Episode 11 – How to Choose Your Financial Advisor

A lot of people don’t know there’s a difference between financial advisors and certified financial planners. But the title says it all. One can perhaps advise (but is also possibly trying to meet product sales quotas), and the other is there to plan your future. I don’t know about you, but I want the person who is helping me create plans that look after me and my family. In my latest podcast, I’m sitting down with the wildly smart financial planner Nicole Putz to talk about why it’s important to know the difference between advisors and planners. She’s giving us all the goods on what to watch for and how to set ourselves up for financial success with our planners.

Show Notes:

Zena: Hello, and welcome back to another round of, “Our Heart of Money Talks”. This is episode 11 and I have the lovely Nicole Putz joining me. We’re going to stir the pot a bit and ruffle a few feathers. We’re gonna share the difference between a financial advisor and a certified financial planner.

There is a controversy in our profession with these two terms that you as a listener probably don’t even realize or know. So we’re gonna share. My kids use the term TMI. We might give a little bit of extra behind the scenes info, and I think that’s, what’s going to ruffle a few feathers and some of the feathers that are going to be ruffled are from the old school industries, stuck in the status quo.

And I think that’s probably where the controversy is going to come from. This is about when you’re looking for an advisor, you need to know the distinction of someone qualified or not, and that’s what we’re going to share today. 

Nicole welcome, and thank you for joining another episode. 

Nicole: Hey Zena. I’m so happy to be here as always. 

Zena: So tell me if you agree with me, a financial advisor is someone that sells products. They are someone that you’ll see on the website where it just says financial advisor or financial representative, and it might be on their business card. That’s when I think someone should bolt and rethink.

I think they should run financial advisors out of town. They’re going to send me hate mail, for that. Old school advisors that sell products and push products like segregated funds as well in there are going to hate me. What’s your thought on that? 

Nicole: Yeah. I’m with you, Zena. I think it’s again like you were saying, like no disrespect, but yeah, sometimes these titles, I think it’s more just glorified salespeople. Not to say that salespeople are good or bad, it’s just, there’s this concept where a financial planner should be doing a bunch of different things, if they’re just selling you a product, that’s bastardizing what it’s all about. I think it gives us a bad name. It dilutes what a real certified financial planner does and is all about.

Zena: Yeah, I think you’re bang on. I want to say congratulations to you. You’re a certified financial planner. You went through that rigorous training. So what’s the difference between you and a financial advisor? That’s something I want to share with our listeners today. 

Nicole: If you are a certified financial planner, you know the differences. There’s a plethora of courses and exams that you have to go through

Right at the very beginning, there are called your core curriculum and there’s a couple, just online type courses you go through. There are two that you start out with, and in terms of financial advisors or people who are just selling products, all they have to do is those two first very preliminary types of courses. 

After those two courses, theoretically, someone can go out and be a financial advisor, but essentially just sell products based on what they’ve just learned, but that’s like dipping your toes into the industry. 

And I remember I had a friend ask me as soon as I finished those two courses, “Do you feel like you could go out and be a full-blown financial planner right now?” 

I said no effing way, no way. I did not feel qualified enough. I did not feel like I knew enough…and, to your point then, no disrespect, but this is all the education they have.

This is all the backing they have. To me, it’s almost scary a little bit because I knew how I felt coming out of that first course. I know I couldn’t have been dealing on a very big scale with people’s money investments, retirement plans, all the things.

 The product sales exam…what it truly is it’s to sell a product and it’s an exam on industry regulation.

There’s a tiny little bit in there, but it’s truly about selling. It’s a very short course and a very short exam. There are no prerequisites. I do remember sitting in that exam many years ago and there were a lot of bank people there. They took it their second and third time because they were told they had to.

That’s the scary part. I remember thinking there because I had a path in mind already. I knew this was the first step to some things that I wanted and I knew that there would be years of education after that. 

I remember thinking. Back to my first time, I bought an RSP was because I owed some taxes and I think I was like 26 or 27 walking into the bank.

It was someone who sold me a GIC because it was a product and there was no conversation. No one said, “Hey, have you thought about this?”

Well I honest to goodness, had to take a little mini loan because I was going to have to pay taxes. And so we took out a little loan and they talked us into it so that I could buy this GIC, but no one sat me down and said, “Okay, so going forward next year what does your income look like?”

That’s my very first memory – a salesperson. And what I know now is that they actually have a quota at the bank. This isn’t to pick on banks. There’s a quota to retain your income and often a bonus structure. 

So going back to being called a financial advisor, if that’s all it is to me. You’ve taken a course and you took an exam and now you’re out there telling me that you can do financial planning and you want to manage my wealth. Ahhhh, mind blow.

 Zena: Right? Yeah, it is. And I think, yeah, again, to your point it’s a thing where, People within that kind of realm of the industry, it’s very isolated.

So it’s isolated to selling a product where you should think of financial planning as the big picture. So like you’re saying about your story, you went into the bank and you wanted to invest in RSPs. What you would personally ask a client today and what you hoped or wished they would have asked you is part of the picture, but what are the other parts, or what are the other pieces?

I think that is really a testament to certified financial planners. It’s a bunch of different things and how they’re all working together, so it’s not about your money going into one account. It’s what that is going to mean for every other account or every other thing in your life, and then we all work together.

Zena: Yeah, that it’s like throwing that rock into the pond and it ripples. You need to find out everything. So tell me about a certified financial plan. You’ve gone through that process, so you know the difference between the two. Just for our listeners to have kind of a quick summary.

Nicole: It’s not easy, of course. I’ll say that it is a lot of work. Even since I was certified in 2019, it’s become a lot more stringent and a lot more, rigorous if you want to call it that. But when I did it like I was saying, there was this core curriculum portion where you take a bunch of courses and you have to pass a bunch of exams.

Then once you’re finished you go into the first part of the CFP program, you’re learning all the fundamentals of what a certified financial planner is, how to work with clients, how to build plans, all this kind of stuff. 

If advisors listen to this podcast, they’re going to appreciate this, as well as anyone who has ever had to work through spreadsheets. But we had to legitimately build our own projection software, which was god awful, but a good learning experience. That was part of the process.

And then there were two kinds of major board exams. Like any other profession, I bring up pharmacists just because my sister went through that big board exam, but it’s essentially a big board exam. It’s national, it’s nationwide and it’s six hours and it’s terrible.

I remember there was a fellow, he was clacking really loudly on his keyboard. I just remember sitting in there and I’m like, “Oh my God. Five and a half more hours of his clacking.”

It was such a distraction now, of course, your brain is looking for any excuses for distraction because it’s so darn hard. But yeah it’s a long process…it’s years.

So some changes are coming, that you have to have some formal post-secondary degrees as well and/or experience. 

Zena: Tell me a little bit that’s coming down the pipe or is it new now?

Nicole: Yup, totally. So it’s getting implemented. It’s going to be in full effect as of, I think it was March or April of 2022.

But essentially what it is to even challenge the CFP program, now you have to have a four-year Bachelor’s degree, and that’s just a qualification. You can’t even challenge it if you don’t have that. And if you. For example, if you don’t have a Bachelor’s, they won’t actually let you try it until you’ve got 15-plus years of experience in the industry.

So right there is a huge difference. 

There’s also an ethics portion. There’s fiduciary responsibility. We’re regulated by FP Canada. They oversee everything. For listeners out there, if they’re a certified financial planner, you can search them on the FP Canada website.

Just make sure they’re in good standing. 

Are there any complaints against them? Have they had any reprimands? 

This is a regulation that you want. Whereas if you just have your license and you’re just a financial advisor, that’s a lot different, you have a lot fewer avenues to go through.

Becoming a certified financial planner is rigorous training and some of the courses are very hard. 

Zena: Yeah. Like you said though, that’s one side of the coin and what you were saying, it’s so important too that there are safeguards in place by FP Canada who we’re regulated through.

Nicole: So yeah, if you have trouble with the CFP or if you’re finding, they’re not taking your best interests to heart, there’s an avenue you can take to actually bring complaints forward and deal with it. And in the same breath, you can see complaints against advisers or planners. 

It just helps you figure out who’s worth your time, who isn’t worth your time, that kind of stuff too. This is where the controversy is…so the confusing part is financial advisors can call themselves financial planners. Now, this is ridiculous. It’s not fully regulated yet in Canada.

In the magazine they have an article and we were talking a little bit about it and what this article is saying that there are still a group of people out there – this is where people, other advisors out there, are just going to send me hate mail – I, old school advisers that are fighting the regulation, meaning that if you haven’t taken all the courses and you’re not a certified financial planner and finish those exams and regulations, you can’t call yourself a financial planner.

That is completely misleading to the public, and there’s still a group out there fighting it.

They’re still trying to say “No, no, if I’m a financial advisor, I should be able to call myself a financial planner.” 

That’s misleading. So I did pull up and this past July, Saskatchewan has started to make the regulations. They’re moving to try and regulate the titles of financial planners and financial advisors in our province.

The financial and consumer affairs authority of Saskatchewan is trying to clarify the definitions of these two professions and stop advisors that are not qualified from using the term financial planner. 

Ontario has begun this for a while and I also read Quebec is too.

This is to quote the magazine. It says, “Quebec was the first province to institute professional guidelines in 1998, regulating the financial planner designation.” 

Wow. I wish we had that here. I’ve been in a room recently with a bunch of professionals. It was lawyers, accountants and financial planners all together in a room for some training.

They went around the room and being in a small city, there was a person who stood up and said, “I am a financial planner” in the introductions and went on and mingled. I know they are not a certified financial planner. I know this. They’re not on the website. They’re not accredited. They don’t have the certified financial planner designation.

But they are still introducing themselves like that. That is misleading. So that means that you took a mutual fund test and you can sell products. You are not doing the tax consequences or the big picture planning. We do tax projections. We do estate productions, you name it, cash flow projections, everything, 

We do big picture thinking. So I’m like, come on, Saskatchewan, bring this on and yes, we do need it. This is to protect consumers. So that’s why I’m passionate about it is because I’m thinking if it’s my mom sitting across the table and who doesn’t have the knowledge or the experience to talk about it is relying on that person across the table.

That’s how I treat everything. You think of a loved one. How would you want them to be treated? I want the best. You want the most qualified person. I think it lights a fire under our butts because we know not to be redundant, but we know how to be tough and how rigorous those courses are. 

So when people call themselves planners, we’re like, “Hey, we went through the hard shit and you didn’t, and you’re not allowed to call yourself that.” 

The other thing here is that life is getting complicated. Finances are getting very complicated. Taxes are getting complicated and there are changes every year.

If you don’t have a regulating body, to help inform you…I’ll use the example right now of FP Canada, which has projections for how long a person’s life is for us to do their planning. 

They also tell us the recommended inflation rate. I’ve seen people do plans because you can get cheap software and I’ve seen some financial advisors are not certified, financial planners… Stats Canada says if you’re a male, so you’re only going to live to 83. Wow. Okay. So they’re going to be short and run and use all their money up by age 83.

That’s a conversation maybe if there’s a scenario of health issues, but think about what 95 looks like because you’re probably going to live a little bit longer. Anyway, that’s just one example of some of the things that FP Canada has regulated for us to use that I’ve seen. And I could rant on about this forever.

Anyway, I want to keep this short and to the point for our listeners. I think that the first thing you need to do is to check the accreditation of whoever you’re working with. If you’re just shopping around, look at their website…you want to see that they’re a certified financial planner. 

You also want to ask them if they’re a certified financial planner, if you just see the term financial advisor, they do not have the education or experience that you probably want someone dealing with your money.

Anything else, Nicole? 

Nicole: That I think that pretty well covers it, I think, yeah. It’s just like you said, once regulations start coming down the pipe in the area, which is great, there’ll be more clarity around it. It’ll just start to be more of a common thing that people realize the difference.

Nicole: But yeah, I think it’s just, like you’re saying Zena it’s just to be aware, ask the questions and like you said, if you ask any question. Ask, “Are you a certified financial planner”.  

Start there and based on that answer, then you can snowball from there. But yeah, if the answer is no, then that kind of opens you up to asking about their accreditations. 

What kind of experience do you have under your belt and it’s yeah, so I think you’re right. I think it’s a good place to start. 

Zena: Oh, thank you, Nicole, for joining and that’s all we’ve got today. We’re going to share more next week. Take care.