Q: I have an RRSP and a TFSA as well as other savings. I usually go to the bank when I have extra money and deposit it into one of those accounts. I don’t have a financial plan or a real advisor, but I feel like I’m on track financially. At what point is a financial plan really that important, and do I really need one?

A: The best way to achieve your financial and retirement goals is having access to sound financial advice grounded in a comprehensive financial plan. Among other things, financially advised households are twice as likely to save for retirement at all ages; have significantly higher levels of investable assets at all ages; improve their regular saving for retirement at all income levels; rate themselves as more financially knowledgeable; and are more comfortable making the financial decisions they need to make to plan for their future.*

Recent research* on the financial situation of Canadians, our savings and investment behavior, and our attitudes toward retirement and savings advice has demonstrated the significant value of delivering financial advice to the public, at all income and asset levels:

  • Advice has a positive and significant impact on financial assets.
  • Advisors perform tasks vital in the financial lives of their clients including improved financial literacy, developing a culture of savings and investment, developing and executing a financial plan, selecting appropriate financial vehicles and products and improving investment decision-making.
  • Advice positively impacts retirement readiness.
  • Canadians trust their advisors, feel positive toward them, and feel more confident they will have enough money to retire comfortably.

A comprehensive financial plan should include investment planning, cash flow planning, education planning, estate planning, insurance planning, retirement planning, and income tax planning – and here’s the key – to be successful, your plan must be tailored to you. It makes sense to seek the advice of a financial advisor who will take you through this six-step planning process:

  1. Goal setting – to define and prioritize your goals and concerns.
  2. Data gathering – gathering all the pertinent financial information to understand your current financial situation.
  3. Financial analysis – analysing the data to determine whether you are on track to achieve your financial life goals, and to identify alternative strategies to achieve those goals. This includes a review of how to reduce your taxes; whether you’ll have enough income to cover your retirement expenses; and strategies for protecting your family and income should you become disabled or die unexpectedly.
  4. Plan formulation and recommendations – developing a written financial plan which contains recommendations and an action plan for achieving your financial goals and improving your overall financial life.
  5. Plan implementation – taking action to implement the solutions that have been agreed upon.
  6. Monitoring and plan review – financial planning is not a one-time event. You should review your plan regularly, ideally at least annually or as major life events occur.

These six straightforward steps are a great start on building your personal financial plan. Be sure you get the advice you need by talking to a financial planner with the team, qualifications and tools you can count on. As I mentioned, financial planning is not a one-time event, it’s on ongoing process.
*IFIC Value of Advice Report 2012.

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