Most Canadians probably figure their financial planner has nothing but their best interests at heart. Unfortunately, there’s no legal requirement for financial advisers to put their clients’ goals ahead of their own. And there is plenty of evidence to suggest that many advisers do exactly the opposite.

Have a look at this article by the Globe and Mail’s Janet McFarland:

It shows what happens when mutual funds pay trailer fees – effectively, big commissions – to advisers. Many of these commissions are not disclosed to the client. But they certainly make it more likely that advisers will recommend the funds, even if they’re not performing particularly well.

That’s why it’s critical that you know how your adviser is getting paid. Ask questions. Insist on answers. And if your adviser is being paid by the mutual fund companies and not by you, can you really count on them to give you the best advice, any more than any other commissioned sales person?

I would never trust anyone getting paid big commissions by mutual fund companies to put my interests first. That’s why I prefer the model used by independent financial advisers, who charge an annual fee to the client for their services, meaning they work for you and not the big funds they are selling.