Financial Planning for the Financially Inept: Choosing the Right Advisor

*This is a guest post by Alex Fayle of Someday Syndrome.

After reading Jeremy’s post on being your own financial advisor (, I had to laugh. I might have been good at mathematics in high school, but I sucked at applying it. There’s no way I could ever be my own financial advisor. Not only do I not understand it, but it bores the crap out me.

In the comments to that post, I mentioned that I learned just enough to know what to look for in a financial advisor and then pick one who would do all the work for me. So, for those of you who are the same boat as me, here’s my story and what I did to find myself the perfect financial advisor.

When my former employer started offering me retirement contributions instead of a pension, I went to my bank where a friend worked and she set me up with a mix of funds. Being a good friend from high school, I trusted her and let her do her thing.

Then my bank merged with another one and my funds got transferred over, going from a mix of about 6 different types of funds to about fifteen. Over the next few years I consistently lost money, but being a big-time procrastinator at that point of my life, I didn’t do anything about it.

When I left the 9-5 world and started my own business, I joined a networking group where I met Rachelle Allen. As we spent time in the group together, I learned more about financial planning from Rachelle. She told us to look for in an advisor – and slowly it sunk in that I should really do something about the money I was wasting in my bank’s mixed up funds.

I learned that it starts with knowing your investment personality. For me, investments are for retirement. I have a long-term view. I don’t care what my investments might be doing now, six months from now or even 5 years from now. All I care about is that in 25 years when I want to retire, they’re going to provide me with another 35 years of decent living (yes, my family’s very long lived and we need to plan for living to at least 100).

So, I knew I needed someone who could take care of my investments over the long-term and would be interested in the future of my money, not what he or she could get out of me in the moment.

Over the year that I got to know Rachelle before deciding to work with her, this is what I learned was important to me:

Trust trumps all. Think about the Madoff fraud scandal. This man was supposed to know what he was doing and he was supposed to have his clients’ interests at heart. I wonder, however, how many of his clients knew him personally. Before I started working with Rachelle, I got to know her on a professional and personal level. I knew that her values matched my own and that I could trust her with my money.

Certification matters. In many industries being certified doesn’t matter, but to me, financial planning is one place where the advisor needs to know what’s what and to understand the language of finances. And the best way to show that knowledge is with certification. In Canada, the most respected designation in the industry is the Certified Financial Planners’ (CFP) designation. It has a three year minimum experience requirement, a strict code of ethics, and a series of three exams. When I started with Rachelle, she had already started working towards her CFP and will be writing the final exam in June 2009.

Who pays the advisor? This one actually one of my first questions to Rachelle: “If I go with you, do you make money off my investments, or do I have to pay you a fee each time you do something for me?” She explained that there are normally three income models for financial advisors:

  • Commission – This is traditionally the most common way financial advisors are compensated.  When you purchase a product or investment, a certain percentage goes directly to the advisor.
  • Flat Fee – Some advisors will charge an hourly rate or may charge a flat fee for creating a financial plan.
  • Fee Based on Assets – Some advisors will charge an annual fee that is based on a percentage of assets.

Then she told me about a fourth way, how her company, Investors Group, does it. She never charges commission, flat fee or a fee based on assets. Investors Group compensates her directly when new clients join her practice.  In addition, the company compensates her for servicing and growing her clients’ assets. In other words, she has a stake in the well-being of the funds and so wants them to grow, without any cost to the client.

That was enough for me. Here I had someone I liked and trusted, whose values and ideas about life matched my own. She was dedicated to ongoing learning and being the best she could be in her profession, and her earnings although tied to the value of my investments didn’t come directly out of my money.

I couldn’t ask for more!

And now that I live outside Canada, the trust and intimate knowledge of the Canadian market is even more important. When the news spouted on and on about the economic downturn, I sent off an email saying: “Do I have to worry?” And Rachelle’s immediate response was “No, you’re in this for the long-term. But I will keep an eye on things and let you know if we need to reshuffle.” And because of my high level of trust for her and because of her strict adherence to being an ethical advisor, that was all I needed to calm any financial fears.

This type of financial planning is not for everyone, however. I doubt Jeremy with his interest in finance would ever want to go this route. But for someone like me who falls asleep at the mention of mutual funds, bond markets and… whatever they’re called, Rachelle was a gift from the gods.

* * *

Alex Fayle, of Someday Syndrome (, is a former procrastinator who uses his visionary ability to uncover hidden patterns and help people break the procrastination obstacle so they can finally find freedom and start living the life they desire.

Rachelle Allen is a Financial Consultant for Investors Group in Toronto, Ontario, who works with all types of people, not just those who find finances boring. You can find out more about her and Investors Group at

4 thoughts on “Financial Planning for the Financially Inept: Choosing the Right Advisor”

  1. Great post! Most people would be well-served with an advisor — not just for financial guidance, but to remove another distraction and peril to worry about. There is one other primary concern, however, that you may (or may not) be overlooking…

    For proper disclosure, I am a CFP with over 10 years of experience, primarily in investment management, and my clients pay me a fee based on assets. Now, here are some questions to ask “Rachele.”

    1. Now I know how YOU get paid but how does “Investors Group” get paid?
    2. Can you select from any investment in the universe or are you limited to a certain propriety group of funds (i.e. American Funds)?
    3. Do you have an investment policy statement? If so, can I see it? If not, what is the specific criteria used in selecting, monitoring and replacing the investments?
    4. Can you provide me with some names of clients (both past and present) for reference?
    5. Are you a fiduciary? (Note: If Rachele doesn’t know what an “investment policy statement” or what the word “fiduciary” means, you may have a problem)

    The problem with the Madoff scandal is that people did not (and do not) know what questions to ask; therefore, they are left with only a “gut feeling” and some background history that may or may not predict future behavior on the part of the advisor.

    Rachele may truly be a “gift from the gods,” as you say, but I’m sure there were plenty of people who said the same thing about Madoff just a few months ago.

    Here a few more pointers:

    1. Never write a check in the name of the advisor — only the custodian (i.e. Fidelity, Schwab, State Street).
    2. If the advisor creates their own statements, run away! Statements should be created by a third party, preferably the custodian.
    3. Most Importantly, always be aware of your own ignorance (this applies in all areas of your life).

    “The fool doth think he is wise but the wise man knows himself to be a fool.” ~ Shakespeare

  2. For anyone looking for the right financial planner, I would recommend that you remember that Personality fit is often an over-looked factor. You want to make sure that you share the same basic philosophies with your planner. For example, if your planner is going to insist that you cut out your lattes each day, but you find them to be a $3 slice of heaven, you may not agree on larger issues either. Also, you might Try to find a planner who is at about your same life stage so that they have a good understanding of where you are and where you want to be. For instance, I have two young children and my whole practice is geared towards new and expectant parents. I am highly tuned into the challenges that come with a growing family and can closely relate to my clients. On the other hand, I wouldn’t take on a client who is nearing retirement, since I don’t have as much insight to their goals and worries.

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