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The different types of financial advisors

 


 

 

When looking for financial advisors, make sure that you understand the scope of their expertise and what they can and can’t do for you. This will help you identify the appropriate advisor for your specific needs.

Take a deeper dive to see which types of advisors suit your requirements.

Designations 
and regulatory bodies
  

 

CFP – Certified Financial Planner

In Canada, awarded by FP Canada Recognized in 14 countries around the world. Candidates must successfully complete one of several FP Canada-accredited educational programs (or hold specific professional and educational designations), pass the certified CFP examination and have a minimum of two years’ relevant work experience. Post-certification requirements include adherence to a professional code of ethics and 30 hours of continuing education each year.

 

RFP – Registered Financial Planner

An advanced financial planning designation awarded by the Institute of Advanced Financial Planners to qualifying members. The RFP designation requires holders to demonstrate competency and ability to apply their knowledge in the completion of a comprehensive financial plan. RFPs are subject to annual continuing education requirements and a code of professional ethics and must carry professional liability insurance.

 

PFP – Personal Financial Planner (chartered banks only)

Regulated by the Institute of Canadian Bankers. Requires the successful completion of five courses in personal financial counselling and two transition courses in insurance and estate planning and taxation.

 

FP – Financial Planner (in Quebec)

Regulated by the Institut québécois de planification financière (IQPF). Candidates must obtain a certificate in personal financial planning and two undergraduate certificates in administration, law, economics, actuarial or equivalent. They must also successfully complete the IQPF professional training course and exam.

Services provided

Financial planners offer advice and guidance covering the complete personal financial spectrum, including saving and investing, insurance, retirement and estate planning and taxation. If they are not licensed to sell securities, mutual funds or insurance, they may need to refer you to another professional if your needs dictate these products.

 

Where to find them

Independent financial-planning firms, banks and trust companies, mutual fund dealers and full-service brokerages. The range of products a financial planner can provide may be restricted to those offered by the company where he or she works. Some planners may be more independent, offering products from a variety of suppliers.

 

How they are paid

Financial planners can be compensated for the services they provide to you in three ways: an hourly fee based on the time spent providing you with advice or drawing up a plan, commissions from the products you use or a combination of fee and commission income. Financial planners working through a bank or trust company are usually salaried employees.

 

Who can benefit

If you’re looking for a complete financial plan, this is the right advisor for you. For financial needs that are straightforward, a financial planner from your bank or mutual fund dealer may be ideal, as he or she already has an understanding of your finances. Keep in mind that these advisors may only be able to provide you with the products from their company. If you require greater product choice, consider full-service brokerages and independent financial-planning firms. Seek out a CFP if you have complex financial needs.

Designations 
and regulatory bodies
  

 

CLU – Chartered Life Underwriter*

Requires the successful completion of CFP program and seven courses in financial planning, including life and health insurance and employee benefits. Sixty hours of annual continuing education are required to maintain designation.

 

RLU – Registered Life Underwriter (in Quebec)**

Requires the successful completion of nine university-level courses (375 hours) in financial planning, including financial management and insurance and annuities.

 

CLU – Chartered Life Underwriter (in Quebec)**

Requires the successful completion of 17 university-level courses (720 hours) in financial planning, including retirement and estate planning.

* Regulated by the Financial Advisors Association of Canada (Advocis).

** Regulated by the Chambre de la sécurité financière.

Services provided

While these advisors generally specialize in life insurance and annuities, they may also be licensed to sell mutual funds and securities. A Chartered Financial Consultant (ChFC) can provide services similar to those of a financial planner, with additional expertise in estate planning and insurance-related issues. Chartered Life Underwriters (CLUs) may provide some financial-planning services, but their specialties are estate planning and insurance.

 

Where to find them

Insurance companies, independent insurance agencies, some banks and trust companies, some mutual fund dealers and some brokerage firms. Insurance agents typically work for one insurance company and can sell only their products. Insurance brokers are independent and may sell a variety of products from different providers.

 

How they are paid

Insurance agents and brokers are compensated for the services they provide by commissions on the products they sell. More and more companies are including a servicing element in their compensation plan to ensure that clients receive proper service. These trailer or service fees are often a percentage of the money invested and are paid to the agent or broker for maintaining the business.

 

Who can benefit

If one of your primary concerns is financial security or estate planning, look to insurance professionals for help. If you’re maturing your Registered Retirement Savings Plan (RRSP) for retirement income, these professionals can provide you with a full range of annuity products. They can also assist you with developing a financial plan, but keep in mind that insurance professionals may be limited in the scope of products that they can provide.

Designations 
and regulatory bodies
  

 

CIM – Canadian Investment Manager

Requires 510 hours of study in portfolio and wealth management.

 

FCSI – Fellow of the Canadian Securities Institute

Requires the successful completion of the CIM, five years of industry experience, an additional two courses and 42 continuing education credits every three years.

 

Both are regulated by the Canadian Securities Institute.

Services provided

Focusing on investment planning and wealth management.

 

Where to find them

Banks and trust companies, and some mutual fund dealers. Investment specialists may be restricted in the products they can offer.

 

How they are paid

Investment specialists working in banks and trust companies are often salaried employees. Mutual fund dealers will earn commissions on the mutual funds purchased by clients. Investment specialists who provide discretionary investment management services will be compensated by a flat fee based on the amount of assets under management.

 

Who can benefit

If your primary need is for investment planning, consider using an investment specialist. If you’re just getting started, or have a small portfolio, the investment specialist where you bank may be a good place to start. If you’re interested in discretionary investment management, keep in mind that these services are usually reserved for high net-worth individuals.

Designations 
and regulatory bodies
  

 

IFIC – Investment Funds Institute of Canada

Regulated by The Investment Funds Institute of Canada. Requires the successful completion of the Canadian Investment Funds Course (CIFC).

 

CSC – Canadian Securities Course

Regulated by the Canadian Securities Institute. Requires the successful completion of the Canadian Securities Course.

 

CIM – Canadian Investment Manager

Regulated by the Canadian Securities Institute. Requires 510 hours of study in portfolio and wealth management.

 

FCSI – Fellow of the Canadian Securities Institute

Regulated by the Canadian Securities Institute. Requires the successful completion of the CIM, five years of industry experience, an additional two courses and 42 continuing education credits every three years.

Services provided

Specialists in developing investment plans and investment strategies, and implementing these plans, brokers have been branching out into other areas of financial planning. Some may be licensed to sell insurance products and provide estate-planning services.

 

Where to find them

Full-service brokerage firms. Some full-service brokerage firms are affiliated with the chartered banks; others are independent.

 

How they are paid

Brokers are paid with commissions generated by the buying and selling of securities, and by the purchase of mutual funds and other products you buy through them. Some brokers receive fee- based compensation in relation to the amount of assets they invest on your behalf.

 

Who can benefit

If developing a long-term investment plan is your focus and you want a professional at the helm, brokers will have the expertise that you need. As different financial needs arise, your broker can refer you to other specialists.

If you are just starting to invest, you may be assigned to a junior broker. While they may have less experience in the business, they have the same licences and access to the same information as the senior brokers. Note that some brokers have minimum asset requirements.

* Also called financial consultant, investment representative or investment executive.

Designations 
and regulatory bodies
  

 

CFA – Chartered Financial Analyst  Requires the completion of three levels: investment valuation and portfolio management, asset valuation and portfolio management, for a total of 750 hours of study.

Regulated by the Association for Investment Management and Research.

 

 

Services provided

These advisors provide investment-planning and discretionary portfolio management services. They will personally manage a client’s investment portfolio based on guidelines and objectives set out by the client. The advisor makes the day-to-day investment decisions, and reviews progress with the client on a quarterly, semi-annual or annual basis.

 

Where to find them

Investment management companies, some banks and trust companies, some full-service brokerage firms and some mutual fund dealers.

 

How they are paid

Investment managers are compensated through a flat fee based on the assets they manage on your behalf. Fees can be as high as 3% of assets managed per year, but may be reduced as the amount of assets under management increases.

 

Who can benefit

Typically, these services are limited to individuals who have $250,000 or more to invest. Some banks and mutual fund dealers are providing a variation of these services for portfolios of

$100,000 or more; however, the investment options are often restricted to proprietary products. If you prefer to have a professional look after the management of your money and you have sizable assets to invest, consider this avenue.

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