When people think about the value their financial advisor provides, many immediately think about investment returns. However, looking at returns alone is taking a narrow perspective because it's only one part. You may be thinking, isn't that the most important part? Not necessarily.
The truth is, it is only one component of many, and it’s easy to over-simplify if you don’t fully understand how many elements exist and how important they can be. There are more complexities to financial planning than meets the eye.
A good financial advisor provides value in ways that cannot be illustrated on your investment statement.
A good advisor will certainly aim for good returns within your investment style, comfort zone and risk tolerance of course. They will navigate the world of investments and recommend what’s most suitable for you. They want to grow your money as best possible and keep you as a satisfied client. But let’s look beyond the obvious at some of the bigger things. Solid financial advice can save you money when planning strategies are employed.
An advisor who considers tax strategies, efficiencies in flow of income and placement of money can make a big difference. And while it may surprise you, it can make a difference that works out to be an equal or bigger deal than your investment return at certain points in time.
To illustrate this point, here are some basic examples of real life savings we have seen in our practice. Each case was very detailed and different from one another but the bottom line is savings based entirely on financial planning advice.
- $11,250 savings from advice on estate planning and tax upon death
- $8,000 savings from advice on retirement/severance/pension package
- $6000 savings from advice on strategic flow of retirement income
- $2,200 annual savings from implementing a tax efficient deregistration strategy
These are only few examples but there are countless others. This type of savings does not show up on any investment statement. A strong financial advisor can help save you money by providing guidance and advice based on your personal situation. They can help answer questions like:
- Based on my situation should I invest in an RRSP or TFSA or both?
- Should I invest or pay down my debt? At what intervals?
- Should I take my Canada Pension Plan at age 60, 65 or delay to 70?
- In what order should I spend my savings? One account at a time or a blended strategy?
- What is the best way to draw my retirement income considering pensions, taxation, clawbacks etc?
- How do I maximize my estate for my beneficiaries?
The answers to these questions are different for each and every person. There is no cookie cutter approach.
When you see what this type of advice can do, you can start to recognize the scope of the broader horizon. Are returns important? Of course! Just don’t forget to get advice and look at the big picture. Or as they say, don’t miss the forest for the trees.
Original column appeared in This Month in Elgin 2017. Updated 2021
Stephanie Farrow, B.A., CFP., Stephanie has over 28 years experience in the financial services industry, a diploma in Financial Planning from the Canadian Institute of Financial Planning and a Certified Financial planner designation. Stephanie has been writing a financial planning column for the local business magazine Elgin This Month / This Month in Elgin since 2010. Stephanie and her husband Ken Farrow own Farrow Financial Services Inc. About our Farrow Financial Team.