It’s never too late for a financial plan, pros say

 Michael Bronstine

While it’s best to start early, you can still benefit from planning at any stage of life

For many Canadians, planning for their financial future can be difficult in normal times, much less during a pandemic. A recent study showed, for example, that 39 per cent of respondents had no plan in place for when government assistance comes to an end.

But it’s precisely in uncertain times that it makes even more sense to review your goals and make sure you have emergency funds on hand. And financial planning can be invaluable in that respect. As CPA Stan Tepner, a portfolio manager with CIBC Wood Gundy, puts it, “A plan offers a pretty good answer to the question, ‘Am I going to be OK?’ ”

WHAT IS A FINANCIAL PLAN?

A financial plan can be compared to a roadmap, says CPA Aurèle Courcelles, assistant vice-president of tax and estate planning at IG Wealth Management. “It shows you how to get from where you are today to where you want to be in the future,” he says.

In addition to cash management, Courcelles notes that a plan can also cover risk management, retirement planning, estate planning, tax planning and investment planning. “Tax planning really permeates every other element of a financial plan,” he says.

Here’s how to get started on a plan, with tips from CPAs in the field.

1. CONSIDER YOUR OPTIONS

There are a couple of basic ways to draw up a financial plan:

• You can visit a fee-for-service planner and either pay by the hour or pay a flat rate (generally from $1,000 to $5,000, although the fee can run higher).
• You can ask an adviser to prepare a plan as part of the services they provide in managing your investments. There are at least three different fee models. For example, some advisers charge based on a percentage of assets under management; others receive commissions based on the sale of a product or a transaction, such as a stock trade; and others are compensated through a combination of fees, assets under management and/or commissions.

As for the plans, they can vary widely in complexity, depending on the type of financial institution or adviser you consult—from banks to wealth management firms and more.

2. PROVIDE THE RIGHT INFO

When you first meet, your planner will ask many questions—often in the form of a questionnaire that can range from a few pages to many more, depending on the institution. (The CIBC Woody Gundy version is 15 pages, says Tepner.)

Questions range from the basics, such as your age and family members, to how much you earn, your sources of income today and future, pensions, life insurance, real estate and so on. Tepner adds that the questionnaire also includes “softer” questions such as, ‘What keeps you up at night?’

3. VIEW THE PROJECTIONS

Once the information is gathered, it’s time, Tepner says, to “plug it all into the planning software and see what it says.” For example, you might want to spend a certain amount a year after tax. The software can help determine if you are on the right path.

The projections will naturally involve making assumptions—such as, how much you intend to save, as well as future inflation, tax rates, investment returns and so on.

Once the first draft is prepared, the planner may run various “what-if” scenarios, says Tepner. “For example, what if you worked four more years? What if you reduced your spending by 10 per cent? Even saving a modest amount can affect how your wealth compounds over time.”

4. CONSIDER TAXES, INSURANCE AND MORE

As CPA Larry Short, portfolio manager and senior investment adviser with Short Financial, iA Private Wealth, points out number crunching is only one part of the process. Depending on the type of planner you consult, they may also look at your insurance coverage, trusts and so on.

For example, Short’s firm provides portfolio management and tailored wealth management solutions to high-net-worth clients. After a series of in-depth planning meetings, the practice will provide a client with a package containing their plan, will, power of attorney, bank accounts and other important documents. “We’ll say, ‘Here’s what you need to give your family if anything ever happens to you,’” he explains.

As portfolio managers, Short and Tepner can create financial plans that are meant to work in tandem with the client’s investment portfolio. And, as CPAs, they also may provide tax planning advice, although they may call on other experts such as lawyers.

5. REVIEW PERIODICALLY

As Courcelles points out, a plan is a living document that will evolve over time. “You can’t expect the plan you have today to last for the rest of your life. It will change and it should be monitored.”

When it comes to frequency of monitoring, however, there’s no rule of thumb, says Courcelles. “Generally, you should look at your plan every year or every second year and whenever there’s a significant event in your life.”

6. TAKE THE PLUNGE

Even if you have never done a financial plan, it’s not too late. As Courcelles says, “It may be more difficult, and it may take more sacrifice and effort to get to where you want to be, but you can do it—and, the sooner you start, the better.”

Courcelles adds that with COVID causing a hiatus in normal activities, this is a good time to learn as much as you can on your own. “Look at the elements of financial planning and educate yourself about budgeting and managing finances and investments and taxes. Then, when you do talk to your adviser, you will be able to have a more informed exchange. And you’ll really be able to help yourself, just as much as you are relying on your planner to help you.”