A partnership that pays

Recent research has found that by working with a financial advisor you build greater confidence and commitment to achieving your goals. What are some of the positive outcomes advised households can expect versus those who don’t seek out help?

More wealth over time. A report from the Investment Funds Institute of Canada highlights that, on average, investors who work with financial advisors have nearly three times the net worth and four times the investable assets of those who do not. This observation holds true across all age groups and income levels. When asked, 61% of advised investors strongly agreed that their advisor had a positive impact on the value of their investments and their investment returns.

Learn winning habits. Advised households are twice as likely to save regularly for retirement as those who don’t seek out expert advice. By setting savings targets and having a systematic approach to building wealth as part of a broad financial plan, those working with an advisor are less likely to fall prey to risks like trying to time the market or making emotional investment decisions.

More confidence, more comfort. Once an advised client puts their financial plan into action, evidence suggests positive results follow.

In its Value of Financial Planning study, the Financial Planning Standards Council found those clients who had a comprehensive, integrated financial plan that included strategies for household budgeting, tax, retirement, estate planning, investing, debt and risk management felt the most comfortable about their finances and were confident in achieving their life goals.

Even in 2008, when one of the worst periods for equity investing in a generation began, an Ipsos survey reported 38% of advised investors believed their financial plan would see them through the turmoil as opposed to only 27% of the non-advised group who felt that way.

Finding the right formula. Advisors focus on creating the correct asset mix for their clients’ objectives. On balance, advised investors have portfolios that are more growth-oriented and tax-efficient, producing greater wealth over the long-term. Non-advised investors, on the other hand, tend to favour lower-yielding cash investments and term deposits, and are only half as likely to take advantage of tax-saving registered plans like TFSAs, RRSPs or RRIFs.

Spelling out who’s qualified. Canada’s financial services industry is highly regulated, but there’s surprisingly little to prevent someone from calling themselves a financial advisor. Fortunately, there are professional standards to give you confidence the person you’re dealing with has the education, experience, expertise and ethics to help you achieve your financial goals. Learn more about common financial designations here.

How an advisor adds value

While working with an advisor improves the likelihood you’ll reach your financial goals, it won’t happen by accident. Success starts by partnering with your advisor to create an integrated plan that brings together all of the different parts of your financial life from investing and managing debt, to retirement planning and insuring against risk.

But a financial plan shouldn’t be a one-time, one-size-fits-all solution. An effective plan will be customized to your unique and specific needs and will adapt as those needs change.

An advisor can get you on a successful path and keep you there by delivering specialized knowledge, experience and expertise backed by academic credentials and professional training. They’ll bring in specialists for greater expertise when required – insurance^† or legal help, for example. What if you have trouble getting started? A financial advisor will help you articulate your priorities.

A mistake many people make is to equate financial planning with investing. An advisor takes a holistic view of your situation. This ensures fundamental areas like tax planning, risk management and estate considerations aren’t ignored. When markets and the economy get rocky, they can offer perspective and help you make any necessary adjustments to your plan.

Getting the most out of your partnership

Teaming up with a financial advisor can be a smart decision. But like in any relationship, success takes commitment from both sides. What can you do to help make your partnership with your advisor a valuable one? Here are four tips.

1. Be open and honest. Any solid relationship has effective communication at its core. Your advisor will have difficulty helping you if you hold back important information or leave out key details. Be clear about your financial situation, what you want achieve and your attitudes toward risk. Don’t forget to include your spouse in the discussion early on. You might find their risk tolerance is much different than yours, and that can affect how well, or how poorly, your plan performs.
2. Keep your advisor in the loop. Your financial plan has to evolve with your circumstances. Keep your advisor updated on major life changes like marriage, divorce, birth of a child or pending retirement. Any significant event should trigger a review.
3. Have reasonable expectations. You should expect your advisor to make specific recommendations, explain those recommendations and identify the risks involved. What they can’t do is say with certainty what financial markets or interest rates will do, or how a recommendation will turn out. It helps to be realistic. Remember when a risk-free return of 6% was easy to find? Not so now. Your hopes should reflect this reality.
4. Show initiative. Taking an active role in your finances will help you get more out of your advisor relationship. Review your account statements. Read information your advisor offers on an investment you’re considering – even do a little research on your own. Don’t hesitate to ask questions about how a recommendation fits in your plan. When you meet, be prepared to bring important paperwork (e.g. tax returns, statements) and take notes. Document what you and your advisor have agreed to.

Establishing a relationship with a financial advisor you can trust is critical to achieving your goals. The advisors and specialists at BlueShore Financial offer a powerful combination of experience, knowledge, and commitment to client service, integrating a wide range of strategies to ensure all aspects of your financial plan are covered.