What You Need To Know Before Meeting With An Advisor

When I first met an investment advisor, who technically referred to himself as a financial planner, it was very icky and I ran for the hills. I really wish my 23 year old self knew better, and scouted out a better advisor for ME rather than thinking they were all the same. Because they are definitely NOT all like that. I have encountered many other financial advisors through my business networking meetings over the years, they have been amazing people. In the last year, I have gotten married, we bought our first house, and we have had family planning discussions. This raised the issue of life insurance and other fun conversations. All I know is that it brought up old feelings of scamminess, but I knew deep down that it was something I needed to look into. After all, insurance is to protect yourself in those holy-sh*t moments. I reached out to two of the ladies I knew who offered this type of service, whom I trusted enough to speak with, and get down to details. Each worked for a different company, supplied services through different insurers, and thus I was left with many options.

My first tip is to make sure that the person you are thinking of ‘hiring’ (they are a technically free service, paid by the insurance companies to help promote & sell the product) is actually registered in a capacity to be legally required to act in your best interest. Apparently the term “financial advisor” is actually a self-coined name which is unregulated in Canada, which means a sales-person could call themself such but sell you products to their own benefit. According to Canadian Securities Administrators (CSA), only about 4% of ‘registered’ advisors truly are; the rest are a “dealing representative” and may sell investments based on commissions versus the client’s best interest. Not exactly comforting is it… But as long as you know going into things, you can be aware and ask better questions. They might be able to advise you towards a better-for-them product, but they are not allowed to lie or purposefully omit information if you ask.

Truth be told, the person I chose to represent me for my life insurance policy is technically registered as a ‘dealing representative’, but because of the relationship we have build over the last few months, and the knowledge she has provided me, I felt confident in choosing her. Besides, it only affected the investment portion of things, not the life insurance. Otherwise it wouldn’t have mattered–I just know since my mother has been in the industry for decades, and has ingrained in me the knowledge to ask questions so I know what to look for. And before you get your knickers in a knot about the mom-advice bit, she’s a registered Chief Compliance Officer, which means her job is literally to make sure people aren’t breaking the rules and are acting in the clients’ best interest. Back to the life insurance bit. I was given the available options to me based on our discussions of my life situation, my core values, and my budget. And as much as I am a math and logic person who’s heard shop-talk for years, I still had question marks floating above my head and needed a crash course in Life Insurance 101.

All of my sources will be linked below for further reading and full details, but this is the gist of it. The simpleton basics if you will. So here it goes.

What You Need To Know Before Meeting With An Advisor

What Are My Options?

If you are looking to cover the cost of your mortgage or other large debts in your life, you want what is called “Temporary Insurance“. This is something you pay into monthly for a determined amount of time (usually 10 or 20 years), and should you pass away suddenly your spouse / family is able to use that (typically) large sum to pay off part or all of the mortgage, and any other existing debts at the time. Most choose to either cover their half of the mortgage or the entire thing so that the spouse doesn’t have to sell the house and move should their salary not cover the expenses. For this coverage, it is typically a low monthly fee that you pay into for the duration of the term, and choose to either renew, collapse, or create a new policy based on your then-current situation.

EXAMPLE: You and your husband bought a 600K house, and have 2 kids. You can choose to cover your half of the mortgage at 300K, or the whole thing at 600K, plus any other debts you’d like covered. For example, future college tuition for the kiddos. In 20 years, you re-evaluate the debts in your life and go from there. Your mortgage would likely have been reduced, but you may have a vacation home, and you might have other dependents. Every situation is different and your advisor will talk you through it and help you make the decision.
Have I lost you yet? No? Good, let’s keep going. If so, perhaps look into getting an advisor who can explain it to you for your exact situation.

If you are looking to make sure your funeral expenses are covered, you want what is called “Permanent Insurance“. This is something you pay into monthly, and when you pass away your family is left with a sum of money (to be decided by you). There are TWO options within this type of coverage.

  1. The first is a low amount that you pay monthly until you die (or it expires, typically when the insured is upwards of 100 years old). The younger you start your policy, the lower the cost.
  2. The second is a higher amount that you pay monthly, where a portion is invested in to mutual funds giving your policy a cash value. (TIP: make sure that investment is a guaranteed one!) This means that your payout actually grows and ends up being much higher than the minimum promised one. This is a better option because it accounts for inflation since funeral costs are very likely to go up in the next 20-60 years. Often time, you can eventually collapse the policy when you’re super old and use a portion of the money yourself, OR you can take our the cash value as a loan to use, slowly pay it back and upon your death your debt is simply taken out of the payout (which has grown exponentially since day 1. Within this second option, there are actually two more to consider: you can pay a moderate monthly fee “forever” OR you can pay a slightly higher monthly fee and only need to pay for 20 years. This all depends on whether or not you can afford the extra dollars each month. TO KNOW: it’s cheaper in the long run for one option (if you live for more than 20 years from your start-date), but the payout of the other is usually more because you are continuously investing into it each month “forever”.

I know most of what you’ve just read is quite complicated, so I definitely recommend you cover the info again with your chosen advisor, but here are a bunch of questions you should know the answer to before meeting with them, and a handful that you should be prepared to ask.

Information To Bring With You & Questions To Ask Yourself

Information to Bring

  • Your immediate family’s health history (parents & siblings)
  • Your financial situation (income, expenses, budget, value of assets, debts (including credit cards), etc.)
  • What you want to have covered (mortgage, vehicle, tuition, etc.) [Term Insurance]
  • Do you want a death benefit in addition to those being covered under the temporary coverage? [Permanent Insurance]
  • Do you want coverage for yourself in a living scenario, either disability or brain-dead, etc. so that your paycheque is insured?
  • Do you want to start a policy for your young children now so it starts off at a very low cost and has plenty of time to grow?

Questions to Ask Your Advisor

  • Are you registered in the province of ____?
  • Are you a licensed advisor or dealing representative? <– not a deal-breaker, but you need to be aware to know which products they can offer you
  • What types of deaths are NOT covered?
  • Is there a minimum amount of time you have to be paying into your policy before a claim can be made?
  • If choosing a policy with an investment portion: Are the mutual funds guaranteed? At what interest rate?
  • If choosing a policy for disability and paycheque coverage: What are you covered for? What doesn’t count? For how long? What is the waiting period?
  • What happens if you change your mind: Can you back out whenever? Can you make changes in a few months/years should your situation change? Is there a penalty?

But let me remind you: I am certainly no expert. I am just a lady who recently went through the experience and wants to help you prepare. I can tell you it is definitely something you need, but I cannot advise you which is the best option for you and your family because I do not know you. Only you know your details, and by sharing them with a professional, THEY can help you figure out the best plan of action. Here are the pros I recommend, and it is up to you to do some further research to pick the right person (or company) that fits best with your family.

Recommended Ottawa Contacts:

Sameen Sami, Quadrus Investment Services Ltd.
Shanna Slater, WFG Securities Inc.

Important Links:


Click to access 500_SIPA_REPORT_REGISTRATION-Above-the-Law_201611.pdf

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