I recently started a serious fitness program that involved one on one sessions with a personal trainer. The first time we met she had me record what I had eaten for the past few days.
What an eye opener. My diary showed that although I wasn’t eating enough calories per day, too high a percentage of those few calories were from fat. She told me that in order to be successful in my workouts I would have to increase my protein intake and decrease my fat. No lecturing just a matter of fact tone of voice. And during the ensuing months she would inquire: Are you eating your protein? The reason for my perseverance in the program she set up for me? It is her encouragement and positive feedback.
What does that have to do with personal finances? Everything! How you ask? After more than a decade in the financial services profession, people have taught me a lot.
So what constitutes a successful financial planning relationship? A recent survey by Investment Funds Institute of Canada (IFIC) shows that people who work with an advisor have substantially higher net worth than those who have no advisor. That is the result. But what was the journey with that professional that got them to their goal? After many years in the business I have discovered it. It’s not the usual things that come to mind such as access to investment products, and technology, or house calls. My experience is borne out in the comments that accompany the survey. It is the intangibles that both client and financial planner bring to the relationship and the main one is the same feature that makes a personal trainer athlete relationship successful: accountability. Those clients that recognize the value of being accountable to a professional have more freedom and less worry. Do you want proof? Another survey result showed that less than half of all non advised households were comfortable with their debt level.
If you let me I am the personal trainer of your financial life. With your permission and commitment I get you to exercise wisdom, discretion, and discipline so you will have assets to show for your years and years of working. You will reach your financial goals. My value to you lies in my ability to sift through the barrage of information to find the facts that matter to your financial life. Because face it, you don’t have time to do a good job of that that yourself.
The accumulation of wealth is a result of participation, guidance from me to avoid fraud, intelligent choices, and you being empowered by me, which leads to confidence in your future.
I want to be able to encourage you all, as I have been encouraged.
A significant part of your financial success lies in how well prepared you are to handle financial emergencies.
I have been asked by clients how much should I be saving each month?
The usual discussed figure is 3 months salary in liquid accessible funds. To most people that seems unachievable enough to not even bother trying. Or, if they do, they pick away at the pile of cash much like saying oh I’ll only eat two potato chips and before you know it the whole bag of chips or cash is frittered away.
Here’s my advice which is more realistic and RELEVANT to your personal situation. Pick one major unanticipated expense that might happen to you in the next year. It could be a car repair, appliance breakdown(like my dryer is older than one of my kids), medical or child expense, or yearly property tax. Have at least the estimated amount of that major expense in a separate bank account that you don’t touch. Don’t touch means you physically have to go to the bank to get the money and you cannot access that account with your debit card. And a line of credit is NOT an emergency fund.
Which brings us to the next couple of million dollar questions.
What is the definition of affordability? In a recent forum of financial professionals there were some interesting observations. But I want to know what all of you think.
Also from the graph can you identify one interesting anomaly? Is there a difference between can’t and won’t afford?
Comments to the above are welcome. Participation prizes and a grand prize will be available depending on the amount of reader participation.
The last year or so has seen changes in documentation and verification that must accompany any investment transaction. As a financial planner I am beginning to feel buried under a veritable avalanche of paper and rules.
This flood of paper regulation is for investor protection. So I am looking at this as an opportunity to increase the knowledge of my clients if they so desire.
One form that is particularly useful is the Know Your Client form. It gives a current snapshot of a client’s financial health and needs revision with every financial change. It is a good measurement of financial progress towards long term goals. I strongly encourage each of you as you are meeting with me in the next few weeks to go over the form with me.
Also identity theft is becoming more sophisticated. I have received 2 emails detailing actual incidents. The essential fact to remember is that most financial institutions will not usually contact you by phone or email. Be suspicious of these communications. If you want to know more please contact me and I will forward the emails to you.
