1. Fees are my friend. New regulations currently being put in place will force advisers to disclose exactly how much you pay in fees on your mutual funds, but that doesn’t mean complete disclosure. “Fee-only planners don’t manage money so they’re approached all the time by investment advisers looking for a referral in return for a referral fee,” says certified financial planner Jason Heath. “These fees often aren’t disclosed.”

2. Great advisers specialize. It pays to pick an adviser who specializes in the area where you need help. For instance, if your marriage breaks down, you might want an adviser with a financial divorce specialist designation. Keep in mind that you’ll likely need more than one adviser in your lifetime—one for investment management and one for retirement and tax planning.

3. I don’t need to put your interests first. Advisers aren’t fiduciaries like lawyers. “It’s just a suitability standard that applies to their recommendations and conduct,” says Heath. That means any investment advice offered by an adviser can be rationalized as suitable for you. In fact, advisers are often offered monetary incentives to sell certain products, a situation that can result in a conflict of interest. There are some great advisers out there, but others are little more than commissioned salespeople who only sell the mutual funds offered by the bank they work for.

4. I may not be as competent as you think. You can become a qualified mutual fund salesperson after just one 30-hour self-study course and exam. You should demand at least a certified financial planner (CFP) or registered financial planner (RFP) designation. Both require far more rigorous certification and training.

5. Your financial future is not as predictable as I’m telling you. Their computer models sound real and concrete, but they can’t predict the future. You may lose your job or become critically ill, rendering your whole plan obsolete.

4 comments on “5 things your financial adviser isn’t telling you

  1. Interesting Advice. Do you also have good advice those already retired? Suggestions on how to manage and maintain your portfolio.


  2. I agree with all of the above and read numerous articles imploring clients to ask about fees so I appreciate the extra point Julie makes in (5) ” they can’t predict the future. You may lose your job or become critically ill, rendering your whole plan obsolete.”
    Too many “plans ” focus on the investments as a way to scare or convince you into moving your funds to their management.
    First off run a surplus ( cash flow analysis) , disaster proof your life, make your debt work for you not against you and THEN invest in the most tax and free way possible. Kathy. Fee Only Planner in SK. http://www.eurekainvestorguidance.ca


    • @ “disaster-proof” – ? By that statement – are you suggesting insurance first, like a Whole life policy? I would disagree with that. Sorry to assume, but how does one disaster-proof their life? Also depending on your fee structure, in some cases you can just wind up giving the 1.5% fee to the fee only planner rather than the MF company so you are no further ahead. So the fees have to be structured fairly for both planner and client. Particularly for clients just starting out.


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