What is Financial Planning?
Our definition of Financial Planning is the full spectrum encompasing what you do with your money. Individuals have been practising financial planning for centuries. Every individual who received money had to make a decision about the best way to use it. Typically, the decision was either spend it now or save it to spend later. You have to make the same decision every time you receive money. Do you spend it now or do you save it to spend it later?
We think that financial planning is a process that you go through to find out where you are now financially, determine where you want to be in the future, and by what means or tools you will use to get there. In our eyes, everyone does financial planning - some individuals are just more successful than others.
Our role is to help you create your own financial plan - meaning, whatever you describe that financial security to be.
What is a Financial Planner?
A Financial Planner is an individual who will help you with your financial plan. The title "financial planner" is not regulated. Anybody can call themselves a financial planner. In fact many product salespersons call themselves financial planners to add credibility to their sales process, or financial products. To sell certain financial products (like stocks, mutual funds, or insurance) the salesperson must be licensed by the province in which they sell. Many so-called financial planners jump to step 5 of the financial planning process and want to implement your "plan" by selling you their investment product.
We feel that you should go through the first four steps of the financial planning process before you buy any investment. We do not sell any financial products, we only provide advice. When it comes to implementing your financial plan, we work with other professionals (accountants, lawyers, investment counselors, investment advisors, bankers and brokers) to find the best solution to your needs.
Do I need a Financial Planner?
Many people find the world of finance a confusing place. Do you have the time and desire to sort through all the opportunities out there? Do you understand how those opportunities can apply to your situation? Can you keep up with changes to income taxes, investment products, estate laws, etc.?
Are you receiving conflicting advice from different sources? Is your banker telling you something different from your insurance agent? Do you want to know what is "right" for you?
Are you unsure of where to invest? Do you want a higher return but do not want to take higher risk? What return do you need to meet your goals?
We provide independent and objective advice to put you on the right track to accomplish your goals. We will confirm whether you are on the right track or tell you what to do to get back on the right track. For many of our clients we provide peace of mind knowing that they are doing all the right things given their situation.
We help clients in the following areas:
Cash Flow Management
This includes reviewing your income and expenses to ensure that you are not spending more than you earn. Can you create new cash flow from your investments? How can you save money (for short term goals, medium term goals or long term goals)?
Are you paying the least amount of interest possible given your situation? Can you reduce the amount of interest that you are paying? Can you pay off your debts earlier? Can you consolidate your debts? What debts should you pay off first? Should you pay down your mortgage or contribute to an RRSP?
Income Tax Planning
Can you reduce the amount of tax that you are paying? Should you contribute to an RRSP or should you invest in capital gains producing investments outside your RRSP. How should you manage your investment portfolio to take advantage of tax preferential income? Are there any "tax shelters" you should consider? What opportunities do you have to split your income with others in your "tax family"?
What rate of return do you need to meet your goals? Are your current investments achieving that return? Do you need to take risk with your investments? Do you want a higher return? How do you get a higher return while minimizing the risk? What asset allocation should you have? What investments should you use to implement that asset mix?
How much do you need to save to be able to retire? Are you on track for meeting that goal? Should you start your pension early? When can you get Old Age Security? Will it be clawed back? Should you draw from RRSPs or non-registered funds first?
How much do you need to save to (help) pay for your children's (or grandchildren's) education? What is the most tax effective way of saving for children's education. Should you use an RESP or an informal trust of capital gains producing investments?
Insurance and Risk Planning
Do you need insurance (life, disability, critical illness, long term care)? If so, how much and what kind of insurance? Who should own the insurance (you, your company, your spouse or children)?
What size of estate do you want to leave? How do you get it to your beneficiaries as quickly and as easily as possible? Will there be enough in the estate to pay the taxes? Can you reduce the taxes that you pay on your death? Can you reduce the taxes for your heirs?
How are Financial Planners Compensated?
A financial planner may be compensated in one of three ways:
1. The fund company pays us a fee for money that I bring in the form of an investment.
2. The fund company pays us a fee on all the money that we administer on behalf of our clients. This is done to ensure that we provide excellent service to our clients so that they will keep their money with us.
3. The best compliment we can receive is for our clients to compensate us if we do a good job for them in the form of referrals over the course of our relationship. I expect my clients to give me referrals of people like themselves.
How do you select a financial planner?
Before choosing a financial planner, it is important that you meet with them to determine how well you get along. Ask about the planner's background, both the education and the experience are important. Ask how long the planner has been in the business. Ask for credentials.
Who is Qualified to do Financial Planning? (Who should I trust?)
Financial planners are individuals that will help you create your own financial plan. Some people prefer to do the financial planning themselves, others will want the assistance of a financial planner for some of the financial planning steps, others still will want the financial planner to do all the steps in creating and implementing a financial plan.
The CFP (Certified Financial Planner) registered certification marks identify individuals who are dedicated to a high level of professionalism in providing financial planning advice. The CFP credentials assure you that those using them have agreed to adhere to the highest internationally recognized standards of competence and ethical practice as set out by Financial Planners Standards Council (FPSC). ( www.cfp-ca.org )
Ask for references, the planner should also be able to show you a sample financial plan. Ask in which areas the planner is knowledgeable. Ideally this should include various areas such as: investments, insurance, business administration, law, money management and taxes. Ask if the planner concentrates on a particular type of client. Ask if the planner would work with you directly or if an associate will handle your account. If you will be working with an associate, ask to meet that person. Ask how the planner keeps clients informed, such as through newsletters or seminars. Ask how often you can expect to meet.
Ask how the planner selects your investment solutions. The planner's role is to be your guide to financial products. You should be free to implement your plan with the planner or elsewhere. Ask how the planner is compensated. Ask how much you will pay for the planner's services and ask if the charge is for the plan only or for ongoing service as well.
Ask if the planner is a member of a professional association. If not, why not? Do not hesitate to ask any other questions concerning a planner's methods, techniques or procedures. After all, you are asking that person to shape your financial future.