What Do Financial Planners Do?

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Canadians consistently list money as a leading cause of stress in their lives. Money worries could lead to health problems, relationship breakdowns, or loss of sleep!

One thing you can do to reduce the stress of managing money is to get help from a financial planner.

A good financial planner or advisor will be able to help you create a financial plan that suits you, helps reduce any stress related to money, and makes thinking about money a positive thing in your life!

Too many people avoid seeking help as they worry it may cost too much, or that they may not understand everything. In this guide, you can learn what a financial advisor does, why you should have one, and how to choose the best one for you.

What Does A Financial Planner Do?

A financial advisor or planner is there to help you achieve your financial goals in life. Some goals people have include paying off debts, early retirement, or homeownership.

Whatever your goals are, a financial planner can help you get there. How do they do this?

First, they need to know what your goals are. Have a good think about your short-term and long-term goals. Once you know what your goals are, a plan can be made.

The financial advisor will create a plan that takes into account your hopes for the future alongside your financial situation. As part of your financial plan, you will get a clearer picture of your current situation, and a map for the future.

Future and past

Making the right investment choices, how much to save and when, and which debts to pay off first will all help to form part of your strategy towards long-term success.

Financial planning done right will consider everything – tax planning, retirement savings, estate planning, investments, and insurance will all be covered.

The benefit to you of using a financial advisor is that you no longer need to figure all this out yourself – give the advisor all the details, and they do the hard work for you!

Who Is Qualified To Be A Financial Advisor?

Here in Canada, financial planning is only regulated in Quebec, in every other province, there are no regulations.

This means sometimes you think you’re dealing with a financial advisor, but it’s actually a salesperson for insurance or investments.

How can you be sure someone is qualified to give financial advice?

The best way is to ask for their credentials and verify that they are qualified. Professional financial advisors should have one of the following designations:

  • CFP – Certified Financial Planner
  • CIWM – Certified International Wealth Manager
  • CLU – Chartered Life Underwriter
  • DFA – Distinguished Financial Advisor
  • EPC – Elder Planning Counselor
  • F.Pl – Financial Planner
  • PFP – Personal Financial Planner
  • R.F.P – Registered Financial Planner

As long as the financial advisor meets these criteria, you can be confident they are the right person to help you.

In Canada, the Financial Planning Standards Council (FPSC) sets the standards and certifies financial planners. CFP is the best designation a financial planner can get.

Quebec uses a different format, and F.Pl is considered the top designation for a financial advisor in Quebec. Standards are set in Quebec by the Institut Quebecois De Planification Financiere (IQFP).

Why It Is Important To Have A Financial Advisor

Although money is a leading cause of stress for many Canadians, it’s also something many people don’t like to talk about. However, avoiding discussing money only leads to poor financial choices, money worries, and missing out on opportunities! To enjoy life to the fullest, you need to do some sound financial planning as early in life as possible.

The benefits of financial planning are numerous – you are more likely to achieve your financial goals, have higher savings, more wealth, and feel more confident about money.

During your lifetime, there are some events that can happen at any moment that can dramatically affect your finances. Children, illness, retirement, divorce, or losing a job are just some of the big things that can happen at any time.

Having a financial plan means you are prepared to absorb these changes when they occur. When a big change in your life happens, that’s also a good time to review your plans, and alter things as required.

Here are some other reasons to use a financial advisor:

Retirement planning.

Once upon a time, Canadians enjoyed having a defined benefit pension plan. This is a pension that meant employers guaranteed a fixed or inflation-adjusted amount when you retire.

Sadly, this type of pension is almost unheard of now. That means to have a comfortable retirement you must prepare as far in advance as you can. Planning now is the difference between enjoying your retirement, or having to carry on working!

Combine family goals.

If you’re in a relationship, either married or cohabiting, then you must talk about finances. Hopefully, you and your romantic partner can agree on your goals in life! The next step is to get help from a financial planner to make sure your mutual goals can be achieved.

Using an impartial person to help plan finances should mean fewer arguments, and that you both know what is expected of each other to reach your goals.

Reduce tax liability.

Taxes are unavoidable, but using a financial planner means your investments can be structured in a way that is tax advantaged. Many financial advisors work with lawyers, accountants, or their own in-house team to find the most tax-efficient way of investing.

Mental health.

Not only are money worries a cause of stress, but the stress can also be compounded by making financial mistakes, or not being able to afford what you want such as a vacation for the family.

Working with a qualified financial advisor means additional worries are taken away. They do the hard work which means no mistakes, and a plan that lets you afford the things you want. All this helps improve your mental health, especially when your stress levels are reduced!

6 Questions To Ask When Choosing A Financial Advisor

Questions to ask

Recommendations from friends or family are often useful, but you should still do your own due diligence before engaging an advisor.

On the FPSC website you can check all registered CFPs using the convenient find a planner tool. This not only helps verify the advisors certifications, but will show if they’ve had any previous disciplinary action.

Once you’ve narrowed down your list of potential financial planners, you need to pick one!

Here are 6 important questions you should ask:

What Will Be Included In My Financial Plan?

The answer you want to hear is ‘financial management’ – this covers everything finance related such as budgeting, insurances, investments, estate planning, retirement planning, cash flow, net worth, and tax planning.

Who Will I be Working With?

Certified and established financial advisors usually work with a variety of specialists. Their team could include lawyers, accountants, junior financial planners, and more.

When you are hiring a financial advisor make sure that it is them you will be dealing with at all times. Although others are helping behind the scenes, it’s easier for you if you are always dealing with one person – the financial advisor you’ve hired.

How Are You Paid?

Financial planners can be paid in one of two ways. The first way is known as fee-for-service. Simply put, you pay the agreed fees for the service received.

The second way is for planners to be paid a commission or trailer fee from investment product providers, such as insurance companies. Sometimes you may be offered the option of not having to pay any fees provided you purchase the investment product. The risk of this method is that there is potential for a conflict of interest.

As always make sure you thoroughly weigh up which option is best for you before agreeing to anything.

Can Everything Be Put In Writing?

There should be no problem getting a written contract covering everything that has been agreed. Services, fees, the number of in-person meetings, and anything else that is relevant should be put in writing. Doing this helps both parties maintain a good working relationship and build trust as it’s clear what is expected.

Are You A Fiduciary?

The financial advisor you choose should always put your interests first. Ask them which provincial or professional regulatory body they are governed by, if they are subscribed to a code of ethics, and that their certifications are up to date.

Tell Me More About Your Business?

You should ask a few questions about their business to determine if it will be a good fit for your needs. Questions about their business include:

How big is your business?

Is the business big enough to give you the full assistance you need on top of other clients they have?

What safeguards are in place to prevent a data breach?

Will my financial information be secure on your systems?

What type of clients do you normally work with? Some financial planners cater to a specific industry – if you’re not in the usual industry they represent, then you may not be a good fit with that advisor.

How large is their network? Lawyers, accountants, and more could be needed from time to time. Do they have an in-house team? Have they got a network setup to handle every eventuality?

All this information will be helpful when deciding if this financial advisor is the best choice for you. 🙂

How Much Should I Pay A Financial Planner?

Fees will vary depending on how much work is involved. Some fee-only planners charge hourly fees ranging from $250-$500. Alternatively, they may charge a flat fee that could range from $1,500 – $5,000 for the entire plan.

Financial planning for individuals is usually at the lower end of the fee scale. If you own a company, or have complex needs relating to taxes or other matters, then you will usually pay fees at the higher end of the scale.

Sometimes you may also have the option of paying an annual retainer fee to get regular advice.

What Are The Alternatives To Hiring A Financial Planner?

In a perfect world everyone would have their own personal financial planner. However, sometimes it’s not possible either due to cost or suitability.

The good news is that there are several alternatives you can turn to if you don’t have complex needs or large assets.

Find an entry-level financial planner.

An entry-level planner is still accredited. Known as a Qualified Associate Financial Planner (QAFP), they are more than qualified to help people with less complex financial situations.

Ask your current financial provider.

Many of Canada’s biggest banks offer additional services for their customer’s including professional financial planning. Remember – these advisors are employed by the bank which means they could promote the banks products more often than others. An impartial financial advisor that doesn’t work for a bank usually offers more unbiased products and recommendations.

Try A Digital Solution.

As technology advances there have been a variety of digital investing options created. Robo-advisors are becoming more advanced, and offering the option of tailored financial advice along with made-to-measure investment portfolios. As well as assessing investments, you can get financial advice for estate planning, taxes, and insurance.

Do It Yourself.

Many people choose to handle some or all their own financial planning. You could to if you have a little bit of confidence in yourself. Skip traditional brokers and look for online brokers – many of these are cheaper to use which saves you more money!

Doing it yourself may seem daunting to start with, that’s why it’s best to start with small amounts. Build up your knowledge and experience before starting to invest bigger sums. The good news about many online investment platforms is there is either no minimum investmount amount required, or it’s very low. This makes investing yourself much easier, accessible, and lower risk!

Do The Basics Yourself.

If you want to meet a financial advisor, but want to keep costs as low as possible, then do as much yourself as you can. The more you do in advance, the less hours the advisor will need to bill you for.

Final Thoughts

If you want to have a successful financial future, hiring a financial advisor is a must.

Not only can you reduce money related stress, but you will have a much higher chance of successfully achieving your goals in life.

You should now have a good understanding of what a financial advisor does, and how to choose the best one for you. All you need to do now is search for the best one in your area and start your journey to a prosperous future!