Finding the “Right” Financial Advisor

The most common question The Retiring Farmer™ receives from the 200 – 300 farm families who attend our seminars annually is “how do we know if you are the advisor we should work with?”  A fair question when there are more than 100,000 financial advisors in Canada all offering solutions to complex problems.  Most will provide investment advice with limited planning but fall short at implementation or execution.  The reason for this is that farm succession, exit or retirement planning is remarkably complex.  It requires a team of professional advisors all with distinctive specialties and backgrounds.

These complexities that require multiple professional disciplines to address is the reason why The Retiring Farmer™ has evolved from a firm of professional accountants to an office of professional advisors coordinating the accounting, taxation, legal, investment, insurance and estate expertise to successfully transition the family farm.

My response to the question as to how to know whether myself or any other advisor is the professional to assist with planning any type of farm transition, is to first ask if the farmer agrees that their farm lives are complex requiring multiple areas of expertise to address.  I have never met a farmer who consider their affairs other than complex.  I then move on to explaining the career of the 100,000 independent financial professionals in Canada.

Independent Financial Professionals in Canada

Being an independent financial professional implies:

  1. A commitment to a profession
  2. An element of planning
  3. A focus on the future
  4. Experience and expertise in a specific specialty

So far, so good.  All financial advisors will agree the core of their profession covers these four points.

The Problem

However, looking beyond the business card, the following will be discovered:

  1. 95% of independent financial services professionals are one-owner practices
  2. Almost all this 95% are building their businesses borrowing tools from historically successful, but vastly different business models such as an outdated “wirehouse” full service brokerage offering research, investment advice and order execution. Today the term “wirehouse” has been updated to “financial institution” referring to large institutional money management firms and banks.
  3. Revenue-sharing, commission-splitting and other eat-what-you-kill compensation models govern the relationship between the financial institution and the independent financial professional.

Result:

  • The relationship between the financial institution and independent financial professional ends upon the retirement or death of the advisor. At this time the relationship with the farm family also ends although a remote connection with a financial institution will remain.
  • The financial advisor’s role reverts to a job that focuses on the sale of financial products as that is how the advisor pays his bills and how the advisor/financial institution relationship is modeled.
  • The farm family’s wealth management has a lifetime matching that of the advisor’s career.
  • 99% of today’s independent financial services and advisory practices will not survive their founder’s career. When the advisor leaves, for whatever reason, the advisor/farmer relationship is over.
  • It is impossible for the advisor to focus on meaningful planning and advice as to do so:
    1. Requires time for which the current advisor compensation model does not support
    2. Requires the skill set of multiple experts as the complexities of law, accounting, taxation, investment management etc. make it impossible for any one advisor to be proficient at
    3. Regulatory bodies and fiduciary responsibilities require a segregation of duties amount two or more advisors

The Solution

Much of the problems faced by the independent financial professional trying his best to truly provide the advice sought by the retiring farmer could be solved, or at least substantially mitigated, if the independent financial advisor profession in Canada was one of independent financial “firms”.

A firm:

  1. Is an established business with a strong foundation of ownership and leadership recruiting and retaining the very best people in the industry.
  2. A firm has multiple generations of ownership with key staff visioning the right to become partners and invest in the firm.
  3. The compensation model is a bottom-up approach where firm earnings is the measure of success, not individual staff commission or revenue-sharing is the focus.
  4. Continuity agreements are the norm giving the firm the ability to weather the death or early retirement of its current leadership group over time.
  5. Collaboration among owners and staff is standard procedure
  6. The goal is not to have the best advisory professionals but rather the best advisory firm
  7. Recognizes senior, professional advisors have gathered experience over time; their role is to not only apply their experience for the advantage of clients but to also pass their knowledge down to more junior advisors to ensure clients interests are maintained beyond the career of the senior advisor

About the Author: 

Donavon K. Tofin CPA, CA, CFP

The Retiring Farmer Wealth Management Process  & Assante Financial Management Ltd.

Don Tofin is a Senior Financial Advisor with Assante Financial Management Ltd. Please contact him and his team at 1-877-996-8696 to discuss your particular circumstances prior to acting on the information above.

 

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