Choosing Your Financial Advisor

Author: Joey San

What is a Financial Advisor?

A Financial Advisor is a professional with skills and expertise to help guide you in making good financial decisions. This guidance can be in the area of:

Retirement Planning
Cash Flow to manage Debt
Strategic Investing
Efficient Tax Planning
Risk Management
Estate Planning

Advisors might have many designations or disciplines but one that stands out is the Certified Financial Planner (CFP) designation. An Advisor with this designation shows that he or she has the knowledge, skills, experience and ethics to help with all your financial needs. An advisor might implement a team approach where they share their area of expertise (insurance, investments, retirement etc.) with other team members and their clients benefit from this shared expertise. Your financial well being and peace of mind is your advisor’s top priority.

Why do I Need an Advisor?

No matter where you are in life today, you are making decisions that will have a big impact on your short- and long-term financial security and goals. Decisions about how you spend your money, how you save for a child’s education, how you plan for retirement and how you protect yourself and the people you love all impact the fulfillment of your goals. Making good decisions is key to achieving lifetime financial security. And getting good advice is the key to good decision making! You can benefit from an advisor’s knowledge and expertise.

Many people encounter these 5 Common Financial Planning Milestones:

Buying a home
Merging finances with your life partner
Starting a family
Sudden life setbacks
Retirement

Advisors have the experience and expertise to guide you through these critical times. They can help you make well informed decisions, understand your risk tolerance, make a plan and build an investment portfolio that meets your short- and long-term goals. Advisors can help you feel assured at times of uncertainty knowing you have taken the steps to prepare, avoid emotionally driven decisions and to manage financial risks. According to Sunlife Financial, research shows when working with an advisor, a client is more likely to consider themselves financially healthy, has about 4 times more investable assets and are 3 times more likely to say they’re financially comfortable. 84% of employed Canadians and 90% of retired Canadians say the service they get from their advisor is beneficial.

What Makes a Good Advisor?

There are many people that offer financial guidance and have their unique views about finances. The best way to find a good advisor is through an introduction or referral from a friend, family member or a trusted associate. The key is finding someone you can trust and can build a lasting relationship with. This can take a little bit of time and may require having meetings with different advisors. Positive characteristics of a good advisor are confidence, truthfulness, reliability, obligation and responsibility. Learn the advisor’s skills and areas of expertise. Your advisor should be someone who can fill in the gaps of your own knowledge and must have your best interest at heart.

An advisor has many responsibilities. He or she should help you make well informed choices regarding:

Building and protecting your wealth
Developing a comprehensive plan to take you through all of life’s stages
Balancing what you want today and what you will need tomorrow
Advising you on options you might not know about

It is also important that he or she actively monitor your progress and help you adjust as your life changes. Your advisor will help you reduce risks and take advantage of opportunities that arise over time.

In summary, a good advisor will poke and prod the way a good doctor does because asking questions gives a clear picture of your financial health. Be ready to answer questions like:

What are your short- and long-term goals?
What is most important to you?
What does success and peace of mind mean to you?

It takes a little time and effort to find your perfect financial advisor. It is important to ask a lot of questions because this is your plan and your future. Remember, a good advisor will become your planning partner, your financial coach, your disciplinarian, your mentor and your lifelong friend.

Connect Wealth is an independent financial planning firm that offers holistic advice to clients based on their current goals and future aspirations. We use well-established workflows and cutting edge technology to maximize planning efficiencies while simplifying the process for clients. Learn how you can maximize your financial opportunities at www.connectwealth.ca

Saving For Retirement

What Are Your Options?
What is the best investment plan to use to save for retirement? It used to be fairly simple; the answer was maximizing your RRSP. Do you know what is the best strategy for your situation? Do you know what your options are?

Here is a basic overview:
1. Save – The first rule of thumb to be concerned about is that you are saving money for your future. Too many Canadians are spending all of what they earn and not putting away any money for their future. A good place to start is to aim at putting away 10% of what you make.

2. Tax Efficient – Ever since the launch of the TFSA, there has been a debate by financial professionals over which investment plan is more tax efficient to use, the RRSP or TFSA? My opinion is that it depends on your situation both now and in the future and should be looked at on a case-by-case basis to see what fits best. I would be cautious if a financial advisor is always only promoting one plan type over the other, both have their benefits. (For more info on TFSAs, see my article from Sept 2013 – http://jaybrecknell.ca/demystifying-tfsa/)

3. Business Owner – If you are a business owner the question can get even more complex as you have more options. Should you use your RRSP, TFSA or instead save your retirement funds in a holding company? Since corporate tax rates are at an all time low in Canada more business owners are saving corporately versus in a RRSP or TFSA. There can be many benefits to saving corporately as it can provide flexibility to the business owner. As this can be complex it needs to be put together by a professional that understands your corporate structure and the tax and legal rules that are involved.

As with any financial strategy we would recommend ensuring that you have your personal situation reviewed by a professional to make sure that is done in the best way possible. If you have any questions or would like your plan reviewed feel free to contact us.

Questions?

December 1, 2014/by Vince Olfert

Business Planning

Business Owners Fail To Plan

Prepare Your Business For Sale
Only 9% of business owners have a documented transition plan in place and yet 70% of small business owners plan to transition in the next 10 years*! As a financial planner I continue to meet business owners who are planning to sell or transition their company but they do not have a plan. Typically they are either unsure of the process, so they procrastinate or the business is their baby and they do not want to let it go. It is understandable that a major decision like this is hard to make, especially without someone to assist you.

When a business owner is considering selling here are some things to consider:

1. Don’t Leave the Party Last – You see this with professional athletes when they face the question of when to retire? In my opinion you are either growing your business or it is shrinking it, there is no standing still. A lot of business owners later in their career can get into maintenance mode, which usually means the business is starting to decrease in revenues. At first the revenues may hold but after a couple of years you typically see them start to decline. If you want to maximize your selling price and be attractive to potential buyers be careful to wait too long.

2. It Takes Time – Selling a business can take you longer than you think. You need to find the right candidate to take over your business. You are looking for an individual that is an entrepreneur; remember there are more employees in the world than business owners. Also, in most transitions the current owner is asked to stay with the company to assist with the passing of the reigns. You should plan for 1-2 years to sell. This means you should be creating a plan 5-7 years prior to your planned exit.

3. Change – Every industry is faced with changes due to technology, regulatory, competition, etc. If you owned a video or record store in the 80 or 90’s, when was the best time to get out? What if the technology that Google is working on to make it so that cars drive themselves eliminate car accidents in the future. Could that affect you if you own an auto body business? What changes face your business?

4. Financials – Often times the financial statements for a business are ignored until it is too late. Yet they will play a very important role in the sale of the business. You want to make sure that your financials present the best view of your company so that a potential buyer is enticed to make an offer.

There are many things to consider when selling a business. The first is to get a professional that can assist you with putting a plan together to ensure that you maximize the value, save tax, and control when and how you sell your business. As with any financial strategy we would recommend ensuring that you have your personal situation reviewed by a professional to make sure that is done in the best way possible. If you have any questions or would like your plan reviewed feel free to contact us.

Questions?

*Source – http://www.advocis.ca/Update2014/index.html

December 1, 2014/by Vince Olfert

Insurance, Personal Planning

Protecting Your Biggest Asset

The Most Overlooked Risk
What is your biggest asset? Most people might answer your house, boat, car, or investments. When in fact it is your income and your ability to earn a living.

When I review a person’s financial situation, one of the most common areas that is overlooked is to protect their ability to earn a living. Disability insurance is a critical part of a person’s risk management plan. When you think about all of the things that people have insurance for, cars, houses, electronics, death, etc. Unfortunately if you do not have an income all of these other areas fall apart.

When it comes to managing risk, a financial planner looks at two main factors:
1. Risk – what is the chance of this happening?
2. Impact – If it does happen, what is the potential damage?

As an example, the risk of a house fire is low but the damage it can cause financially is extreme. Hence why people buy home insurance.

The Risk Is High:
Did you know that 1 in 3 people, on average, will be disabled for 90 days or more at least once before they reach age 65?*

The Impact Can Be Severe:
How long could you survive for without your income? Most families could last maybe 4 to 6 months before they would have to start selling other assets such as investments or their home. How would you survive till age 65 and then into retirement?

The main way to manage this risk is to have long term disability insurance to protect yourself in case of an illness or injury.

Possible Options:
1. Canada Pension Plan – This will only pay for the most severe disabilities and the amount is small.
2. Worker Compensation – This only covers you if it is a work related injury.
3. Group Plan – This is how most Canadians are covered. IMPORTANT! You should have your coverage reviewed to make sure you are properly protected.
4. Individual Plan – You can purchase this through the major insurance carriers.

Key Facts:
• If you are an executive or earn over $80,000 per year and you have group coverage you should have it reviewed, as you may not be fully protected.
• If you have group coverage your plan definition typically will change after 2 years of being disabled. This can allow the insurance company to decline your coverage if your disability is not severe enough. This is done to keep your rates lower for your group plan. You can get individual insurance to protect against this.
• The definition of a disability policy is critical.
• Most disability insurance is designed to cover you till age 65; some may have only a 5-year benefit period.

Questions?

*Source – “A guide to disability insurance”. Canadian Life & Health Insurance Association

December 1, 2014/by Vince Olfert

Choosing Your Financial Advisor

Author: Joey San

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