There are many investment dealers in ÎÚÑ»´«Ã½. Each dealer will often have dozens of different advisors at their firm. The sheer volume of available investment dealers and professionals makes obtaining a second opinion a daunting exercise for some.
Even though you think you may have identified the right financial institution, you also must find the right Wealth Advisor or Portfolio Manager within that firm. No two advisor teams will be the same.
Each Wealth Advisor and Portfolio Manager can operate differently, within the framework of the licensing that they have, and the financial firm that they work at.
Below are a few items that you may want to explore when deciding “Where to go?” and “Who to see?” when obtaining a second opinion.
Minimum account sizes
If we receive phone calls or emails for a second opinion, we will first have a verbal discussion to ensure that our service offering is what they are looking for. One of the things to note is that full-service brokerage typically deals with clients who have household assets of $250,000, or greater. Every Wealth Advisor and Portfolio Manager will also set their own threshold for the size of clients that they work with. Some advisors may have a $500,000 minimum and others may have a $1,000,000 and above minimum. One of the questions we will ask is the value of assets that they wish to invest. This will enable us to provide the best guidance of where they should go.
Level of involvement
The first step in seeking a second opinion is to determine what you are looking for. If you are wanting to be involved in the day-to-day investment selection, then you should approach a Wealth Advisor, provided the household assets are above the required thresholds. If you are wishing for someone else to make the day-to-day investment decisions on your behalf, then looking for a Portfolio Manager is likely your best option. A Portfolio Manager has the license to offer managed accounts so that trades can be done on a discretionary basis. A Wealth Advisor is not permitted to do trades on a discretionary basis and must verbally confirm the details of each trade with you.
Licensing
The type of investments you want will also guide you on where you request a second opinion. For example, if an advisor is licensed through the Mutual Fund Dealers Association (MFDA) then mutual fund investments is all that advisor can offer. If you’re looking to purchase common shares that trade on a stock exchange (i.e. bank shares, technology shares, etc.), then you must deal with an advisor who is licensed with the Investment Industry Regulatory Organization of ÎÚÑ»´«Ã½ (IIROC).
Style of investing
Not all advisors have the same style. Some are super conservative, and some are super aggressive; however, most are in-between these two extremes. A super conservative advisor may be comfortable advising you to hold a lot of cash or invest in guaranteed investment certificates (GICs) and term deposits. A super aggressive advisor may look at investing your money in small-capitalized companies, emerging markets, commodity trading, options and derivatives, etc. Finding an advisor that has the right style to match your investment profile, risk tolerance, and investment objectives, is the key.
Ability to have some customization
More and more clients are asking for some level of customization to portfolios. Examples may be the desire to exclude fossil fuel related companies from the portfolio. Another example is wishing to avoid companies in the materials sector that have operations negatively impacting the environment. You should feel comfortable that the advisor that you are working with is listening to what you are saying and is able to customize a portfolio that meets your needs. Finding the right fit from a personal level is very important.
Years of experience
Years of experience is also very important and should be a key component in your search for the most qualified individual. Finding out how long they have been an advisor and how long they have been with the firm is also worth asking. Although it is nice to help a new advisor, this is your financial future that you are dealing with. In my opinion, the more experience the better.
Education and professional designations
Asking questions about educational and professional qualifications is a must. If you are wanting to obtain services, such as financial, tax and estate planning, then you should look for an advisor that also has additional credentials. Examples of additional credentials are: Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), or Chartered Professional Account (CPA). It is possible to contact professional organizations to ensure that the members are in good standing.
Contacting the regulators
One resource that is open to all investors is the ability to search an individual Wealth Advisor or Portfolio Manager through the regulatory organizations they are licensed. This is a relatively simple step to ensure that the individual that you are looking to approach for a second opinion has no infractions or disciplinary actions. Both the MFDA and IIROC have websites that you can access.
For the MFDA it is referred to as “”.
The IIROC offers an .
The Canadian Securities Administration (CSA) provides a .
Stability of advisor
The Advisor Report, which is generated through the IIROC website above, outlines the IIROC categories that the advisor is approved for. Another helpful part of this report is that it will show the firm that the advisor is currently registered with and all previously registered firms. If an advisor has changed the financial institution that they work for multiple times in their career, it is worth thinking about why they have moved so often. There are many advisors that have a very long track record of stability. In my opinion, I do not recommend short listing advisors that have changed firms three or more times.
Location of Wealth Advisor or Portfolio Manager
Location used to be a primary factor when seeking a second opinion, but with technology it is not as big of a factor today. Ensuring that your advisor is licensed in the location that you live is a key component. For example, if a Portfolio Manager wishes to have clients in Alberta and Ontario they must also be licensed in those provinces. We have, for example, received phone calls from people reading our column in different parts of ÎÚÑ»´«Ã½ that have asked us to assist them. We have also received referrals from existing clients for other family members and friends in different provinces. Provided we are licensed in the province, we can help them. It is also relatively easy for advisors, registered with IIROC, to get licenced in different jurisdictions within ÎÚÑ»´«Ã½.
Recommendations from people you trust
A good starting point to determine who to approach for a second opinion is to have recommendations or referrals from close friends, colleagues that you trust, family members, your accountant, or anyone you know that is successfully managing their finances. One item to note is to use caution when a friend may recommend a specific stock, especially if the stock is speculative. Rather than action a particular investment, you are wanting the conversation to flow in the direction of recommendations for a professional Portfolio Manager.
Householding with family
Sometimes family members have discussions regarding finances which can lead to information on where to go to receive a second opinion. We talk to our clients about the benefits of householding investment accounts with family members. Linking family members to a household means everyone will benefit from lower fees if they work with the same Wealth Advisor or Portfolio Manager. Provided your family members are happy with the person they are working with, then this is certainly an option worth exploring. The link to our past article on householding family accounts can be found here: How a Portfolio Manager helps families.
Doing your own research
Once you have narrowed down what you are looking for then it is relatively easy to do some research on your own. By simply doing an internet search you should be able to find out more information. It is possible now in the comfort of your own home to check out various websites of financial institutions, and more specifically, to research the individual Wealth Advisors and Portfolio Managers at those firms. All firms have a general website that you can review, and most advisors will also have their own individual website. These general websites will provide some information about the individuals at the firm, but what is often more useful is to review the individual websites for the Wealth Advisors and Portfolio Managers, provided they have one.
When you approach a Wealth Advisor or Portfolio Manager to provide a second opinion analysis, we would encourage you to ask specific questions that you want covered. Requesting the information in a written report will enable you to read through the information thoroughly and share the analysis with those people you trust the most. We feel going through the analysis, in person, will also enable you to ask additional questions and meet all members of the team.
Kevin Greenard CPA CA FMA CFP CIM is a Portfolio Manager and Director, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250.389.2138, email [email protected] or visit
