Navigating the world of personal finance feels like embarking on a never-ending quest, one where the goalposts are constantly moving. From fluctuating markets to ever-changing tax laws, and evolving personal and family dynamics, it’s clear that a financial plan is never set in stone. Rather, it’s a living, breathing entity that demands regular attention and revisions.
Financial planning encompasses a wide array of components—retirement and tax strategies, investment decisions, insurance coverage, estate planning, and managing the ins and outs of your everyday finances. Though ideally, a robust financial plan includes all of these aspects, understanding the format and frequency of these updates remains perplexing for many Canadians.
At its core, financial planning doesn’t subscribe to a one-size-fits-all model. The standards set by FP Canada for Certified Financial Planners (CFPs) allow for flexibility, acknowledging the wide range of financial advice—from straightforward tips to more intricate strategies.
Some professionals, like Utah-based CFP Carl Richards, advocate for simplicity. Richards promotes the idea of distilling financial plans into a single page, focusing on key elements like cash flow, net worth, and financial aspirations. On the flip side, other financial advisors may opt for a comprehensive, detail-heavy approach that involves various experts, culminating in a bound presentation covering every financial aspect imaginable. Regardless of the method, having a clear, written overview of your financial situation and goals can enhance accountability and reduce stress.
Interestingly, many Canadians find themselves working with financial advisors whose primary expertise is in investments. While investment decisions are crucial, they should integrate into a broader strategy of saving, spending, tax reduction, and estate planning—not stand alone.
High-net-worth individuals, those with investments exceeding $1 million, might find financial plans that favor purchasing permanent life insurance to manage taxes after death. It’s a balancing act between opting to invest more, potentially having funds to cover taxed amounts later, or committing to hefty insurance premiums.
Navigating where to acquire a comprehensive financial plan can be tricky. While some banks offer good financial planners, caution is advised due to potential biases toward selling life insurance. Independent firms provide planning, often tied to fees included in investment management. Alternatively, accounting firms are stepping into the planning space, especially for business clients looking for year-round advice beyond the busy tax season.
For those wanting pure advice, a niche market of advice-only planners exists. These professionals focus strictly on providing financial guidance without selling products—though their scarcity and long waitlists can be a downside given the domination of the market by major banks.
Adopting financial planning should be seen as a continuous journey, not a one-time task. Life changes like buying a house, marriage, parenthood, or preparing for retirement should trigger reassessment of one’s financial strategies. In parallel, ongoing planning can alleviate concerns about retirement savings—a sentiment echoed by a recent survey from the Canada Pension Plan Investment Board, which highlights how those with an updated financial plan feel more secure about outliving their savings.
But financial plans should not just sit static on a shelf. They require regular revisiting and updating to reflect new personal circumstances or external economic factors. Transitioning from a static ‘financial plan’ to dynamic ‘financial planning’ better captures the essence of this ongoing process, ensuring you’re equipped for whatever the future holds.
Advice from seasoned planners suggests an annual review at the very least, covering aspects like retirement, tax adjustments, investments, insurance, and estate considerations. This approach ensures that your planning keeps pace with life’s ebbs and flows, providing peace of mind and financial security.
Jason Heath, a seasoned advice-only certified financial planner from Objective Financial Partners in Toronto, advises staying proactive in engaging with your financial world. It’s about keeping things current and ready for the future, always.
Remember to bookmark reliable financial news sources and stay updated with the latest developments and recommendations for managing your financial life. Sharing this wisdom can also enrich your social networks, fostering a community where sound financial practices are shared and celebrated.
