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What Questions Should You Ask to Make Sure An Advisor is Working in Your Best Interests

Senior couple read the form for life insurance

I believe the most important component in every advisor client relationship is trust.  A quick way to build that trust level is by determining that the advisor is truly looking out for your best interests.  This can be a very difficult thing to see clearly, but as you continue reading I think it will come into focus.

Before we dive into the specific questions to ask a financial advisor I want to make one thing clear, the financial industry, like any other industry is designed to make money.  As an advisor that has worked for multiple banks, insurance companies and exempt market dealers I know that making money is at the heart of everything they do.  There’s nothing wrong with this and it should be expected by any for profit company, but sometimes I think investors forget this.  Understanding this will help lead you to asking your advisor the right questions to find out if they are looking out for your best interests.

Advisors are trained how to position their products and potentially discredit products they aren’t able to offer.  This comes back to what is going to make the advisors and the company they work for the most money.  This may lead to advice that is lacking in some areas.  So, how do you get around this?

You want to understand your advisors experience and what registrations they hold or have held.  Your advisor will definitely make it very clear what they can offer you, but the most important question may be what can’t they offer you?  If your advisor recommends you speak to another advisor in an area that isn’t their expertise, then you are on the right track to finding an advisor who has your best interests in mind.

I believe the four main pillars to a financial plan are insurance, public & private market investments and tax planning.  Insurance products like life, critical illness, disability and long term care insurance can help protect against the unexpected.  You can also get products like annuities that will generate guaranteed income for the rest of your life, which isn’t available through other channels.  Public markets give you access to liquid income and growth generating options like stocks, bonds and mutual funds.  Private markets give you access to higher yielding, higher risk, less correlated, illiquid investments and proper tax planning is important to help minimize your taxes owed, which can be done with your advisor and accountant.

Now, back to the question at hand, how do you know your advisor is looking out for your best interests?  In order to do this you will need to ask them, “What other options or services should I consider that you can’t offer me?”

If your advisor mentions some other things you may want to consider without you asking, then there’s a good chance you’re working with the right advisor.  If they say they can do everything on their own than you may not have an advisor that is truly looking out for your best interests.  Many advisors will have other specialist that they will work with to help provide additional services for their clients, so if they would like to introduce you to another professional don’t take it as a lack of knowledge on their part,  take it as a good sign that they want the best for you!

A financial advisor can only hold so many registrations and be an expert in so many areas in this vast field.  To become a truly skilled advisor, one must focus on a niche.  When it comes to other areas of finance, advisors have a major benefit over the average investor because they work in the industry.  A financial advisor is equipped to sift through the noise and find the options that best serve their clients’ needs.  Investors know it’s important to diversify their investments, but it’s also important to take a diversified approach to obtaining financial advice.

At the end of the day, the most important thing to investors is feeling comfortable and confident in their financial plans.  In order to achieve this goal, you need to have a good relationship with your advisor and know that they have your best interests at heart.  For the most part, I believe advisors do have their clients best interests in mind, but they don’t know what they don’t know.  Therefore, it’s important to do some of your own research to determine what services are available to you that may be a fit, but may not be something that your advisor can offer you.  It’s unlikely that one advisor alone can offer you all solutions: insurance products, public and private market investment opportunities.

Many advisors at Pinnacle are registered to offer both exempt/private market securities and insurance products, but aren’t able to directly offer public market securities.  For this, we have developed relationships with top level portfolio managers where there is a referral agreement in place.  This helps to minimize potential conflicts of interest and ensures that we can cover off all four pillars of a financial plan for our clients while getting compensated appropriately for it.  This creates a winning situation for all!

Like anything else in life.  If you don’t ask the question you won’t get the answer, so don’t forget to ask your advisor what they can’t do for you?

Sean McMann is a Dealing Representative for Pinnacle Wealth Brokers Inc. He is based out of Victoria, British Columbia.