|Financial planning is a moving target
Tuesday, November 16,, 2010
I am in the financial services business, which really means
I am in the advice business. I spend time every day reading
articles online, in the business press, and many other sources.
I often think the advice rendered could be very dangerous to
the financial health of readers. That’s not because it’s not
good. It is good. And advice from some of the pros in the business
(Jon Chevreau at National Post and Rob Carrick at The Globe
and Mail, for example) is often excellent. But it suffers from
one mighty drawback: It’s generic. It has to be, because newspaper
writers, advisors, and columnists can’t sit down with you face
to face to explain how an investment or planning idea might
– or might not – work in your individual situation. They have
deadlines. And they write to fill a 750-word space.
If you read about investment strategies involving various exotic-sounding
exchange-traded funds (ETFs), stocks, limited partnerships,
labour sponsored funds, options, or leverage, check with your
advisor before taking action. That’s because your financial
plan is a moving target, and a business columnist can never
assess the potential impact of an investment idea on your entire
Your goals and risk tolerance can change quite dramatically
over five or 10 years, sometimes less. If you or your spouse
lose your job, have a baby, get divorced, get a promotion, receive
an inheritance, or encounter a disability, all your retirement
goals have to be re-visited as a result of your life-changing
The fact that financial planning is a moving target means you
have to be extremely careful about applying generic, third-party
advice to your own situation.
Your financial advisor should always be the quarterback in
your financial planning and will include other professionals
(lawyers, accountants, insurance specialists) as required.
Your advisor can tell you why a product is being offered as
an investment or tax solution, what the benefits are, what the
risk is, what some of the alternatives are – in your specific
financial situation. For example, your advisor will take into
account how a specific investment or planning idea fits in with
your whole financial picture, including insurance, debt, cash
flow, and education, retirement, and tax planning.
To get the most out of the advice being rendered, you should
be honest, open, and give full disclosure. It’s difficult for
advisors to give good advice when they don’t have all the relevant
information. Not just fiscal information like debt levels, income
changes, and so on, but also whether you are thinking about
retiring earlier/later, have relevant health information, that
may affect your plans, or are thinking about starting a new
business. All of those factors influence your plans and risk
tolerance. Can you get all that from your daily business columnist
or commentator? No.
Most Canadians need a financial planner to help guide them
through the minefield of investment and planning options they
read about every day and help determine what information applies
to their situation.
Generic Mutual Fund Disclaimer
Commissions, trailing commissions, management fees and expenses
all may be associated with mutual fund investments. Please read the
simplified prospectus before investing. Mutual funds are not
guaranteed and are not covered by the Canada Deposit Insurance
Corporation or by any other government deposit insurer. There can be
no assurances that the fund will be able to maintain its net asset
value per security at a constant amount or that the full amount of
your investment in the fund will be returned to you. Fund values
change frequently and past performance may not be repeated.
Personal Opinions & Recommendations Disclaimer
The foregoing is for general information purposes only and is the
opinion of the writer. This information is not intended to provide
specific personalized advice including, without limitation,
investment, financial, legal, accounting or tax advice. However,
please call the author to discuss your particular circumstances.