How To Find A Fee-Only Financial Advisor

by Mike Holman

I received a question from Lily Leung of ExploreForAYear.com 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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{ 6 comments… read them below or add one }

1 Thomas Venner

I offer Fee-only planning services in the Golden Horseshoe area (mainly between Oakville and St. Catherines) and have had calls from as far away as Saskatoon. Some people found me through the Moneysense list and others found my website with search engines by typing “Fee Only Financial Planner” followed by any number of cities in S. Ont. I was surprised to find it was so difficult to find Fee Based/Fee Only planners, especially in Toronto given the size of the population. Perhaps I shouldn’t be surprised, when I tell other advisors what I’m doing they look at me like I have two heads.

2 Money Beagle

I did some IT work years back for a fee-only advisor. Their structure, from what I could tell, was that they managed your entire financial portfolio and you were charged based on the dollar amount of everything you had. This included things like your income taxes, a semi-annual portfolio review, and other services along the way.

3 jesse

Some claim to be fee-only but then start leaning on insurance and mutual fund products after they’ve hooked you in. I’ve found disclosure a rather grey area. Tread carefully!

I would try a bank as a first pass, it may be “boring” and some may not be the brightest lights but they give you a good summary based on what their software tells them and you can do a straight delta based on that. Any advisor should be recommending low MER index funds as an option. If they don’t, back away.

What are people’s thoughts on advisors that recommend anything other than index funds? Just curious; I’m often wary they just throw some razzle-dazzle into the mix to make them stand out, but actually don’t know any better.

4 Thomas Venner

For clients that are looking for investment advice I usually provide 3 types of portfolios, index only, index plus low MER funds (core and explore) and fully managed. I explain the pros and cons of each approach and they can make an informed decision themselves.

5 Lisa Ashton

I am a CFP in Perth, Ontario and fee-based advising is not yet an option here. There are pros and cons to all models so it is important to ask the right questions until you find someone that you trust. The bank advisors usually do not have the education…before everybody slams me for that comment ask your representative at the bank what his or her education is. Advisors are not all the same….I have helped everyone that has ever come to me whether they could pay me or not. So I believe that the most important quality besides education is the integrity and reputation of the individual, so do some homework.

6 Lily Leung

Hi Mike,

Thanks for answering my question finding a financial advisor and the additional resources/articles you provided above. Bookmarked and noted, thanks!

– Lily

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