Choosing a financial adviser is a big decision. An adviser can help you set financial goals, choose investments and track your progress. It is an important relationship, and you want to get it right. When choosing an adviser, you want to ask the following questions:

1. Are you registered?

Nova Scotia law requires financial advisers to be registered (some exceptions apply). Registration helps protect investors because firms and individuals can only be registered if they are properly qualified. Firms and individuals are registered by category—each category has different education and experience requirements, and permits different activities.

2. What is your background?

You want someone who is qualified and has the right experience to give you the help you need. Ask follow-up questions like:

• What are your educational and professional qualifications?
• How long has your firm been in business?
• How long have you been with the firm?
• How long have you worked in the industry?
• What professional associations do you belong to?

3. How are you paid?

Advisers can be paid by salary, commission, a flat fee, or a combination of these methods. If an adviser is paid by salary, the cost of their advice is built into the products you buy. Many advisers are paid a commission for every product they sell. Other advisers charge a flat fee based on an hourly rate or a percentage of the assets in your
account.

4. What kinds of products and services do you offer?

Not all advisers offer the same products and services or have the same expertise. Some specialize in certain kinds of investments. Others can offer you a wide range of investments and services.
If you’re an experienced investor, you may want an adviser who offers a wide range of products and lets you choose. If you’re newer to investing, you may be more comfortable with fewer choices and more guidance from an adviser.

For more information, download our brochure Working with a financial adviser.

What other questions would you (or have you) asked your adviser? Is there information you wish you had known before hiring an adviser?

In Canada, anyone trading securities or in the business of advising clients on securities must be registered with the provincial or territorial securities regulator, unless an exemption applies.  A securities regulator will only register firms and individuals if they meet certain standards.

Remember that an adviser must be registered in the jurisdiction where their clients live. So if you chose to do business with an adviser in Toronto, but you live in Antigonish, your adviser must be registered in Nova Scotia. If you are working with an adviser in Sydney, and you move to Alberta, you must either transfer to an adviser registered in Alberta, or your current adviser must register there to keep your business.

Use the National Registration Search to find out if an individual or firm is registered in your province or territory.

The category of registration tells you what products and services a firm or individual can offer.  Being registered, however, doesn’t mean that firms and individuals have the same skills, provide the same services or charge the same fees.  Make sure you understand their qualifications, and the product or service they are selling you.

(Read Provinces team up on retirement income in the Globe and Mail.)

The workforce has seen a shift in the past few decades, from a time where a worker spent most of his or her life with one employer and was then “taken care of” during retirement. Today’s workers change jobs more often, and are often left to fund their own retirement through RRSPs or defined-contribution pension plans. Life expectancy has also increased, leading to a need to fund longer retirements. All these factors lead to many Canadians short on cash through their retirement years.

Whether or not the provinces agree to a new pension plan, what it will look like and when it will come into effect are still up in the air. In the meantime, Canadians need to look closely at their retirement needs and ensure they are well informed of their goals and how much savings they will need to achieve them.

It takes time to save enough for retirement. It’s important to start planning as early as possible. Otherwise, you may end up with a lot less money than you need to live the way you would like after you retire. Also, remember that it is never too late to review your retirement plan. Remember the old Chinese proverb: “The best time to plant a tree was twenty years ago. The second best time is now.”

Follow these simple tips to get started with a retirement plan:

• Look at how much time you have. If you plan to retire in 10 years, your plan will be different than someone with 30 or more years left to save.
• Consider the lifestyle you want at retirement: will you stay in your current home, or maybe downsize? Do you intend to travel, volunteer, or even work part-time?
• Set clear goals. Figure out how much money you’ll need when you retire, and make that your savings target. You can work this out with a financial adviser, or use one of the many calculators found online to estimate. The Investor Education Fund provides great tips.
• Consider your other sources of retirement income. What can you expect from the Canada Pension Plan? Do you have a retirement savings or pension plan at work? Deduct this from your savings estimate.
• Don’t put all your money into one type of savings. Diversify. Spread your money around into different types of investments. If one way doesn’t work out, other ways may be better.
• Protect yourself and your retirement savings. Invest smart. Don’t do things with your money that you don’t understand. And always remember, if an investment seems too good to be true, it probably is.
• Track your progress every year. Discuss with a financial adviser and change your plans when and if you need to.

Twenty-four per cent of investors participating in a recent J.D. Power and Associates survey said they would “definitely” recommend their primary investment firm, down eight per cent from the year before. Ten per cent of investors said they were considering switching advisers this year, compared to six per cent in 2008. (Read more in the Globe and Mail.)

Are advisers taking too much of the blame for the market downturn? While some advisers who get the boot may well deserve it, it is worth considering whether Canadian investors have realistic expectations.

Think of your relationship with your adviser as a partnership, with both of you working to achieve your financial goals. You are both responsible for making this work. And like any relationship, open and honest communication is key.

What you should expect from your adviser

The role of your adviser is to give you helpful, informed advice as you build and carry out your plan. Your adviser is obligated to act in your best interests at all times and to recommend investments that are suitable for you.

To do this, your adviser will need to take the time to get to know you and get a clear understanding of your financial situation, your goals and how you feel about risk.

Once your plan is in place, your adviser should tell you about investment opportunities, as well as any changes that could affect your investments. Your adviser should be available to answer your questions, especially during market lows when you may be tempted to act on your emotions.

You can expect your adviser to:

• make clear and specific recommendations
• explain the reasons for the recommendations
• point out the strengths and weaknesses
• outline the risks involved

Your adviser must get your permission before they take action like buying or selling investments for you, or withdrawing money from your account. The only exceptions are if you have given your adviser “discretionary” authority or you have given someone else trading authority or power of attorney over your account. Your adviser will send you a written confirmation of any transactions they make for you and will send you regular account statements.

What you should not expect from your adviser

Your adviser will not be able to:

• predict the performance of the markets with certainty
• recommend investments that are always profitable
• act on vague or general instructions to buy or sell investments
• meet unrealistic goals or expectations of profit

For more tips on working with an investment adviser, read the CSA’s Working with a financial adviser brochure.

Atlantic Canadians are more likely than the average Canadian to be approached with a fraudulent investment, according to research conducted by the Canadian Securities Administrators in 2006.  Atlantic Canadians are also much less likely to believe that investment fraud is a problem in their province.

Nova Scotians have a reputation for friendliness and hospitality. Does this put us at increased risk for fraud? Are we simply too trusting? Perhaps there are times when we should worry less about being rude and just close the door, hang up the phone, or delete the email.

Many of us rely heavily on the recommendations of advisers, family and friends when it comes to our investment decisions.  If the people we put our trust in are not acting in our best interest, this can have disastrous consequences for our finances. Who would you prefer handling your future – someone with your best interest in mind, or their own?

The key to avoiding investment fraud is to deal with a registered and reputable adviser. Anyone selling securities (investments) in Nova Scotia is required to be registered with the Nova Scotia Securities Commission (unless they qualify for an exemption, which you can verify by contacting the commission). Firms and individuals can only register with the commission if they are properly qualified.

How do you find YOUR adviser?

Ask for referrals from friends, family or work associates, but never assume that who’s right for them is right for you.  Make a list of potential candidates. Call them, and screen over the telephone. Ask potential advisers for references who you can follow up with.

You can check an adviser’s registration with the Nova Scotia Securities Commission. You can also search our enforcement proceedings online, for any past litigation.  The Better Business Bureau can tell you if they have a history of complaints against an adviser.

Choose an adviser who has the necessary qualifications and experience, who is registered with your local securities regulator and who you believe is trustworthy. Just as important is choosing someone you are comfortable with. Trust your judgment about whether a candidate will listen to and answer your questions.

Don’t be afraid to make a change if it becomes clear your first choice was not the right one or if your needs change. Account transfer fees can often be waived, and in any case are a small price to pay for peace of mind.

This post featured in Carnival of Pecuniary Delights, Edition 21, August 27, 2009.

Maybe, but the best advice would be to steer clear of unsolicited e-mails that promote specific investments. Many of these e-mails promote microcap companies, smaller companies that often have limited assets. Microcap stocks often trade on over-the-counter (OTC) markets that have fewer regulations than the major stock exchanges. These OTC markets include the United States OTC Bulletin Board (OTCBB) and the Pink Sheets.

While all investments have some risk, microcap stocks are considered high risk because many of these companies are new and have few assets or business operations. In addition, there is little public information available about them. By contrast, larger public companies that trade on recognized exchanges like the Toronto Stock Exchange (TSX) must meet minimum listing requirements. They must also file financial statements and other reports with securities regulators, which any investor can get for free on such websites as www.sedar.com.

Remember you should research all investment opportunities before investing. Be particularly careful of spam e-mail touting microcap investments, as by their nature these can be very risky investments. While no investment is without risk, up front research may reduce the risk of investors falling victim to a scam or committing to an unsuitable investment opportunity.

You do not know the motives of the person sending the e-mail, and they do not know you, your financial objectives or risk tolerance. They are not in a position to give you investment advice.

Some spam e-mails have lengthy disclaimers that are at odds with other information in the e-mail. If you read the fine print, you may find that the people sending you the e-mail are being paid to promote the investment. They also may benefit from an increase in the value of the stock they’re encouraging you to buy. They may also use fancy scientific or financial jargon to convince you that the people behind the opportunity are professional, knowledgeable and experienced. Don’t take it at face value.

Spammers urge you to act with statements like “this one is ready to explode!” and “We have a runner – opportunities like this don’t knock on the door every day.” If they are trying to manipulate the market for the stock, it’s in their interest to get you to act fast. Whatever you do, don’t reply. Even if you just reply to ask the sender to remove you from their mailing list, that tells them that they have a legitimate e-mail address and you may get more spam.

Delete the e-mail. Block further e-mail from that sender. Some web-based email systems also allow you to report the email as “junk” email. This helps to increase the effectiveness of junk mail filters, and can reduce the amount of spam you receive in the future.

If you have a question or concern about an e-mail that promotes an investment opportunity, contact the Nova Scotia Securities Commission.