How To Find A Fee-Only Financial Advisor

by Mike Holman

I received a question from Lily Leung of who asked about finding a fee-only financial advisor in Toronto for a younger investor:

Quick question on financial advisors – a friend was asking me about how to a financial advisor (she’s in Toronto), do you have any suggestions on resources on:
1.) How to select an advisor
2.) Directory of financial advisors (esp. fee-based ones)?

First of all – the type of advisor she is talking about is one who charges for specific services. For example they might charge $300 for a financial plan. This type of advisor typically won’t handle the actual investments. They are like financial architects – they draw up the blue prints and then you (or someone else you hire) has to start building.

I don’t think the fee-only advisor business model has been all that successful in Canada.  It might be easier to find a commission-based advisor who also has a fee-only advice service.

Fee-only advisors are not perfect

Word of warning – Fee-only advisors may not have conflicts of interest because of commissions from investment products, but they do have a conflict because of their fees.

The more financial analysis they do for a client, the more they can charge.  I think for someone fairly young, having a detailed financial plan is useless because there are just too many unknowns in your future.

An expensive financial plan might be a good idea for someone who is about to retire, needs to get a handle on their finances and has a good idea of what their retirement income, needs are.

For most young people, the “rules of thumb” are as good as any detailed financial plan.  Avoid/reduce debt, save 10% of your income is a great start.  An advisor can give good advice about investing ie how to set up an appropriate portfolio, risk level etc.  But it shouldn’t cost too much.  I wouldn’t spend more than a couple hundred dollars for an analysis.

How to find an advisor – resources

These articles will provide a good background for someone who is looking for a new financial advisor of any type:

Here is an interesting case study by Canadian Capitalist where he actually tries to find a fee-only financial advisor:

Here are a couple of fee-only advisor lists:

Does anyone use a fee-only advisor?  Any advice on how to find one?




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