HOW TO CHOOSE A FINANCIAL PLANNER AND WHAT TO EXPECT

by Frank R. Sommer CFP

The first thing you may want to ask yourself is whether you even need a Financial Planner. Has something in your life recently changed that could affect your financial future? Events such as a forced retirement, an addition to your family, an inheritance or simply trying to figure out whether, or when, you can afford to retire, all point to the need for a professional opinion. Do you feel that you are paying too much tax, or are you confused by all the financial advice you have received from various sources? Are estate taxes a concern to you? Or are you confused about where to invest your hard earned money? With all of the lending institutions changing their rates daily, where is the best place to shop for the highest GIC rates and not have to pay a fee? Do you feel that you need a second opinion on your current portfolio? If any of these situations have you bogged down, you may be wise to contact a Financial Planner.

Depending on the skill sets of the Financial Planner you choose, all of your concerns could be addressed. Like any other professional, each Financial Planner has acquired their skills through a variety of professional courses as well as the school of hard knocks. Some will prepare a Comprehensive Plan while others are happy to do piecemeal planning. Finding the right person for yourself will take some effort on your part. There are a number of associations that can send you in the right direction, if you take the time to call, or research them on the Internet. A couple of associations that come to mind are, the Canadian Association of Financial Planners and the Canadian Association of Insurance and Financial Advisors. The alternative is to ask for referrals from your friends, or your accountant, or your lawyer. One of the most important things to remember is to find someone you like as the relationship can often last a lifetime.

Some of the professional designations that your planner may have acquired include the following: Certified Financial Planner (CFP), Chartered Life Underwriter (CLU), Chartered Financial Consultant (CH.F.C.), Registered Financial Planner (RFP) as well as others. The key to success with the planner you eventually choose is to be completely open about your situation and have a list of concerns that you feel you need help with. Your planner will likely take you through a six-step planning process, to develop a plan that is designed for you, and your particular needs. There are several ways for your planner to be compensated and these should be discussed during your initial meeting.

There seems to be a lot of confusion in the mind of the general public as to what a financial planner really is. Is he or she an investment advisor, or an insurance representative, or a mutual fund salesperson, or a tax specialist? Well the truth of the matter is that your planner could be all, or any of the above; or none of the above. The key to finding the right planner is once again, to know what you are looking for in the way of help, and try to find the planner who is conversant in those areas or who works with other professionals that are. As an example, if you are concerned with asset allocation, your planner can be very helpful if you tell him or her some idea of what you would like to hold in your portfolio along with your comfort level of risk. If you are set on having a favourite stock in your portfolio, and your planner is not licensed to sell stocks, you may have the wrong planner, assuming you want the planner to implement their recommendations. The six-step process mentioned earlier should provide an excellent basis for you to move forward. Once completed you will know where you are at present, and where you are going. You will also have a guideline on how to get to where you want to be financially, if possible, while still operating within your own risk tolerance. Protecting your family's financial future will also be covered in the event that you die prematurely or become disabled. There will also be an outline of potential problems you may run into if you stay on your current path, along with recommendations on how to correct them, if possible. Another feature that is often developed with your planner is an Investment Policy Statement that will outline what investment parameters you and your planner will be working with and what to expect. If you are successful with your investments then keeping as much as possible from the taxman for your own enjoyment while living, and ultimately for your family once you have passed away, will be important. These areas can all be covered in your financial plan.

As you go through life and accumulate more investment assets, your choice of investment options increase. For example when starting out with a paper route you would likely be a saver and put your money into a savings plan, at your local bank. When you start a job with higher pay you become an investor and may direct your money into Mutual Funds and GICs. As you become an experienced investor your investments increase and so should your awareness about different types of investments, such as WRAP accounts, tax advantaged investments, stocks and bonds, f class shares and the use of leverage, etc. Finally as an affluent investor, your planner may advise you to consider a segregated account, whereby your WRAP account is separately managed, which could offer a number of additional benefits.

In summary, when looking for your Financial Planner, find someone you feel comfortable with that is knowledgeable in the areas where you need help. Also discuss how your planner is compensated, and their experience as a Financial Planner, as well as what professional designations they have acquired over their years in the industry.

About the Author:

Frank Sommer B.Sc., CLU, CFP, CH.F.C., RFP, is a Branch Manager with Berkshire Securities Inc. and has over 25 years experience in the financial services industry. He specializes in financial and estate planning for clients with a portfolio of $200K and above. Frank would be pleased to answer your individual questions by phone at (604) 531-7695 or email fsommer@berkshire.ca.