Skip to main content
Open this photo in gallery:

Industry advertising and a continued emphasis on investments among some advisors help explain Canadians’ narrow understanding of a financial plan, says an advisor.DNY59/iStockPhoto / Getty Images

The vast majority of Canadians – even those who work with advisors – are not aware that a financial plan extends beyond investment management, according to a recent survey by IG Wealth Management.

That’s spurring some advisors, who offer comprehensive financial planning services, to redouble their efforts to educate clients.

In the survey released in November, more than four in five participants (82 per cent) believed a financial plan was exclusively about investments. And almost three in four people (73 per cent) who worked with an advisor and had a financial plan thought the same thing.

A further finding that surprised Laura Southall, senior wealth advisor at Assante Financial Management Ltd. in Kingston, Ont., is that almost two-thirds of the survey participants said they have a financial plan in place.

A true financial plan “should answer all kinds of things like the tax implications in your retirement, what your real estate is going to be worth, different goals for charitable giving. There are so many facets,” she says.

Ms. Southall doubts that more than 60 per cent of Canadians have a plan that encompasses all the areas it should.

But perhaps that helps explain why so many believe a financial plan only deals with investments – an investment-focused plan may be the only type of “financial plan” they’ve seen.

To make sure her clients understand the broad scope of a holistic financial plan, Ms. Southall emphasizes the questions the plan can answer for them.

“What do you have right now? Is that going to be enough for what you want to do? What happens if things change? … Are you going to be able to take care of your family?” Ms. Southall says.

“Those are questions that everybody wants to know the answer to, so if you can get in there and answer that for people, they want to hear it.”

Ms. Southall delivers seminars on topics such as saving on taxes in retirement and transitioning wealth through an estate plan that drive home the point that investments are just one aspect of financial planning.

In both seminars and client meetings, she is keenly aware it’s critical to convey abstract financial planning concepts in a way that makes it easier for clients to remember them.

“I try and make it more concrete by sketching it out, drawing it out, telling a story, explaining an example, and then revisiting it,” she says.

Educating clients to get them to take action

For Iftikhar Mahmood, certified financial planner at CreateWealth Planning in Markham, Ont., industry advertising and a continued emphasis on investments among some advisors help explain Canadians’ apparently narrow understanding of a financial plan.

“It comes down to financial literacy … and as advisors, we definitely should be using strategies to educate our clients,” he says.

When he asks clients what’s important to them about money and they answer that they’re just looking to put funds away for retirement, he explains that’s just one aspect of financial planning. Then, he steers the conversation toward cash flow, debt, protection planning, and estate planning to remind them it’s not all about investments.

“Is my prime objective just to sell them that shiny object, or is it to really educate them and tell them, ‘Well, you can have that shiny object, but you also need to take care of A, B, C, and D,’” Mr. Mahmood says.

He works with clients to set firm deadlines to make sure they take action to address those other aspects.

“I’ve found having those hard, concrete dates in place and follow-ups are what really makes a key difference with all my clients,” he says.

‘Lost opportunity’ for advisors

Treena Nault, certified financial planner with the Nault Group Private Wealth Management at IG Private Wealth Management in Winnipeg, likes to ask prospects, “Do you have a plan or do you have a statement?”

She adds that “Just because you get a quarterly statement that may have $2-million on it, for all I know, that doesn’t mean you planned.”

Ms. Nault says “there’s so much lost opportunity” for advisors who aren’t doing in-depth financial planning that goes well beyond investments.

“Tax is one of the biggest ways I make a difference for my clients,” she says. “So, if I get you a 1 per cent better rate of return because of the investments I’m picking, or I save you 30 per cent on taxes because of the tax planning strategies I’m employing, which one is going to make the bigger difference?”

There is a pie chart within her letter of engagement that shows new clients all the areas their financial plan will address and review on an ongoing basis.

She also routinely shows clients their situation with and without planning. And as she gets to know each client’s learning style, she tailors information and presents it as a visual, in a spreadsheet, or in whatever format works best for that client.

“The better you know the client, the better you’re going to be at showing them value in their own eyes,” she says.

“People look at the numbers, the tax savings and the data, but it’s that amazing feeling that ‘My family and I are going to be okay,’ which is the value of the plan at the end of the day.”

Giving more clients a greater sense of confidence about their entire financial plan may be the best way advisors can bump up the number of Canadians who understand the full purpose and potential of one.