Hello everyone, and welcome to the Retiring Canada Podcast. In today’s episode, we're going to discuss how a one-page financial plan can change your life. Bold statement, I know.
Specifically, we are going to discuss:
- The drawbacks of an overly complicated financial plan
- How the true purpose of the financial plan isn’t intended for the client
- How simplicity, implementation, and accountability are the true measures of a successful planning process
For all the links and resources mentioned in today's episode, please check out the link in the show notes or visit retiringcanada.ca.
Over the last 12 years of my career, I have helped hundreds of families create, implement, and update holistic financial plans. A holistic financial plan is advisor speak meaning we leave no stone unturned when it comes to your finances.
From buying a first home and saving for kids' education to helping with the sale of a business and the succession of a farm property to the next generation, and your ever-important retirement income plan, one overarching principle remains consistent time and time again: Keep it simple.
I don’t mean this as a negative or to sound belittling towards clients and prospective clients. What I am trying to get at is that there is a reason a client or prospective client is sitting across the table from a financial planner to begin with. It is the role of the advisor to teach, not to preach or sound smart using a bunch of financial jargon. The bottom line is that prospective clients are already there because they believe you have the answers for them, and making the answer convoluted or masking it in a 50-page financial plan only goes to obstruct a deeper client-advisor relationship.
One of the most eye-opening experiences I have had when it comes to sharing my knowledge didn’t come through my career, but rather while volunteer teaching at the Global Gathering Place in Saskatoon. For those of you who are not familiar with the Global Gathering Place, it is a non-profit organization that helps refugees and immigrants adapt to life in Canada.
During my time teaching there, it has really instilled this teach-first mentality when it comes to personal finance that I have translated into my practice. Newcomers to Canada come to the Global Gathering Place eager to learn and understand how basic finances and taxes operate in Canada, and in turn, I was eager to teach and share my knowledge with them. A true win-win.
Ok, so getting back to the reason for this episode: how a one-page plan can change your life.
Chances are if you work with a financial planner, at some point they have asked you to gather some information, tell you some assumptions, click a button, and then the next thing you know they drop a 50-page financial plan on your desk... Boom. Here’s your financial plan.
The real question is... how many of you actually read it after leaving the meeting?
Sure, it has colorful pictures, financial projections, and maybe even some mathematical predictions called Monte Carlo analysis in there to keep you on your toes and justify some sort of value.
To be honest, throughout my years, the only clients to go through these overly detailed plans were engineers, which, to be fair, really isn't all too surprising.
But for most people, they will just never go through it. Ultimately, they just want to know: Mr. or Mrs. Advisor, can you just tell me if I can retire and what I need to do to get there, or what do I need to do differently?
Don’t get me wrong, as a Certified Financial Planner professional, I build these in-depth plans all of the time. However, I think the value of these plans gets lost when you bundle them in a one-inch-thick binder that the client is just never going to look at again once they leave the office.
In the early years of my career, I worked quite a bit with my mentor and now business partner, Richard. In one specific instance, I had spent a number of hours constructing a well-thought-out financial plan and then presented my findings to his clients. As I finished delivering my presentation, the clients looked like they had completely glazed over.
I felt like I had delivered a strong message with strategies that were relevant to them and presented them with my 50-page masterpiece that was soon to be relegated to collect dust in their important stuff drawer. Anyway, I remember my mentor said something in that moment that was really quite profound. He looked over at the clients as I was handing them the binder and said, “This plan really isn’t for you, it’s for me.”
What do you mean? they asked.
He continued, “We do our very best to test your plan against foreseen and unforeseen circumstances. We stress-test our recommended strategies to ensure that when we look you in the eye and say you can retire, we mean it.”
And that’s what a financial plan should be. It’s a tool for a professional to utilize to complete proper due diligence when shaping the future of his or her client’s financial future. This tool lends credence to the tax planning strategies we implement, the investments we consider, and the retirement income withdrawal strategies that are most suitable.
It wouldn’t make much sense to open up this financial planning toolbox that we have intimate knowledge of and expect our clients to grasp the nuances of our profession.
Think of it this way:
Say you were going to see a surgeon to get a hip replacement. After a number of consultations and assessments, the surgeon slaps down his or her 50-page report on what needs to be completed to replace your hip, including rehabilitation and future follow-up.
Would you leaf through the surgeon’s 50-page analysis looking at charts, assumptions, risks, and timelines, or would you trust the professional opinion and say... ok, what do I need to do next?
Ok, so all of this takes me to the true measure of success when creating a financial plan: implementation.
The surgeon may tell you your hip needs to be replaced as soon as possible, otherwise you risk permanently damaging your other hip... so there are direct consequences to not doing what the surgeon is suggesting.
The same can be said for a financial plan because, at the end of the day, a financial plan is only as good as the degree to which it is implemented.
A 50-page plan doesn’t lend itself as something that is actionable. Period.
This is where the one-page financial plan comes into play and can make all the difference in the world. Let me break it down for you.
After an initial discovery meeting to uncover your goals, aspirations, needs, and concerns, we then get to work to apply our technical knowledge to your personal situation.
We then get to work on our due diligence by completing a comprehensive plan utilizing our financial planning software and drilling down to test all aspects of a client's finances. Call this our financial planning toolbox. In this box, we stress-test our:
- Retirement income plans
- Advanced tax planning strategies
- Investment strategies
- Cash flow management
- Estate planning
- Business planning and more
We then curate our findings in degree of importance and write them down in plain English.
Not only does this process provide clear, actionable steps, it provides a guided road map with timelines, expectations, and follow-up.
I often like to refer to these one-page plans as being "written in crayon."
Because that is what a knowledgeable advisor should be able to do: teach and keep it simple.
Lastly, with implementation comes the ever-lingering curse word, accountability.
This can be a tough one for people, I get it. We can all procrastinate and kick the ball down the road on taking action.
Sometimes we need a friend, family member, or trusted partner to really make sure we are following through with the things that will truly benefit our lives.
From eating healthy and staying active, to ensuring we make wise financial decisions now and over time, partner with a professional who will have scheduled follow-ups to hold you accountable and ensure that the financial strategies that can improve you and your family’s well-being are actually being put in place.
Something a 50-page plan just cannot deliver.
OK, so this podcast kind of felt a little bit more like my financial planning manifesto than a discussion on what financial planning actually is.
And you know what, I’m ok with that. I feel passionately about delivering value and I feel strongly that client confidence and success are derived from simplicity.
Alright, well action items for this one.
First, if you have a 50-page financial plan in your important stuff drawer or buried as a PDF in your email... have a look at it. Does this monstrosity have clear, actionable steps you can take? Or are they buried somewhere between "I don’t understand" and "I don’t care"?
Second, keep it simple. Align yourself with a team of professionals who can communicate in plain English. After all, you are paying them to enhance your life, not make it more complicated.
And lastly, volunteer your time, especially if you are nearing retirement or recently retired. Volunteering is a great way to build relationships outside of work and help ease the transition into the next chapter of your life. There are a multitude of great organizations out there looking for people just like you, so have a look and find a cause you are passionate about. I will leave a link in the show notes to the Global Gathering Place volunteer page for those of you who may be interested.
Ok, that will do it for today’s episode.
For the links and resources discussed, please check out the link in the show notes or visit retiringcanada.ca.
If you have a question you would like me to answer on a future episode, please click the link in the show notes to submit your question and I will do my best to answer it on a future episode.
And hey, when it comes to your retirement, don’t take chances.
Make a plan so you can retire with confidence.
All comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy, facts and figures are not guaranteed, the content is not intended to be a substitute for professional investing or tax advice. Please seek advice from your accountant regarding anything raised in the content of the podcast regarding your Individual tax situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment planning.