How do I find a financial advisor?
January 17, 2004 1:35 PM Subscribe
How do I find a financial advisor? [more inside]
Here are the basics of the situation. I live in Toronto. I am trying to save the money to buy a house or condo in 2-3 years, while still putting my money into my RRSP. I'd prefer an advisor who is more interested in advising me on how to balance decisions like "RRSP v. House fund" than on selling me whatever mutual fund he's getting the best commission on, and I'd be willing to pay upfront in order to get that.
Do such advisors exist? How much should I expect to pay them for their services? Would it make sense to then go and buy actual investment products somewhere else, to avoid the commission conflict of interest? How do I know if they're good or bad?
Here are the basics of the situation. I live in Toronto. I am trying to save the money to buy a house or condo in 2-3 years, while still putting my money into my RRSP. I'd prefer an advisor who is more interested in advising me on how to balance decisions like "RRSP v. House fund" than on selling me whatever mutual fund he's getting the best commission on, and I'd be willing to pay upfront in order to get that.
Do such advisors exist? How much should I expect to pay them for their services? Would it make sense to then go and buy actual investment products somewhere else, to avoid the commission conflict of interest? How do I know if they're good or bad?
DISCLAIMER: I am not a financial advisor. My opinion should not form the basis for any investment decisions.
posted by five fresh fish at 2:52 PM on January 17, 2004
posted by five fresh fish at 2:52 PM on January 17, 2004
FFF, how does one find and purchase an index fund? It's indexed, so do I then have to choose what it's indexed to?
posted by theora55 at 6:00 PM on January 17, 2004
posted by theora55 at 6:00 PM on January 17, 2004
No, it's indexed to the market in general. If the market does well, you gain, but if the market does poorly, it'll just maintain its value.
And I'll second fff's opinion about mutual funds from my personal experience. The average gain for them is just over 2% - those figures that the bank employees show you are almost meaningless, because they indicate the fund's gain from the lowest point in a year to the highest, not how much you will gain by being invested in it all year. Mutual funds aren't good for the short term (i.e., less than five years) especially.
Jacquilynne, I am in almost the same situation as you. I live in Toronto and I just bought a condo two and a half years ago. I used to do a maximum RRSP when I was saving for my down payment, and it did pay off when I bought my place as I was able to use the first 20K of my RRSP as part of my down payment. I do have to pay it back, but I have 15 years to do it. Since buying my place I've been doing a minimal RRSP (over and above the $1500 of repayment, which doesn't "count" tax-wise) and concentrating on mortgage prepayments. I figure paying off my place IS saving for my retirement since real estate in Toronto is a terrific investment, plus I get to benefit from the money in the short-term i.e., I'll be mortgage-free a lot faster, which saves me money in interest, and if/when I want to trade up to a better place it'll be a lot easier.
posted by orange swan at 7:00 PM on January 17, 2004 [1 favorite]
And I'll second fff's opinion about mutual funds from my personal experience. The average gain for them is just over 2% - those figures that the bank employees show you are almost meaningless, because they indicate the fund's gain from the lowest point in a year to the highest, not how much you will gain by being invested in it all year. Mutual funds aren't good for the short term (i.e., less than five years) especially.
Jacquilynne, I am in almost the same situation as you. I live in Toronto and I just bought a condo two and a half years ago. I used to do a maximum RRSP when I was saving for my down payment, and it did pay off when I bought my place as I was able to use the first 20K of my RRSP as part of my down payment. I do have to pay it back, but I have 15 years to do it. Since buying my place I've been doing a minimal RRSP (over and above the $1500 of repayment, which doesn't "count" tax-wise) and concentrating on mortgage prepayments. I figure paying off my place IS saving for my retirement since real estate in Toronto is a terrific investment, plus I get to benefit from the money in the short-term i.e., I'll be mortgage-free a lot faster, which saves me money in interest, and if/when I want to trade up to a better place it'll be a lot easier.
posted by orange swan at 7:00 PM on January 17, 2004 [1 favorite]
There are a variety of index funds. You can index the TSE, the TSE techs, oil, bio, real estate, whatever.
You can also look into trust funds and income funds. Some of these can be disastrous -- I lost a fair chunk of change when my telco trust matured during the bust -- and some can be remarkably good.
I've had bad experience with so-called "advisors" who are nothing more than shill men for mutual fund companies. Rat bastards, the lot of 'em.
My hearty recommendation is to open a self-directed RRSP account with TD Waterhouse or other online broker. Toss a swack of money into it and move that immediately into money market fund (~2.5% right now) or laddered GICs or short-term corporate paper (~5%, IIRC). If you open a basic RSP account it'll only cost you about $25 a year; if you move it to an equities-capable account it'll cost more.
Then spend the next few months figuring out what you're going to do with the money.
(My actual more-hearty recommendation is to forget all about RRSPs. IMO there is little advantage to the tax sheltering: any losses you take in the RRSP do you not help you on taxes; and with capital gains being tax-free for the first 50%(?), the tax burden is probably lower outside the RRSP than inside it.)
As always, Your Mileage May Vary.
posted by five fresh fish at 7:24 PM on January 17, 2004
You can also look into trust funds and income funds. Some of these can be disastrous -- I lost a fair chunk of change when my telco trust matured during the bust -- and some can be remarkably good.
I've had bad experience with so-called "advisors" who are nothing more than shill men for mutual fund companies. Rat bastards, the lot of 'em.
My hearty recommendation is to open a self-directed RRSP account with TD Waterhouse or other online broker. Toss a swack of money into it and move that immediately into money market fund (~2.5% right now) or laddered GICs or short-term corporate paper (~5%, IIRC). If you open a basic RSP account it'll only cost you about $25 a year; if you move it to an equities-capable account it'll cost more.
Then spend the next few months figuring out what you're going to do with the money.
(My actual more-hearty recommendation is to forget all about RRSPs. IMO there is little advantage to the tax sheltering: any losses you take in the RRSP do you not help you on taxes; and with capital gains being tax-free for the first 50%(?), the tax burden is probably lower outside the RRSP than inside it.)
As always, Your Mileage May Vary.
posted by five fresh fish at 7:24 PM on January 17, 2004
Oh, and jacqui, there's also a line of thought out there that figures you're better off renting: the money you would pay as downpayment may very well accumulate faster in the stock market than it will in property.
You might want to google for "Canadian MoneySaver" and read some of their online articles. Also worth a subscription for a year or two, just to become familiar with some lines of thought out there.
Finally, your library reference section will have a barrow-full of good newsletters and such.
posted by five fresh fish at 7:26 PM on January 17, 2004
You might want to google for "Canadian MoneySaver" and read some of their online articles. Also worth a subscription for a year or two, just to become familiar with some lines of thought out there.
Finally, your library reference section will have a barrow-full of good newsletters and such.
posted by five fresh fish at 7:26 PM on January 17, 2004
Sigh. And finally, for the moment, to answer your question:
To find a financial advisor, shop around. You want someone who takes cash up front. This relieves the advisor from any conflicts of interest brought about by commissions and management fees. Go interview a bunch of 'em -- the first half-hour should be free -- and pick the advisor you like the best.
The same thing applies to realtors: go interview them.
posted by five fresh fish at 7:29 PM on January 17, 2004
To find a financial advisor, shop around. You want someone who takes cash up front. This relieves the advisor from any conflicts of interest brought about by commissions and management fees. Go interview a bunch of 'em -- the first half-hour should be free -- and pick the advisor you like the best.
The same thing applies to realtors: go interview them.
posted by five fresh fish at 7:29 PM on January 17, 2004
i would say: a financial planner should be someone you trust implicitly, so, hen picking one, just extend your web of trust: ask a friend with similar financial goals or a similar temprament if he/she can recommend a financial advisor.
too bad my cousin moved from toronto, ca to barcelona, esp, or else i could recommend him.
posted by complex at 10:42 PM on January 17, 2004
too bad my cousin moved from toronto, ca to barcelona, esp, or else i could recommend him.
posted by complex at 10:42 PM on January 17, 2004
This thread is closed to new comments.
Once you factor in management fees and the risk of choosing the wrong fund, the market indexes have outperformed the mutual fund industry.
Instead of getting badly burned like most of us Gen X canucks, purchase an index fund. They're not actively managed, so they have negligible fees. The markets are also expected to bound this year, so it's a good time to get in.
posted by five fresh fish at 2:51 PM on January 17, 2004