Financial advisors: do you have one?

Most of you know that I really want to figure out what I should do about my (lack of an) investment strategy. It’s been really bothering me over the last 6 months. In fact, a goal of mine for November was to read 10 articles about investing. Well, I figured I’d be reading about mutual funds, ETFs, stocks, and some sort of basic strategy. But instead, I found myself researching investment advisors.

I personally think an investment advisor is the best way for me to go. I decided to look into a “fee-only” advisor, because I’m confident that – once given a plan – I can execute it myself. And, because I have a small portfolio that doesn’t need constant managing by a professional. Fee-only advisors are expensive though. Through my research, I saw them charge anywhere from $100-500 per session. To get an analysis of your entire financial well-being, as well as a strategy for the future? Even though it might seem expensive, I feel like it’s completely worth it.

Even though, up until recently, I didn’t believe in paying someone for financial advice. I figured I was young enough to do it on my own through trial and error, and besides, I had the basics down. I knew I was invested in the right mutual funds, and I had a basic understanding of what I needed to do. But as I creep closer to 30, I realize that I need a professional to help me. Nobody has ever seen my investments before. I need validation and a plan.

Now this is what I call perfect timing: earlier this month, my editor at the Toronto Star asked if I wanted to be the Moneyville guinea pig and get some complimentary advice from a fee-only financial advisor. I said yes, of course. And I’m excited to share what I’m learning with all of you soon.

Have you ever considered hiring a financial advisor?

About Krystal Yee

I'm a writer, personal finance blogger, and marketing professional based in Vancouver. I'm a former Toronto Star (Moneyville) columnist, author of The Beginner's Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I'm not working, you can usually find me running, playing field hockey, or plotting my next adventure.

27 comments

  1. I don’t have a financial advisor at this point-well, technically I do through the first institution that I set up my RRSP with (there’s only about $10K in that one) but I’m small potatoes so the advisor isn’t exactly concerned with me. The rest of my RRSP & investments are through the Couch Potato Strategy that Moneysense always talks about so I haven’t seen the need for an advisor. Once I start investing outside of my RRSP (and that strategy) I will go the advisor route, so I’m looking forward to hearing what your experience is like!

  2. That really is great timing! Do have any say in who the adviser is? Hopefully it will be someone who can match up with what you need at this point in your life. I’m looking forward to seeing how this turns out for you.

  3. After the fellow from Investors Group failed to explain the Smith Manoeuvre better than I had to Mrs. SPF, no, I do not employ a CFA. Add on top this fellow wanted over 3% management fee there was NO WAY I would pay for an advisor from that group.

    We seem to be doing quite well advisor free. I feel there is more than enough content on the web to help me along in our financial decision making.

  4. At this point I sort of have one. I saw someone before I bought my house to make sure we were financially sound before we went for it. I haven’t seen him since, only because we’re at a point in our financial plan where we can’t move to the next step until we’ve completed this one. Can’t talk investments until we have our basic emergency fund completed!

  5. I’ve considered a financial advisor, but never met with one. I’ve seen some tips in the past on GRS for finding one that looked helpful.

    $100-$500 doesn’t sound like a lot to me, especially if they’re advice returns much more than it costs. If anything just finding an advisor and making the time to sit down with him/her is what’s stopping me, not the cost.

  6. When thinking about my future (namely when I get to stop paying tuition and start investing, saving, etc), I think that might be a good way to go but that’s mainly because of laziness for me. I don’t want to have to look into all of this investing stuff and try to wrap my head around it.

    On the other hand, they’re expensive. I would do the same thing as you – I don’t think having somebody take a portion of my interest is the best bet.

    We’ll see how I feel when I have money to invest/save!

  7. I don’t have one, but I need one.

  8. I don’t have a financial advisor, but if I suddenly won the lottery, I surely will retain the advice of an advisor and a lawyer! :) Right now, I am doing fine with my investments in Vanguard. I invest pretty simply – mostly index funds in international and domestic stocks, and a blended bond fund – and I think that will serve me well. Once I get to $500K in assets with Vanguard (looooong way to go!), I will have access to a certified financial planner that will write up a financial plan for me and such.

  9. I could write a novel on this.
    I would suggest that if you don’t feel comfortable with DIY, then learn. You could wind up with a poor planner and not even know until it is too late and then be faced with starting over and catching up.

    Many planners just put you in funds that you could research and find yourself. They may offer you an F-series fund which looks good at first but also pays them a ongoing commission on top of their fees.

    Before doing that, learn more about dividend investing. You can do just fine on your own. I think the bigger issue is finding a planner or someone to give you a long term tax strategy with your investments. You want to make sure you keep as much as is rightfully yours down the road.
    ;)

  10. This was on my mind a lot 6 months ago. That is when my husband received his inheritance from his father’s passing. I believe it’s about $450k in 2 IRAs and $150k in U.S. treasuries. All I know about it is that we are going to receive annual RMDs from the IRAs ($13k last year, not sure if it’s the same every year) and that we could cash the U.S. treasuries at any time. This was a lot to be handed to us, him being 30 and I am 26. I really wanted to talk to a financial advisor and make a plan. I feel like we’ve been handed a 50 y/o’s retirement account, but we have 30 more years to do something with it. If that’s not worth hiring somebody for, I don’t know what is. My husband, on the other hand, thinks we are fine managing it on our own, though he has consulted several times with someone from the IRA accounts. To me, though, that is like looking at one piece of the puzzle without ever getting the big picture of our finances, our future goals, etc. I don’t know if this lady does all that as part of her job, but I suppose it’s worth finding out. (Esp. if it’s a service we’re technically already paying for!)

  11. I used to have a financial advisor through Investors Group but I didn’t feel comfortable with him and thought it was weird that I was losing money in my account (like 6% down) when the market was going up within the same time period.

    It was then I realized I was being charged a 3.5% fee annually on my investments. Here’s my experience:

    http://youngandthrifty.ca/investing/me-myself-and-investors-group/

    I just felt that financial advisors who are selling mutual funds (I call them mutual fund advisors really) have an inherent conflict of interest because of the commission involved.

    I now DIY and I think that the TD Eseries is one of the best vehicles for investing- Just set it and forget it. Dividend stocks are the way to go too if you’re not too upset about market ups and downs.

    It would be great to get a fee based advisor, but my portfolio is too small for that. Looking forward to hearing what this complimentary advisor has suggested for you! :)

    • I totally agree. I am a DIY investor with the TD e-series funds too. I just wanted to make sure I was doing it properly, and I’ve actually gained a lot of insight. Even though I didn’t have to pay for my financial advisor’s service, I think it would have been worth the money to me anyway. My portfolio is smaller than yours (by a lot, I think), but just having him create a plan for me is great, and I can continue doing it myself going forward.

      • How do you split your investing between TFSA/RRSP and your own TD funds? Do you have a limit to the first two and then any extra goes into your DIY investments? And what’s your diversification like?

        I’m just trying to work out a strategy for myself at the moment (in NZ so slightly different system) and while I’m maxing out my govt scheme to get their contributions, I want to bust out into the ‘real world’ and invest elsewhere too.

  12. I used to have a financial advisor, until I found out he was trying to sell me products with the highest fees. I still try to receive financial advice from professionals whenever I can but Ive learned to not pay for them anymore. But A fee-only advisor may be a good option, though I have never tried. Let us know what your experience was afterwards.

  13. most banks will actually offer the advice of a financial planner without paying extra fees, so long as you have a minumum of investable assets. This is a great way to get some financial advice… the minimum at TD is $150, 000 and then you qualify for a financial planner without paying.

    For now, working for the bank, I feel confident that with a small portfolio, I don’t really have the need to hire a Financial Planner, however as soon as I have investable assets of $150, 000 I will take avantage of FP services available to me :)

    I don’t actually feel that my portfolio is worth a Financial Planner’s time right now.

    • But don’t you think that the advice from a financial planner that works for a bank will be somewhat biased? It will be very unlikely that they would recommend investments at other financial institutions, even if it would suit your needs the best.

      • A financial planner through the Wealth Management division of any of the Big 5 Banks will have access to almost all investments, not just those that belong to their affiliated bank, so no, i don’t think that the advice would be biased for that reason.

        I just recently learned this, I thought that a TD Waterhouse FP would only have access to TD investment products but this is not the case. Someone can move all their investments over from differend investment firms without pulling out of all those investments so that a professional financial planner can help you develop a strategic plan that will meet your financial goals.

  14. I am only just starting out (a rather late start compare to most of you; oh well better late than never). I opened an account with Questrade back in July and I plan to do it myself for a while. Doesn’t make any sense for me to get an advisor at the moment.

  15. so you’ve already met with this advisor? What did kind of plan did he lay out for you?
    oh share the wealth, so to speak.. : )

    • Yes I have already met with him. Look for a post on my experience on Moneyville… and after that I have a post ready to go for this website too. Lots of interesting information! :)

  16. Krystal- I love your blog and I just read your article on Moneyville. Out of curiosity, did the advisor suggest his opinion on the cap at which to move out of E-series? There is a lot of conflicting opinions about when the optimum time to move out is.

    • Hi Heather,

      I’m the advisor who helped out Krystal!

      In my view, the TD e-series mutual funds are suitable for anyone, even in to the hundreds of thousands of dollars and perhaps beyond that.

      In fact, the decision pertinent to e-series vs. ETFs vs. other investment strategies doesn’t depend much on portfolio size in my opinion. There are scenarios where you may consider other strategies, for example:

      (a) Lump-sum: You prefer to invest lump-sum once or twice per year rather than at regular intervals (bi-weekly, monthly). In this situation, it may be possible to build a basket of traditional ETFs with ultra-low MERs and no-to-low commissions that puts you ahead of the e-series fees. I would encourage people to do a calculation (or work with an advisor) to figure out which works better.

      I emphasize traditional ETFs here (i.e. those that track market-cap indexes such as the TSX, S&P 500, MSCI EAFE) because every day there are new specialized ETFs coming out that have no place in most investors’ portfolios.

      (b) Group RRSP: You have a group RRSP plan available at work. If your employer is matching a portion or all of your contribution, in most cases it may make sense to maximize your contributions through work because of the immediate return. You also need to consider the mutual funds available, associated MERs and implications to leaving the company.

      (c) Significant non-registered portfolio: Tax planning becomes important if you have a non-registered portfolio in addition to your RRSPs and TFSAs. For example, you may choose to hold bond funds/ETFs in your RRSP and stock funds/ETFs as non-registered.

  17. Here’s the problem: 100% of financial planners/advisors/brokers are first and foremost sales people. Their job is to bring in new business and charge clients as much as possible. Then the money management is done automatically or by an assistant (or three, depending on the size of the portfolio the “advisor” has managed to accumulate).

    Here’s the bigger problem: the less money you have to invest, the less experience and education your planner is going to have. The best advisors have huge minimum investments for new clients because they only have so much time to dedicate to meetings and analysis. The mediocre advisors still have large minimums. The only planners/advisors/brokers who are going to meet with you if you have less than 6 figures to invest with them are the kind who have had less than 5 years experience and less than extensive financial training. They have probably had a few company sponsored courses in basic sales techniques though, you can be sure.

    Anything you need to know about investing you can learn from a $20 book. I’ve read dozens of them and they all say the same thing. I’m a Certified Financial Planner and I tell all my clients the same thing. The sad fact is that you can’t make any money helping the people who actually need help though; you only make money by selling products and services to wealthy folks with teams of advisors and so much money they don’t care about paying 1-3% of it to folks to handle for them.

    The sadder fact is that it’s so basic it’s ridiculous:

    Have 6 figures in cash – 1 year of expenses minimum plus any amount you need in the next 5 years to buy a car, home, tuition, or engagement ring.

    Max out your retirement accounts. Dump the money in a diversified index fund that is 20% bonds and 80% world mix of stocks.

    Most people never even check these steps off the list. When and if you do – and once you have piles of money accumulating after that – THEN it’s possible that you might benefit from a financial advisor who may be able to find tax advantaged strategies for investments or give you access to investments that require larger minimums (hedge funds, private equity, etc).

    • Meg,

      I’m surprised by some of the comments in your post as a CFP. I would like to address them as I would certainly not want someone to take unwise actions.

      1. Financial professionals as salespeople: I would agree with you here that most (not all) financial professionals are in the business of selling financial products. However, it’s certainly not 100%. I’m one of those advisors that operates on a fee-only basis, which means I charge a fee for advice and I don’t sell any financial products.

      2. Books as advice: With any topic, you can certainly get advice from books, magazines and web sites. But, how do you know if that information is relevant to you at any given time? And, more importantly, will you take action on it? I’m curious to know what books you recommend to your clients.

      3. Making money by helping people: You mention that you can’t make money helping the people who need help. I do. Most of my clients are thirty-somethings that truly need help with important financial decisions. A positive difference today could have a huge impact in the future.

      4. Generalized advice: You mention “have 6 figures in cash,” “max out your retirement accounts,” and maintain a “20% bonds and 80% world mix of stocks.” This advice is way too general. You really counsel your clients to keep $100,000 in cash? For some people maximizing the retirement accounts may not be the first priority, it may be paying off debt. And, most certainly, 20% bonds and 80% world stocks is not a suitable asset/geographic allocation for everyone.

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