Executing Changes, Using Your Tools

Over the past few weeks, I’ve written about setting and adjusting your goals and how to use your tools to reach them.  This week, let’s look at how to use all of those things to build a plan.

Your goals are the most important part of your plan.  It can be easy to focus on investments- most advisors are paid on the amount of investments they manage.  There has been an increased discussion about the importance of planning, however not all advisors are interested in, or compensated for, planning.  As clients, sometimes we pull the focus away from planning -  We’re sure that if we own the right investments that provide the right rates of return, we’ll hit our goals.  Sometimes we assume our advisor knows our goals.  In a traditional advisor- client relationship, it can be hard to change focus to look purely at the planning side of things before diving into investment management.

A comprehensive, personalized plan reflects your goals back to you, and shows you a path to reach them.  Sometimes there is more than one way to arrive at your goal; when you work with the right advisor, you get the information you need to choose the best way for you and advice on how to implement the plan.  Sometimes you just need to use what you have, sometimes you need to stop a certain action to make another one happen.  Sometimes, you are likely to reach all of your goals without changing your current behaviour, but you didn’t know that until you had help with a plan.  The value of this scenario, reaching your goals with your current behaviour and tools, is the freedom to develop new goals. 

Increase your likelihood of reaching your goals in 2018 by starting now.  Spending time now to review your goals, detail your tools and work with WD Development on your plan allows you to start 2018 using small, consistent changes that will move you towards meeting your goals.  Contact Sara at 519-569-7526 or sara@wddevelopment.ca

Last week’s blog discussed the difference in outcome when you have a will versus the intestate rules being applied to your estate.  Taking our example on step further, what happens when Mrs passes away? 

Based on our initial example, this family had saved and invested well.  Mrs’ career allowed her to maintain the family’s lifestyle without using investments.  Investment Corporation is also holding 3 in-force life insurance policies that will pay to the corporation once Mrs passes away.

Assuming Mrs lives to her average life expectancy of 83, the estate will be worth approximately $14 million.  If she passes sooner, at age 55, the children will inherit approximately $2,500,000 each when they are in their early 20’s.

How do you increase the likelihood that your estate will benefit your family/beneficiaries and decrease the potential negative impact of what may be sudden wealth for someone unprepared?

• Talk to your family about money basics.  If you don’t feel confident about this, that’s okay; you can learn together.  Monopoly has many money truths.  If you over-spend, you will run out of money and have to negotiate with other people or surrender (and that doesn’t feel good).  Expenses come out of the blue.  Properties need maintenance.
• Look at your own values and how you are earning/spending your money- do they match?  Once you have clarity for yourself, think about how you will share this with your children.  There is significant gain in these conversations for all of you. 
• Follow and expand on what catches your family’s interest.  If your kids are showing an interest in investing, see how much information you can find together.  Find sites that will let you build a hypothetical portfolio and track it’s behaviour over time.
• If you have advisors that you trust, be explicit with your family about that.  The younger children are, the more all-knowing you seem.  Even adult children may not realize that a very successful parent relies on an advisor for help that is out of their area of expertise.

The sooner you have these conversations, the more time you have to repeat the information.  Learning happens over time, with repetition.  It’s not too late to start talking as a family about your values and how to handle money and wealth so that it meets your goals instead of acting as a hindrance.

Disclaimer- the above example is a hypothetical situation for illustration purposes only and is not to be considered legal advice.   Intestate rules vary from province to province.  For legal advice specific to your situation, drafting and execution of your wills, please consult your lawyer.

To discuss your current situation and estate goals, please contact  admin@wddevelopment.ca to book an appointment.

Check in later in June for blogs on how to talk your kids about money and finances.

Knowing the Difference Can Make a Difference

The word ‘Fee’ has become a larger part of our planning and investment conversations, and I believe that’s a good thing.  As a client, you need to know the context to know the meaning.  This post deals with the difference between fee-only and fee-based advice and why you might choose a fee-only advisor.

(Investment fees have become more transparent in the last few months due to regulatory changes.  See my previous blog: Get There However You Choose)

Fee-Only Advisors are paid based on the amount of planning work that they do for you.  Fee-Only Advisors help answer your questions around meeting your goals, retirement timing, wealth transfer.  The fee is usually calculated on a per-engagement or per-hour amount.  Fee-Only Advisors are not paid based on the investment products that they sell you; often they are not licensed to sell you product.  Fee-Only advisors can help with a portfolio review and risk tolerance review, but they do not hold your investments and do not have a fiduciary duty to you in that area.

Fee-Based Advisors do sell you product and hold your investments; their compensation is a percentage of the assets that you hold with them.  The advisor is responsible for giving suitable investment recommendations and managing the investments according to your goals, risk tolerance, and risk capacity.  The fee may or may not include financial planning.

Why would You choose to work with a Fee-Only Advisor?

You Prefer to Work with Specialists.  A Fee-Only advisor makes everyone’s job very clear to you as the client.  Your planning doesn’t get pushed aside by a portfolio review- you have 2 separate meetings with 2 separate advisors for these areas.  You have the opportunity to have joint meetings- if you are making a significant change or a big decision, you have a team who can put the pros and cons on the table for discussion and arrive at the best decision for you.  Any biases that your advisors have are made clear by the role division, making it easier for you to see why a recommendation is being made.
You Only Need Planning Advice.  If you are comfortable and successful in managing your own investments or have a good relationship with an investment advisor, you may only need the planning advice.  Working with a Fee-Only advisor gives you that advice, as well as an objective sounding board for your questions.
Circumstances.  There are times when you need advice directly tied to a specific situation or decision point.  For example: decisions related to a severance package; sale of a business; or receiving an inheritance.  Divorce is another time when you may benefit from planning to guide your decisions around division of assets.  Your investment advisor may not be the best person to help in these cases if you are unclear whether there are biases on the advisor’s side; in the case of divorce, your advisor may not have specialized training.

To further review whether a Fee-Only Advisor would benefit your situation, please contact Sara at 519-569-7526 or sara@wddevelopment.ca