Paying for financial advice

BY FAZAAD BACCHUS

You always pay for financial advice, either to the bank, to the advisor or through your mistakes. If you want quality planning then finding the right advisor to help you grow your money is of utmost importance.

This has become a most interesting topic in the last three years since the regulators made a decision that fees must be disclosed on all investment products, regardless of whether you buy them at the bank or whether you buy them from an investment advisor.  Up until three years ago, if you bought an investment product at your local bank you were told that there was an MER and you were given the fund facts but not necessarily were you told that there were fees associated with investment advice. Many clients did not know that the bank charged for advice and there are many clients therefore who paid for advice and never received any.

Again, up to two years ago there were some direct investing companies (no names called) who were charging clients an MER which included investment advice but because you were buying or doing direct investing, you were not entitled to advice. The regulators made a decision that these funds will no longer include the advice fee and basically are “do it yourself DIY” investments. Hence the term D series investments, they are one of the cheapest alternatives, but again it comes without advice, so you never can be sure that you are making the right decision.

So clients are faced with a dilemma, you buy DIY series and you have no idea if you have done the right thing or you walk into your local branch and you are sold some investments under a no load structure, which includes fees for advice but where you don’t typically get any. The representative at the bank moves to another branch and the new representative has no idea about you or your concerns.

Here clients can now make a decision if they are going to engage the services of a professional advisor, someone who is qualified and understands the nature of financial planning. Your advisor can sit and plan your retirement options, your forecast, whether you will have to work longer, or whether you will have to save more and generally can you retire at the time you would like to. This advice is not free, the advice given by your lawyer, doctor or any professional is not free, it’s part of the professional’s livelihood. The same applies for a professional advisor who knows what he or she is doing.

So clients have a choice, no fees in DIY funds or pay for advice in advisor series funds.  Should you choose the advisor series, your advisor will want to ensure that he calculates your risk tolerance, understands your time horizons, your overall financial position, and your other sources of income and prepares a plan to either grow or retain you wealth depending on your stage in life. Your advisor now carefully chooses the funds that match all the parameters just mentioned above and continues to monitor the investments year over year. This is the advice you should be getting if you are paying fees, which in most instances you are, unless you are in D series funds. Talk to a qualified advisor today.