What’s the state of your financial health? Most Canadians get a failing grade.
According to a recent report by FP Canada (fpcanada.ca) “IMAGINE 2030″, half of Canadians are worried about their financial security for good reason. The overall score for 2021 on the Financial Well-Being Index is 49 out of 100.
No question, this report, along with recent news about high inflation and rising interest rates, has created an uncertain environment for anyone looking to retire.
One of my financial planning mentors once told me: “You will never know the cost of free advice, but good advice is priceless.”
I know this to be true. Retirement is much too complex of a subject to pass off with free or biased advice, especially the kind you find all over the internet.
You are likely asking the same questions as other Canadians, such as:
· How long will my money last?
· Can I afford to retire in a high inflation environment?
· What are the best investment options right now?
· When is it best to take CPP/OAS?
· What is the most tax-efficient way to withdraw from my retirement savings?
· How do I avoid the OAS claw-back?
Retirement planning becomes like solving a cryptic puzzle, trying to fit the pieces together in the most efficient way for your specific goals and lifestyle. The biggest missing piece, and therefore the solution to this failing financial grade, is finding good advice.
But what constitutes as good advice?
Firstly, in my opinion, financial advice should not be used as a guise for selling products. It should be a simplified process that helps you first clarify what you want to achieve, thereby cementing the plan and corresponding strategies. This is basically what a fee-only financial planner does. They take you through the full planning process without a product focus, putting your interests first.
There is always a strong appeal in the fee-only financial planning environment with people seeking unbiased planning advice: It should be apparent that people want clear advice, not recommendations tied to product sales. This is what would help Canadian’s financial well-being. The issue is that while there is an abundance of financial advisors out there willing to help, there is only a handful across the country that can call themselves unbiased.
Secondly, there are two main avenues of financial advice; financial planning and portfolio management, so finding the right financial advisor becomes even more confusing.
Fee-only planners are generally un-registered individuals that will create a plan for you but cannot legally recommend or implement the investment strategy i.e., they still refer you to a 3rd party portfolio manager. Now you have one person creating the plan and another who may implement some, none, or all of it, on their whim.
A financial plan is the best way to secure your future, while a registered portfolio manager will carry out the corresponding investment strategy in a rational manner with unlimited investment options. That way you can feel confident in your long-term outlook regardless of the current markets. A combination of both services in one financial advisor is rare.
This is the first in a series of articles sharing unbiased advice on financial planning and behavioural finance.
David Miller, BFS, CFP®, R.F.P., CIM® is with RT Mosaic Wealth Management in Calgary, and is both a fee-only financial planner and a registered portfolio manager. View Miller’s registration status under the Alberta Securities Commission and financial planning status under FP Canada, as well as under the Institute of Advanced Financial Planners (IAFP). Email [email protected]