Do you intend to buy a house or are you planning your retirement? To see your projects through and achieve your objectives, it is important to plan your finances! Indeed, a good plan will give you the means to ensure your financial security.
This exercise will also give you an accurate picture of your current situation, which will enable you to take the necessary steps to preserve and increase your assets, protect your loved ones and guarantee your financial independence and quality of life.
A complete personal financial plan should cover finances, taxes, legal aspects, retirement, estate, investments and insurance. Depending on your situation, however, it is not always necessary to include all these elements in your plan. For example, the needs and concerns of a young professional fresh out of university are obviously not going to be the same as those of a parent. Your plan can be completed and updated as your needs change and in keeping with your personal and professional life.
When should you start thinking about a financial plan? The answer is from the moment you have a specific objective or once you need to ensure your financial security.
Picking a Certified Professional
It is very important to use the services of specialist, such as a financial planner, who can analyse your situation and clarify the choices you will have to make.
With the exception of Quebec, Canada does not have any law governing the financial planning profession. As such, these professionals are not recognized as financial planners, but rather by the services they offer (e.g. insurance agents, investment advisors, etc.). However, the Certified Financial Planner Board of Standards offers certification that combines different requirements (academic training, professional experience and an exam), which verify the planner's competence.
In Quebec, not just anyone can be a financial planner. The procedure to obtain this title is governed by the Institut québécois de planification financière, which issues licenses to candidates who completed an exam. Moreover, in future, all financial planners will be required to have a university degree in administration, law, economics or actuarial sciences and enrol in an ongoing training program that changes every two years.
Your financial plan is important, so be sure you check the qualifications of the person you select to guide you.
Six integrated personal financial planning steps
Generally speaking, your financial planner will plan an approach with you that is based on the following six steps.
- First, you must establish and define your financial planner's role and mandate. He or she will explain the services available, as well the related responsibilities and limitations.
- Once the terms have been established, your planner can collect the information needed to analyze your situation. The information you provide must be as accurate and complete as possible so that your plan accurately reflects your situation. You must also establish precise financial objectives, which your planner will help you reach.
- The third step is analyzing and evaluating your financial situation. Your planner will compile all the information and analyze it, on the basis of the elements you have selected together.
- Afterwards, your planner will prepare a personal financial plan and present it to you. Using the information you provided, he or she will recommend strategies to help you reach your objectives, taking the time to explain each of them to you. Adjustments can be made afterwards so that you are completely comfortable and satisfied.
- Depending on the mandate you have given, your planner will apply the strategies you selected or coordinate them with other professionals.
- Finally, your planner will monitor closely the steps taken and the overall course of your portfolio. Depending on the mandate you have given, he or she will be able to advise you on any changes to be made.
Compensation
There are two ways financial planners are compensated. If he or she simply produces a financial plan without implementing the recommendations, a fee or lump sum based on the complexity of your situation may be charged. However, if your planner sells you financial products, the payment may be reduced because he or she will be getting commissions on each product sold.
Proper Planning: the Key to Your Financial Security
A judicious financial plan is the key to reaching your objectives. Carry out this step as quickly as possible, establish measurable and realistic objectives, properly understand the effects that each of your decisions will have on your financial situation and re-evaluate them from time to time, and you will ensure your financial security.
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