You don’t want to entrust your life savings to just anyone, right? But let’s face it, when vetting financial advisors, you’re usually the one who is at an informational disadvantage.

Figuring out whether an advisor is offering you a fair deal can be like sitting at a poker table where the other guy is holding all the cards. Here are six questions you can ask an advisor to more effectively stack the due diligence deck in your favor.

1. What steps have you taken to represent your clients’ best interests?


Anyone who wants to advise you about your financial well-being should be willing to serve your best interests above all else, right? Unfortunately, it’s not required. It’s up to you to spot advisors who may claim they’ve got your back … only to disappoint you once your back is turned.

In our opinion, if an advisor won’t fully commit
to always acting in your best interest,
you can skip to the end. Interview over.

Hint: One way to find an advisor who is committed to placing your best interests first is to look among those who have successfully completed a Centre for Fiduciary Excellence (CEFEX) assessment and received CEFEX certification, confirming that the firm has demonstrated adherence to the industry’s best practices. PWL Capital is proud to be one of the first investment advisory firms in Canada to successfully complete this independent certification process for our entire business.

2. How do you get paid?


Advisors can be compensated through the management fees you pay them directly, as well as potentially through third-party arrangements. We agree with Vanguard founder John Bogle, who has famously borrowed from holy writ in describing advisor compensation: “No man [or woman] can serve two masters.” If your advisor is receiving undisclosed third-party incentives, your best interests may end up playing second fiddle to those other sweet nothings being whispered in their ears – such as undisclosed commissions, sales quotas, referral arrangements or bonuses for recommending one product over another. To establish your financial success as your advisor’s only “master,” a transparent, fee-based arrangement is preferred.

3. What is your investment strategy, and why?


How will the advisor manage your money?

  • Does he or she offer a written Investment Policy Statement that documents your personal financial goals and your strategies for achieving them?
  • Is your portfolio structured according to decades of robust evidence indicating how to capture long-term market growth in accordance with your risk tolerances?
  • Is the strategy implemented with efficient, low-cost solutions that make best use of this same evidence?
  • Are your assets being considered as an integrated whole, whether directly under your advisor’s management or held in outside accounts such as your company’s retirement plan?

4. What services do I receive for your management fee?


Depending on your personal circumstances, there are other areas of expertise you may seek from a financial advisor beyond just managing your investments, including but not limited to financial planning, retirement planning, estate planning, tax planning, risk management (insurance), special needs planning and more. For the same fees you’re paying for basic investment management, you may be able to find a wealth manager who knows how to add value and reduce risk across the spectrum of your financial life.

5. Can you provide me with several references?


It never hurts to hear how others feel about an advisor with whom you’re considering doing business. Naturally, expect to be pointed to clients who are generally happy with the relationship, but you can probe deeper by asking pointed questions such as what they like most – and least – about doing business with the firm.

6. How will you report performance information to me?


There’s some good news on this front. The biggest portion of the second phase of the Client Relationship Model (CRM2) is set for implementation in January 2017. Granted, our financial regulators may not be receiving any awards for artistic creativity but, despite the decidedly un-catchy name, CRM2 is designed to deliver more standardized and complete performance reports and related disclosures throughout the financial industry.


That’s a good thing … at least for those who prioritize best-interest relationships and pricing transparency for their clients. For those who feel otherwise, well, perhaps their days at the table are numbered. CRM2? Bring it on!