Just like you would hire an architect to plan for your home, you hire a financial advisor to manage your finances. However, finding the right financial advisor can feel overwhelming.
In this guide, we’ve compiled everything you need to know about financial advisors, their qualifications, investments they can help with, and how you know you’ve found the right match.
Key Takeaways:
- A financial advisor should do more than just pick investments; they can help you prioritize, plan, and reach your financial goals.
- Most Canadian investors, or about 77%, say their advisors help them develop better saving and investing habits while having more than twice the accumulated assets compared to those without advisors.
- Amur Capital’s Mortgage Investment Corporations (MICs) offer a unique opportunity to access a diversified income stream from the real estate market without the complexities of direct property ownership.
What is a financial advisor?
A financial advisor is a general term for someone who helps you manage most aspects of your financial life in exchange for compensation. They can be part of financial institutions like banks and investment brokerages or work as independent agents.
While the term “financial advisor” has no precise industry definition, it encompasses various roles, including financial planners, insurance agents, and investment managers, depending on their specific areas of expertise. Note that some provinces may require them to meet specific requirements to use the financial advisor or financial planner titles.
What does a financial advisor do?
A financial advisor can play an important role at any stage of your financial journey. Here’s how they can support you:
- Tailored financial solutions and planning: With a financial professional, you can access diverse investment opportunities combined with comprehensive, step-by-step financial planning. Financial advisors can adjust this plan to adapt to your unique goals and life stages, ensuring your investment portfolio aligns with your aspirations.
- Empowerment through education: You can gain valuable investment advice while receiving expert guidance to cultivate effective savings and investing habits. Ultimately, the goal of a financial advisor is to empower you to make informed decisions and avoid common pitfalls in your financial journey.
- Holistic financial services: Financial advisors can also go beyond investment management to offer estate and tax planning. This creates a well-rounded financial strategy that addresses all aspects of your financial well-being.
Why work with a financial advisor
Three-quarters of Canadian investors believe their financial advisor is worth every dollar they pay. And while 44% feel they receive high-value advice, the level of trust financial advisors have traditionally held is shifting, especially among younger investors.
Canadians who work with a financial advisor have been more successful in achieving their financial goals
Research consistently shows that working with a financial advisor can effectively support you in meeting your long-term financial goals. Here are a few examples of how a financial advisor can make that difference:
Retirement planning is one of the most critical aspects of financial management, which is why a majority of Canadian retirees report feels more optimistic about their financial situation when they have a written financial plan. Think of a financial plan as a roadmap to your goals.
In addition, a report by the Investment Funds Institute of Canada (IFIC) found that retirees who have worked with financial advisors can increase their retirement savings by 55% to 60% compared to those without.
Lastly, advised investors can accumulate 2.3x more in financial assets than their counterparts in the same period, leading to greater financial security and increased opportunities for wealth generation.
Advised clients gain more confidence and positive sense of well-being
A financial advisor’s professional guidance may play a key role in boosting your confidence in your financial life. Here’s what research shows:
More than three-quarters of Canadian investors feel that advisors encourage better saving and investing habits. While 69% of Canadian investors say they are closer to achieving their financial goals due to a professional who makes investment choices with logic rather than emotion.
In fact, the impact of financial advisors extends globally. The majority of investors (76%) worldwide report a positive sense of well-being because of working with their financial advisors.
Choosing the right financial advisor in Canada
So, how do you find the right financial advisor for your needs? Here are three things you should consider:
Types and qualifications of a financial advisor
Financial advisors are bound by a fiduciary standard, which ethically obligates them to act in your best financial interest. As such, they are required only to recommend products appropriate for your specific needs.
Take a deeper dive to see which types of advisors suit your requirements.
Financial planner
A financial planner is a type of financial advisor who covers the complete personal financial spectrum, from saving and investing to estate planning and taxation. If you’re looking for a complete financial plan, this may be the right advisor for you.
| Designations and Regulatory bodies | Certified Financial Planner (CFP) |
| Awarded by FP Canada, this certification requires candidates to successfully complete FP Canada-accredited educational programs (or hold specific professional and educational designations) and pass the certified CFP examination. They also require adherence to a professional code of ethics and 30 hours of continuing education each year. | |
| Registered Financial Planner (RFP) | |
| Awarded by the Institute of Advanced Financial Planners (IAFP) to qualifying members, the RFP designation requires holders to demonstrate competency in completing a comprehensive financial plan. RFPs are also subject to annual continuing education requirements and a code of professional ethics and must carry professional liability insurance. | |
| Personal Financial Planner (PFP) | |
| Regulated by the Canadian Securities Institute (CSI), this designation has three paths that require completing several courses in financial counselling and a comprehensive exam. | |
| Financial Planner (Quebec) | |
| Regulated by the Autorité des marchés financiers (AMF), candidates must obtain a diploma from the Institute of Financial Planning and pass the Institute’s exam. |
Insurance agent/ broker
Insurance agents specialize in life insurance and annuities. However, they may also be licensed to sell mutual funds and securities. Some agents are brokers who work for brokerage firms, or they may work independently.
| Designations and Regulatory bodies | Chartered Life Underwriter (CLU) |
| Requires the successful completion of a CLU program and three designation courses. A minimum of 30 continuing education credits each calendar year is required, two credits of which must be from a partner Ethics program. | |
| Registered Life Underwriter (in Quebec) | |
| The Chambre de la sécurité financière exclusively confers this designation. It requires completing nine university-level courses (375 hours) in financial planning, covering financial management, insurance, and annuities. | |
| Chartered Life Underwriter (in Quebec) | |
| Similar to the RLU designation, the Chartered Life Underwriter designation is regulated and conferred solely by the Chambre de la sécurité financière. It requires completing 17 university-level courses (720 hours) in financial planning, including retirement and estate planning. |
Investment specialist/ advisor
Investment professionals provide advice and guidance on various types of investments, such as stocks, bonds, and mutual funds. They also conduct securities analysis in return for a fee.
| Designations and Regulatory bodies | Canadian Investment Manager (CIM) |
| Offered by the CSI, the CIM designation is the industry educational standard for discretionary investment and portfolio management services. It requires the completion of 3-4 courses in portfolio and wealth management. | |
| Fellow of the Canadian Securities Institute (FCSI) | |
| Also regulated by the CSI, the FCSI designation is the highest financial services credential in Canada. It requires successful completion of a designated program (any one of the CIM, PFP, CLU, and others), seven years of industry experience, an additional two courses and 42 continuing education credits every three years. | |
| Canadian Securities Course (CSC) | |
| This is a foundational course regulated by the Canadian Securities Institute and is usually the first step in attaining an investment representative or registered representative license. |
Wealth advisor
Wealth advisors help high-net-worth individuals (HNWI) with financial planning and investments. They offer services like estate planning, tax advice, charitable giving, and health insurance, usually requiring a minimum investment in the millions.
Wealth advisors typically have a combination of financial planning and investment management designations.
Robo-advisor
A robo-advisor automates investing using information about an investor’s risk tolerance, financial situation, and goals. It creates a customized portfolio, rebalances it as needed, and tracks performance, providing a cost-effective way to manage investments without traditional advisors.
Some robo-advisors offer additional services like financial guidance and planning, adding a touch of human support to the digital platform.
Services offered
As mentioned above, financial advisors provide various services to clients, from investment and tax planning to budget and debt management. However, remember that the right financial advisor for one person may not be suitable for another. The key is to evaluate how their services can help you reach your financial goals.
Here are some questions to ask a financial advisor about their services:
- How long the firm has been operating
- How long they’ve been with the firm
- What products and services do they provide
- How they choose suitable investments for clients
- How they will assist you in achieving your goals
- Payment and compensation
Financial advisor costs differ depending on the type of service provided. For example, advisors may be paid:
- an hourly fee;
- an annual salary;
- a commission or trading fee, or
- a percentage based on the value of your managed assets.
A salaried advisor typically works for financial institutions such as banks, credit unions, or trust companies. Advisors who meet or exceed their sales targets may also qualify for bonuses.
On the other hand, a fee-only financial advisor can opt for an asset-based charge or an hourly rate. Since asset-based fee advisors can sell securities to their clients, they can also invest their clients’ money for them.
Where to find a financial advisor in Canada
There are a few good ways to find a financial advisor. You may start finding yours from the following:
- Banks and credit unions
- Stockbrokers and mutual fund dealers
- Insurance companies
- Independent financial planning companies
Alternatively, you can always ask your family and friends to recommend a good financial professional. Remember to check reviews or even complaints filed against the advisor using the following:
- Canadian Investment Regulatory Organization (CIRO)
- Canadian Securities Administrators (CSA)
- Better Business Bureau (BBB)
- Autorité des marchés financiers (Quebec)
Investment planning with a financial advisor
Once you’ve selected the right financial advisor (or if you already have one), the next step is to engage in comprehensive investment planning. A skilled advisor will tailor an investment strategy to align with your financial goals, risk tolerance, and time horizon.
Your advisor may recommend a range of investment products, including a selection or combination of:
- Stocks: Equities representing ownership in companies, offering the potential for capital appreciation and dividends.
- Bonds: Fixed-income securities that provide regular interest payments, ideal for conservative investors seeking stability.
- Mutual Funds: Pooled investments funds managed by professionals, allowing diversification across various asset classes with relatively low initial investment.
- Exchange-Traded Funds (ETFs): Similar to mutual funds but traded on exchanges like stocks, offering flexibility and often lower fees.
- Alternative investments: Financial assets that differ from traditional options like stocks, bonds, and cash. These investments typically have a low correlation with conventional equity and fixed-income markets, making them a great diversifier in your portfolio.
One investment type that has gained popularity, particularly for those seeking consistent income and diversification, is Mortgage Investment Corporations (MICs). MICs pool funds from investors to provide mortgages to borrowers, typically offering higher yields and risks than traditional fixed-income investments.
As you work with your financial advisor, consider how each investment option fits into your overall financial picture. While a well-structured investment plan is vital, continue to adjust it to fit your financial situation and goals.
Amur Capital’s MICs: A smart investment choice for financial advisors and investors
As an investor, you want the highest-quality investment option for your portfolio. Amur Capital offers a unique opportunity to access the real estate market without the complexities of direct property ownership. By investing in Amur Capital’s MICs, you can benefit from a diversified income stream while gaining exposure to Canada’s thriving real estate sector.
For financial advisors, recommending Amur Capital’s MICs can also add significant value to your client’s investment strategies. The stability and potential for higher yields make these MICs an excellent addition, particularly for those seeking to balance risk and reward.
Amur Capital offers three MIC funds that can suit a variety of investors’ risk tolerance and investment objectives:
- Amur Capital Conservative Income Fund (ACCIF) provides investors with stability in returns and reliable growth in value, with a focus on residential first mortgages. Its target net annual return is 9.00%.
- Amur Capital Income Fund (ACIF) offers investors a blend of stability and income growth, focusing on first—and second-home mortgages. Established in 1984, the fund has a target net annual return of 11.00%.
- Amur Capital High Yield Fund (ACHYF) is for investors willing to accept an increased level of risk, focusing on higher ratio mortgages over shorter terms. Its target net annual return is 13.00%.
At Amur Capital MICs, we pride ourselves on our expertise in mortgage investing. We aim to become a unique and valuable investment partner for discerning advisors and their clients.
Ready to invest? Contact our Investor Relations team today!
FAQs
What exactly does a financial advisor do?
A financial advisor helps you manage your financial life by creating and implementing a personalized financial plan, from investment management to retirement planning.
What is the average cost of using a financial advisor?
The average cost of using a financial advisor differs depending on the type of compensation structure. One common method is for advisors to charge a percentage of the assets they manage on your behalf, ranging from 0.5% to 2% per year.
How do financial advisors make money?
Financial advisors earn money in various ways, including an hourly fee, salary, commission, or asset-based percentage.
Is it worth paying for a financial advisor?
If you want to feel more confident about your financial situation or need help achieving your financial goals, it can be worth paying for a financial advisor. Keep in mind that the value they provide should outweigh their fees.
