Fiduciary Financial Advisors in Canada

Should You Work With a Fiduciary in Canada?

Written by John Woodfield, Portfolio Manager,CIM®CFP®

Are you looking for a financial advisor in Canada and wondering if finding a fiduciary financial advisor is critical? With so many designations and jargon in the finance industry, it can get confusing fast.

However, having a trusted financial advisor with your best interests at heart is crucial. When managing your finances and investments, you don't want to worry about the person acting as your guide. If you want to be sure that your advisor is putting your needs first, you may choose to work with a fiduciary financial advisor.
But what exactly is a fiduciary? And how does their role differ from that of other financial professionals?

This blog will cover the benefits of working with a fiduciary financial advisor and answer essential questions about cost and designations.

Fiduciary Financial Advisors in Canada

What is a fiduciary financial advisor?
A fiduciary is a professional who is legally bound to act in the best interests of their clients. This means they must prioritize their clients' financial well-being above their own interests, even if it means putting their own interests aside. Fiduciaries are held to the highest ethical standards. This means they are expected to provide transparent and unbiased advice.

Are all financial advisors fiduciaries in Canada?
No, not all financial advisors are fiduciaries. Many advisors, such as brokers and insurance agents, are held to a "suitability standard," which requires them to only recommend products suitable for their clients' needs. This doesn't legally oblige them to act in the client's best interests. However, fiduciaries are legally obligated to prioritize their client's best interests.

In Canada, are financial planners also fiduciary financial advisors?
Financial planners can be fiduciaries, but not all of them are. This makes it important to clarify an advisor's role and to look for specific designations and certifications to determine if a financial planner is also a fiduciary.

Designations to Look for When Seeking a Fiduciary Financial Advisor
If you're looking for a fiduciary, consider advisors with designations such as Certified Financial Planner (CFP), Registered Investment Advisor (RIA), Chartered Financial Analyst (CFA) and portfolio manager. These professionals generally have a fiduciary obligation to their clients. In addition, when you meet the advisor, ask them about their fiduciary duty.

Fiduciary Duty vs. Suitability Standard
The fiduciary duty sets a higher ethical and legal standard than the suitability standard. Fiduciaries must provide advice that is solely in a client's best interests. Advisors following the suitability standard can recommend products suitable for the client, such as mutual funds, even though they may not be the best option.

Finding the Right Fiduciary in Canada

How do I know if I'm working with a fiduciary financial advisor?
First, look for their designations on their website’s About page. Most advisors are proud of their designations because getting them takes hard work. So, if someone has any of the designations mentioned above, they will put them on their website.

Next, ask your advisor directly about their status. They should be transparent about their obligations and disclose potential conflicts of interest.

At SWAN Wealth, we are fiduciary financial advisors. As a portfolio manager and CFP, I have a fiduciary duty to always act in my clients' best interests.

Who should work with a fiduciary financial advisor?
Anyone seeking advice, especially those with significant assets or complex financial situations, can benefit from working with a fiduciary. Fiduciaries help you make well-informed decisions that align with your long-term financial goals.

What are the different types of fiduciary relationships?
Fiduciary relationships vary depending on circumstances. They exist between clients, financial advisors, trustees and beneficiaries, or even corporate boards and their shareholders.

What happens if fiduciary duty is breached?
In the unlikely event that a fiduciary financial advisor breaches their commitments by acting against a client's best interests or engaging in unethical behaviour, they will face legal consequences and disciplinary actions by regulatory bodies.

Cost of Working With Fiduciary Financial Advisors

Is working with a fiduciary financial advisor worth it?
The cost of working with a fiduciary may be higher than other financial advisors due to their commitment to providing comprehensive, unbiased advice, generally in line with industry standards. The benefits of working with a fiduciary, including superior investment choices and reduced conflicts of interest, are generally well worth it, even if there is extra cost.

However, it should be noted that if you have substantial assets, the cost of working with a fiduciary, such as a portfolio manager, may be less than working with a regular advisor. A portfolio manager can create a portfolio of investments tailored to your needs without using packaged products with high associated costs. Typically, the more investable assets you have, the lower your fee will be.

For example, if you have over $3M in investable assets, your annual fee could be 0.89 per cent, whereas if you have $500,000 in investable assets, your fee may be 1.3 per cent.* The management fees you pay a PM to manage a non-registered account should be tax-deductible in Canada.

However, the management fees for managing a registered account such as an RRSP or TFSA will not be tax deductible. When you have substantial assets, most of your investments will not be in registered accounts, thus making the tax deduction an important part of your tax planning.

*These are general numbers. Every portfolio manager has different fees.

General Questions About Fiduciary Financial Advisors in Canada

Is a fiduciary financial advisor better than a financial planner?
A fiduciary financial advisor is not necessarily better than a financial planner. You may find financial advisors who are not fiduciaries but are excellent financial professionals who always act in your best interest.

However, having the additional comfort that your advisor is legally obligated to do what is right for you is of value to many investors. This increases your protection and may allow you to sleep well at night.

However, even when assessing a fiduciary financial advisor, it's still crucial to research and evaluate individual advisors before you begin working with them. Your financial advisor is a long-term partner. They should help guide you through important money milestones and be there during the ups and downs of the market.

Choosing someone you feel comfortable with and who you trust with your investments for the long term is important.

Are all Canadian financial advisors fiduciaries?
Many Canadian financial advisors operate under a suitability standard, so they are not fiduciaries. A suitability standard does not require an advisor to prioritize their client's best interests.

Why should I use a fiduciary financial advisor?
Using a fiduciary financial advisor can give you confidence that your financial interests are being placed above the advisor's.  

How is a fiduciary different from other financial advisors?
The main difference between a fiduciary and other financial advisors is that a fiduciary is legally bound to act in your best interests. 

Is it better to have a fiduciary financial advisor?
Whether having a fiduciary financial advisor is better depends on your specific financial needs and goals. If you want security and you value transparency, trust, and a higher ethical standard, a fiduciary may be the better choice for you.

What should I look for in a fiduciary financial advisor?
Consider a fiduciary financial advisor's qualifications, certifications, costs, and willingness to provide clear details of their fiduciary duty to you. In addition, if you have complex issues such as cross-border wealth, find an advisor with experience dealing with your specific circumstances. In addition, if you have substantial assets, you might wish to find a financial advisor who can help you with your estate planning.

If you're an American moving to Canada, you'll also need a good cross-border accountant and attorney.

Are CFPs fiduciaries?
Certified Financial Planners (CFPs) are fiduciaries if they operate under a fiduciary standard. However, not all CFPs are fiduciaries, so clarification is necessary before forming a relationship.

Are portfolio managers fiduciaries?
Portfolio managers who manage investments on behalf of clients are often fiduciaries. This duty means that they have a legal obligation to act in the best interests of their clients when making all investment decisions.

Is a robo-advisor a fiduciary?
Many robo-advisors operate as fiduciaries because their algorithms are designed to consider a client's best interests and risk profiles. Since this may not always be true, verifying each robo-advisor's practice is essential.

Working with a fiduciary can give you the peace of mind of knowing that your financial well-being is your priority. However, conducting thorough research and looking at your unique financial goals before deciding who to work with is essential.

Whether to work with a fiduciary financial advisor or a regular advisor depends on what aligns best with your goals and values.

Summary of Key Points:

• A fiduciary financial advisor has a legal obligation to act in your best interest.
• A financial advisor who is acting under the suitability standard has to provide you with investment advice that is “suitable.”
• Certified Financial Planners (CFP), Registered Investment Advisors (RIA), Chartered Financial Analysts (CFA) and portfolio managers are all typically fiduciary advisors.

Next Steps

If you’re a Canadian resident or are planning on moving to Canada and need assistance with moving and optimizing your investments, estate planning, wealth management and portfolio management, please get in touch. At SWAN Wealth, we specialize in Canadian financial planning, cross-border financial planning and cross-border wealth management.

More Financial Planning Articles and Guides

If you’re planning a cross-border move, these articles and guides will help you simplify your move and ensure you’ve covered everything.

Simple Estate Planning Checklist for Canadians

How to Choose a Certified Financial Planner in Canada

Foreign Tax Credits in Canada and the U.S.

About the Author

John Woodfield is a Financial Management Advisor (FMA), a Chartered Investment Manager (CIM), and a Certified Financial Planner (CFP), and in 2007 was inducted as a Fellow of the Canadian Securities Institute (FCSI). As a portfolio manager and CFP®, he works with clients across Canada. John’s clients are families, individuals and business owners who understand the importance of comprehensive wealth and investment plans driven by the lifestyle they want to lead.

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