Managing your money isn’t easy. But finding someone to help you with it can be just as tricky in this country.
Even when you’re looking for fairly basic guidance on how to organize your finances, people who claim to be able to assist you come with a variety of titles, certifications and acronyms. There are financial advisers, financial planners, money coaches, wealth consultants and credit counsellors, to name just a few.
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In part, this is because the business of giving money advice is lightly regulated. Anyone outside the province of Quebec, for example, can call themselves a financial planner or financial adviser.
“My mom could start a financial planning firm tomorrow,” said Jason Heath, a fee-for-service financial planner at Thornhill, Ont.-based Objective Financial Partners.
The other reason why getting good information is difficult is that many of us are loath to do any research.
“In Canada, I would suggest that money is the last taboo,” said Stacy Yanchuk Oleksy, director of education and community awareness at the Credit Counselling Society.
Those of us with debt woes can be especially embarrassed or ashamed about them, she said. That’s why, she added, “when we see or hear a really great ad about cutting your debt in half, we treat it as a life raft.”
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But from steep fees to bad advice, signing up without asking questions can be a costly mistake. So here’s a brief field guide to the choosing the money expert that’s right for you:
Financial advisers and financial planners
Canadians use “financial adviser” and “financial planner” interchangeably. But while financial adviser often encompasses various types of investment advisers, the term financial planner is somewhat narrower and tends to refer to someone who will assess your financial situation and chart your future needs and goals.
Financial planners can help you with basic budgeting, but their bread and butter is longer-term planning. They can help you figure out how to manage an inheritance or how much you need to save for retirement, for your kids’ education, or for big purchasers, such as buying a house.
When it comes to investing, financial advisers need to meet specific licensing requirements in order to sell financial products, such as securities, mutual funds, and insurance. Financial planners who don’t sell financial products won’t be able to pick stocks for you or recommend a specific mutual fund, but they can give general advice, such as what mix of stocks versus bonds you should have in your investment portfolio.
Financial planners and advisers can also help you with tax planning, making sure you are saving and investing in the most tax-efficient manner.
Although anyone can call themselves a financial planner outside Quebec, there are a number of professional certifications they may hold, including the Certified Financial Planner (CFP) designation, which comes with continuing education requirements.
When looking for a financial adviser or planner outside Quebec, “I would recommend someone who has at least a CFP,” Heath said.
There are a host of other professional designations that might help you determine whether the professional you’re looking at will be able to provide the advice you’re looking for.
However, you shouldn’t rely simply on certifications. Someone who is a CFP but who spends most of her time tweaking investment portfolios might have little experience drawing up long-term financial and retirement plans, Heath said. To figure out whether someone’s a good fit for you, ask questions.
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How they get paid
Among the key questions you should ask of any money experts is how they get paid, both Heath and Yanchuk Oleksy told Global News.
The vast majority of financial advisers work for financial institutions like banks, credit unions, insurance companies and mutual fund dealers. This arrangement has pluses and minuses for customers, according to Heath. On the plus side, a financial adviser backed by a large financial institution will likely have access to resources like in-house tax accountants and lawyers, who can help with specific issues facing your financial situation. On the other hand, according to Heath, these advisers are generally caught between “competing interests” – yours and their employer’s.
Turning to independent professionals doesn’t guarantee unbiased advice either. The term “fee-based financial adviser” has become increasingly popular, Heath said, but some stand-alone advisers are still collecting fees for selling financial products. If you’re leery of that, look for advisers who charge only for their time, something known as “fee for service.”
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“Money coach” is a term that has surfaced only in recent years, Heath said. Money coaches generally don’t give investment advice, but the designation can indicate anyone from a financial adviser to someone who focuses on simpler money issues, such as everyday budgeting.
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Credit counsellors also provide day-to-day money management advice, taking into account a client’s overall financial situation, Yanchuk Oleksy said.
They also provide financial literacy programs, such as free workshops on how to build a budget, and debt repayment services. The latter works a bit like debt consolidation, with the counsellors working with the client to combine various debts into one manageable monthly payment that is distributed among creditors. A credit counsellor may be able to negotiate with lower debt repayments with creditors and the waiving of interest and fees. However, creditors participate in such arrangements on a voluntary basis, unlike a consumer proposal, which is legally binding and can only be obtained through a licensed insolvency trustee.
The credit counsellors designation isn’t regulated either, but accreditation exists through Credit Counselling Canada (CCA), a national association of 17 organizations.
How they get paid
Credit counsellors accredited through the CCA work on a non-profit basis, said Yanchuk Oleksy, meaning that most services are free. Participating in the debt management program comes with a small fee that can be waived based on individual circumstances, she added.