There are literally hundreds of thousands of financial and life insurance advisors in Canada. Finding someone interested in looking after your retirement dollars is not a problem. Trying to understand what they can do for you is the hard part.

The financial industry has done a terrible job defining what exactly a financial advisor does and the differences between them. The terms Financial Advisor, Financial Consultant, Consultant, Planner, Representative, Vice-President, etc are used interchangeably, but there are big differences between tye individuals you may meet with. It’s not that most advisors aren’t qualified (most are), the problem is that depending on who you are dealing with, an advisor may have less expertise than others and they may provide investors with less access to various investment products.

Currently there are approximately six different types of financial advisors/firms that you can invest with.

THE 6 TYPES OF FINANCIAL ADVISORS

Also referred to as “planners”, “MFDA advisors” or “sweaters” these advisors focus on mutual fund solutions (some insurance reps fall into this category) and don’t traditionally deal in any other types of financial products, including stocks, bonds, ETFs or other alternative type investments.

Their name implies that these advisors specialize in financial planning, which may or not be the case. Speak to your advisor about whether they have completed any financial planning designations from the Canadian Securities Institute. Discuss these details with the advisor before you decide to invest.

Planners are traditionally looking for a minimum of 100K in investable assets (although some less sophisticated planners will take $500 to start).

How Much Do I Need to Invest?: Generally about $100K+, although there are some planners that will take much smaller accounts.

Financial Planning firms: eg. Investors Group, TD Financial Planning, etc.

Qualifications: At a minimum financial planners are required to complete their Investment Funds Canada course (90-140 hours) from the Canadian Securities Institute. They may also choose to take additional courses, including a 2-3 year program which allows them to officially use the “Financial Planner” designation.

The Good: Most planners run “straight-forward” books of business that focus on financial planning, diversified portfolios and provide 1×1 support.

The Bad: As they focus on mutual funds, they don’t have access to other products which can potentially offer additional upside/downside protection or tax advantages.

Full-service brokers historically focused on buying or selling stocks. Previously they were known as “stockbrokers” but that term isn’t used any longer. Today they primarily offer HNW investors ($500K-2M+) access to a broader range of financial solutions, including stocks, bonds, mutual funds, ETFs, separately managed accounts and other alternative investments (including options, new issues, tax advantaged products, etc). Each advisor is different in how they incorporate these products in their practice, if at all.

How Much Do I Need to Invest?: Generally full service brokers are looking for accounts in the $500K+ range but are willing to take smaller accounts.

Full Service Broker Firms: eg. RBC Dominion Securities, CIBC Wood Gundy, Edward Jones, etc

Qualifications: At a minimum, these advisors are required to complete their Canadian Securities Course (150-200 hours) from the Canadian Securities Institute. They may also choose to take additional courses, including the “Financial Planner” or Certified Financial Analyst designation which tests the fundamentals of investment tools, valuing assets, portfolio management, and wealth planning.

The Good: Having access to a more robust product suite provides increased potential for upside gains, lower fees and tax-advantaged products, which may improve after-tax returns.

The Bad: While many do have financial planning designations, this type of designation is not mandated

Many advisors working at a bank branch can provide some basic investing capabilities, however these would be primarily limited to buying mutual funds and GICs manged in-house by their own firm. Banks may also have a financial planner or full service broker working in the branch as well, however they typically require investible assets in the $100K and upwards range before referring you to these individuals.

How Much Do I Need to Invest?: Technically you can start with as little as $1, although some funds may require a $500 minimum.

Banks: These individuals would work in bank branches such as ScotiaBank, CIBC, BMO, etc.

Qualifications: At a minimum, anyone selling mutual funds are required to complete their Investment Funds Canada course (90-140 hours) from the Canadian Securities Institute. Most bank branch advisors will not hold any additional designations unless they plan to become a planner or broker.

The Good: Easy to access.

The Bad: Rotating staff and no dedicated support, limited knowledge and experience in financial markets,

One of the fastest growing investment options, Robo-Advisors allow investors to choose from a selection of pre-built investment portfolios, primarily comprised of passive/index ETFs. Fees are low, the interfaces are sleek and easy-to-use and there is some basic customer support.

Contrary to the name, there are humans that work at “Robos”, although the bulk of the work for on-boarding, evaluating your risk tolerances and investing your money is all done online. Human contact is limited, although you do have a customer support line and regular email communication. Some advisors are even choosing to leverage Robo solutions as an offering for their practice.

How Much Do I Need to Invest?: Investing options start as low as $1 with preferred pricing as you invest more

Robo-Advisors: Wealthsimple, Questwealth, etc.

The Good: Low cost, easy to transact and user-friendly interfaces you can access from your phone. Low fees could potentially result in larger long-term returns and new features being added all the time.

The Bad: Limited access to products. Minimal live support and no dedicated advice unless you hit minimum thresholds (eg. $500K for household). Passive/index investing means you won’t necessarily outperform the market (the debate on active vs passive is ongoing).

Also referred to as direct investing, if you prefer to look after your own investment portfolio, you can open a trading account directly with most of the big banks or other trading firms. You have a wide range of investment options, which can include buying low-cost balanced index ETFs, mutual funds, a portfolio of stocks and bonds or doing something a little more “aggressive”, like day-trading. The individuals in these organizations can’t provide you with investment advice or stock recommendations (you need to do that research yourself), but they can help you execute trades, show you where you can do some basic to advanced stock and market research and assist you with your account.

How Much Do I Need to Invest? There is no minimum to invest in, although you will be need enough to cover your purchase. Some firms offer “free” stock trading while others minimum charges of $9.99 per trade – review their fee schedules before you choose a firm.

Discount Brokerages: Examples include TD Direct Investing, RBC Direct Investing, Wealthsimple Trade

Qualifications: At a minimum, anyone executing stock trades are required to complete their Canadian Securities course (150-200 hours) from the Canadian Securities Institute. They may also choose to take additional courses.They are not permitted to provide financial advice or recommendations.

The Good: You have access to a wide berth of financial products and low trading costs.

The Bad: You are responsible for your own financial planning and staying on top of the markets and following your stocks. Potential for big losses if you don’t know what you are doing.

If you have over $1-2 million dollars (and up) you could have access to a private wealth advisor, offered through the private wealth area of the bank or investment management firm.

Depending on the organization, you would access to a comprehensive financial plan as well as a myriad of high-net-worth services, including private banking, estate planning, charitable giving, and business and tax support. This can also include more complex financial support and co-ordination between your own accountants and lawyers.

How Much Do I Need to Invest?: Generally $1-2M to start with various alternatives (Family Office) if you have even more money.

Private Wealth Firms include BMO Private Wealth and Jarislowsky Fraser.

The Good: A one-stop shop, that provides complete financial support and handles many of the day to day administrative issues you don’t need to concern yourself with. Fees may be lower if you choose to forgo some of these services and simply focus on discretionary portfolio management.

The Bad: Some fees may be higher than you could get if you choose to do it yourself. You may also be limited in your investment options, depending on the firm’s capabilities.

Which is Right for You?

The role of the advisor continues to change. Industry regulators are requiring firms to remove ambiguous titles from advisors (eg Vice-President) to something more indicative of the services that an advisor actually provides. This may take some time, but will be beneficial to investors over the long term in determining the appropriate advisor to suit their needs.

Depending on your financial situation, you may not require sophisticated planning or products and a simple in-house mutual fund wrap solution may be the product that meets your objectives.

If you prefer to have a long-term ongoing relationship with a specific advisor, look to a planner or full-service broker. However if you are not fussy about who you speak to and are just looking for the lowest cost option, a robo-advisor may suit your needs. Individuals with greater assets ($1M+) and or more complicated financial affairs (eg. Selling businesses, estate and tax) should look to either a full service broker or private banker for a more comprehensive options to meet their needs. Individuals looking for specific products and/or stock trading ideas, might be best suited to discount brokerage.

Whatever your choice, be sure to ask alot of questions in your meeting to ensure you feel comfortable with whoever it is you are dealing with.