Canadian Personal Finance Blog
Given the name of our blog, I figured it’s a good idea to do a basic definition of what an index fund is. Before I define it however, a bit of background. Investing has a variety of things called asset classes. These are ‘types’ of …
We put two kids through school, through masters programs. Ultimately, it was not a real burden on us – it certainly wasn’t ‘expensive’ as you might be lead to believe. But, we definitely made some specific choices to achieve this result. Here’s what we did. …
There’s a whole bunch of terms in the financial industry to describe individuals who provide financial advice. And up until recently, those terms have been unregulated. I could have called my dog a financial planner. Good boi! Good financial planning!
And that’s pretty much what the state of the industry was. Financial planners and/or financial advisors (the terms were used interchangeably) could be a life insurance salesperson selling you life insurance and seggregated funds. Or they could be your clerk at the bank. Or they could be a mutual fund salesperson who just sold investments. Most/many of them didn’t do any planning they mostly did sales of whatever they were pushing.
Well, the sales part hasn’t change – you should be aware of how your financial person makes their money. Nobody’s providing you free advice without the expectation of making some money and since most (but not all) don’t charge for their advice, they’re making money when you purchase a product or service from them.
The good news is that the government regulators have stepped in recently to regulate the two terms ‘Financial Planner’ and ‘Financial Advisor’. There are now requirements for anyone to use those titles. My dog is now no longer a financial planner, and neither is the life insurance agent selling life insurance plus seggregated funds (or anyone else for that matter).
The new requirements still allow anyone to call themselves either Financial Planner or Financial Advisor – IF they meet some minimum educational requirements and expertise.
Anyone using the title financial planner must be knowledgeable (both in breadth and depth) of a variety of areas including estate planning, taxes, retirement & investment planning, financial management and insurance/risk management.
Financial advisors need only have technical knowledge of a single investment product type such as mutual funds or stocks. Plus, they need to be able to develop suitable financial recommendations for consumers.
I don’t really understand why a financial advisor needs to be able to develop financial recommendations but only needs to be expert in a single type of investment product, but them’s the rules.
So, the government dictates you need to be knowledgeable, but they’re not going to define specifically what those requirements are. Instead, they’ve hoisted that responsibility off onto the industry, and in particular a variety of educational organizations that provide industry education and credentials. Basically, as long as you qualify for one of the designated credentials (which requires education) then you meet the government requirements and can then use the title Financial Advisor or Financial Planner.
In the past, as I mentioned earlier, even someone with a life insurance agent license could call themselves a financial planner. And the requirements to get licensed as a life insurance agent are a pretty low bar, you hardly even need to understand life insurance. But that’s changed – the new requirements for Financial Planner are not erroneous. They’re going to take some serious work for someone to qualify.
To use the term Financial Planner, you’ll now need to have a CFP, CLU, and a few other options. These credentials are not inconsequential, people can take a few years to gain the credentials, and they cover a pretty exhaustive list of educations topics. These credentials have long been the top tier credentials in the industry, and generally only obtained by long term senior advisors.
There are other routes available, but they all require substantial investment in education.For example, a 2 year diploma centered on the financial industry plus an exam will qualify you for the title of Financial Planner.
Long story short, the term financial planner is now going to require some serious credentials and education. I’d suggest that if you see someone using that credential, they’re likely well qualified.
Not so much with the term Financial Advisor. This credential/title can be obtained with much lower requirements, i.e about the same as the traditional requirements for a mutual fund dealer rep licensing.
So no longer does a simple license for life insurance or mutual funds allow you to use the term Financial Planner. People in the industry can likely obtain the title Financial Advisor without much work, but Financial Planner – that’s going to take some substantial work and experience. The title Financial Planner is now going to really set some advisors apart from the crowd.
So that’s just financial advisor and financial planner. There are other terms and modifiers.
Fee based ‘financial planner/financial advisor’: These people charge a flat fee – generally a percent of your investments – for their services. i.e. a fee based financial planner might charge 1%/year. These people are generally advising on and handling your investments and savings.
Flat fee based ‘financial planner/financial advisor’: These people charge a flat dollar fee to provide advice – say $3000. This is intended to suggest that they’re unbiased, as they don’t make money on how big your account is, the performance, or any specific investment type. Again, these people are typically advising on investments.
Financial Coaches: When people think financial advisors or planners, this is likely to be what they’re actually thinking of. Financial coaches provide unbiased holistic overall advice, for a flat fee. i.e. they’ll take you through budgeting, investing strategies, retirement and tax planning, all sorts of stuff. And it’s done for a flat dollar fee. They don’t make commissions, often aren’t licensed to sell products and as a result often won’t advise on specific investments. i.e they might say ‘you should consider index funds for investments’, but they won’t say ‘you should consider TD index funds specifically’.
The term financial coaches remains unregulated. I suspect many financial coaches were previously using the terms financial planner or financial advisor, but they’ll be walking away from that. Ironically, financial coaches are often highly educated and experienced and many of them already meet the requirements to actually use the financial planner term – often you’ll see these folks with CFP’s and CLU’s.
There’s the vegetable soup of designations going forward, I hope I’ve cleared up some of your confusion.
Hey All, I’m the new admin here on BTI. We’ve got a somewhat refreshed look, hopefully much cleaner. And we’re going to be pumping out new, high quality posts again, as often as we can. To that end, I’ve copied most of the previous articles …
The federal government made investing in increased development of the Alberta oilsands a top priority for the future of the Canadian economy. One of the goals of increased oilsands investments is to help reduce the cost of gasoline for Canadian drivers, who are paying rates that average …
“Investing” is a scary word for many people, enough to let their money sitting in their bank accounts for years. These people might have no idea on how to invest except that does not justify letting the value of your money drop year over year thanks to this low interest rate environment.
Regardless of the amount you want to invest, the basics remain the same. Investing can reward you with financial freedom in the future if done right. The following tips and tricks will help you make smart choices in the fabulous world of investing.
Are you thinking of buying a Condo? It’s a big commitment, one that shouldn’t be taken lightly. Getting your mortgage approved may well seem like the most difficult step on the road to your dream home, but amidst finding the best mortgage rates don’t forget to read …
Whether you are in the process of purchasing a home for the first time or are simply tired of overpaying for your current home owner’s insurance, you may very well find yourself shopping around for the best home insurance rates on the market today. After …
Everyone knows that it is important to make sure you are properly insured, as not having the right insurance means you could be left with hefty bills in the event of an emergency. Even if you never need to make use of your personal insurance, having it can give you peace of mind. Here’s a quick rundown on some of the key types of personal insurance you should look out for.
If you are a homeowner, home insurance is one of the most important types of insurance you’ll need. This is split into two main types: buildings insurance and contents insurance and it is important that you have both to make sure you are covered for your possessions as well as the house itself. You have the option of buying these two insurance components separately, but many people find that it is more cost effective for them to buy them together as quite a few insurers offer special deals or discounts if you get them as part of a package.
While we all hate to think about the inevitable, we will face it sooner or later. Losing a loved one is a very stressful event both emotionally and financially. Funeral insurance is designed to to help cover funeral costs and other final expenses. Best pick one that does not demand medical tests offering Guaranteed acceptance. This is one of those insurance types that takes minutes to fill out if you’re with the right provider. For more information check out the GIO funeral insurance page.
Another really important type of personal insurance is car insurance, and as you are probably aware, everyone who drives a car needs to have it. Car insurance will typically cover you for things such as if you get into an accident and subsequently need medical care or to pay for repairs to your car. Depending on your specific car insurance policy, it can also pay for things such as legal costs associated with your car and roadside recovery if you break down; it’s always a good idea to check with your insurer exactly what is included in your policy as it does vary.
A range of factors play a part in how much you pay for your auto insurance, so it’s worth taking action wherever possible in order to keep your costs to a minimum. For instance, just as making your house more secure can minimize the costs of your home insurance, adding security measures (such as an alarm and steering lock) to your car can also help.
You can also help to reduce the cost of your car insurance by ensuring you drive safely, reducing the amount you drive, driving a car that isn’t too powerful and raising your deductible. These are all things that can help you get cheap car insurance and so should be borne in mind when you’re looking to renew your policy; doing an online price comparison can also help you save cash.
Travel insurance is another type of personal insurance that you need to have if you are going to be traveling anywhere – especially if you will be going out of the country. As with other types of insurance, the chances are you’ll never need to make a claim on your travel insurance but you should always take out a policy just in case.
Holiday insurance will cover you for things such as if your holiday gets delayed, cancelled or finishes early due to a range of circumstances outside your control. It can also pay for healthcare while you’re away and cover your money and personal items, making it a must-have for anyone going on a trip.
Yesterday, the bank of Canada went ahead and raised the prime rate for a second time in a row. The prime rate is now 2.75%. Regardless of what the rate predictions are for next year, the numbers will be reviewed more than once until then. …