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Money smarts may come with a fee, but they can also set you free.

Laurie Campbell

For the latest scoop on trends and advice surrounding financial planning and investments, Rob Carrick makes for a good read. He covers a lot of ground through his blog at the Globe and Mail. Recently, he wrote about the hesitancy of many Canadians to pay fees to financial specialists for the wisdom they can impart. He believes people ought to rethink the matter, and I heartily agree with him.

Fee-based financial advisory services are well worth paying for if people choose their advisors and counsellors wisely, be it specifically for investments or for general personal financial planning and budgeting. Let’s just keep in mind that, generally speaking, advisory fees are small in relation to prospects for the long-term financial security of any family or individual. Perhaps the whole issue of paying for financial advice simply comes down to this: how much do we as Canadians value long-term peace of mind?

The price to pay for advisory services might come as a surprise, especially when it’s put into the context of long-term benefits.

I suspect the issue also has to do with education. A lot of people aren’t quite sure what to make of financial specialists. The field seems to smack of high finance or something that applies mostly to the well-to-do. But, as I say, the price to pay for such services might come as a surprise, especially when it’s put into the context of long-term benefits. Here I offer a primer that might help lift the mystique surrounding these specialists by defining who they are, what they do, and how they charge.  

Financial specialists come by many general titles, from financial planners and financial advisors, to financial counsellors or, in friendlier terms, money coaches. Some specialize in certain areas (e.g. investments, insurance, taxation, retirement planning). Others are generalists who can help with overall goal setting, budgeting, and investments.

Seek a specialist who is objective about your needs and who has no conflict of interest in the investments being recommended.

Before seeking aid, you must understand what it is you want out of a specialist. Do you require all-embracing financial advice? Do you need help with saving and goal setting? Do you want to initiate or review a retirement portfolio or set up an education fund? Do you need pointers about tax breaks or advice about investments in, say, mutual funds? Particularly in relation to investment advice, you should seek a specialist who is objective about your needs and who has no vested interest or conflicts of interest in the investments being recommended.

Above all, your specialist must be skilled as an expert with good references. It’s always wise to ask around among family, friends, and associates about professional services that are trustworthy. It’s often better to get some first-hand suggestions before scouring the Internet. Meanwhile, you can contact the Financial Planning Standards Council a not-for-profit organization which develops, promotes and enforces professional standards in financial planning through Certified Financial Planner® certification, and raises Canadians’ awareness of the importance of financial planning.

Keep in mind that in the financial services industry there is no shortage of certifications, designations, and abbreviations.

As you talk to others, keep in mind that in the financial services industry there is no shortage of certifications, designations, and abbreviations. By understanding what the designations mean, you will be better equipped to choose the professional best suited to help you.

Familiarize yourself with this list of designations:

  • Chartered Accountant (CA) - A CA is an experienced accountant that has met strict education and licensing requirements. A CA will be a good choice for tax issues.
  • Personal Financial Specialist (PFS) - CAs can undergo additional financial planning education. After meeting exam and experience requirements, they can use the CA/PFS designation.
  • Certified Financial Planner (CFP®) - The CFP is a respected financial planner with a minimum of three years of experience, a strict code of ethics, and tested abilities through lengthy exams. These individuals will be able to provide a broad range of financial advice.
  • Chartered Financial Consultant (ChFC) - ChFCs are typically insurance experts who specialize in some aspects of financial planning by meeting additional education requirements in economics and investments.
  • Chartered Retirement Planning Counsellor (CRPC) - CRPCs specialize in retirement planning. They must also pass stringent exams and meet a strict code of ethics.
  • Credit Counsellors (including Money Coaches) – While they specialize in programs to help people with problem debt, they also can provide financial literacy training that assists with overall personal money management (budgeting, goal setting, spending plans). They are certified under strict standards by industry associations

Note that this is just a partial list of the many different designations found in today’s financial marketplace. Some specialists may have multiple designations.

Any reputable financial specialist will hold an introductory meeting with you at no cost. This is your opportunity to explain your situation.

Here’s how fees can be administered:

  • Flat Fees - This is a common method of compensation. Some planners may charge an hourly rate, while others may charge a fee for putting together a thorough financial plan. Typically, there is not much to worry about in terms of a conflict of interest since the planner is getting paid whether you purchase any investments or not.
  • Commission - This also is a common way financial professionals are compensated. Let’s say your planner suggests you purchase an investment. A certain percentage of the total purchase will be deducted and a portion of that will go directly to your planner. Though this is a common practice, you must feel confident that your planner takes your best interests to heart.
  • Fee Based on Assets - This is a less common compensation option. Some planners charge an annual fee that is based on a percentage of the assets you have invested with them. Remember that many planners offer a combination of the above fee options.

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