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Considerations for Choosing a Financial Professional

Gaining financial advice from a qualified, ethical, financial planning professional can make a big difference for your financial future. There is no easy road to finding the right financial professional; you need to do your homework. The financial professionals you see giving quick answers on popular television programs will never understand your specific financial situation, and you’ll benefit from a financial professional who can.

1. What services do you expect the financial professional to provide, and what approach or process does the financial professional use?

It is important to discuss the scope of services you require: are you looking for a comprehensive financial plan, are you looking for assistance with insurance for your business, or do you want to purchase a specific product? You may benefit from a comprehensive approach that covers a full evaluation of your needs and situation, appropriate recommendations for your circumstances and risk tolerance, and ongoing monitoring of the financial plan. Make sure you understand – if you engage a financial professional for limited services.

2.  How does the financial professional get paid, and how much will the service cost you? Are there any potential conflicts of interest?

Don’t be afraid to ask this question and get the details. It’s important to know how your financial professional is paid. Through commissions on product sales? Through fees on assets under management? For fee-based services? Also ask when your interests might be in conflict with those of your financial professional. Will he/she receive commissions on some products sold to you and not on others? Does she get paid more using one company’s products versus another’s? Has this been disclosed to you? Make sure you understand how the compensation works and how much your financial professional’s services will cost you.

Ask questions about mutual fund fees and get the answers in writing. What kinds of fees are attached to each fund? When will you have to pay the fees? How will you know when you’ve paid them?Are there any early withdrawal fees?

3. Check your financial professional’s credentials.

Contact the grantor of your financial professional’s credentials to verify that he or she is in good standing, and verify what the credentials represent. In particular, ask if your financial professional has one of the major financial professional designations: CLU® (Chartered Life Underwriter®), CFP® Certification (Certified Financial Planner™), CH.F.C (Chartered Financial Consultant), RFP (Registered Financial Planner) or PFP (Personal Financial Planner). Or does he simply call himself a financial advisor?

4. Will you be working directly with the financial professional or with others in the office?

Find out who will be handling the day-to-day details of your account. If you will be dealing with others in the office in addition to your primary financial professional, meet them and ask questions about their backgrounds as well. Make sure you will have access to the services for which you’re paying and are comfortable with all of the advisors in the firm.

5. Verify references, qualifications, experience, and commitment to continuing education.

Check with others who have had a long-term, successful relationship with your financial professional. Verify with your financial professional where they went to university, what credentials they have earned, what work experience they have had, and what continuing education they complete each year. Trust but verify and ask questions. It is recommended that he/she should have obtained or be in the process of obtaining one of the designations mentioned above.

6. Never take a “hands off” approach to your money.

Understand where your money is and make sure your financial professional will keep you informed about how it is invested, what fees you are paying, and what returns you are getting. Never disengage from this important issue, regardless of how talented your financial professional seems to be. Make sure if you don’t understand a potential investment or product recommendation, your financial professional will have the patience to answer your questions until you do. Never write a cheque for any investment or insurance product payable directly to your financial professional.

7. Check your financial professional’s track record. If it sounds too good to be true, it probably is.

Do ask about historical performance, but have a healthy skepticism and use common sense when evaluating recommended approaches from your financial professional. If, for example, your financial professional is selling products guaranteed not to go down when the market declines but to still capture the upside when the market rises, check for expenses, penalties, and surrender fees. While guarantees may be worth the price, they are never free. Ensure that you and your financial planner understand the products he/she is recommending.

8. Ask for key commitments or information in writing.

It’s fair to expect your financial professional to provide you with the information you request in writing. It’s important to have your relationship with your financial professional and the services that will be provided clearly understood in writing so that there are no misunderstandings later.

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