Most investors face a more important decision than which fund or stock to buy. It’s choosing their financial advisor. Here’s how to do it.
Most investors face a more important decision than which fund or stock to buy. It’s choosing their financial advisor.
The right person for you will depend on how much you have to invest, the range of investments you’ll hold and your financial-planning needs. How to find him or her?
The traditional way is through referrals, references from satisfied clients and face-to-face meetings to gauge your comfort level. Another way is to use online search engines. They’re free and anonymous. You’re not asked to register or identify yourself. Searching online can help you answer key questions, including:
1.) Are they registered?
Most advisors who sell stocks and mutual funds fall into one of two main types: Mutual fund dealers or stock brokers. Of the two, brokers have access to a much wider range of investments, including stocks, bonds and exchange-traded funds, as well as mutual funds.
Other dealer types include scholarship plan dealers, who are registered to sell education savings plans, and exempt market dealers, who are allowed to sell non-prospectus offerings.
Subject to more stringent requirements are those who are designated as portfolio managers. They generally serve wealthy clients and are formally deemed by regulators to be “advisors.”
To check on a dealer or advisor’s registration in Ontario, go to the investors section of the Ontario Securities Commission website, www.osc.gov.on.ca. You can search by firm or by the individual’s last name. For other provinces and territories, the Canadian Securities Administrators (CSA) website has a similar search tool.
2) What are their qualifications?
There are dozens of different certifications. Usually they show up on business cards as acronyms, such as
CIM, CLU or CFA, to name only a few. To sort through the various qualifications and what they mean, and their educational and other requirements, check out the online glossary of financial certifications at the Investment Industry Regulatory Organization of Canada’s website, www.iiroc.ca.
Type in CFP, for example, and you’ll learn about the designation of certified financial planner, which is conferred by the Financial Planning Standards Council. The glossary notes that, along with taking courses and passing exams, CFP holders must have at least three years of related work experience, and complete 30 hours of continuing education each year.
IIROC, the self-regulatory organization for the brokerage industry, launched the glossary in late October. “It’s not passing judgment on any of these designations,” says IIROC president Susan Wolburgh Jenah. The purpose of the glossary is to provide information in one place, “so that people can make their own assessment.”
3) Do they have a clean record with the regulators?
Online searches enable you to identify advice-givers who have run afoul of securities regulations. The offences range from relatively minor compliance failures to multi-million-dollar scams.
This information is available at the Canadian Securities Administrators website www.securities-administrators.ca. You can search by name, by ruling body, or by the type of violation or misconduct.
The CSA site lists the 10 most recently disciplined persons. As of the end of December, for instance, this list included the penny-stock scam artist Sandy Winick. As reported in the Star. the OSC ordered Winick to pay $1million in penalties and banned him for life from the securities industry.
You can now also check on insurance agents, including those that sell segregated funds As of Dec. 1, Canada’s insurance regulators introduced a national directory of disciplinary actions. It can be found at http://decisions.cisro-ocra.com.