The ABCs Of Choosing A Financial Advisor
Finance Tips Determining whether a financial advisor has the qualifications and certifications to meet your specific needs can be quite daunting. Follow these basic guidelines.
Choosing an advisor is one of the most important decisions of our financial lives. But knowing whether an advisor has the right skills for your needs can be difficult, especially since there are many financial certifications in use by the financial industry.
The range of financial certifications is wide. Some may be obtained relatively easily. Others include rigorous exams and continuing education to ensure high levels of proficiency and up-to-date knowledge.
"Choosing an advisor is one of the most important decisions of our financial lives. But knowing whether an advisor has the right skills for your needs can be difficult."
Advisors dealing with retail clients and at firms regulated by the Investment Industry Regulatory Organization of Canada (IIROC), for example, must complete certain courses and an intensive training program to be licensed by IIROC. They must also participate in mandatory continuing education that focuses on professional development and compliance.
To help sort through the various financial certifications held by financial advisors, IIROC has created a glossary of financial certifications, containing information in one central location on over 40 certifications used by financial advisors in Canada.
"Be an informed investor. The facts you need to choose an advisor will come from various sources. Do your research and, if you’re still in doubt, don’t be afraid to ask questions."
Here are some guidelines that may help:
→ Learn what’s behind the certification
It can be difficult to know exactly what an advisor’s certification means in terms of skills. IIROC’s Glossary of Financial Certifications includes information on the organization granting the certificate, exams required to be certified and whether you can check for the status of the individual within the issuing organization.
You can even learn if the issuing organization has a process for taking complaints against its members. Use the glossary to research and compare common financial certifications.
→ Make sure the qualifications are what you need
Certification may come from educational bodies, trade groups and other professional organizations. Make sure you understand the specifics of any credentials. As well as investigating the requirements for certification, for example, you might ask how an individual’s qualifications relate to the proposed services, or what products or services he or she is registered to sell or provide.
→ Don’t equate a designation with registration or a license
No matter how official or impressive it sounds, the credentials that follow an advisor’s name are not the same as registration or a license to conduct business.
Checking an advisor’s registration status is one way to protect yourself as an investor, since regulators will only register individuals who are properly qualified. Those registered with IIROC will be searchable in the online IIROC AdvisorReport.
→ Do your homework and be prepared to ask questions
Above all, be an informed investor. The facts you need to choose an advisor will come from various sources. Do your research and, if you’re still in doubt, don’t be afraid to ask questions. Your background check might include a formal interview with the person you’re considering.
In addition, take advantage of available online resources to learn as much as you can. For example, IIROC makes available on its website a list of questions to ask when choosing an advisor, a directory to check the qualifications and backgrounds of advisors at IIROC-regulated firms and an interactive guide that explains the rules and mechanics of trading.