The Benefits of Working With a Financial Planner

Retirement was easier for our parents.  They worked for the same company for most of their careers.  When they hit 65, they had a big party and looked forward to sitting back and relaxing.  They were secure in the knowledge that their company pension and government benefits would cover their regular expenses, and their savings paid for fun stuff and other needs.

Not so anymore.  Retirement can now be a more complicated time when it comes to our finances.  You’re going from one primary source of income to multiple sources.  In addition to payments from the Canada Pension Plan, Old Age Security and workplace pensions we’re likely to have several savings and investment accounts and other assets that we can draw income from. Then we need decide what the optimum time is to start taking that income and in what order.

How do you solve the puzzle of integrating all these sources to achieve a dependable amount of income that will last your lifetime, minimize the taxes you pay, and leave some money to your beneficiaries?

There are a lot of decisions to make.

It’s a balancing act

And there’s no single solution that suits everyone.

There is no right way to structure an income plan because there are too many variables and everyone’s circumstances are unique.  The approach that will work for you will depend on your marital status, your ages, lifestyle, net worth and estate plans.

On-line calculators can work for you – and there are some good ones.  But if your financial situation is more complicated it can be tedious inputting all the variables for different scenarios.  Plus, they have their limitations – after all, they’re free.

If you need more help, a financial planner can pull it all together and develop an income plan that’s custom-designed just for you.

Finding the right financial advisor

To find the best financial advice for your situation you need to be clear about your goals, what type of advice you need, what problems you want solved, and what services a potential advisor can provide.

Despite all the different titles in the financial advice and planning industry (see this guide to decoding financial advisor titles.) there are really only two main types of services you can receive:

  • Investment advice which is primarily focused on recommending, implementing and managing specific investments in your portfolio.
  • Financial planning encompasses all aspects of your financial life and may include cash flow management, insurance and tax planning, retirement income, estate planning and more.

Compared to investment advice, financial planning is far more comprehensive.  It involves assessing where you stand financially, understanding your goals, and how to realize them.  You can get a one-time plan that you manage yourself afterwards, or have ongoing monitoring, reviews and adjustments as they become necessary.

The first step is to know what services you are looking for.  Do you want comprehensive financial planning or retirement income planning?  Do they offer extra services like tax and estate planning?  Do they offer discretionary portfolio management?

Your goal should be to hire the right advisor for your particular needs.  You don’t want to pay for unnecessary services.

Benefits of working with a Retirement Planner

The investment industry doesn’t have a lot of incentive to help retirees in their decumulation stage.  After all, they are compensated for growing assets and most don’t have the expertise to deal with draw-down strategies.

A recent financial planning specialty is that of retirement income planning.  The Retirement Planner has a skill set that goes beyond financial planning and investment advice.  They have greater expertise in pension rules, government benefits and taxes, and knowledge of how to manage the income phase of retirement.

Once they know your retirement lifestyle goals, they will able to offer advice on such things as:

  • What amount of retirement income you could reasonably expect to have.
  • At what age to take your government and pension benefits.
  • When to convert a RRSP into a RRIF.
  • Go over the details of your employer benefits package to see what you’re entitled to.
  • Which account to take withdrawals from each year and in what amounts.
  • If an annuity is a suitable investment for you.
  • How you can rearrange your investments to reduce taxable income.
  • Whether to keep your workplace pension or roll the lump sum into a LIRA.
  • What insurance policies are suitable for you.

This is a critical phase in your life, one you can’t afford to get wrong and risk outliving your money.  The right advisor can position you with a comfortable, worry-free retirement. 

That’s really what the endgame is for all of us isn’t it?

How to find a Financial Planner

Don’t just go with the nice lady at the bank.  Ask friends, family and other professionals such as your lawyer or accountant.

Focus your search on advisors who are licensed through the Investment Industry Regulatory Organization of Canada (IIROC).

Choose two or three likely candidates and ask for a free consultation.  In the introductory meetings you can see what they have to offer and ensure they have what you are looking for.    Expect to spend at least an hour with each advisor.

Make sure your financial advisor has reputable credentials

When you work with a financial planner it’s important to know that the person advising you has sufficient training, knowledge and experience to counsel you on the issues that matter to you and that they are properly qualified and licensed.

Unfortunately, the titles “financial advisor” and “financial planner” are not regulated except in the province of Quebec.  (Ontario and Saskatchewan are in the process of setting up regulations).  In the other provinces there is no legislated standard in place for those who offer financial planning services.  Pretty much anyone can use these terms without having any credentials, qualifications or experience whatsoever.  All they need is a software program to consolidate your information which spits out an impressive looking colourful report. 

As part of your due diligence, make sure that prospective advisors have the registration they claim to have and ensure that they haven’t had any disciplinary action brought against them.

You should look for an IIROC-licensed advisor holding the CFP designation and you should actually verify that they are in good standing with the regulator. You can do that here.  See how long the advisor has been serving clients because experience really matters.

In Canada, the educational requirements for receiving a Certified Financial Planner (CFP) designation is undergoing some changes effective January 2020.  You can learn more about them here. 

I would also add that someone with a Chartered Investment Manager (CIM) or Chartered Financial Analyst (CFA) designation and registered as a Portfolio Manager could also be an ideal type of financial advisor and planner to choose as they are held to a higher fiduciary standard of care.

How to prepare for your first meeting

Don’t come empty-handed.  Start organizing your priority list.  An advisor can’t help you if you’re not clear about what you want.  What lifestyle do you want in retirement?  Have some concrete ideas.

Gather your documents.  Here are some things you should have with you:

  • Latest statements from all your investments
  • Information about other major assets or probable inheritance
  • Work compensation details (e.g. benefits, pension)
  • CPP statement of contributions
  • Monthly expenses including any liabilities you may have (e.g. have you co-signed a loan for your child?)
  • Estate planning information (will, life insurance)

And come prepared with questions.

Questions to ask your financial advisor

A good financial planner should ask you a lot of probing questions.  But what questions should you have for them?  Arm yourself with some questions so that you can interview the prospective advisor while he or she is interviewing you.

Here are some questions to ask:

  • What are your professional designations?
  • What is your background and experience?
  • What do you specialize in? (Retirement income strategy? Estate planning? Insurance?) 
  • What areas are you not able to advise me in?
  • What are your fees and how will I pay? (commissions, referral fees, directly?) What’s included in those fees and what’s extra?
  • What type of clients do you typically work with?
  • How often will we meet (or have contact)?
  • What types of investment products are you licensed to sell?
  • How many clients do you have?

What was your first impression?   Was he personable, respectful or arrogant?

What kinds of questions did she ask you?  Did she ask more about your money and the size of your portfolio or more about your financial experience and retirement goals?

Did he demonstrate good listening skills, or did he dominate the conversation? 

Did she explain matters in language you could understand or use jargon and talk over your head making you feel stupid.

Take careful notes of the answers.  At the end of your meeting, let the advisor know you are interviewing other advisors and you will get back to him or her.

Are you a good fit?

You can find a very knowledgeable, well-accredited and experienced advisor. but sometimes that just isn’t enough for a successful working relationship.

Speaking about your finances can be a sensitive topic.  It’s important to find someone you feel comfortable speaking with.  You want to be open and honest not only about your assets, but your dreams and uncertainties.  The advisor should help you articulate your goals and acknowledge and respect what’s important to you and your values and choices.

This doesn’t mean they always agree with you or tell you what you want to hear.

You want someone who is honest and sets realistic expectations and probable outcomes.  Someone who is able to reach productive solutions to make your dreams a reality.

If your advisor is hesitant to advise you, or you ignore that advice, then why would you think you could work together?

A proper financial plan shouldn’t be used to simply sell you a product or service. It should outline all the potential solutions, with the positives and negatives, based on your personal goals. This is the best way to ensure you are getting a financial education along with making an informed choice about your financial future.

It’s important to have a written agreement which lays out the important terms of your work together so there’s no confusion or misunderstandings.

In the end, you want someone whose interests are aligned with yours, who you would enjoy working with and is a good fit for you.

How financial advisors are compensated

Financial advisors deserve to get paid just like any other service business.

Portfolio Managers:  Someone who manages your money will be typically paid through client fees which are usually based on a percentage of your total managed assets.  A 1-2% management fee is pretty standard depending on the size of your portfolio.  There may be a minimum annual amount. 

Find out what other services this fee will cover and decide if you will use them enough to warrant it.

There may be other, separate, fees as well – commissions and transaction fees (individual or flat rate), and hourly rates for special services (estate planning).

You may be able to negotiate certain fees.

Financial Planners:  Commission or “fee-based” financial planners provide investment management services and typically are paid commissions or a percentage of assets if they also manage your investments.  

Fee-only or Advice-only Financial Planners and Money Coaches don’t sell financial products.  They charge clients a fee either hourly or by project.  Fees for financial plans depend on the complexity of your planning needs and can range from $100 – $300 an hour or $1,500 – $20,000 per plan. If you are a do-it-yourself investor and feel comfortable managing your own money or use a robo-adviser this may be ideal for you. The advantage is you only pay for what you need.

Good advice is worth paying for. The question is whether you’re getting good value.  The measure will be how much wealth and peace of mind will that financial plan bring over the coming years and decades. Ultimately you will have to decide whether the cost is worth it to you.

The bottom line

Do you need a financial advisor or planner?  You can likely get by without one but on the other hand it might be the best money you spend, especially if you have complicated needs, you don’t have a lot of knowledge or you’d rather spend your time on other things.  There’s always stuff you don’t know, and you don’t know what you don’t know.  But there are professionals who do know.

Finding the right financial advisor for you isn’t always easy, but once you find that match, it’s probably one of the most important professional relationships you can have. You will benefit from it immensely, and possibly for many years. 

You can feel more in control when you have a plan in place.

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2 Responses

  1. Peter says:

    Good morning Marie,

    Very very nice…I only hope (and continue to encourage others btw) your followers read the entire content….
    I particularly love the focus on the major importance of matching up advisors….
    I would add into that section also help with lifestyle understanding as I believe that is the elephant in many couples retirement room!!!

    Having said the above/I continue to think about your last note to me on doing a research study on my own retirement learnings…
    Due to YOUR suggestion, I have began to jot down bullet points and will see where this goes…
    I want to build on your style which I think is important, as I really believe connects with the readers…
    I am not and never will be a writer but am going to take a stab at this (thanks to you) in an effort to maybe help others in addressing what I fell is an untouched area of this wonderful and critical time in people’s lives…that being the lifestyle and softer issues(not simply about the money)
    Any thoughts or suggestions will be much appreciated…
    Many Thanks-Peter

    • Marie Engen says:

      Thanks Peter. Working with a financial planner or retirement planner can be a benefit for many and would be worth the cost.
      I also think a lot of retirees (and soon to be retirees) are interested in reading about other peoples’ experiences. What they like about retirement, what they would do differently, how they occupy their time, etc. I look forward to seeing your draft.

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