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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 financial plan.

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 event.

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.



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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.