Wealth Management and What You Might Expect From a Financial Planner

Ted Krestanowich
September 25, 2008 — 1,269 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

The wealth management process starts by establishing a strong relationship with an individual whom you trust. That individual must operate the highest ethical level and have your interests at heart. The individual selected must be able to assist in wealth management, and should be able to provide you with the information on which sound decisions can be made.

A Financial Planner will outline the steps required to create and implement strategies, both financial and personal, which can meet your life goals. A Financial Planner is not going to make you rich, rather they are going to outline a process of specific steps in order to arrive at your goal.

The four pillars of financial planning are:

Retirement planning Risk management and insurance Tax planning Estate planning

Retirement Planning

Less than 45% of Canadians belong to a company pension plan. The majority of Canadians are therefore responsible for providing for their own retirement. How much money you need, and what is the best way to save for this retirement is unique to you, and should be tailored to your specific situation. Bald, naked, and broke is how you came into the world, but I'm certain that's not how you wish to depart.

Many people have their assets spread between a number of financial institutions and consequently a number of advisors. For some folks this is their idea of diversification. This approach can work, but it takes a great deal of effort and the amount of money you have placed with each company is relatively small, therefore you get very little time or attention from them. Reducing the number of RRSP/GIC/Mutual Fund companies can simplify your life. One should also learn how to read the statements that come from the various firms. Generally folks who have had problems with investing have not done their due diligence. To insure your money is invested properly and in the appropriate types of investments suitable for your own personal situation, you need to do your homework. Developing a specific plan stating your goals and why investing in a particular product is your best opportunity to maximize your return. Your advisor is not there to make you rich, but they are there to insure that you invest properly according to your specific requirements. Your advisor should explain in detail, and without a lot of technical terms, what the various investments are, and why they are suitable for you. There are a number of terms that you need to know. If you only familiarize yourself with two investment concepts, they should be:

"Asset Allocation" which basically means don't put all your eggs in one basket. This is the fundamental cornerstone in protecting your interests. You also must understand the difference between investing and speculating. Speculation has no place in a retirement portfolio.

Risk Management and Insurance

A review of your personal insurance, matched against your current needs, should be high on your list of things to keep current. Insurance allows you to identify and cover risk. It should be approached in a systematic way and would include a number of topics such as: · Group insurance at work · Health and life insurance needs · Disability insurance · Property and casualty insurance · Auto insurance

Generally people with special needs require additional insurance. These might include: · Small business owners who may require buy/sell insurance, liability insurance, fire insurance · Senior executives or professionals may require additional amounts of insurance and those who work from home may have special needs regarding theft or fire, extra insurance on computers, phones, etc.

Tax Planning

Tax planning is understanding how you can minimize your taxes by what type of investment products you purchase and the type of return they would provide you on an after tax basis. This involves the shifting of income from a higher tax bracket to a lower tax bracket, or investing to take advantage of the most appropriate form of investment income so that you attract the least amount of tax. You should be aware of how interest is taxed, how dividends are taxed, and how capital gains are taxed. Areas which should be explored and may require further explanation might be: · Investing in an RRSP or paying down your mortgage. · Should I borrow to make an RRSP purchase? · When should I convert my RRSP to a RIF? · How does income splitting affect me? · The use of trusts to save tax · The proper use of principal residence deduction · Effect strategies for transferring assets among family members

Estate Planning

Estate planning involves wills, and power of attorney so that your hard earned wealth is directed to where you would like it to go, and not where the government dictates it should go. Generally, estate planning and retirement planning should be done concurrently. Estate planning is considered to be the orderly transfer of your worldly assets to the next generation. If done properly, the beneficiaries receive the maximum allowed by law with the minimum of taxes and fees and with the minimum amount of delay.

Since dying is not an option, a number of decisions should be made with respect to your estate.

Registered ownership of assets Naming beneficiaries and which assets they are entitled to receive Naming of executors Specific requirements for individual family situations such as family members with disabilities

If your situation is more complex, it may need special handling. · Common law relationships · Second marriages with children · Same sex relationships · Children born outside of marriage · Beneficiaries under the legal age

It is strongly recommended that you have a lawyer prepare your will. Home Will kits are a disaster waiting to happen. A properly drawn will is the best money you will ever spend, and could save a great deal of acrimony and hard feelings when your time comes.

About the Author

Biography of Ted Krestanowich BSc, PFP, FMA

President of Cambridge Consultants (25 years) Specialization in taxation, investments Formerly stock broker with Merrill Lynch Canada Formerly President of local executive recruitment firm Former member of Board of Directors and Vice-President - Cambrian Credit Union (9 years) Graduate of University of Manitoba - BSc (Math / Statistics) Canadian Securities Course

Ted Krestanowich