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Apply Cautions When Selecting Advisors

Professional advisors are essential to protect your interests. They can provide knowledge, expertise and objective advice in areas in which you have little experience. It is important to recognize when it is necessary to call in an expert to assist you. Because of the costs associated with hiring a lawyer, accountant or financial planner, some people are inclined to try the do-it-yourself approach. This can be a shortsighted decision, not to mention detrimental to your financial interests.

For instance, if you decide to process your own income tax return rather than hiring a professional tax accountant, you may miss out on tax exemptions that could save much more than the cost of the accountant’s time. Or, a person who does their own will or power of attorney could end up having the document deemed invalid due to a technicality. Alternatively, lack of professional tax and estate planning could result in a lot more tax being paid during your lifetime and on your death, than was otherwise necessary.

Professional advisors include lawyers, accountants, financial planners, investment advisors and others. They serve different functions, and you have to be very selective in your screening process. The right selection will inspire confidence, enhance your peace of mind, reduce taxable income and protect your legal and financial health. The wrong selection will be costly in terms of time, money and stress.

There are many factors you should consider when selecting advisors. Here are the most common ones:

Before you entrust an advisor with your affairs, you need to know that he or she has the appropriate qualifications to do the job. This may include a lawyer’s or accountant’s professional degree, or in the case of a financial planner, professional training accreditation and experience relative to their professed area of expertise. Lawyers have to be accredited to practice law, but anyone can call themselves an accountant or financial planner.

When selecting a professional accountant, look for a Chartered Accountant (CA) or Certified General Accountant (CGA) designation. A financial planner should have a Certified Financial Planner (CFP) or Chartered Financial Consultant (CHFC) designation.

It is very important to take a look at the advisor’s experience in the area in which you need assistance. Factors such as the degree of expertise, the number of years of experience as an advisor, and the percentage of time spent practicing in that area are critically important.

Compatible personality
When selecting an advisor, make certain that you feel comfortable with the individual’s personality. If you are going to have an ongoing relationship, it is important that you feel comfortable with that relationship in terms of the degree of communication, the attitude, the approach, the candor and the commitment to meet your investment needs. A healthy respect and rapport will increase your comfort level when discussing your needs, and thereby enhance further understanding of the issues.

If you are not comfortable with the “chemistry” of the relationship, don’t hesitate to find another advisor. If you don’t like someone, it is only human nature to resist contacting them, and that could compromise your best interests.

This is an essential quality for a professional advisor. If advice is tainted in any way by bias or personal financial benefit, obviously it would be unreliable, and potentially self-serving. That is why you want to get a minimum of three opinions on your personal situation before deciding which professional to select.

Lawyers and professional accountants (i.e, CAs, CGAs) cannot obtain any direct or indirect collateral benefit from advising you, as it would be a conflict of interest. This could result in a professional negligence claim and/or professional disciplinary action including the loss of a practicing licence. However, when dealing with a financial planner, it is a different situation. Some offer fee-only services and receive no other benefit from their advice, and confirm this in writing. Others obtain a fee as well as commissions from the products they recommend or sell to you. This could potentially influence the nature of their advice. You need to clarify these issues in advance.

It is vital that you trust the advisor you select. Whether the person is a lawyer, an accountant, or a financial planner, if you don’t intuitively trust the advice as being in your best interests, never use them again. You cannot risk the chance that the advice is governed by the financial self-interest of the advisor, with your interests as a secondary consideration.

You need to feel comfortable with the fee being charged, and the payment terms. Is it fair, competitive and affordable? Does it match the person’s qualifications and experience? Most initial meetings with a lawyer, accountant or financial planner are free, or have only a nominal fee. This meeting provides an opportunity for both parties to see if the advisory relationship would be a good fit.

It is a good rule of thumb to see a minimum of three advisors before deciding which one is right for you. You need that qualitative comparison to know which one–if any–of the three, you want to rely on. Seeing how they respond to your questions will be a good reference point. The more exacting you are in your selection criteria, the more likely it will be that a good match is made, and the more beneficial that advisor will be for you. Write down your questions before your meeting so you don’t forget, and prioritize them in case you run out of time. If you have a partner, friend or business associate who attends with you, you will have the opportunity to objectively debrief afterwards in terms of your impressions and assessments.

When going through the process of selecting an advisor, you can get prospective names from friends who have a trusted advisor, the Internet, the Yellow Pages, or from professional associations in your province (i.e., the law society, chartered accountants association, certified general accountants association or financial planners association). The initial consultation is usually free, but make sure you confirm this before you go to the appointment.

Copyright © 2024 , Douglas Gray, LL.B. All rights reserved. Any reproduction of the material contained in this website is strictly prohibited. E&OE (Errors and Omissions Excepted). Please refer to Copyright and Disclaimer at bottom of website page. Refer to Books section for related information.


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