Financial Literacy Month is just ahead, so prepare for a lot of self-important outreach by various players in the world of personal finance.
First up, financial planners. A group representing planners has poll results in hand that document how much money stress the pandemic has caused, and how using a planner can help you be more confident about your finances.
More than two decades' worth of reader questions have taught me something about financial planners: They are overlooked, underrespected and essential. More people should use them to work through their questions about debt, retirement and pensions.
But as much as they’re a vital asset, planners have also failed. As a profession, they haven’t figured out a way to get their services into the hands of the people who badly need them. If people are needlessly suffering financially in the pandemic for lack of planning, a lot of that’s on planners.
FP Canada, which oversees the Canadian planning sector, had a poll queued up for Tuesday with a sobering headline finding: 30 per cent of people are worried that they will not recover financially from the pandemic. In addition, roughly four in 10 said they didn’t feel strong enough financially to handle a second wave of COVID-19, and that they’re worse off financially than before the pandemic began.
Those who said they used a financial planner reported being more confident about their money situation through the pandemic and less likely to worry about the effect of a second wave. None of this is in dispute. Having a financial plan and a planner to tweak it when emergencies like the pandemic occur will reduce stress, add happiness and help you be your best self in a money sense.
We have to ask ourselves why more people aren’t grabbing onto this great service. Part of it is suspicion, often enough justified, that they’ll have to contend with a mutual fund salesperson packaged as a planner or, worse, a fake with no qualifications. Look for planners who have one of these three designations: certified financial planner (CFP), registered financial planner (RFP), or personal financial planner (PFP).
Cost is an issue, too. A full financial plan covering everything from savings and debt to investments and insurance might cost $4,000 to $5,000, or more.
But the biggest reason why people aren’t using planners is that planners expect clients to find their way to them. It’s like they believe that if they just keep saying how useful they are, people will eventually get the message.
I have talked to planners who are busier than they can manage, so the message is getting out for sure – in some cases. But the level of financial distress documented in the FP Canada poll tells us there are plenty of people who need a planner, but don’t have one.
So how do we connect people and planners? One way is to create a go-to search engine for planners and then market the heck out of it. FP Canada has a “find a planner” page on its website and it does allow users to focus on an individual planner’s clientele (millennials, professionals, entrepreneurs and so on) and area of focus (credit and debt or retirement, for example).
What’s needed is an easy way to search specifically for fee-for-service planners, who charge a flat or hourly fee for their services and do not receive compensation through the sale or management of investments. Fee-for-service planning resonates with people and it might just be the most effective way for planners to expand their reach. (Until then, investing blogger John Robertson maintains a helpful spreadsheet listing of fee-only planners, online at bit.ly/feeonly-planners.)
We also need technology to help put planning in the hands of the people who need it. Planners are like every other part of the financial universe – they prefer rich people as clients because they have the capacity to pay more. It’s hard to make a living doing quick takes for middle-class clients that answer questions such as, can I afford to buy a house and am I on track to have enough retirement income?
A robo-planning solution could help, but we haven’t yet seen a major financial player grab onto this idea. Maybe the Wealthsimple people can tackle it with all the venture capital money they recently scored.
Finally, how about a reboot for the whole concept of financial planning? Not a means to building confidence (yawn), but rather a practical way for people at all stages of life and wealth to get expert help with milestones such as home buying, planning a child’s college or university education and, of course, retirement.
Get on it, planners. The country needs you, now more than ever.
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