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How to assemble a financial advisory team

by | Jul 10, 2017 | SELF-PUBLISHED

Professionals bring unique skills to the table

It seems like there are “financial advisors” around every corner. Trouble is, they all seem to offer different services and have different qualifications. And they all charge different fees. Do you really need a lawyer or an accountant to set up a portfolio? How do you know you’re getting the best bang for your buck? Here’s a guide to the various professionals who might offer financial advice, and how they can work for you.

There does indeed seem to be an embarrassment of riches when it comes to financial advice. But this is a good thing. Each type of professional brings a specific skill-set to the table, which perhaps the others lack. In the world of medicine, not everyone can be a brain surgeon, a cardiologist, and an ophthalmologist at the same time. Similarly, in the world of financial advice, different practioners offer different kinds of expertise. Your challenge is to know whom to call on and when.

Financial Planner. To accomplish anything worthwhile, you need a plan. This will include assessing your current financial situation by helping you gather all your current financial information, sort it, organize it, and get it up to date.

A financial planner will help you focus in setting goals and help you determine what’s realistic, what’s attainable. She’ll also analyze your needs, quantify your resources and apply them to your goals. The result will be your personal financial roadmap.

The planner will then offer solutions in the form of written plan with recommended courses of action for you, explaining how each element fits into your overall plan.

As part of the planning service, your financial planner will also implement your plan, from investment accounts to tax-planning to insurance needs and estate planning. Financial planners ensure your plan gets started, recommending investment managers, accountants, and lawyers where necessary, and ensures your plan stays on track.

At a minimum, a financial planner should hold the Chartered Financial Planner (CFP) designation.

Investment Advisor/Portfolio Manager. Research has shown that up to 95% of the return you get is a result of proper asset allocation, not just picking the right individual stock, bond, or fund. It’s important to find an advisor who can provide documentation that clearly outlines an asset allocation methodology that’s right for you.

Your investment advisor should be free to select investment products from the entire universe of investments and must have access to a wide range of investment choices, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs), and not be limited to the offerings of only one company.

I’ve found that today many of the best financial advisors no longer attempt full portfolio management for their clients. They in effect “outsource” the job to professional portfolio managers who have large research teams, better access to markets, and cost-effective trading platforms. This does not mean that you will pay more to have assets managed in an arrangement like this. In fact, in most cases, you will pay less than if a more traditional investment advisor did the whole job. The fees you pay are simply shared between the portfolio manager and the advisor.

At a minimum, a qualified investment advisor will have a recognized accreditation, such as Chartered Investment Manager (CIM) and Fellow of the Canadian Securities Institute (FCSI). Professional portfolio managers will often also have a Chartered Financial Analyst (CFA) designation.

Insurance Advisor. The range of insurance products on offer increases every year. While someone may not require life insurance per se, the “living benefit” contracts that insurance companies now offer may enhance your financial well-being in one way or another. Insurance companies not only offer critical illness policies and long-term care policies, but also various investment products with features that cannot be obtained anywhere else. For example, they offer a product that pays a guaranteed minimum monthly income, which is often a good choice for retirees who are living on a fixed income.

While some insurance advisors do nothing more than underwrite various insurance needs, it is more common today for a financial planner or investment advisor also to be licensed in the insurance business. Some insurance advisors also hold a securities license.

Insurance brokers and agents must be licensed. Many will also have specialty designations, such as Chartered Life Underwriter (CLU) and Certified Health Insurance Specialist (CHS). Insurance brokers, agents, and underwriters must also take continuing education programs to keep their licenses up to date. Check with your agent about their current status.

Accountant. An accountant may be a necessary key member of your team if you are a business owner, have a professional practice, or have a substantial net worth. Most individuals and smaller businesses are typically served by local or regional accounting or bookkeeping firms, who tend to outsource when they require something more sophisticated.

At a minimum, an accountant will have a professional designation, such as Chartered Professional Accountant (CPA). A CPA is a senior finance professional, and fees will be commensurate. If keeping your accounts organized is all you need, a bookkeeper will have a diploma from an accredited university or college in bookkeeping, along with membership in good standing in a professional association such as the Canadian Bookkeepers Association, which allows members who have passed a qualifying exam to use the designation Registered Professional Bookkeeper (RPB).

Lawyers. Your legal counsel will deal periodically with more your more specialized needs related to your personal financial affairs, such as drafting wills and powers of attorney, establishing trusts, and incorporating companies, as well as giving advice on various corporate and business matters, including share issues and contracts.

Practicing lawyers must have a degree in law (LL.B or J.D.) from an accredited university, must have passed the bar exam in your jurisdiction, and must be a member in good standing with the law society in your jurisdiction.

As for fees in general, many financial planners have moved to a fee structure that represents a percentage of assets under management. (Specialized legal or accounting help, if needed, is typically charged separately on a services-as-rendered basis.) Some financial advisors still use a commission-based approach, charging for each transaction separately, in addition to charging separate fees for various services. But with new regulations regarding transparency of financial advisory fees, this model is rapidly fading away.

Often, individual financial planners, insurance advisors, lawyers, and accountants will have a long-standing informal network-type working relationship formed over many years. This is the best way for you to tap into precisely the kind of expert advice you need. The best situation is the one in which your financial planner acts as the quarterback of a team that includes an accountant and lawyer.

© 2017 by Robyn K. Thompson. All rights reserved. Reproduction without permission is prohibited. This article is for information only and is not intended as personal investment or financial advice. Securities mentioned are not guaranteed and carry risk of loss.

© 2021 by Robyn K. Thompson. All rights reserved. Reproduction without permission is prohibited. This article is for information only and is not intended as personal investment or financial advice.

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