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By Julie Cazzin with Allan Norman
Q: I paid a fee-based planner for some financial advice, but they didn’t tell me anything I didn’t already know. I feel like it was a waste of money. Am I missing something? — Caitlin in Penticton, B.C.
FP Answers: Caitlin, hopefully you said something to your planner — for both your sakes. Your question got me thinking. In future, what is the one thing you can do to feel like you’re getting full value from financial planning and it doesn’t seem like a waste of money? Simple: curiosity. Stay curious throughout the planning process and you will get your money’s worth.
Some of the best planning sessions I have had were with engineers who asked me a lot of questions and gently challenged me. I once asked my dad, who was a chemical engineer, why engineers ask a lot of questions, and he told me, “Because a good engineer always wants to know why.”
Caitlin, you need to know “why” as well.
Planning is about learning, making good decisions, dealing with change and building confidence so that you are comfortable living the lifestyle you want without the fear of ever running out of money.
Did you remain curious and ask lots of questions throughout your planning sessions? Did your adviser give you the chance to ask questions? Was your adviser curious about you and your lifestyle?
One thing that helps trigger questions is the use of detailed financial planning software that you and your planner interactively work on together. For example, let’s say you punch in some numbers on an online accumulation calculator and get some results. If you were to give your planner the same numbers to punch into their sophisticated software, they would likely get similar results and you would think, “What a waste of money.”
But a curious adviser will want to know how you spend your money since it’s a reflection of your lifestyle, and will ask you to fill in an expense sheet. I was once working with a client and things weren’t quite working out the way he wanted, so he suggested reducing his retirement income by $10,000. I said sure. But did he want to cut out his trips south? No. What about his fitness spending? No. Some entertainment costs? No.
He wasn’t prepared to give up some of his lifestyle and this led to further discussions of how to make things work. If I had just accepted his suggestion of reducing his retirement income by $10,000, that would have been the end of the discussion and there would have been no learning.
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Each planner has their own way of guiding you through the planning process, but there are some general steps. The first is to lay out all your financial chips on the table along with your current lifestyle. This way you learn the truth about your money and what it will do for you. Do you have some gaps? When? Why? Do you have more than you need? Ask questions.
The next step is to see what’s possible. This is where you want to be really curious. “What happens if I buy a cottage? Can I help my kids financially now?” This is also where you want your planner to be curious. They should ask what is important to you about owning a cottage. If you rented the same cottage for two weeks each year, would that satisfy your needs for owning a cottage?
Once you know what is possible, you can set some lifestyle and financial goals and develop a plan that lets you achieve those goals your way. With your goals in place, you need a to-do list, developed by you and your planner. Ask for it if you aren’t given one and make sure the trip to Miami is on there, too. Remember, this shouldn’t just be a financial list. It’s a lifestyle plan.
Finally, your plan needs to be monitored by you or your planner. You can do that by using a net-worth and cash-flow projection itemized annually. Ask your planner for something you can use to monitor your plan. It’s time to review when your actual circumstances start to deviate from the plan’s projections. Ideally, though, you should be reviewing your plan each year.
Think of your planner as your thinking partner or your guide to an amazing life. Meeting on a regular basis and staying curious will help you learn to make good decisions and become more confident with your situation, so that you are in a better position to get the lifestyle you want. Stay curious, Caitlin, and you won’t be wasting your money.
Allan Norman, M.Sc., CFP, CIM, RWM, provides fee-only certified financial planning services through Atlantis Financial Inc. Allan is also registered as an investment adviser with Aligned Capital Partners Inc. He can be reached at www.atlantisfinancial.ca or [email protected] This commentary is provided as a general source of information and is not intended to be personalized investment advice.