General Questions

Are you registered?

Registration protects investors in some cases as a result of regulatory authorities only registering certain individuals and firms if they are properly qualified.  Check with your provincial regulator to ensure an individual and/or firm is registered.  In addition, you in some cases can check to see if any advisor had any previous disciplinary actions. 

How are you registered?

Advisors are registered through different regulatory licensing bodies.  How they are registered will affect the type of products and services that will be made available to you.  Advisors registered with IIROC will tend to offer a wider array of investment vehicles and in some cases more sophisticated investments.  This does not necessarily mean the products are better. 

Advisors registered with the MFDA will in most cases only be able to offer mutual fund-based investments.  As well, depending on the firm, in some cases advisors will be allowed to offer the majority of funds in the Canadian marketplace, while advisors with other firms will only offer possibly one or few different types of fund companies. 

In addition, advisors need separate licencing to offer insurance based investment products such as segregated funds or guaranteed investment funds. 

What is your background and experience?

There are thousands of financial advisors or investment advisors in the country.  Investors should ask financial advisors about their educational background and what designations they have.  Registration itself involves courses, but there are additional courses advisors take to better educate themselves about products and services and other planning opportunities.  Look for designations such as Chartered Financial Analyst (CFP), Certified Financial Planner (CFP), Canadian Investment Manager (CIM), Professional Financial Planner (PFP) and other designations.  In addition, you probably want to know how long your financial advisor has been in business.  Experience in the financial services world makes a big difference. 

 How are you compensated?

Investors need to fully understand how advisors are compensated.  Investors should ask about commission charges to buy and sell securities or the load structure or fees to purchase or sell mutual funds for example.  In addition, investors should be fully aware of terminology advisors use about products such as “deferred sales charge” or “back-end load”. 

If there are annual management fees, investors should know this up front. 

By sceptical about advisors who tell you there are no fees involved to buy or sell a product, or that the investor doesn’t have to pay the advisor anything, because this may not be the case.

Do you receive additional income or bonuses for achieving sales objectives for any specific investment you recommend?

Most advisors are compensated on a commission basis. However, some commission-based advisors are paid increased bonuses for hitting certain levels in assets under management for certain products. More specifically, some are paid at high commission and/or bonus levels if a certain portion of their sales is in a certain class of products, typically the bigger revenue generators.

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