The importance of independent, unbiased advice

The Advocate, Wednesday March 6, 1996

This is the third time I have written about the explosion of the number of mutual funds available in Canada. As of December 31, 1995, there are 1246 mutual funds and the number is still growing. I want to emphasize to all those considering buying any mutual fund, seek out an independent fund advisor who has no allegiance to any mutual fund group, bank, trust, or insurance company who sell only their company's products.

Find someone who will search for the best funds for you, who is not a captive of any company. Ask them some questions that an experienced qualified advisor should have no problem answering. For example:

1. How long have you and your company been in business?
2. What are your qualifications and how much experience do you have?
3. What services do you provide? (i.e. newsletters, comprehensive portfolio statements).
4. Can you explain what a systematic withdrawal plan is?

Lastly, ask yourself the question, do I feel comfortable with this individual and confident in their advice? You have to develop a comfort level where you feel you can freely communicate your needs and wants. It's like selecting a doctor. Financial advisors don't manage your money, they merely suggest what to buy and sell and when.

Investing in mutual funds should be part of an overall financial plan. Therefore, part of the secret to developing a comfort level with a financial planner is to establish your own clear investment needs and goals. If you do not take responsibility for your share of the relationship, your planner will, and you may not be happy with the result. I consider it like hiring an expert. It is a two way street. Remember, the expert is also "hiring" you, and is more likely to do a good job if you fit into his or her notion of a quality client.

In dealing with financial advisors, honesty is clearly the best, the only policy. I can't do anything right for my clients if I don't have all the facts. The perfect client tells me everything and that includes feelings as well as financial facts and figures. Preferred clients share another trait, an attitude of trust and confidence in their advisor's ability and integrity. However, the experts do not recommend you come to your advisor expecting to have all financial cares lifted from your shoulders. No money specialist wants to work with someone who abdicates personal responsibility.

A willingness to be educated by reading necessary information is another client trait that I appreciate. The client has to do his or her share of the work. Those who haven't spent any time in sorting out and organizing their records are not greeted with open arms. A financial arrangement with a client is like a marriage in that it should be long term. This long term relationship is an important factor for all financial experts. I want a loyal customer and a returning customer who is more than happy to refer me to his friends and relatives. Another trait I look for in a client is someone who is open to new ideas and new products. One last and important characteristic I look for in a client is an appreciation for my efforts. It's surprising how easy it is to work for some people and how difficult it is to work for others. Happily, my clients help to make my job a lot easier most of the time.

I have two excellent articles, "Your broker is not your friend," and "The value of independent advice," that you should know before purchasing a mutual fund. Contact me for a copy of them.

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Created: Thu May 16 10:30:50 1996
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