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How much do you really know about financial planning and the true role of financial advisors?

Man wondering about the services he is receiving from his current financial planner and what fees he is paying his financial advisor.Ask two people to define the terms "financial planner" and "financial planning" and you will likely get two different answers.  See how much you know by answering whether the following statements are True or False.  Click each statement to see if you guessed correctly.

All financial planners require professional training and must pass a test to become licensed.

False.   No professional training or license is required to become a financial planner.  In fact, anyone in Canada, outside of Quebec, can call themselves a financial planner.

Financial planners have a legal obligation to put their clients' interests before their own.

False.   Financial planners are free to make any recommendation, which is why some choose investments based on the commission, not what is in the best interest of the client.

In Canada, there are 17,000 Certified Financial Planners (CFP), 25,000 financial planners and 90,000 financial advisors in Canada, but there are only 250 Advice Only financial planners. *


Financial plans are only about money management.

False.  A comprehensive financial plan integrates multiple aspects of the client's finances, including cash flow, tax, retirement, estate planning, investing, debt or risk management  -- all of which should lead to financial independence.

Financial Planning is a process, not a product.

True.  Financial planning is an ongoing process that ensures people make informed decisions that advance their key goals.

Financial planners always disclose who is compensating them.

False.  Some financial planners do not disclose how they are being compensated, usually because they don't want their clients to know that their decision making is influenced by who is paying them the best commission.  This is why you should not hire a financial planners until you know how they are being compensated and by whom.

Investors know exactly what they are paying in terms of fees and how that impacts their investment returns.

False.  Some investors have no idea what they are paying or even how the fees are calculated and collected.

Advice-only financial planners receive no compensation from any third party.

True.  An Advice-Only financial planner represents the client and only the client.

An Advice-Only financial planner does not sell products.

True.  Advice-Only financial planners are paid for the expertise they share with a client.

* these numbers are approximate and are subject to change without notice.

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