5 steps to assess your advisor

1. Understand your total return over time

Your total return includes capital gains plus all interest and dividends. It does not include investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition costs or any taxes you may pay.

In most cases, you won’t find your total return on your accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition statements. But your dealer or adviser should be able to get this information for you, going back to the beginning of your relationship with their firm.

Keep in mind that short-termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition returns are less meaningful than long-term ones. Try to find out your total return for the longest period that you can. Measuring average returns over at least 5 years will give you a good idea of how well your investments are doing, but even 2 or 3 years of data can be useful.

2. Calculate your total costs for each year

Your investment costs reduce what you make investing. It’s important to know your costs, so you can assess whether you are getting value for your money.

Get a full accounting of all costs including:

  • sales fees and commissionsCommissions What you pay to a broker or agent for their services. Often called a “sales commission”. For example, you pay a fee to someone who buys or sell stocks or real estate for you.+ read full definition
  • fund management expenses
  • administrative charges (such as RRSPRRSP See Registered Retirement Savings Plan.+ read full definition fees)
  • any flat fees or asset-based fees.

3. Compare your results to appropriate benchmarks

Your total return, minus your total costs, shows how well you’ve done investing. The next step is to compare your results to how the markets did, using benchmarks. Look for a benchmarkBenchmark A yardstick that you can use to measure the performance of an investment. Example: a stock market index may be a benchmark you can use to compare how well your own stocks are doing.+ read full definition that has a similar asset mixAsset mix The percentage distribution of assets in a portfolio among the three major asset classes: cash and cash equivalents, fixed income and equities.+ read full definition and risk as your investment portfolioPortfolio All the different investments that an individual or organization holds. May include stocks, bonds and mutual funds.+ read full definition. Your advisor can help you understand which benchmarks most closely match your portfolio.

Keep in mind that benchmark results do not factor in investment costs. But even after costs, your returns should at least come close to the benchmark. The pattern of change each year should also be similar. In other words, if the benchmark is up, your results should be up, too.

4. Assess the total value that your advisor provides

How well your investments are performing toward achieving your goals can give you an idea of the value you’re getting from your advisor. Also consider the other services your advisor provides, such as:

  • helping you map out your investment strategy based on your financial goals, tolerance for risk and time to investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition,
  • giving you access to research and information you may not easily find on your own,
  • providing advice about insurance, taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition planning and estate planningEstate planning The plans you make to build and manage wealth for your lifetime and thereafter. Goals may include leaving the most money possible to your loved ones, with the least amount of taxes. Other goals may include caring for children, paying off debt or passing on a business.+ read full definition (if they are qualified to provide these services), and
  • keeping track of necessary paperwork and documents.

5. Assess whether you’re happy with your results over time

If you’re not happy with your returns, or your investments aren’t helping you reach your goals, address your concerns with your advisor. You should also talk to your advisor as your financial needs and goals change. Ask if there are ways to reduce your costs or change your investment strategy to improve your results.

If your advisor seems unwilling to help, you may consider changing your advisor. This is a big decision, and you may have to pay transfer fees to move your investments to another firm. There may also be costs and tax consequences if your new advisor recommends changes to your portfolio. Discuss any potential changes to your portfolio with the new advisor before you decide to switch.

5 questions to ask

  1. What’s your total return?
  2. What are your investment costs?
  3. How did you do against a benchmark?
  4. Is your advisor providing value?
  5. Are you happy with your results?
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