Getting you from where you are to where you want to be.

William (Bill) Green, CFP, FMA, CFDS, CIM


 

Financial planning vs investment planning

Many people confuse financial planning with investment planning or retirement planning. That is because currently across most of Canada there is no regulation on the use of the term “Financial Planner”. Almost anyone can describe themselves as a Financial planner.  When in fact, many people that use the term financial planner are really investment planners/advisors, or product sales people.  There is regulation on the use of the CFP ® trademark.  A true financial planner will discuss all parts of your financial plan with you see Financial Planning for Canadians . A true planner will analyze all aspects of your financial situation and create a written plan, they will follow-up with you on a regular basis and make adjustments to the plan as required.

 

Insurance

Bill feels that insurance is a vital part of everyones financial plan, that is if they are not at a point where they are self-insured or simply do not have a need.  He deals in Heath Insurance (Health Care Spending Accounts or HSAs. HSA accounts are an inexpensive medical plan for any size business), Life, and Accident and Sickness areas of personal insurance, not property (Auto/Home) or casualty (Liability). 

Insurance provides a safety net for those times when our cash flow and investments simply are not enough to cover the bills.   His approach is straightforward, buy Term (or temporary insurance) when the need is temporary and buy Permanent when the need is ongoing and everlasting. 

Smart Talk About Insurance Video Link A description of the various available insurance options and the process of puchasing a policy.

Smart Talk About Insurance Video Link Insurance what it is for and why it is important to have the proper coverage amount and type.

Smart Talk About Insurance Video Link Joint Last to Die Insurance is an inexpensive way to fund your Success Tax Liability or to leave behind a lasting legacy.

Insurance is a unique product, and has many valid uses inside of a well structured financial plan and can be a valuable part of your estate plan when it comes to funding your Success Tax Liability.

Investments

Investments also form a critical part of your financial plan, however, investment returns, should not be the sole focus of your investment decisions.  Risk tolerance, Objectives, Asset Allocation, Investment Time Frame, Tax Planning, Asset Protection and Preservation of Capital, also need to be considered in all of your investment choices.


Estate Planning

Estate planning is an essential part of any financial plan that often gets neglected. Bill will review your Wills and Powers of Attorney to make sure that they are in line with your wishes. If you do not have a valid Will or Power of Attorney, he can refer you to one of the lawyers that he works with. Many people are simply not aware of the benefits of having a well thought out estate plan, and while there is no "Estate Tax" in Canada we do have "The Success Tax" and most people do not know just how much “The Success Tax” could cost their heirs.

 

Financial Divorce Work

In his role as a Chartered Financial Divorce Specialist, Bill works with you and assist lawyers and/or mediators in designing settlement proposals that will maximize my client's satisfaction, considering all the available financial options. He provides financial analysis of a couples' assets, liabilities, income, child and spousal support payments, also taking into consideration inflation and the changing tax consequences. Additionally, Bill provides insight with respect to pension plans, other investments and insurance (including ongoing protection), while showing options for future financial projection scenarios. He helps educate his clients on tax and other financial consequences of retaining or giving up certain assets, as well as budget management during the difficult period before and after a divorce.

 

Hourly vs Asset Management Fee vs Commission

There are 3 basic ways you can pay for a financial plan.

The most common in the past had been a “free” financial plan provide along with the purchase of investment products, that paid a Commission or trailer fee to the planner.  In this case, the client was often unaware of the fees that they are really paying, as the fee is often hidden in the price of the products they are purchasing.

Currently the most common is an Asset Management Fee or fee for service, based on the assets that the planner is managing or over seeing. These fees can vary but often fall within the range of ¼ of 1% to 2 ½% of the assets that the planner is managing.  Some planners charge a lower fee, and base the fee on the clients total net worth in order to avoid any conflicts of interest.

The third way, is a newer trend in Canada, that has existed in other parts of the world for several years. The Hourly planner. An hourly planner works for you on an hourly basis, much the same as your accountant or lawyer would. Most hourly planners have an annual package available for purchase, so that clients are not concerned about contacting their planner an getting an invoice in the mail each time they do.  Hourly fees vary depending on the experience of the planner. A more experienced planner will charge a higher hourly fee, but can often do way more work in less time then someone without the same experience.  While hourly fees may initially appear to be fairly high they often are lower then Asset Management Fees.  A client with a $1MM portfolio might pay 2% which is $20k a year in fees, that would be 80 hours of work by a $250 an hour, hourly planner*.

* Please note that Asset management fees usually also include the selection and management of specific investments while most hourly planners do not pick or hold actual investments for their clients, they focus more on asset classes and asset allocation. The hourly financial planning client, is usually a do it yourself investor looking for a second opinion rather then someone to pick individual investments for them, or a client of a fee based or commission advisor looking for a more detailed plan or a second opinion. Bill offers both fee for service and hourly planning options for his clients, He does not offer product sales to his hourly planning clients.


Robo-Advisor vs Human Advisor

A new type of advisor is making an appearance in Canada called the Robo-advisor.  A Robo-advisor is a call centre person that uses a computer program that selects and re-balances an investment portfolio based on the input from the client.  The main selling point to Robo-advisor’s is that they promote lower fees, however fees are not the most important thing when it comes to your investments. Net returns (returns after fees and taxes) are the most important.  

If you have an investment that has a gross return of 7%, with a 3% fee and another investment with the same 7% gross return but it only has a 1% fee, the lower fee wins hands down. However, if you have two investments and one has a gross return of 10% with a 3% fee, for a net 7% return and another that has a 7% gross return with a 1% fee, for a net 6% return the one with the higher fee provides the investor with a higher net return, despite the higher fee.  

There have been several studies done over the years that clearly show that investors that use Financial planners end up with higher long-term returns than those that do it themselves.  This is despite the higher fees paid by the investor in order to compensate the advisor for the work they do.  This is likely due to the emotional aspects that go along with investing. Historically investors buy high and sell low. They panic and sell when they should be buying and they often buy at market peaks.  Robo-advisors have no ability to deal with human emotions and it is our emotional responses to what is happening in the markets that often effects our investment performance.


2nd Opinion service

Bill offers a second opinion service on almost any financial aspect of his clients' lives. Bill helps answer questions like; Should I Rent/Lease or Buy; What is my best Financing/Loan/Credit option for me; Can I afford to…, I need some cash where should I take it from; Should I put money into an RRSP a TFSA or pay down debt?

When working as an hourly planner, these are just some of the questions that he can help answer, unbiasedly* since Bill has no vested financial interest in the out come.

*There are many great commission/fee for service planners and sales people out there, but it never hurts to have a second opinion.



For a free review of your existing financial plan, or to discuss your financial planning or insurance needs, please send Bill an email or give him a call.

 

Bill Green, CFP, FMA, CFDS, CIM

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