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Have A Personal Financial Question? Ask An Approved Advisor

January 2nd, 2017

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This blog post was originally published on the MoneyGeek.ca blog by Jin Choi. The website no longer exists, but Jin has graciously allowed us to re-publish his research for the benefit of future investors forever.

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EDIT: To direct a question to the approved advisors, set the visibility of the question to 'Approved Advisors Only' when you ask a question on theQ&A Forum.

Since I launched MoneyGeek, Ive had a steady number of people ask me for advice regarding their personal finances. Sometimes, I was able to give them answers but at other times, I wasnt able to. This is because Im not a licensed financial advisor.

Regulation prevents me from giving personalized investment advice. I can answer general questions, such as whether or not I think a stock is undervalued or an investment strategy is viable. However, I cant answer questions that involve personal details, such as, Im 10 years away from retirement and have $X amount of money. What should I do with my money?

There are a few reasons Ive chosen not to become a licensed advisor, but the biggest is cost. Being registered would incur at least tens of thousands of dollars every year, and it would cost me many hours to keep up with paperwork, communicate with regulators, etc. For these reasons, I will not become a registered advisor anytime soon, though I wont rule out the possibility of ever becoming one.

Fortunately, I think Ive found a good solution that could help those who have personal financial questions. From this day onwards, members will be able to ask personal financial questions from an approved financial advisor on the Q&A forum. Asking the question is free, and the advisors I have in mind have committed to answering each question.

So who are these approved financial advisors? Let me introduce you to Shawn Jakupi and Fionn OFlanagan.

My Criteria For Approved Advisors

Shawn and Fionn are licensed financial advisors from an independent advisory firm called Raymond James, and they are of the rare breed of good financial advisors. Let me explain why I say that.

When I look for a financial advisor to recommend to others, I look for three things - fiduciary duty, competency, and reasonable fees. Let me talk about each of these in turn.

When an advisor commits to a fiduciary duty, the advisor commits to put the clients needs above his or her own. Among other consequences, this duty prevents advisors from recommending high cost products if theres a superior low cost alternative available. It also forces advisors to disclose all compensation and potential conflicts of interest.

Unfortunately, most financial advisors in Canada are currently not bound by fiduciary duty. Instead, they are bound by a much looser obligation called the suitability standard, which doesnt oblige advisors to keep their clients interests first.

Advisors under the suitability standard can recommend inferior high cost products, as long as the products are consistent with their clients goals. This is why most advisors are allowed to make a living selling high cost mutual funds, even if they think a low cost ETF would be better for clients. For a good analogy of fiduciary duty vs. suitability standard, please see this Forbes article.

On the contrary, advisors bound by fiduciary duty are of the minority. As an example, Shawn who heads an independent Raymond James office in London Ontario, has a Chartered Financial Analyst (CFA) designation. The CFA charter is one of the most respected designations in the investment industry, in part because it obliges everyone who takes the designation to commit to fiduciary duties with their clients. The other major reason the CFA is respected is because its hard to obtain.

Obtaining the CFA designation involves passing three very long and hard exams. The study material for each exam consists of several books, which when combined are several thousand pages long. The exam itself takes 6 hours to write, and only roughly 45% of all participants pass each exam. As someone who has taken and passed two exams, I can tell you that its grueling.

However, I believe it would be a mistake to trust an advisor just because he or she has a CFA designation. After all, some people have a knack for passing exams, which doesnt always translate into real world skills. My own preferred method for judging an advisor is by examining his or her actual recommended portfolios. I have seen such a portfolio that was recommended by Shawn and Fionn, and I believe it was built on sound principles.

This, however, doesnt mean that I will always agree 100% with Shawn and Fionns choices, but thats perfectly normal. Even the best investors in the world, such as Buffett and Soros, have different views on stocks and the market. Whats important is not that I agree 100% with the advisors on everything, but rather that I respect their judgment.

Lastly, let me comment on the matter of fees. You wont be charged a fee for having a question answered on the Q&A Forum, but if you have a greater need for Shawn and Fionns services and retain them as your advisor; fee is a discussion you can have with them. Note that I receive no financial benefit if Shawn and Fionn find clients through MoneyGeek.

In summary, I believe that having approved advisors such as Shawn and Fionn will benefit everyone on this site. So if you have a personal financial question, please ask away in the Q&A forum.

This blog post was originally published on the MoneyGeek.ca blog by Jin Choi. The website no longer exists, but Jin has graciously allowed us to re-publish his research for the benefit of future investors forever.