Financial Advisors have been under enormous pressure over the last year; clients are getting tired of seeing red on their statements and are looking for answers from their advisors.

The most common answers given by their advisors is “This is part of the market cycle, just stay invested and you will be fine in the long term.”

There really is nothing wrong with this answer, it’s one that I give on my blog and to readers who email me, but this may not always be the best answer. Advisors often have a vested interest in their clients staying invested. Although I agree with that, should investors take this opportunity to invest, one should question the motivation of the financial advisor behind this suggestion.

Is it because he (or she) truly believes you are doing the right thing? Or is it because his income depends on the commission your money generates? Unfortunately there is a high level of conflict of interest between the advisor’s interest and those of his/her client’s.

How can one know the difference? Before you hire a financial advisor you should conduct a good interview and ask your prospective financial advisor important questions. If you do it right then chances are you will find a trustworthy advisor.

In case you have some doubts, the following steps might help you in figuring out your advisor’s motivations.

1. When was the Last Review?

When was the last time your financial advisor reviewed your finances and portfolio WITHOUT making a new sales pitch? If the only time you hear from your advisor is when you call them or when there are “new opportunities” than I highly doubt they are truly looking out for you. Your advisor should contact you on regular bases without any new sales pitches. If you notice that every time you are contacted is when “new opportunities” arise you may want to look for new advisor or at least have a serious conversation with the current advisor.

2. Pay Attention to the Questions

Does your advisor ask questions about changes in your situation or personal goals or does he (or she) just want to know if there is any new money available? Things change, you become more conservative/aggressive, children grow up, family members get sick, etc. Does your advisor adjust your investment portfolios accordingly or does he just ask if you have more money available? Financial advisors are trained to question and dig for more money, you should pay close attention to the questions you are asked.

3. Products

What products does your advisor recommend to you on regular basis? Are these often expensive investment vehicles, such as mutual funds? Are index funds or ETFs ever recommended? If your advisor never speaks to you about low cost investments, than just ask your advisor about them. They know all about it so why do they never recommend them to you? If you are constantly offered mutual funds then you should question the motivation of your advisor and ask about alternatives.

4. Ask Tough Questions

Do not be afraid to ask the difficult questions. Ask your advisors about index funds and ETFs – ask them what they don’t like about these investment products and why they’ve not recommended them to you. Ask if they truly believe mutual funds are significantly better than index funds and if the fees charged are justified.

These are just a few things you can do to appraise your advisor, the best suggestion is to keep asking questions and keep your eyes open for any potential conflict. Financial advisor’s duties are not just to recommend investments, but also to inform and educate their clients.

What is your experience with your financial advisor? Have you ever been betrayed by them? Any good or bad examples? Share your insights please!

This is a guest article by Ray, the owner and primary author of Financial Highway, where he discusses investing, saving and practical money management concepts. You can check subscribe to his RSS feed or follow him on Twitter.

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Because of the MERs that mutual funds flow down to the investor, I am not interested in them anymore. I’m currently gathering up the courage to buy stocks myself.

I recently dumped my financial advisor because that seems to be all they were interested in!!

Great article Ray, thanks!

CanadianDad, if you like mutual funds because of their diversification, but don’t like to pay the high fees, you should do some research into index ETFs. Same idea as mutual funds except that they cheaper and they trade on the exchange.

You wrote, “Your advisor should contact you on regular bases without any new sales pitches.”

What is regular enough? Once a year? Twice a year? I really don’t know what’s normal or average.

Great article! I’ve often felt that financial advisors have a conflict of interest when they make money off the investments they sell. How can they have my best interests at heart when they are commissioned based and need to give their own self interests priority to make a living?

I agree with FT’s advice to Canadian Dad about index funds.


This is the topic of my interest, now talking about my advisor he is good to me, as when I was at some mistakes, he corrects me and always bring the latest information for the stock market that can benefit me. With his help I have my portfolio reviewed thrice a year.

In the core, I think if I will grow only then he will be benefited.

I’ve been interviewing advisors lately and haven’t found a single one who was in it to help me. They are all very interested in funds with high trailers and less-than-average returns. The biggest joke was one “advisor” who showed me a sample portfolio he would build for me. Over half of the funds he was suggesting were closed to new money. One didn’t even exist anymore. Nice, huh, cherry pick 5 MFs with the highest returns over the last year and tell me that’s what I’m going to get by investing with him.

I’m also on side with FT about index funds. This is where most people should be placing their money. If you want to keep 5% aside for stock picking, fine, but keep that under control and tread carefully. When I started looking at stock picking, though, the stocks I started looking at were already well representing in most major indices.

Trusting a salesperson whose livelihood depends on making you buy something is tricky, at best. The system is designed for disappointment for the client. That’s a shame.

Obviously, if you are able to do it yourself, that’s best. But few have the time and most simply want to hire a professional for the best possible advice. Sadly, their advice is far from best.

For the do-it-yourself crowd, you already know that traditional mutual funds are a bad idea. The fees are too high and the performance is too poor.

I take a point of view that strays from that of the professional advisors. I recommend using conservative option strategies to guarantee that losses are limited. In return, you agree to accept limited, but acceptable, profits.

The Rookie’s Guide to Options is my primer for anyone who wants to learn to do it without paying fees for bad advice.

Good point about #4. However, if the financial advisor educates the client too much, the client can use the knowledge and do it by yourself.

I was reading about Rick Ferri on ( ) that asset management fee should be fee based (.25 to .50% of assets) and financial planning should be fee be only, charged by the hour.

My only experience with advisors was with the bank mutual fund sales people back when I was a teen.

I’m sure there are good advisors out there, but certainly they must be few and far between due to the inherent conflict of interest in their work.

On the flip side, I can understand to some extent how a new and genuinely sincere advisor could ‘lose their path’. I can imagine your boss haring about meeting some quotas, I can see your new family needing more income, I can see just getting annoyed by investor/clients whom do not bother educating themselves with even the basics, then nagging/harping on you when you don’t ‘deliver the returns’.

Thanks FT for the opportunity!

@ Kathyrn- I dnt think there is a right answer for that, it will mainly depend on the situation, but they should call you at least 1/month to talk on the phone and by that I don’t mean with a sales pitch, rather just a check up on how things are, if you have questions about your statement, any changes etc….If you hear from the on “regular bases” and every time they selling something… know something is wrong.

@Sampson…yes there certainly are some good commission based advisors but like you said hard to find them and even then people don’t trust them, just because they are paid commission.

This is why I stopped working as a commission based advisor, I just didn’t feel good and firm kept pushing funds I didnt like.

Has anyone had a personal experience with Ed Rempel & Associates?

Hey Ray,

Very interesting article. Same concept applies to your Real Estate Agent and the inherent conflict of interest that may play out.

I remember reading somewhere in Freakonomics that Real Estate Agents are less willing to oversee the sale of your house/property in the long run because they just want to make the commission and move on, rather than holding out for a little while longer so you can squeeze out a few extra thousand dollars. The marginal gains just isn’t “worth their time”.

Grilling them is a good idea as well because it tests how genuine and how hard they’re willing to work to retain you as a client.

Very timely post…

Just had a back and forth with my FA about index and mutual funds and MERs. Was a positive communication but reading this blog and moneysense’s couch potato portfolio sometimes leaves me overwhelmed or with more questions.

I find it’s very difficult to find a FA who will be honest with you regarding this subject because essentially it’s just one big conflict of interest. Fortunately, I’m comfortable at this time with my FA as he does allows us to ask any questions at any time and asks questions about my short and long-term situation. Was pleasantly surprised to find out my FA is only compensated by the Fund companies since we hold our investments past the load time frames and we exercise our free 10% switch every year to make funds a little more liquid if an emergency should arise.

It would be nice though if I could sit down face to face with an FA that did speak highly of index and ETF funds…



That’s why the whole system is bankrupt.
Conflicts everywhere.

The professional planners want their money. Period. Sure there are exceptions, but too many think only of themselves – just as every other salesperson does.

Hi Ray,

I think I would be annoyed if my financial advisor was calling me every single month. I think a semi-annual check-up is just about the right amount of communication for me, and if there is something that has changed in my financial situation, I just contact him myself in the meantime.


The fact that they prefer traditional mutual funds to ETFs and Index Funds tells you all that you need to know: They do not care about you. They deliberately sell funds that under-perform. Deliberately.

Some funds indeed under-perform; howerver; not all funds. In some cases (not all cases obviously) an FA that choses a variety of quality funds will be better for you than chosing ETF”s. And the debate goes on.

You know, I have always said – give kids just one freakin’ mandatory class on money management in school and the entire country would benefit. They learn about all the internal organs of a frog, but NEVER get taught about compound interest.

No wonder banks rake in the fee’s. Nobody knows anything about money heading into the world, so they just throw their funds at advisers who talk spin to them and scare them half to death.

There MUST be a reason why they leave basic financial management out of the curriculum.

Scott: How does your FA know IN ADVANCE which ‘quality’ funds to buy?

I learned the hard, and expensive, way what failing to choose an advisor wisely and trusting them blindly can do to your net worth. Investors Group took me to the cleaners and in retrospect my advisor failed every question one should ask when chosing an advisor. Even when confronted he and his replacement gave me the old don’t worry about it attitude and when I really started digging I was treated like I was an annoyance. Even when I went to the highest levels I was met with red tape, stall tactics and lack of effort to resolve anything. Choose wisely and for the good of your portfolio stay away from IG!!!!


I use IG as well, but have been very pleased so far. I have a good advisor (was “referred” by my parents, so there is a long-term relationship there) and haven’t had any problems.

I have a question, I email him and he responds quickly.,

Great article and something I’ve been trying to figure out for a while. I’m a do-it-yourself investor now since taking everything back from my various advisors but still wouldn’t mind bouncing ideas or looking for alternatives. Other than this site and other financial blogs it would be nice if more firms offered fee based advice where you would know the “advice” isn’t motivated by commissions.

Adam – I figure it’s a combination of society’s structure (our consumer economy requires that people spend rather than save) and vested interests (banks firms etc profit from our stupidity).

However certain jurisdictions do have such courses, no?

Then again, maybe it’s better to have this stuff taught within the family. My family taught me very little about finances (they still don’t want to talk about it) and being the horrible student I was I doubt I would have paid attention in Personal Finance 101! However my wife’s family has a strong tradition of teaching basic finance issues within their culture (she’s Chinese) and not only was she forced to learn herself as a girl (she has done well as a result) she has also taught me a lot along the way that I have no doubt we will pass on to our kids.


Some brokers started that proactive. They charge an annual management fee instead of commissions and that theoretically should solve this problem.

I run an investing site that’s primarily focused on education. No commissions, no fees, no costs (ok, I sell a book, but no one has to buy it). If you want to learn how options can reduce investment risk, take a look around.

I’m with Adam on there being a mandatory class on this stuff. It seems that most people don’t think they need it though. Maybe it’s pride? I don’t know.

Aren’t there different types of Financial Advisors?

There are those who work for investment companies – those you have to be a bit careful of.

And then there are those who are Financial Planners who are Financial Advisors and they help you to invest and manage your money and get paid on for that job – but they don’t make money off of selling an investment product.

My advisor always wanted me to buy mutual funds from her and she still continues to this day despite my lack of interest.

@ avgJoe: I have not used the services of Ed Rempel & Associates, but I did talk to them a bit over a year ago. I liked their philosophy and that they took steps to ensure a good match with their potential clients. I did not like that they want clients to commit 100% of their investments with them. As Earl Jones and Bernie Madoff have shown us, there are risks to putting all your eggs in one basket. (Of course those risks can be mitigated, but that’s another topic…)

I’m seriously considering hiring a fee-only financial advisor since I agree with the concerns raised here about the motivations of commission-based advisors. Has anyone used the services of E.E.S. Financial Services Ltd. ( They appear to be a true fee-only operation and have been around since 1968. Are there any other fee-only financial advisors you would recommend?

The truth is, that it is very difficult for a financial advisor to have your best interest in mind (especially when the economy is bad). And if an advisor is really were to “educate” his/her client, then the client may reach a point where they no longer need him/her.

So I am more of the persuasion that a person should educate themselves. But I do like the idea of a Fee Only advisor. That way there is more of a chance that the advice is not biased.

Not surprised that this article generated a lot of comments. I have a terrible financial advisor and if it were not for the DSC fees I would have sold a long time ago. Counting down the days until mid Nov so I can pull out at a lower penalty and go with TD e-Series.

High fees are wealth destroyers but do not expect our govt to do anything about it when they collect GST on these fees whether or not it is in an RRSP.

You are right, lots of comments, but little sense.

Please realize that it is a “Relationship”. Just like a spouse, a friend, a business partner, etc. if the relationship doesn’t work, why are you still there? But on the flip side, why isn’t the consumer asking questions? You just buy a car because the salesman said so? How about a house?

A lot of people laugh and put down banks, but it is the place to start. No fees (except MER’s), convenient, no back end fees, no lock in commitment (unless you purchase a non-redeemable GIC), etc.

After that, just educate yourself. Dummies books are a great place to start or this web site :)

FP’s are salespeople. They are making a living. And just like anything else in life, there are good and bad.

I started with a bank. RBC’s Balanced Fund. Started my RIP at $7.89 a unit (its trading at around $11.20 now). I have seen my shares of idiots over the years, but I realized a long time ago, I am in charge here. If I don’t like what you are selling me, I’m out of here.

I now have a DRIP portfolio and purchase ETF shares from Shareowners on a quarterly basis.

Simply put, stop blaming the other guy. It’s your money.

Word to the wise… you really need to be passionate about finances but still have the where with all to separate emotion from money decisions.

It’s easy to talk a big game but when it’s time to put your money where your mouth is, some people will procrastinate or stress-out under the pressure. Would love to take over all my investments but at what sacrifice?


P.S. There seems to be a real need for hourly fee planners to assist those DIY who require a shoulder to lean on when questions arise. Could be nice niche market for someone with qualifications? Just saying…

Financial Advisor = professional guesser

I think the western society trend of hyper-processing things for instant gratification has converted the whole ‘investing’ concept into a white-color casino. A casino where people even charge you to enter the premises… set-up fees, transaction fees, admin fees, and then add insult to injury with fee fees (Taxes) if you do manage to squeak out a profit…

…think about it, do we really know what is underpinning a so called blue chip company anymore? Have we ever truly been told the facts without bias?

I can hardly believe there are so many sheep roaming this planet pretending they understand those fine print documents they sign…

One thing that can help is to 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.

Some of you may remember these jokes but here they are again.

CEO –Chief Embezzlement Officer.
CFO — Corporate Fraud Officer.
VALUE INVESTING — The art of buying low and selling lower.
P/E RATIO — The percentage of investors wetting their pants as the market keeps crashing.
BROKER — What my financial advisor has made me.
STANDARD & POOR — Your life in a nutshell.
STOCK ANALYST — Idiot who just downgraded your stock.
FINANCIAL PLANNER — A guy whose phone has been disconnected.
MARKET CORRECTION — The day after you buy stocks.
CASH FLOW– The movement your money makes as it disappears down the toilet.
INSTITUTIONAL INVESTOR — Former investor who’s now locked up in a nuthouse.

Kathryn wrote: How can they have my best interests at heart when they are commissioned based and need to give their own self interests priority to make a living?

I partially agree here, but the question I have to ask is – are you willing to pay for your investment advice? Advisors can either charge a commission, or go fee-for-service, and most Canadians are unaccustomed to paying either out of pocket or from fees collected on their investments. The FFS route is a difficult one for some advisors, as they need to make a living, and clients are often uncomfortable being the party who cuts the cheque.

For all the dutch people read extrabudget, it’s a website that help you for free.

I don’t have an advisor as every time I tried to work with one I never found that they truly gave me any value.

I could see that there would be times they could bring you interesting investing opportunities about which you would otherwise not know.

For the great majority of people, investing is a concept that is hard to master and thus they place a great deal of trust in people with letters after their name. The trust may not always be well placed, but without basic education of financial management, how does one know what one doesn’t know?

Great Article. Tips mentioned here will be helpful in figuring out my advisor’s motivations.

This thread is interesting in retrospect. It is from 2009, shortly after the bottom of the financial crisis when most investors sold near while the markets were down.

Both advised and non-advised investors sold their investments low, but advised investors were more likely to stay invested and more likely to buy more at great prices.

There is a huge difference between working with most investment-focused advisors vs. working with a planning-focused advisor that actually prepares a professional Financial Plan for you and gives you comprehensive planning & tax advice, in addition to investment advice.

I wrote a detailed article on this topic, quoting relevant studies ( ).


I already got burned once by a financial advisor. It can be hard to know who to trust with your investment portfolios, especially when you’ve had bad luck in the past. Fool me once and all that.

So how do you find great recommendations for an advisor before you even get to the “ask important questions” part of the hiring process? I don’t want to waste my time again.

Should I ask family members? Colleagues? Maybe other professionals who handle other financial aspects of my life?