Investment Planning for Retirees

How changing regulations will benefit Canadian investors.


Investment Planning for Retirees - Saskatchewan

The sheer number of investment options available to Canadians is staggering. Even financial professionals themselves can have a hard time keeping up with all of the options that are available.


It has reached such a boiling point that the Canadian Securities Administration has released regulations requiring advisors to Know-Your-Product.


What does this mean?


An advisor CANNOT make a recommendation unless they truly understand the investment they are suggesting and can confirm it is suitable for you.


This is a huge win for all investors in Canada.


This reform is sure to have a sweeping impact on investment institutions across Canada and will help the consumer ensure the investment solution being recommended to them is in their best interest, not their advisors.


The onus of transparency has been generally reserved to advisors who hold their Chartered Financial Analyst (CFA®) and Chartered Investment Manager (CIM®) Designations.


This "fiduciary gap" is starting to close in Canada.


As Bob Dylan would say - Times... they are a changin'!!


And in all seriousness, it is about time Canadian investors or more protected.


So where does this leave you, the individual investor nearing retirement or recently retired?


Well, first and foremost. Be sure you are working with a CERTIFIED FINANCIAL PLANNER professional (CFP® ). Not an investment only advisor.


There are over 90,000 financial advisors in the Canada* – and not all of them have a professional designation. Despite what you may think, becoming a financial advisor is rather easy.


All you really need for a big bank to hire you is to take a securities/licensing exam (i.e. IFIC, CSC).


To help narrow down the field, search for financial advisors that have the CERTIFIED FINANCIAL PLANNER® professional designation. Less than 25% (17,000) of financial advisors hold the CFP® designation**, and for good reason.


CFP® Board requirements are much higher than simply passing a securities exam. With more education and higher standards, CFP® Professionals are taught to take a holistic approach to wealth management.


In addition to helping you with your investments, CFP® Professionals will also help with retirement planning, insurance planning, tax planning, estate planning, charitable giving strategies, and more.


CFP® Professionals are trained to help you plan around every aspect of your financial life, whereas ordinary financial advisors likely have much less expertise. Look for the symbol!


Certified Financial Planner Saskatchewan

Second, qualify your new or existing advisor to ensure the investments you hold are in YOUR best interest.


Here are a few red flags that may make you question your advisors intentions.


  • A financial advisor asks you to send your current investment statements ahead of the first meeting.


  • Your meeting with a financial advisor starts with investment recommendations.


  • Your financial advisor praises a handful of investment options right away without proposing any sort of underlying financial plan.


  • You only receive a call form your advisor when they the "Next best thing" you should invest in.


  • You have not created a retirement plan that will minimize your tax and maximize your retirement income.


We recently released a consumer guide to help you choose a financial advisor. It goes into depth on investment only advisors and other key factors to consider when trusting somebody with your life savings.


CLICK HERE TO CHECK IT OUT


Investment transparency is a no-brainer.


You know what else is? Guess... I'll wait.


Fees!!!


The financial planning industry didn’t do consumers any favors when choosing names and designations to describe the different types of financial advisors and accounts.


But there is one key difference you should know and understand.


Fee-Based and Commission-Based are NOT the same thing.***


One option "unbundles" your cost of investing from your advisory fee making it more transparent.


While the other account is "embedded," meaning it is difficult to distinguish what you pay for advice and what you pay for your investment.



Fee-based advisors will be able to distinguish the cost of their advice and the cost of the underlying investment portfolio.


This clear distinction helps consumers understand what they pay their advisor and the value receive in return.


When hiring a new advisor or evaluating your current relationship, challenge them to show you value of their financial advice in dollars, not percentages.


Does their value proposition outweigh what you will pay them?


If they aren't willing to create a complimentary retirement plan to prove their value, refer back to the RED FLAGS I mentioned earlier.


If you want to build wealth and optimize your financial life, hiring a financial advisor can be a smart move. Unfortunately, not all financial advisors are equal – not by a long shot. And if you hire someone who isn’t qualified, you could wind up worse off than when you started.


Thankfully, regulations are starting to catch up to help protect investors from bad advice.


However, as with everything in life, the decisions YOU make will have a lasting impact on your probability of success in retirement.


Be informed and take your time when choosing the financial professional that is right for your and your family.


* https://www.advocis.ca/pdf/Financial-Advice-Industry-Economic-Profile.pdf

** Estimated percentage using data from the point above (*) https://www.fpcanada.ca/certifications/cfp-certification#:~:text=There%20are%20approximately%2017%2C000%20CFP,the%20financial%20planning%20profession%20worldwide.


***FEE BASED STRUCTURE - Clients who have these type of investments pay an advisory fee and a separate MER. The advisory fee is charged directly to the client for the advice and service they receive.


EMBEDDED FEE STRUCTURE - All expenses are charged at the fund level. This includes both the fees paid to the fund managers, and the fees paid for the advice and services clients receive. Under a bundled fee structure, the fees are the MER and the TER.


Written and published by Michael Isbister, IG Private Wealth Management as a general source of information only, believed to be accurate as of the date of publishing. Michael Isbister is a CERTIFIED FINANICAL PLANNER professional in Saskatchewan. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on up to date withholding rules and rates and on your specific circumstances. Trademarks, including IG Wealth Management and IG Private Wealth Management are owned by IGM Financial Inc. and licensed to its subsidiary corporations.

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