Seven questions to make sure your financial adviser fits your unique needs

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Perhaps you already work with an adviser and are looking to start a new relationship, or maybe you have accumulated savings and your situation now requires planning advice. Either way, you’re looking for an adviser who fits your needs and you feel comfortable with.

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A quick Google search of “questions to ask a prospective financial adviser” will bring up some of the most common ones: What is your experience? What are your credentials? What fees do I pay and how are you compensated? What types of clients do you work with, and what makes you different from other advisers? These are all good questions to ask, but they are also questions that most advisers are prepared to answer.

Here are some other important questions to ask and things to watch for when interviewing a prospective financial adviser. 

What is your investment philosophy? Does the adviser have a clear and defined investment philosophy with access to a broad range of investments? Do they have a disciplined approach, or do they follow trends? Do they focus on a broad asset allocation or focus on specific sectors? Ask this early and make sure you are comfortable with how your portfolio will be managed.

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What type of volatility can I expect with my portfolio? Look for consistent and stable returns and ask how much volatility other clients experienced in years such as 2020. In March that year, equity markets experienced a significant correction, but most investors who stayed the course would have seen their portfolios recover, and gain, by the end of the year. Ask yourself what level of volatility you are comfortable with, since investors often make emotional decisions during times of increased volatility, and an experienced financial adviser can help manage your behaviour, so you don’t miss out on market recoveries.

How much cash flow is my portfolio expected to generate? My colleague, James McCarthy, a senior wealth associate at Nicola Wealth, recently shared with the Financial Post why cash-flow investing is a strategy that should be considered during times of increased market volatility. Cash flow (dividends, interest, rents) is an important number to track if you are in retirement or need income from your portfolio to live on. Ask if portfolio cash flow is reported separately from the portfolio total return.

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What type of planning have you done for other clients? The response to this question will give you a good idea about the level of planning they do and the type of clients they work with. In their podcast Investing Matters: The Value of Advice, my colleagues, wealth advisers Ethan Astaneh and Kyle Westhaver, discuss the true value of financial advice and integrated planning. Not all value-added services are seen on investment or management fee statements, and the proper planning can have a huge impact on your long-term financial situation. 

A good indication of the planning level you can expect will be revealed by the type of questions that are asked in your initial meetings. What is the level of detail that is being asked about your situation? Is the adviser asking for copies of your tax returns and corporate financial statements, wills and other estate planning documents? 

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If you are a business owner, have they asked if you have a succession plan? Have they asked for an introduction to your external advisers? A red flag is if you are being provided with advice before the adviser has taken the time to learn your situation.

Will you work with my external advisers? Collaboration with your other professional advisers, for example, your accountant and lawyer, is important when taking an integrated planning approach. You want your team of advisers working together collaboratively to achieve your goals.

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Who makes up your advisory team? Ideally, the relationship you form with your financial adviser is long term. Some advisers work alone, and others will work with a team. The individual you meet with initially may not be the only person you have contact with moving forward on a regular basis, so ask who supports them and who will be available in their absence. Who is your main point of contact?

What type of reporting can I expect? This is often something you don’t consider until several months into the relationship when you have questions on what your return and profit, net of all fees, has been. You may find that the provided investment, fee and tax reporting is disappointing. Ask upfront for sample client reports, so you know what to expect and how often you will receive it. 

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With client online access and mobile apps, you should expect regular and current reporting data. Also ensure that your accountant will be provided with adequate information to file your personal and corporate returns.

The above questions will ultimately lead to other conversations, but one thing is certain, the right financial adviser can be worth every penny of the fees you pay and can set you up for success for many years to come.

Perhaps most important is that you have a strong feeling of trust and comfort with your financial adviser, because they will often be the first person you call when you have a life-altering event.

Jennifer Leathem, CFP, CIM, is a financial adviser at Nicola Wealth. This article should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. All investments contain risk and may gain or lose value. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required provincial securities commissions.

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