During the week, I save articles that I consider as suitable for the next blog. When I review the list in preparation for writing the “Hot Off the Web” blog, I select those that I think would be most interesting and/or educational to readers. With July 1st in Canada and July 4th in the U.S., it’s been a light week for financial press and when I looked the collected articles, the vast majority had a ‘how and why to select a financial advisor’ flavor to it. So here they are:
In Financial Post’s “Advisors can keep you out of trouble”  Richard Croft starts off by defining wealth as “From a long-term perspective, wealth is all about accumulating a large enough asset base to spin off sufficient income to allow us to live a comfortable lifestyle without having to work. Only you can define the cost of a comfortable lifestyle.” I’ll do a blog on various perspectives on what is wealth in the near future, but this is a pretty good definition; it makes the point that wealth is not just about assets, but also sustainable income for a lifestyle defined by you. After spending some time on how to accumulate assets (regular saving, letting time work its magic, strategic asset allocation consistent with your risk tolerance), he moves to risk management, which he considers second to only taxes in importance. Risk management allows you to stay invested despite the volatility of the market and because of your conviction that your asset allocation will achieve your objectives. This is where, he feels, that an experienced advisor earns his keep: goal definition and helping you hang in during market swoons (preventing you from a sell-low, buy-high strategy).WSJ’s Jon Burton in”For financial advice CFP or CFA?  tries to educate the reader on the difference between the CFA and CFP designation. He calls CFA “the investment profession’s equivalent to Mt. Everest” narrower but much deeper on the investment side than the CFP, which is perhaps shallower but wider covering “retirement, education, taxes, insurance, estates and other life issues.” It almost sounds like you must find an advisor who has both designations to be successful, but only 2% of the CFPs have a CFA. In retrospect, looking at the question asked in the title of this article, one may quickly conclude that asking the right question is even harder than finding the right answer. I suspect that an advisor with either designation would be a great start in your selection process but adding integrity, fiduciary responsibility, comfort/chemistry with advisor/approach and other considerations (see “Choosing an Advisor” blog at this website) The right advisor, CFA or CFP, will know when to reach out to get the necessary extended expert assistance to do the right thing for the client.
In “Doomsday ahead, author claims”  Jonathan Chevreau quotes Danielle Park who switched from being a lawyer to a financial advisor was shocked to find that fiduciary responsibility is the exception rather than the rule in the financial services industry. “She has harsh words for the advice dispensed by those who are not true fiduciaries. Her list includes mutual fund salespeople, stockbrokers, insurance specialists and financial planners. Park believes retail investors should not get their investment advice from salespeople. Instead, they should seek out true fiduciaries, who must act in their best interests, not make commissions from product sales and disclose all conflicts of interest.” There is no doubt that fiduciary responsibility is preferable and, for some, may even be a necessary requirement of an advisor; it is certainly not a sufficient requirement for choosing one; and by the way not all non-fiduciaries are just self-interested salepeople. I have dealt with a stockbroker for fixed income investments for over 30 years and I have encountered integrity at all times.
I’ll finish with the non-advisor related article “How couples can maximize social security” which reaches the counterintuitive conclusion that for a married couple the optimal starting age of Social Security is as late as possible for the husband and as early as possible for the wife. This is due to the fact that the wife’s survivor benefit is determined by the husband’s Social Security payments, so she might as well start taking hers as early as possible; interesting. The complete article “When should women claim social security benefits” is in the Journal of Financial Planning. (I wouldn’t assume that this advice is applicable for Canadians’ CPP, since there the survivor benefits are structured differently; you’ll need to speak accountant, advisor or read up on it in more detail)