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Simply Put

The pros of hiring a pro

June 24, 2016

Despite its decidedly uninspired name, something called CRM2, “The Client Relationship Model – Phase 2”, is gearing up to make some pretty big changes to how our industry operates. This year for the first time, investors will start seeing right on their account statements exactly how much they’re paying their financial advisors, in dollar terms. Many have raised the question of how investors will react. Will this heightened transparency increase pressure on advisors to demonstrate their value?

The benefits to investors that advisors can bring to the table have been more than simply stated – they’ve actually been quantified by multiple sources. For example, Morningstar found that advisors can add the equivalent of 1.82% annually to investors’ bottom line.i Similarly, Vanguard identified “advisor alpha” as a boost to the investor experience that had the potential to improve investors’ annual net returns by some 3%.ii

Closer to home, the Investment Funds Institute of Canada (IFIC) compared advised and non-advised households and found the former had significantly higher assets, saved twice as much and enjoyed stronger long-term investment performance.iii

So why haven’t all investors jumped on the advisor bandwagon and why are some jumping off in favour of lower-cost alternatives, including automated services (called robo-advisors) or even going the DIY route?

For investors without an advisor, we’d tell you that we’re firm believers in the power of independent, objective financial advice to get you to where you need to be financially. You likely have neither the time nor the resources to take on the job yourself. In any case, a good advisor can offer you a lot more than meets the eye.

The flip side is that inasmuch as advisor value needs to be acknowledged, so does the fact that not all advisors are created equal. If you’re not careful, you could find yourself dealing with a bad apple. You can’t pick an advisor blindly – it’s up to you as an investor to do your homework and find the right person for the job. We don’t partner with just anybody and neither should you.

Tips for finding a financial advisor

Sure, it takes effort on your part. But working with an advisor is one of the quickest ways to improve your financial life. Here are five things to consider in your search:

  1. Know thyself
    To choose an advisor suitable for you, first evaluate your priorities. Be prepared to articulate the issues you’re looking for help with, things like building an emergency fund, education savings or maintaining your current lifestyle in retirement. And understand your attitudes toward money. Are you up at night worrying about the state of your investments? Or can you live with suffering some short-term losses to gain over the long term? Look for someone whose approach to investing aligns with yours.

  2. Find someone qualified
    Referrals, even from trusted sources, aren’t enough. Do a full background check on education, credentials, experience, the kinds of products an advisor is registered to sell, how they’re compensated and if they’ve ever been subject to disciplinary action.

  3. Take your time
    Meet face to face with more than one advisor. Make sure you feel comfortable discussing your finances with them and that they provide the services you want. Learn about the types of clients they may specialize in and the level of contact they maintain with them.

  4. Ask around
    Don’t just trust your gut. Get references from clients with similar needs as yours. If the advisor works with any other experts, such as lawyers, accountants or insurance agents, also ask for references from them.

  5. Understand the costs
    Determine up front how an advisor is paid and compare their rates with others. Be aware of conflicts – an advisor who earns a commission rather than a flat fee may be incentivized to steer you in a particular direction. Then again, fee-based advice can be comparatively expensive for a level of service you may not need or want. While there’s no obvious answer in terms of which mode of compensation is best, with a little probing you’ll gain a clear picture of the fees you’ll be charged and what exactly you can expect for what you’re spending.

In a nutshell, our advice is to get advice! Before you invest your money, invest the time and energy in finding a good advisor to set yourself up for a brighter future.

iBlanchett, David and Kaplan, Paul. “Alpha, Beta, and Now…Gamma,” Morningstar Investment Management, August 28, 2013,
iiKinniry, Francis M. Jr, et al. “Putting a value on your value: Quantifying Vanguard Advisor’s Alpha,” Vanguard research, March 2014,
iiiCockerline, Jon. “New Evidence on the Value of Financial Advice,” The Investment Funds Institute of Canada, November 2012,