Financial Planning

SPECIAL SECTION C11 SATURDAY, JANUARY 25, 2020 FINANCIAL PLANNING Own your Dreams RRSP & TFSA 5-year Fixed Term *Subject to change without no ce. caseracu.ca 2.60% * What Can a Financial Advisor Do For You What does investing mean to you? If the word makes you think of transactions – buying or selling stocks and bonds – you're looking at only part of the picture. To work toward all your goals, such as a comfortable retirement, you need a comprehensive financial strategy. And for that, you might need to work with a personal financial advisor. But what, specifically, can this type of professional do for you? Here are key services a financial advisor can provide: Help you invest for your retirement – An experienced financial advisor can look at all the relevant factors – your current and projected income, age at which you'd like to retire, desired retirement lifestyle – to help you determine how much you need to invest, and in which investment vehicles, to help you reach your retirement goals. To cite just one example, a financial advisor can review your employer-sponsored retirement plan and help you determine how to use it to your greatest advantage. Help you save for post-secondary education – Higher education is expensive, and costs are rising every year. If you'd like to help your children – or grandchildren – continue their education, you need to save and invest early and often. A financial advisor can suggest appropriate savings vehicles and strategies. Help make sure you're well protected – If something were to happen to you, could your family maintain its standard of living? Or if you someday needed some type of long-term care, such as an extended stay in a nursing home, would you be able to maintain your financial independence, or would you be forced to rely on your adult children for help? A financial advisor can recommend and possibly provide suitable protection products and services for your needs. Help you adjust your financial strategy – Not much will stay constant in your life – and that includes your financial strategy. Any number of events – a new child, a new job, a new retirement destination – can cause you to adjust your investment moves, as will some of the factors influencing the financial markets – economic downturns, changing interest rates, new tax laws, and more. A financial advisor can help you change course as needed – and sometimes encourage you not to change course, when, in his or her professional opinion, you might be tempted to overreact to some event. While a financial advisor can help you in many ways, you'll need, above all else, to feel comfortable with whomever you choose. Ultimately, you'll want to pick someone who understands what's important to you, and who will follow an established process to create personalized strategies and recommend specific actions needed to help achieve your goals. And you'll want someone who will be with you in the long run – someone who will revisit your objectives and risk tolerance and who can adjust your strategies in response to changes in your life. A financial advisor can make a big difference in your life. So, work diligently to find the right one – and take full advantage of the help you'll receive as you move toward your important goals. Edward Jones, Member Canadian Investor Protection Fund. Blake Abbott 922 Grosvenor Ave. 204.452.5154 Susan Park CFP ® Suite 109 1090 Waverley St. 204.452.7818 Darren S. Quiring CFP ® , CIM ® , FCSI ® Unit 6 680 St. Anne's Rd. 204.255.1293 Mick A. Kolteski 1-935 McLeod Ave. 204.669.8637 www.edwardjones.ca When it comes to financial planning, many people feel like burying their head in the sand. H owever, it's better to face your finances directly — no matter how uncomfortable the task might make you feel. "The first step to financial planning is don't avoid it," said Chi Liao, assistant professor in the department of accounting and finance at the Asper School of Business. "It can be painful in the sense that the truth hurts." Financial planning for the beginner often hinges on three key components: budgeting, retirement planning and investing. When you're creating your budget, be sure to include contributions to your registered retirement savings plan (RRSP) and tax-free savings account (TFSA). "With budgeting, spend less than you earn," Liao said. "You can get the bank to automatically transfer money from your chequing account to your RRSPs and/or TFSAs after you receive your paycheque each month. If you don't see money in your bank account, you're less likely to spend it." Many employers offer the benefit of matching RRSP contributions, which makes saving for the future even easier. "Ideally, try to max out your RRSPs and TFSAs each year," Liao said. "Not only should you max them out, don't let it sit there in cash. Make sure it's invested in stocks, bonds or other financial securities. If you leave it in cash, it's not going to grow and thus not helping you achieve your retirement goals." Another aspect to consider is the power of compounding. "Compounding is when your interest earns interest — and the interest on that interest continues to earn interest," Liao said. "That's how your money grows. Compounding will help to grow your wealth without you having to do anything." Liao suggests investing in mutual funds or exchange traded funds that are passively managed and diversified. "Passive investing is also called couch potato investing because you buy and hold over a long investment horizon. You don't have to do anything else except rebalance your portfolio annually," Liao said. "You'll also want to be diversified, so you should invest all over the world. You don't want to put too much of your portfolio in the Canadian market, or in a single firm or industry, because you want to avoid putting all your eggs in one basket." Active management is the alternative to passive management, Liao added. "With active management, you're paying a fund manager to pick and choose stocks. Those actively managed funds tend to have higher fees. It's important to be aware of all the fees that you have to pay. Not only that, research has shown that actively managed funds do not generally out-perform passively managed funds net of fees because it's very hard to beat the market consistently," Liao said. "The other thing to consider is that past performance is not a good predictor of future performance, so just because a fund outperformed in the last three years does not mean it will outperform in the next three years." For anyone seeking some financial guidance, professionals are on hand to help. "There's no harm in meeting with a financial advisor. Don't be afraid to ask questions like whether they are a fiduciary and how they are compensated. You don't have to commit to having them invest your funds right away, but they can give you a sense of whether you're on track with your retirement goals, which is a good place to start. Those who are more comfortable with technology might even consider using an online investment management service, such as Wealthsimple," Liao said. "I don't think finance needs to be complicated, but many people view it as a scary thing. It can seem onerous if you've never had a budget or never thought about how much you need to save each month in order to have the retirement you want. The best thing you can do is stop avoiding it and just get started." CHI LIAO, ASSISTANT PROFESSOR IN THE DEPARTMENT OF ACCOUNTING AND FINANCE AT THE ASPER SCHOOL OF BUSINESS MAKING CENTS OF FINANCIAL PLANNING BY JENNIFER MCFEE Financial planning for the beginner often hinges on three key components: budgeting, retirement planning and investing.

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