The Importance of A Financial Plan - Choosing an "Advisor"

Sam Akram

July 20, 2006

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Do you know how much money you need to save to meet your retirement goals? Have you started to save for your children’s post-secondary education and college? Will your family be able to maintain the lifestyle that you have established and created in the event of death or disability?

These are just a few of the many issues that can be addresses in a business plan. Most people have not determined their financial goals let alone developed a plan to reach them. You should first make basic decisions on the road to start your planning process. It is often said if you do not plan where you want to go you will end up somewhere else.

You should and must follow a systematic approach to ensure that your goals are well defined and that are set of achievable steps are established and appropriate benchmarks have been put in place.

Should you use an investment planner or another outside party? That is a very good question. Woody Allen’s joke in 1960 was that an insurance salesman was a person who invested your money till it was all gone is as timely and accurate as it was in the 60’s. Only the titles have changed to fool most.

The current term is now “Investment Counselor “. Or “Wealth Manager “ or some such nonsense.

You have several options

A counselor who comes as part of the package - free. Remember that there is no such thing as a “free lunch”. The counselor may not charge you directly but somewhere someone has to pay. It is you. The investment or insurance company pays the agent a commission to sell you the product. Guess who ultimately pays the shot – you do of course somewhere in the product cost or fees that you will pay.

Never believe that the agent is there for your benefit. They are there solely for the commission. True, some agents are better , more honest as well as more sincere than others – actually interested in helping you.

If you find such a person they are very rare and exceptional in the financial field. Treat them like gold.

Secondly there are individual professionals who will help you for a fee.

Do not laugh at the cost. These people are doing fee for service as opposed to getting commission off the sales. These people are more objective and not affected by the gold of the commission shining in their eyes.

Often the real cost to you as investor is much less than a “free service” from a commission agent.

Lastly avoid the “financial advisors” or “wealth managers “at banks, credit unions, saving and loans etc.

These are people who are on salary, putting in time. Their only concern is going for lunch and going home at 5 and not getting their boss in trouble so as to draw attention and ire to themselves.

They may help you accidentally. However they hide behind the façade and power of their institution. And t hey will generally not be in the position when you need their help with some problem or disaster . They will be long gone transferred to another branch or position and maybe even being promoted . Lots of luck in tracking them down and getting their help. Generally in such organizations as in government jobs ultimately no one is accountable at least to you as a consumner and investor.

At least with a commission salesperson you have the ultimate threat “Screw off. I am unhappy. I am leaving and you will lose the commissions and residual commissions coming to you. So you had better take care of this problem.

A written financial plan incorporates many different aspects of financial planning. Retirement planning is always popular, as is planning for a child’s education.

Estate planning is growing in importance as baby boomers age. Investment and tax planning are essential components of a comprehensive plan and other issues such as saving for a major purchase or pension buyout options can be addressed.

Whatever your financial goals may be the actual selection of investment products does not occur until much later in the process. The investment vehicles that you and or your advisor select should be chosen for their ability to help you meet your long term personal and financial goals. In order to ensure that your portfolio is appropriate for your objectives you should make certain that your financial pan is current especially in regards to taxation before you invest.

Financial planning is a process, not a one time event. A plan that works today may be inappropriate tomorrow due to changes in your life and financial and / or personal circumstances.

It is important that you constantly review and access your portfolio for changes and growth either yourself or with meetings with your advisor.

Don’t wait for spring. The sooner you begin the sooner you will be on your way to your chosen financial dreams...