What exactly does a paid financial planner do?

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A. Your question is a good question that I get often, Rob, even from people in the industry. So let me explain.

Something I like to point out frequently is that I do not sell any financial products. I think this is an important point to clarify so people don’t wonder if I have a conflict of interest when they read my advice in articles and interviews.

Some financial planners make money by selling products, such as mutual funds or insurance. These products can pay them initial or ongoing commissions, or a combination of both. Different products pay different commissions, and their advice may be influenced by how they are paid. That’s not to say their advice may not be good, but they may have conflicts of interest.

Many consumers don’t understand the difference between a financial planner, a financial advisor, or the many other financial titles businesses and individuals use to describe their role. Quebec is the only province where you need credentials to call yourself a financial planner. In the other provinces and territories, anyone can present themselves as a financial planner. Ontario is changing that — and it’s a change I welcome, being based in Ontario myself.

I am a Certified Financial Planner, or CFP, which is the most recognized financial planner designation in the world. I would consider a financial planner to focus more on the overall financial planning process – savings, debt repayment, tax and estate strategies, retirement – as opposed to a financial advisor specializing in just one aspect, such as investments or insurance .

I consider myself a paid financial planner, Rob, because I’m only paid by fees paid by my clients. I do not accept referral fees or commissions from third parties; it is a choice, not a requirement. My clients pay project fees, hourly fees or annual fees. I primarily focus on retirement planning and overall financial planning strategies, but I do different things for different clients.

For example, this week, I have five client meetings:

  • Examining a retirement planning projection with a portfolio manager and a newly married couple in second union who are approaching retirement and live in Northern Ontario. They pay a one-time fee.
  • Discussing benefits with a new employer and potential first home purchase for a young single client in Toronto. They purchased a block of hours for financial planning services.
  • A meeting to review tax and investment strategies with a GTA incorporated business owner with an online business that sells globally. They pay an annual fee which includes tax preparation.
  • Discussing a retirement plan with a young Calgary couple considering buying a vacation property and trying to set annual savings goals. They pay an annual fee which includes tax preparation.
  • Discuss investment, tax and estate strategy with a retired attorney in his 80s who owns a corporation and has children and grandchildren living in the United States. They pay an annual fee.

The media has really talked about the allure of paid financial planning over the past 20 years since I started my career. A problem in Canada is that since titles are unregulated, anyone can to call themselves paying. There are a lot of what I would consider paid investment advisers, who manage portfolios and charge a fee as a percentage of assets, and who also define themselves as fee-only. But, again, there’s no title regulation, so there’s no regulatory reason why someone can’t call themselves paying.

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