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Investors prefer honesty from advisers over returns

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(Special) - Who would you prefer - an investment adviser who is honest, communicates well and is willing to spend time to work with you, or one who gets you returns?

Perhaps somewhat surprisingly, a recent study by BMO Nesbit Burns has found that Canadians would prefer the former rather than the latter.

With so much uncertainty and volatility in financial markets and world economies, getting good advice from a qualified financial adviser or planner is more important than ever.

"There is tremendous value in working with a trusted investment adviser given the sideways movement we've seen in the markets and the myriad of financial options available to Canadian investors today," says Bill Brown, senior vice president and managing director of BMO Nesbitt Burns. "Working closely with a professional who understands your financial goals and can identify a suitable investing strategy can greatly enhance your ability to succeed when it comes to managing your investments."

The BMO study found that when selecting an adviser, 89 per cent of Canadians want trustworthiness and honest, 88 per cent look for knowledge level, 83 per cent experience,76 per cent look for a good track record and availability, and 75 per cent want a good reputation and confidence level.

The study also showed that 82 per cent of Canadians want their adviser to explain their investments in easy-to-understand terms. Eighty four per cent say it is more important to get returns that meet the targets of their financial plans while 71 per cent think it's more important to get returns that outperform the market.

Finding a good adviser is not that easy because financial planning is not regulated in most Canadian provinces, which means that anyone can call themselves a financial planner. However, not everyone who refers to themselves as a financial planner is actually qualified. Many so called financial planners actually are licensed to sell products but have no actual financial planning or expertise.

Some of the financial planning credentials on the market include CFP, Personal Financial Planner (PFP), Chartered Financial Consultant (CH.F.P) and Registered Financial Planner (RFP). Additional qualification financial planners hold may include chartered Accountant (CA), Certified General Accountant (CGA), investment dealer, mutual fund dealer and insurance broker.

"In the absence of government regulation, consumers must ensure their planner is trained, certified and held accountable in providing professional financial planning," says the Financial Planning Standards Council, which offers the following tips to help consumers find the right planner.

Do some independent research to maximize your familiarity with financial planning terms and strategies. Understanding the basics will allow you to engage more in the process.

Think about your financial and personal goals. Financial planning is about putting the right strategies in place to meet your life goals.

Speak with friends and family whom you trust to see if they know of or have worked with advisers they would recommend. Interview more than one planner, verify their credentials and get referrals.

Understand fee structures. Planners are paid in a variety of ways such as commissions, fees and salaries, so it's important to understand how each planner will be compensated.

Insist on a written, usually called a letter of engagement, outlining the specific terms of the engagement and any potential conflicts of interest. The letter should clearly disclose the planner's method of compensation and business affiliations.

Frequent communication is crucial and make sure your planner understands your needs as they change over time and have your plan amended and updated accordingly.

Honest, trust and communication on both sides are critical to the success of the financial planning relationship.

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.

Copyright 2012 Talbot Boggs

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