Tuesday, April 29, 2025

Q: Financial advisors at banks are basically salespeople. How do I find a good financial advisor who isn’t just selling the mutual funds from the company they work for?

A: There’s about 5000 different mutual funds in Canada. Each of the big banks own their own family of mutual funds. One bank in particular would own 30 or 40 mutual funds out of those 5000. If you go to an advisor at a bank branch to get advice, they have their own mutual funds to sell as well as many other funds like AGF. There’s new rules coming out for licenced advisors and it’s called ‘Know Your Product.’ What those rules are in place for is to ensure that advisors are providing the best product available to meet your individual needs. What the banks have decided is that their advisors are only going to sell their own proprietary in-house funds in their branches, which means that the choices are being limited to consumers rather than expanded to consumers. That’s not really the intent of ‘Know Your Product’ rules and regulators are not looking too kindly of it. There’s 100,000 or so licenced mutual fund advisors in Canada. So there’s lots of choice and advisors to go to. There’s independent advisors. Credit union branches offer their own products plus many other products. The banks all own their independent brokerage houses and you can go there to buy other funds besides the bank’s proprietary funds but you can’t just buy them inside the bank branch. The other thing you can do is go to an online investor and there’s lots of great online tools. You don’t have to get advice from the bank advisor. You can obviously and they’re licenced to do that. But if you want a choice, you’re only going to get the bank’s products if you go there.

Q: I have a question regarding credit card interest rates. If I were to call my credit card company and ask them if I qualify for a lower interest rate, will this impact my credit rating?

A: Generally, your credit score is negatively impacted when there is a ‘hard’ hit to your credit bureau file from a lender, which happens when you are ‘seeking’ credit such as asking for an increased credit limit, a new loan or new credit card. If you are just making a change to existing credit, it usually results in a ‘soft’ hit on your credit file and your credit score is not affected. Now, credit card interest rates in Canada are generally fixed on the actual card product you have. Cards with good rewards generally have higher interest rates and there’s likely no chance of the card company reducing the interest rate. Most premium reward cards that also have many features and benefits are 19.99 per cent to 22.99 per cent interest, plus a high annual fee. If you have a card like this, don’t carry a balance. If you want a lower interest rate, you’ll likely have to change cards. For example, an 11.99 per cent card because you plan on carrying a balance is likely a card with low or no rewards and limited features and benefits. It is still expensive to carry balances on a credit card. It is better to pay off monthly or get a lower rate personal loan to pay off the card balance.