When you don’t know where to go for financial advice, the natural default is generally to trust a financial advisor affiliated with a bank. No question, particularly in Canada, the big banks have a long track record of providing services and security to their customers. We’re Canadian so we tend to trust banks unreservedly and they’re super convenient; you can find at least one on every main street. But just because a financial advisor works for a bank doesn’t make them equipped to provide better financial advice nor does it make your investments safer. In reality, your finances are just as safe with an independent financial advisor because regulations are in place that governs how all registered investment advisors must manage your finances. Financial advisors in Ontario are either licensed and regulated by IIROC (Investment Industry Regulatory Organization of Canada) or by the MFDA (Mutual Fund Dealers Association). These regulatory organizations are charged with ensuring all member advisors have the proper licenses, , compliance procedures and supervision in place for the benefit of the clients they deal with. Additionally, clients of all members of these associations have assurance provided by the CIPF (Canadian Investor Protection Fund) or the MFDA Investor Protection Corporation should any of their members become insolvent.. Accounts held by member firms are insured up to certain limits.
So, while banks and large financial institutions may look “safer”; look beyond the walls and instead look for experience and educational credentials. Here’s a list of the real differences in working with an independent financial advisor:
- Independent financial advisors work for their client rather than an insurance company, bank, financial institution, brokerage or investment firm. It's easier to work in a client's "best interest" as an independent financial advisor as a result.
- Independent financial advisors offer independent advice without having to meet sales quotas
- Independent financial advsors have the freedom to choose which investment options to offer clients. They are not bound to any family of funds or services and instead offer different products from a multitude of different firms
- Independent financial advisors are entrepreneurial business owners and value long term client relationships accordingly
- Independent financial advisors often operate on a fee-based compensation model which lends itself to being simpler and more transparent in reporting. It incetivizes advisors to grow client assets. It also means that independent financial advisors have discretion over the fee charged and can charge less than a large institution allows their financial advisors to charge. Fees matter especially over the long term.
- Independent financial advisors don't typically use a "one size fits all" mentality. They provide fully-customized solutions and don't have to follow some cookie-cutter rules of engagement or script
- Independent financial advisors often hold several different financial licenses or designations in order to be able to offer advice in multiple areas
Ultimately, it's a matter of trust. Trust is particularly key when you're dealing with your hard earned life savings, family security and your financial future. Do your homework, ask questions, educate yourself and re-assess the relationship on a regular basis. Your needs may change over time. Don't stay with the same financial advisor out of obligation or because you think it will be a lot of work to move. It's not.
I'd be happy to chat with you any time.
