Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Investing

When it comes to a financial plan, size doesn't matter Add to ...

It's not the size that matters. It's how you use it. I'm talking about financial plans.

Everybody should have one, but one size does not fit all. That's true whether you are a DIY investor or are using a full service adviser.

As the financial advice industry evolves, advisers who traditionally provided just investment advice are increasingly offering comprehensive financial planning. Even if they do not have the certified financial planner (CFP)designation, many will have access to internal financial planning support teams or outsource to external financial planners. These plans can vary in length, with some over 50 pages long. So should you feel like you're missing out if your plan is lacking in girth?

More related to this story

Not necessarily.

If you are new to the workforce, your financial plan will not require the better part of a forest to be sacrificed. Unless you inherit a complex estate when you are young, you will likely have the same goals as everyone else: paying off student debt, saving for a mortgage, monthly budgeting, starting an investment plan and getting the right types and amounts of insurance to disaster proof your life.

A plan written for a retirement date 40 years from now makes a lot of assumptions, many of which will turn out to be false simply because no one knows what the future holds. Who knows how many children you will have, let alone spouses?

The focus at a young age should be on putting away as much as you can, investing prudently, getting debts under control and hoping like mad the stars align and allow you to retire early.

But retirement is so far off that your confidence in a 50-page plan at this life stage is likely to be minimal. Most twentysomethings have no clue what the next ten years has in store for them, never mind the next 40. Younger investors are often better off with a plan that helps them establish good long-term habits while focusing on shorter-term goals.

Fast forward a few decades and hopefully those good habits have translated into an estate that needs more expert handling. The range of possible outcomes to your life has narrowed, and as retirement approaches it becomes a priority. Your financial plan will become more detailed, and hence thicker.

The process for DIY investors is the same: you start off with some rules to live by and over time, you formalize your plan on paper. As a DIYer, your early-life and later-life financial plans might be smaller than the commensurate plans of your advice-seeking counterparts. But as long as you financial plan meets your needs, it doesn't need to be the biggest on the block.



Preet Banerjee is a senior vice-president with Pro-Financial Asset Management. His website is wheredoesallmymoneygo.com.

Follow on Twitter: @preetbanerjee

 

More related to this story

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories