When you first meet with a new financial advisor, you should not find yourself on the receiving end of a high-pressure sales pitch. Your new advisor should not be trying to sell you any investments, products or services before really getting to know you, your full financial situation, your family and business situation (if relevant) and most importantly, your goals.
Similarly, if you’ve been with the same advisor for a while, they should not be constantly suggesting you change your investments, insurance and so on. These actions are a sign that your advisor’s interests might not be aligned with yours – that is, they may be, consciously or subconsciously, trying to earn sales commissions rather than serve your needs.
Understand that financial advisors sometimes do play the role of salespeople – part of their job is to sell you products and services – and as such some advisors can be subject to pressure from their corporate employer (such as a bank or an investment or advisory firm). Many bank and brokerage advisors have sales targets imposed on them: they’re told they must sell so many or so much, or risk losing their jobs. As we saw last year, some bank brokerages let a number of their advisors go because those advisors had not reached prescribed revenue targets – that is, they hadn’t sold enough services, products or investments to their clients. And more recently, as reported by the CBC, we’ve seen that even bank branch tellers and call centre employees, in addition to advisors, are under threat if they don’t constantly “upsell” customers with products and services the customer may not need.
Who’s in Charge?
This is not how an advisor relationship is supposed to work! Your advisor should listen to you to understand your needs and your goals and then find the products and services that are right for meeting those goals. An independent advisor, meaning one who doesn’t work for a specific bank or brokerage but is in business for themselves, will be able to offer a much wider range of products and services from many companies and thus be able to find the ones that are best for you. Advisors who work for one firm may be completely unaware of products not offered by their firm – and wouldn’t offer them to you anyway. As business owners themselves, independent advisors are not subject to targets pronounced “from on high” and they’re not being told which products to “push.” They’re not constantly being pressured to sell to you, so they’re not likely to be pressuring you to buy things you don’t need or to change your investments with every shift in the markets.
A 2013 article in the Financial Post lists some of the ways your advisor might be putting their own interests ahead of yours, including trying to sign you up for new credit cards, pushing mortgage or credit card insurance and always promoting their proprietary products over other types of investments.
It should be clear to you from the beginning how your advisor is paid. If it’s not, find out. Ask them; ask them specifically about commissions. If you’re not paying them, who is? They should be upfront about this. If they seem uncomfortable with the question or if their answer seems evasive or vague, that’s a red flag. If, on the other hand, you pay your advisor a flat fee for a clearly understood level of service, you can be much more comfortable that they are not going to be badgering you to buy to increase their profits.
Sales Skill, or Financial Know-how?
Ask your advisor about their background and education. If their experience is primarily in sales in another field (cars, real estate), rather than in finance and economics, you may want to reconsider. Many bank and brokerage advisors are hired for their sales ability, not their financial knowledge. According to a 2015 article in Forbes, some brokerage-employed advisors know just enough about investing and insurance to stay within the law, but often know next to nothing about critically important financial topics such as tax and estate planning. Look for an independent advisor who will include these areas in your overall financial plan.
DFS Private Wealth has been voted the top financial planner in Mississauga five years running and is also a winner of the Small Business of the Year Excellence Award from the Mississauga Board of Trade. As independent advisors, the professionals at DFS have wide-ranging expertise in tax and estate planning, financial planning, and investment and wealth management for individuals and business owners. DFS Private Wealth’s specialists will be happy to meet with you to discuss your situation, and together make a plan that’s right for you. No pressure.