Finances

January 22, 2024 Published by Golden Horseshoe Chapter - By Will McKay

Navigating Financial Waters for Condominiums: Choosing the Right Financial Advisor for Your Investment Voyage

From the Volume 18, Winter 2024 issue of the CCI GHC Condo News Magazine

Selecting a financial advisor is like hiring a captain for a ship. You need someone who will steer your budget away from stormy seas and help ensure smooth sailing. Ultimately, you want to work with someone who won’t jump ship when things get challenging.

There are many articles on “Choosing the Right Financial Advisor” for individuals, but how do you choose the right one for your condominium corporation? The condominium space is a specialized field that requires specific experience to have a thorough understanding. In some cases, a board may choose a financial advisor that a member already works with for their personal portfolio. This may work if the advisor understands the corporation’s needs. But what if the board member leaves the board? Like a ship without a rudder, the relationship with the corporation and advisory team could falter. In addition, if the advisor does not understand the rules or needs of condominium corporations, they may steer the corporation in the wrong direction.

We recommend that when a board is looking for financial advice they focus on advisory teams that have financial planning qualifications and experience. As per Section 115 (8) of the Condominium Act, “Before investing any part of the money in the corporation’s reserve fund accounts, the board shall develop an investment plan based on the anticipated cash requirements of the reserve fund as set out in the most recent reserve fund study”. 1998, c. 19, s. 115 (8). Qualifications such as the Certified Financial Planner (CFP) or Chartered Financial Analysist (CFA) demonstrate a commitment to professional financial planning standards. These standards serve as the navigational charts in building an investment plan.

In addition to financial planning experience, you should also consider an advisory team who have experience in the condominium field and specialize in condominium corporations. Consider this the equivalent of sailing under various market conditions and having a captain who understands the routes in the good and bad times.

A seasoned professional can provide valuable insight into complicated situations that may be new for the board but already experienced by the Advisory team with other corporations. For instance, what if your board requires access to funds prior to the maturity date? Is there an option to provide liquidity outside of maturity dates? Working with a financial partner who can provide options for liquidity is significantly better than someone who is solely focused on earning you interest. Choosing a team who can access an extensive list of investment providers benefits the board and corporation by providing more opportunities and choices to eligible investments to meet their needs.

Transparency of fees is just as important as knowing the cost before you set sail. You wouldn’t embark on a journey without understanding the expenses; similarly, a clear fee structure helps to ensure you know what to expect. Regulatory compliance for a financial advisor is similar to a sailor’s maritime regulations. Ensuring a financial advisor is registered and has a clean record signals a commitment to ethical navigation within financial waters.

Ultimately, your financial advisor should be the captain of your investment ship, guiding you to your destination while weathering the occasional financial storm. I’ve often said, there are only three ways to get funds into the reserve fund: special assessment, raise fees, or invest the funds in a better way. As an owner myself, I know what I prefer.

Will MacKay, CFP, CIM - Investment Advisor, Portfolio Manager CIBC Wood Gundy
Tel: (905) 272-6026
Email: will.mackay@cibc.ca
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