-What services do you offer? The services a financial planner offers depend on a number of factors including credentials, licenses and areas of expertise. Generally, financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses, or give investment advice unless registered with state or Federal authorities. Some planners offer financial planning advice on a range of topics but do not sell financial products. Others may provide advice only in specific areas such as estate planning or on tax matters.

-What are your qualifications? The term “financial planner” is used by many financial professionals. Ask the planner what qualifies him to offer financial planning advice and whether he is recognized as a CERTIFIED FINANCIAL PLANNER professional or CFP practitioner, a Certified Public Accountant/ Personal Financial Specialist (CPA/PFS), or a Chartered Financial Consultant (ChFC). Look for a planner who has proven experience in financial planning topics such as insurance, tax planning, investments, estate planning or retirement planning. Determine what steps the planner takes to stay current with changes and developments in the financial planning field. If the planner holds a financial planning designation or certification, check on his background with CFP Board or other relevant professional organizations.

-Will you be the only person working with me? The financial planner may work with you himself or have others in the office assist him. You may want to meet everyone who will be working with you. If the planner works with professionals outside his own practice (such as attorneys, insurance agents or tax specialists) to develop or carry out financial planning recommendations, get a list of their names to check on their backgrounds.

-What is your approach to financial planning? Ask the financial planner about the type of clients and financial situations she typically likes to work with. Some planners prefer to develop one plan by bringing together allof your financial goals. Others provide advice on specific areas, as needed. Make sure the planner’s viewpoint on investing is not too cautious or overly aggressive for you. Some planners require you to have a certain net worth before offering services. Find out if the planner will carry out the financial recommendations developed for you or refer you to others who will do so.

-How much do you typically charge? While the amount you pay the planner will depend on your particular needs, the financial planner should be able to provide you with an estimate of possible costs based on the work to be performed. Such costs should include the planner’s hourly rates or flat fees or the percentage he would receive as commission on products you may purchase as part of the financial planning recommendations.

-How will I pay for your services? As part of your financial planning agreement, the financial planner should clearly tell you in writing how she will be paid for the services to be provided.

-Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career? Several government and professional regulatory organizations, such as the National Association of Securities Dealers (NASD), your state insurance and securities departments, and CFP Board keep records on the disciplinary history of financial planners and advisers. Ask what organizations the planner is regulated by and contact these groups to conduct a background check. (See listing at right.) All financial planners who have registered as investment advisers with the Securities and Exchange Commission or state securities agencies, or who are associated with a company that is registered as an investment adviser, must be able to provide you with a disclosure form called Form ADV Part II or the state equivalent of that form.

-Could anyone besides me benefit from your recommendations? Some business relationships or partnerships that a planner has could affect her professional judgment while working with you, inhibiting the planner from acting in your best interest. Ask the planner to provide you with a description of her conflicts of interest in writing. For example, financial planners who sell insurance policies, securities or mutual funds have a business relationship with the companies that provide these financial products. The planner may also have relationships or partnerships that should be disclosed to you, such as business she receives for referring you to an insurance agent, accountant or attorney for implementation of planning suggestions.

How do you make money from this? Anyone who offers to help you manage your cash is looking for a piece of it. Bank employees are encouraged to push bank products. Financial advisers earn hidden fees for selling you mutual funds. Bestselling authors have to tantalize readers with the prospect of huge returns to sell their books. The more willing someone is to explain how he makes money from helping youand the more specific he is about how much hes makingthe more trustworthy he is. A good adviser will disclose what his fees are for selling you a mutual fund or buying a stock for your portfolio. He will also be happy to show you how much each mutual fund is charging you in the way of management fees, or MERs.

This is when you begin to realize that the most fundamental investing skill of them all is the ability to recognize who you can trust and who you cant. Like a poker player, you have to be able to detect the bluffers from the people who truly do hold a good hand. Here are five questions that you should ask anyone who wants to help manage your money:

What else should I read? If the experts answer is to grab a sheaf of marketing materials and push them into your hand, you should cross that person off your list. Genuine experts will welcome your interest and suggest some fine background reading. Some excellent books are A Random Walk Down W. Street by B. Malkiel, Winning the Losers Game by C. E., Buffett: The Making of an American Capitalist by R. Lowenstein and Contrarian Investment Strategies by D. Dreman.

What are your qualifications? A surprising number of supposed financial experts have no qualifications. Oh, sure, theyll hand you a line about how they graduated from the school of hard knocks, but thats not real knowledge. You should steer clear of any financial adviser who doesnt possess the Certified Financial Planner (CFP) qualification and ignore any money manager who doesnt possess the Chartered Financial Analyst (CFA) designation. If youre assessing authors, prefer those with PhDs in finance, especially those that teach at top universities.

What do you think of index funds? Lowcost index funds beat 75% of actively managed mutual funds over time. Not everyone is a fan of indexing, but any financial adviser should be willing to discuss indexing with you. If he or she wont, look elsewhere.

What returns can I expect? Be suspicious of anyone who talks glibly of 12% a year returns or better. Mutual funds that invest in Canadian and U.S. stocks have returned 9% a year or less over the past couple of decades. Funds that invest in Canadian bonds have returned about 7.5%. Those returns have come during an unusually prosperous time for both markets. A reasonable expectation for your portfolio is 6% to 8% a year.



I started by saving $300 a month when I was 32, but you could start later if you’re willing to save more. I opened a discount brokerage RRSP account at my bank and chose a couple of low cost balanced mutual funds to invest in. I set up an automatic transfer from my chequing account, so that twice a month when my paycheque was deposited, $150 was immediately whisked away and invested.

To make your own million, it’s better if you start young. If you have 30 years before you retire, you’re very lucky. You may not be flush with cash, but you’re rich in time. All you have to do is save about 10% of your salary each year, invest it automatically in a low cost portfolio that’s heavy in stocks, and wait.

That’s quite a bit short of a million, but I had done the hardest part: I had started. To make my million, all I had to do next was gradually increase the amount I saved each month as I made more money. It’s easy to increase the amount you save when you get a raise, because even after bumping up your savings, you still have more left over to spend than you did before. Now I have only 28 years left until I retire, but I’ve increased the amount I save every month so I’m on track to make my million.

Then I surfed over to the online Vancity savings calculator to see how I was doing. (Go to www.vancity.com, click on my money, then tools & calculators, then online calculators, then savings calculator.) I entered my facts: I had 33 years to go until I retired at 65, I was saving $300 a month, and I hoped for a 7% return. The savings calculator told me I was on my way to a nest egg of $440,000.

For instance, if you were making $75,000, your double your salary mark would be $150,000. If you had that much in your portfolio and you were saving 10% of your salary each year, in one year your savings would grow by $18,200 (assuming a 7% return). Of that growth, $7,500 would be due to your contributions and a full $10,700 would be from investment growth. If you reach that point by your early 40s, you’re well on your way to becoming a millionaire.

The most difficult period is up until you reach the double your salary mark. Before that point, most of your growth comes from your deposits, so your portfolio sometimes seems to be treading water. However, once you have double your salary in your portfolio, youll be delighted to find that most of your growth is produced quickly and easily by the magic of compounding.

If you invest in the markets, you should invest in an RRSP to reduce the drag from taxes, and choose a low cost portfolio to reduce the drag from fees. I recommend our Classic Couch Potato Portfolio, which has the lowest fees going, and has produced an average annual return of 11.8% since 1976. Or you could go with a low cost balanced mutual fund. Find out more about the Couch Potato and check out our latest mutual fund ranking.

Getting an investment return of 7% a year is tough, but it’s certainly not impossible. I recommend investing in a portfolio that’s at least 60% stocks, because stocks have beat every other type of investment over the long run. Yes, real estate has been on fire lately, but it has its cold periods, too. Toronto, for instance, has seen average home price increases of only 2.4% a year after inflation since 1980, even with the recent run up.

Since my saving is on autopilot, I rarely even think about it. But if my resolve ever falters, I just go back to that Vancity calculator to check in on my plan. So far, it’s doing just fine. In fact I’ll be able to finish paying off some debt this year, so I’ll have an extra $250 a month to play with. I could easily spend the cash, but the calculator tells me that saving it might be worthwhile. If I do, I’ll retire with $1.3 million.

The longer you save, the easier it gets, because it’s near the end that your money really balloons. In the last few years, your portfolio will be rocketing up by more than $70,000 a year.

A financial planner or financial advisor is a practicing professional who helps people deal with various personal financial issues through proper planning, which includes but is not limited to these major areas: cash flow management, education planning, retirement planning, investment planning, risk management and insurance planning, tax planning, estate planning and business succession planning (for business owners). The work engaged in by this professional is commonly known as personal financial planning. In carrying out the planning function, he is guided by the financial planning process to create a financial plan a detailed strategy tailored to a client’s specific situation, for meeting a client’s specific goals.

eople enlist the help of a financial planner because of the complexity of knowing how to perform the following:

• Providing direction and meaning to financial decisions;
• Allowing the person to understand how each financial decision affects the other areas of finance; and
• Allowing the person to adapt more easily to life changes in order to feel more secure

Defining personal financial decisions

Personal financial planning is broadly defined as a process of determining an individual’s financial goals, purposes in life and life’s priorities, and after considering his resources, risk profile and current lifestyle, to detail a balanced and realistic plan to meet those goals. The individual’s goals are used as guideposts to map a course of action on ‘what needs to be done’ to reach those goals.

Alongside the data gathering exercise, the purpose of each goal is determined to ensure that the goal is meaningful in the context of the individual’s situation. Through a process of careful analysis, these goals are subjected to a reality check by considering the individual’s current and future resources available to achieve them. In the process, the constraints and obstacles to these goals are noted. The information will be used later to determine if there are sufficient resources available to get to these goals, and what other things need to be considered in the process. If the resources are insufficient or absent to meet any of the goals, the particular goal will be adjusted to a more realistic level or will be replaced with a new goal.

Planning often requires consideration of self-constraints in postponing some enjoyment today for the sake of the future. To be effective, the plan should consider the individual’s current lifestyle so that the ‘pain’ in postponing current pleasures is bearable over the term of the plan. In times where current sacrifices are involved, the plan should help ensure that the pursuit of the goal will continue. A plan should consider the importance of each goal and should prioritize each goal. Many financial plans fail because these practical points were not sufficiently considered.

Financial planning should cover all areas of the client’s financial needs and should result in the achievement of each of the client’s goals. The scope of planning would usually include the following:and Insurance Planning

Risk management

Managing cash flow risks through sound risk management and insurance techniques

Investment and Planning Issues

Planning, creating and managing capital accumulation to generate future capital and cash flows for reinvestment and spending

Retirement Planning

Planning to ensure financial independence at retirement including 401Ks, IRAs etc.

Tax Planning

Planning for the reduction of tax liabilities and the freeing-up of cash flows for other purposes

Estate Planning

Planning for the creation, accumulation, conservation and distribution of assets and Liability Management

Maintaining and enhancing personal cash flows through debt and lifestyle management

Relationship Management

Moving beyond pure product selling to understand and service the core needs of the client

Education Planning for kids and the family members