Finding Help with Your Money – Part 1
Posted by Gail | Filed under Good ideas
I often extol the benefits of taking advantage of a professional when it comes to figuring out what to do with your money. The tough part, of course, is figuring out if he or she is really good at the job and how to avoid the money-grubbing, self-proclaimed know-it-alls who would have you line their pockets while you scratch your heads. And so we come to a question I received from S:
I have decided that my 2010 New Year’s Resolution is to do a complete money makeover: prioritize debt repayment, develop a long-term/short-term savings plan, build an investment portfolio, create a budget and cash flow tracking system, start planning for retirement, and educate myself on tax strategies. I have two questions for you that I hope you will answer:
#1: what are the names/functions of the different types of financial professionals out there? (i.e. I need to know who will try to sell me a financial service/product, who will try to help me sort out my finances, and how I can tell the difference before I make an appointment?)
#2: for a total money makeover like I’m trying to achieve, is it necessary to see more than one type of financial professional or is there an all-in-one person who can help me achieve my goals?
The financial world is filled with an alphabet soup of designations for people who purport to be available to help you. Sometimes, however, these people are only working to help their companies or themselves and so you must be very careful in making your choices.
Here are some of the most common designations you’ll come across and how they may be able to help you, providing you find the right person.
CFP stands for Certified Financial Planner. This designation is recognized in 14 countries around the world. To become a CFP a body must have successfully complete an accredited educational program (or hold specific professional and educational designations), pass the national exam and have a minimum of two years relevant work experience. CFPs must also adhere to a professional code of ethics and must complete 30 hours of continuing education every year.
RFP stands for Registered Financial Planner, which is an advanced financial planning designation that requires holders to demonstrate their ability to apply their knowledge in the completion of a comprehensive financial plan. Like CFPs, RFPs are subject to annual continuing education requirements and a code of professional ethics. They must also carry professional liability insurance.
PFP stands for Personal Financial Planner, which is a designation created by the chartered banks to add credibility for their staff. PFPs must complete courses in personal financial counseling, insurance, estate planning and taxation. However I’ve met more than a few people with this designation who didn’t understand some of the most basic rules despite having completed the training.
Your next decision will affect your wallet. You can go “no fee” or “fee only.” When you work with a fee-only financial planner you’ll pay an hourly or package fee for your advice. Since they do not make money selling product, they should be focused on trying to help you sort out what it is YOU want. If you hit a body who seems to be pushing you in a direction you don’t like or offering options you don’t understand, cut your losses in terms of the time invested and move on. (Back in March 2008, MoneySense Magazine created a list of fee-only financial planners you might want to check out.)
When you work with someone who is selling products and earning a commission you will likely not be charged a fee, but will have to buy the products and services sold by that individual/financial company. This usually means a more limited range of options.
Whomever you choose, this person should be willing and able to refer you to specialists in a variety of arenas, not all of whom work for their organization (because if they do it isn’t a “referral”, it’s “cross-selling.”) For example, if you need help with tax issues, if you want to create an estate plan or if you need insurance, your financial planner should have experts with whom (s)he works regularly and to whom (s)he can refer you. If your financial planner can’t provide you with a list of resources without “checking” first, run for the hills. Most are well connected and work on the “I’ll scratch your back if you scratch mine” referral system, so they have each other names at their finger-tips.
If you’re looking for someone with whom you can forge a long-term relationship, start by narrowing your prospective list of candidates to about three or four. Ask friends, family, colleagues and business associates for the names of the people with whom they deal. Ask your accountant. Ask your lawyer. You might also want to take some courses on money taught by financial experts to see if there’s someone whose approach you really like. Read the paper and see who is writing the expert articles and who is being quoted.
Tomorrow: More on Hiring Help
Don’t forget to vote in this week’s poll. Go to Gail’s Blog at the top of this page and click. That’ll take you to the blog home page. Scroll down and you’ll find the poll on the right at the bottom. On this poll you can vote for as many options as you wish.
December 21, 2009 at 8:10 am
A good start when you are starting from point zero is a financial service rep at your bank..there in no cost and they are easily accessible…I can help a client with all aspects of finance…debt repayment, cash flow, savings and investing..and if there is a partner I can refer you to, to better meet your needs I will do that as well.
December 21, 2009 at 8:19 am
No offence, sparky, but a bank would be one of the last places I would go to for investiment advice. Banks are out to make money for themselves and I would be very sceptical about the objectivity of their advice.
Always ask who is backing the financial planner, or who they are associated with, and look into that company as well.
December 21, 2009 at 8:34 am
Of course I’m offended…I give good advice and excellent service…and Tess, do you think there is actually a business out there that doesnot want to make money??…but, that is not how we operate…it makes no sense to put you in a product you won’t benefit from…I look at the whole picture and make recommendations based on YOU not on the bank’s profit line…give up the sterotypical assumptions that the bank is some big bad place and give them a try…you might just be pleasantly surprised…
December 21, 2009 at 9:34 am
I first visited a rep at a bank for financial advice a few years ago and did set something up through them… stayed with them for a few years… then discovered that the ‘advice’ I had received was not necessarily the best for me, for what I was looking for… so now I have a Financial Advisor that does NOT work for a bank.
Now, I’m not saying that all banks operate in the same way… and ‘Sparky’, I’m sure you do give out good advice to your clients… but I have to agree with ‘Tess’ in that a bank would be among the last place I would go to for financial advice. They are my ‘go-to’ place for a lot of other services – but not for financial advice.
December 21, 2009 at 9:42 am
I think much of the problem is that many of us have been crossed by a bank or two, and are skeptical about their services. My issues stem from the staff turnover at my current bank… I’ve had over 10 different staff deal with my credit line in only 3 years! They once referred me to a Personal Financial Planner – I went in and listened, however, felt that this person did not listen to me and my goals.
We must remember that our personal experiences will weigh in on our choices in life, but we should not hold our grudge against someone else in the same position! When I finally close my credit line (I’m down to $2800 from $25000 in 2.5 years) and leave my bank, I will be finding a new bank and try out their Personal Financial Planner, just to see what they say and if they listen to me.
December 21, 2009 at 10:07 am
Trying to defend my position is pointless…I really should know that by now…there are certain sterotypes out there about certain professions that are as old as dirt…c’est la vie!
December 21, 2009 at 10:16 am
I recommend reading. Read Gail’s books which are great, but also broaden out a little. Definitely read before you go to a professional, and while you are reading, work through Gail’s budget and planning process – it’s fairly comprehensive. There are many great Canadian websites with lively and informative debates about money and clear instructions on how to do things on your own.
I think much of the appeal of professionals is wanting someone to take care of us – not in a bad, passive way – just holding our hands and guiding us through, to make sure we don’t make mistakes. The other part of wanting professionals is hoping for magic – 28% return on tax-free, guaranteed investments plus a weekly massage, or 10% on the dollar for debt repayment.
So much of financial security is derived from being sensible and reasonable. Calm down. Think clearly. Explore your options. Act steadily. Postpone short-term gratification. Be reasonable.
December 21, 2009 at 10:24 am
Julie makes a great suggestion. As consumers of anything nowadays, we need to be educated. Choosing a financial advisor is no different. Like any large purchase, you will always get a better product if you know all of your options ahead of time and do the research you need to choose what’s best for you.
December 21, 2009 at 10:24 am
I may be simplistic in my views, or perhaps it’s because I don’t have a mountain of money to worry about or invest, but I don’t see why you would pay for someones opinion anyways. (Even an educated opinion, is just an opinion). Unless you’re a complete doughnut head (nothing in the middle)….if you’ve got the internet and the motivation to take the time, research the information yourself. Gail provides a ton of free information and rock-solid advice here…and there are plenty of other sites as well.
December 21, 2009 at 10:26 am
If it wasn’t for my bank representative I would have lost my house and my mind. When I started working I got alot of useless financial advice from “experts” selling financial security. I felt like had lost control of my money and my life so I ended my ties with these people and got my money back. Shortly after I began a stready job and later became ill. So ill I had to apply for disability through Sunlife who was doing everything it could to avoid having to pay me any money. My EI had run out and didn’t know what to do other than put the house up for sale since I no longer could pay the mortage (I am single so there is no one else to make the payment). I didn’t want to sell my house and I knew I needed help so I called my bank and made an appointment with one of their financial planners whose name was well known and liked by people in the community. I entered her office in tears but left with a plan. She knew this was only the beginning of my disability application hell and that it didn’t mean I had to loose my house. She gave me a line of credit and increased my credit card slightly so I could use them to pay my mortage and utilities while all this was going on. She told me that if it had to go beyond the amount she had alotted me then I should sell and would then owe nothing nor have anything but I had tried. She was sure it would work out and then in a couple of years when it all had settled down I was to see her again.
Over the 2 years that followed I fought hard to get my disability payments, CPP, and then forced retirement all of which sent my monthy income on a rollercoaster ride of income. I never knew if I had enough to cover my monthly expenses or not. I use the LC when I needed it and payed on it when I got extra. After many tears and sleepless nights in pain, it finally got all of that settled and I had a steady monthly income.
I returned to my bank financial advisor and she consolidated my debts onto my mortage since it was up for renewal. We spoke about what that meant and it was left to me to decide. I went ahead and consolidated to put the past behind me financially as much as mentally. If it hadn’t been for her I would have probably sold the house as the disability people kept telling me to do, or I would have lost it since I couldn’t make payments at that time. She and a new financial rep have been helping me so that when I reach 65 and sunlife no longer pays me and I have an income dive, I will still be fine. By then my house will be payed for and I will have money put aside.
It was from these financial reps that I first heard of the percentages that I should be paying for housing, debt, etc… and they helped me keep to that. Every year I go back and we reasses what goal or direction I want to go and what I need to do to get there.
They have gotten me through the disability application hell, major house repairs, debt repayment, saving and my many questions. Today I am debt free, have money being saved for future house repairs, a cemetary plot I want to buy, a trip to Disney, and saving for the future. As well their advice saved my good credit which was always important to me. Thanks to them, I still have my house and am on the right track. My future looks bright.
December 21, 2009 at 11:02 am
I only use a financial planner for working out which mutual funds I want invest in for things like RRSP and TFSA and such. I was careful in picking the planner out and I must say I’m quite happy with my choice. The rest of my financial planning I’ve taken the time to do on my own.
regards,
Jason
December 21, 2009 at 11:14 am
[...] See the article here: Finding Help with Your Money – Part 1 « gailvazoxlade.com [...]
December 21, 2009 at 11:20 am
Wow, Anne. That’s some story. Glad to hear you came out on top!
When I first started working after university, I didn’t have a lot of assets or money to my name but I decided to get on the right financial track and so I looked into investing and saving my hard-earned money. I read a book or two because I didn’t really know a lot and I went to my bank to get me started with GICs and mutual funds. Sure they asked me that questionnaire to figure out my risk tolerance and my long term and short term goals. But I never really felt like they understood my questions or that they even understood me. It probably didn’t help that I would often go to whatever branch was convenient and saw whoever was available. Having a consistent advisor or whatever title they hold would have been beneficial.
After about 4 years with banks I decided that I had enough money saved up that I was ready to work with a different financial planner/advisor. I did a lot of research into what questions to ask and what to look for in their answers. I got referrals for two individuals. I interviewed both of them. I reviewed the financial plans they both put together for me. I felt ready to make a decision even after only interviewing two people and their references. (Yes, I asked for references from their clients.) BTW, my planner said he had never been through an interview like what I put him through and he encourages potential clients to use the questions I put together to screen financial planners to find the right “fit” for them.
I have been with my financial planner for over 4 years now and it’s been a great relationship. He’s helped me sort my life and money goals. He’s linked me with many professionals (accountant for taxes, lawyer for wills/POAs, insurance people) and he’s opened my eyes to financial realities that I would not have otherwise known how to handle. He’s seen me through my wedding and the birth of two children. Not literally but you know what I mean.
In the end, I felt that finding a professional was right for me because I knew I would never know all there is to know about the financial industry and that I would benefit from having a knowledgable person guide me.
December 21, 2009 at 11:32 am
Hi Gail – not related to this post directly, but to this week’s poll. I just wanted to say that I did “vote”, but I think your poll is not necessarily an accurate way to get a picture of your readers. In this case, the question about guardianship of children seems problematic. I voted that I don’t have “a guardianship designation for the kids” – because I don’t have kids! Please bear this sort of thing in mind when designing/analyzing your polls – I’m not being negligent, that category just doesn’t apply to me, and presumably other readers too.
Cheers.
December 21, 2009 at 11:36 am
My Financial reps at TD Bank have been nothing but helpful. At 27 years old it’s worked out very well for me, and I have learned so much from the 2 people I have dealt with over the years. Everything from getting debt paid off, Line of Credit, RSP’s, and sooooo much information as a first time home buyer! I know this is not the case at all banks, but I would very much recommend dealing with TD bank, if you are looking for great customer service, and they really are out to help you, not to screw you over! Cheers to TD!
December 21, 2009 at 11:43 am
Arteme I too don’t have children and didn’t find that relevant.
Gail you might want to however add pet guardianship to the mix. A friend of mine and I have pet birds which will often outlive us (my friend’s african grey has a life expectancy of over 80 years) and we have to ensure that they have guardians or a sanctuary etc.. to go when we die. Not just anyone can adopt our birds. It has to be someone the bird knows or feels comfortable with, and someone who knows bird care and wants them too. Just something to think about.
December 21, 2009 at 12:45 pm
I am disappointed by the portrayal of bankers as somehow inept becasue they want regular hours and a decent medical plans. I am a mom of two small children and I am a very qualified planner and so is my husband. I need the regular hours and the regular pay check that the bank happily provides. I have never once given advice to someone that benefited me more than them. Someone once asked if I had a sales target and I said of course I do doesn’t everyone. I produce 140% of my results every year and get a huge number of referral because I believe in the value of my advice and that telling the client the truth as tactufully as possible will always benefit them in the long run. I spend a lot of time reading outside resources including all of Gail’s material which I find wonderful and SO helpful. The comments make it seem like if I had a bad dentist then all dentist are bad. Use the free advice first and then let that guide you on where to do some research yourself. You don’t need to be a rocket scientist to manage your own money. All the tools you need are right here.
December 21, 2009 at 1:29 pm
As a banker, I must back up my collegues. Bankerbyday said it perfectly~ thank you for your post.
I presently work in a different area of the bank, but as a Personal Banking Officer, I strove to provide the best advice I could offer, present options & solutions. In the end it’s the client’s choice to make, not mine. I can only guide them. I will not offer products/services that have no value/benefit to the client. This goes against my intergrity and my reputation.
In terms of sales goals, I have consistently achieved over 120% of my goals simply by having quality conversations with my clients and looking at the whole picture with them. I don’t beleive in product pushing. I am good at what I do because I have a passion for it and strive to offer quality to my clients.
There are plenty of good, qualified banking profesionals out there that can be a world of help to you. Not everyone can afford to hire “experts”. Use the services that are available to you for fee. Listen to your gut. If you don’t like what the person has to say – “get a second opinion”.
December 21, 2009 at 1:54 pm
Every thing in life comes to your personal choice and level of comfortability…….
at one point I thought of going for consolidation loan then I saw Gails show. I had the bank appoint and then I was doing some math (serious math)…….even with the 12% interest I was paying on one card with the banks interest and the length of term it just made more sense for us to budget every penny and get rid of it in a little over a year and forgo the next “hit” on our creidt reports. Banks in my opinion are good for some things providing you as the consumer did your homework and educated your self. At the end of the day its your money and your future…….you can take their advice but you have to sign that is ultimate decision maker right there….
December 21, 2009 at 2:03 pm
I use both the bank and a financial planner and have for many years. Both give advice of varying quality, which is what I expect. Neiter have been afraid to suggest another expert when needed. I have always found that in order to get the information I need from the experts, I need to have done the legwork myself so I can ask the right questions, but more importantly understand and decipher the response.
There are a lot of places to get your information. You have to be aware of where the information is coming from and the motive for the way the information is written. Trust your instincts as if something seems too good to be true, it probably is. This is one of the reasons that the experts push diversification and we’ve all heard people say “don’t put all of your eggs in one basket”
In the end as a debtor or investor or somewhere in between you are the one that has to live by the choices that get made. It is important to get professional advise and use professional services. At the end of the day, they will help you but you are the one that has to live with the consequenses. The best professionals are the ones that provide the advise they themselves will follow.
December 21, 2009 at 3:59 pm
@Kevin: “The best professionals are the ones that provide the advise they themselves will follow.”
Well said Kevin!
December 21, 2009 at 5:23 pm
YAY to all the banker defenders!!…We do a good job and give good service…you may get the odd “bad apple” but that’s true of every profession no matter what it is. I always have a good conversation with my clients so I can recommend what’s best for THEM, because of that I have happy satisfied clients that keep coming back to me and refer family and friends to me as well. I love my job and I am sincere in it…and there are many more out there like me as well:)…Cheers to the bankers!!
December 21, 2009 at 5:33 pm
We have had a financial advisor at TD Canada Trust for several years. These planners work for TD Waterhouse and there is no fee for their services. Our first, who has retired gave us excellent advice. I really liked him as he was our age and knew where we were coming from. Our second, and present advisor, is very young. Having said that ~ he listens to what we have to say and after giving us his opinion lets us make our own decisions on how to proceed.
Doesn’t matter what profession you are in. There are good and bad apples in every barrel. You just have to make sure you are wise enough not to bite into the rotten one.
LOL….any bankers out there want to join us on our yacht? You know, the one we can afford to sail around the world in cause teachers make so much money they don’t know that to do with it??? And they earned all that cash by only working 9-4 and taking the summers, Christmas and Easter off…not to mention doing diddily squat on PD days. And the list of gripes about lawyers, dentists, Drs. accountants etc. could go on and on and on ad nauseum.
December 21, 2009 at 7:28 pm
To “Best Debt free Tips” above with the link to your site – I posted here and yet key words from MY post are appearing on your link. I don’t like that. If I wanted to post on your site I would have, but I didn’t. I’m not saying your site is not worthy but it does NOT belong here.
Gail and staff please note that the above link is selling its own book via its link. It is usiing key words from the blog here, such as “cemetary plot” which only I mentioned as key words to lead someone to this info. There is no mention on your web site that when I post here that it will be linked to another site. I personnally do not think it belongs here, else you should warn people that their posts will be linked to outside web sites.
Personnally I like it here. This is a great place for wonderful, insightful, and truthful Gail advice, and it also has wonderful posts from like minded people whom I also can learn from. I want my posts to stay here and not on other sites.
Anne: I deleted the offending post! g
December 21, 2009 at 7:57 pm
Everyone that supposedly has some credibility has to take many financial related courses, but as far as I have seen most are still utterly unreliable even with the designations. I used to have my IA license and was working on all the courses; they were far too easy and the tests were based very loosely on the material. Further, they are always multiple choice tests? You need to be able to communicate financial ideas if you are in the business don’t you? Why not make that part of the educational requirements.
December 22, 2009 at 9:15 am
Sparky et. al.:
I think that banks do serve a purpose, but I also think that most individuals who have experience with banks are frustrated with the low interest rate of return on their investments in general, especially when banks report record profits year over year. It’s nothing with the bank ‘people’ themselves, as I know I’ve been helped many times with products and such, even getting exceptional cc rates from some, while others are almost as high as the dept. store rates.
It’s just a general frustration with wondering how we can get offered a paltry 0.5%-2% rate on RRSPs/MFs, etc., pay 6%+ on loans, yet banks are making astronomical profits from the backs of those of us who invest hard earned dollars only to see increases in the pennies.
If you can figure out how to change things so that consumers want to invest in bank products at more competitive interest rates, then you’re definitely getting a higher ranking with Jane Does and Joe Schmucks in the world! (at the very least, for those who try to put you in the same pool as lawyers and the like!!)
Oh, and to clarify, I don’t think you’re like lawyers…at least you return phone calls!
December 22, 2009 at 9:37 am
The best thing I ever did for my investments is to read http://www.canadiancapitalist.com and learn how to invest my own RRSP’s and RESP in a safe way rather than give up control of my finances to someone who is only interested to skim off the surface to line his/her own pocket.
December 22, 2009 at 1:33 pm
@ Catherine – you write “We have had a financial advisor at TD Canada Trust for several years. These planners work for TD Waterhouse and there is no fee for their services.” – There likely is a fee, it’s hidden in the MER fee you are being charged. Which in and of itself is not necessarily a bad thing, because who works for free? Just I think you should go in and ask them point blank, ‘how do I pay you?’ because you are in way or another.
@Ioana – +1 here. I’ve done the same thing. It really does seem scary at first (ah! buying index funds, what am I doing?) but it’s really quite easy and cc does a nice job of explaining the theory and how to do in practice (it’s not hard, and doesn’t require much money up front).
December 22, 2009 at 4:23 pm
@Geoff~I most certainly will ask next time we have a pow wow with our financial advisor. We were told by both that they do not work for TD Canada Trust, but, for TD Waterhouse and receive a salary from them. There is no charge to us. By the by, I don’t know what a MER fee is?
December 22, 2009 at 10:12 pm
Catherine:
http://www.canadiancapitalist.com/the-importance-of-mutual-fund-mers/
December 23, 2009 at 2:15 am
Hi. My boyfriend and I have been talking with one lady at BMO for a couple of years now. Even though we don’t have much money yet, she has always taken extra time to make sure we understand our options, and let us know our options. Sometimes when we talked with her, we really didn’t have options, with all the debt we have, and our limited income. Other times, she was able to go the extra mile and find options we didn’t even know we had. In future years, when we have enough money to invest, I would very likely ask for her advice, as well as do my own research.
December 24, 2009 at 10:37 am
@ Catherine, I suspect what they are doing is saying that you aren’t charged a set fee, but instead pay out an MER. Standing for Management Expense Ratio, it means that TD takes a ‘cut’ out of your fund’s total return for itself.
So let’s say a mutual fund MER is 2.5%, which is roughly average.
SO if your mutual fund returns 7.5%, you receive a 5% return. TD (or whoever) takes that 2.5% cut from you. The tricky part is that your statements just say a 5% return.
There have been studies that show a 2.5% MER cuts a monstrous swath through your finances over the years. Basically, you’re always paying 2.5% of your return, even if the fund underperforms the market.
Conversely, you can get a TD efunds MER at 0.4% or so. So if the fund returns 7.5%, you receive 7.1%.
December 26, 2009 at 1:20 pm
An adviser with a CFP designation cannot guarantee you superior investment performance. In fact, the financial regulatory authority (www.finra.org) and click on “Professional Designation” states that they do not recognize any professional designation. So please do not be fooled in thinking that a financial adviser with a CFP designation can give you superior financial advice.