Adroitin Consulting Services

The two least intimidating words in the wild world of money: Financial planning.

This explains why you hear planning being mentioned more and more these days by the investment industry. Planning is practical, comprehensible and separate from the vagaries of the stock market. People are more prepared and have better financial outcomes if they have a plan to follow. But as with any financial service or product, you have to be a careful consumer. To coincide with Financial Planning Week, let's take a look at five realities of having an expert create a money road map for you.

1. Financial planning is often a come-on for selling investment products.

Financial planner is a phrase, not a true title or profession. There are several financial planning designations that tell you a person has actually been trained as a planner, including the Certified Financial Planner (CFP), Registered Financial Planner (RFP) and Personal Financial Planner (PFP). But those who hold these designations may spend all or most of their time selling and managing investments.

Beware of companies with financial planning in their name. They may be nothing more than mutual-fund mills. Investment sales and planning can go together, but the plan comes first and must be based on reams of personal data supplied by you, including all your assets and debts.

It's also worth noting that the title of financial planner is unregulated outside Quebec. A planner without any credentials is an amateur at best.

2. People like the idea of paying for a plan without a sales pitch for investments.

A retired Winnipeg man shared his financial advice to his daughters in a recent column (read it online at tgam.ca/Dw2F), and the point that generated by far the most response from Globe readers was to hire an investment planner who does not sell any investment products of any kind. In other words, use someone who is paid by the hour or a flat rate.

Fee-only planners aren't easy to find, but they're out there in cities across the country. Some things to ask if you're considering one of them: Are you licensed to make recommendations about securities as part of the plan, or can you only discuss big-picture investing matters such as asset allocation? Do you strictly do planning, or do you also manage portfolios? Are your prices negotiable, or flexible in terms of reflecting the level of detail I need?

MoneySense magazine publishes a very good director of fee-only planners (moneysense.ca/directory-of-fee-only-planners). Also try a Google search of fee-only planners in your city.

3. Some people are too cheap to pay for financial plans.

Talk to financial planners who work on a flat fee or hourly basis and they'll tell you that the point where they lose the most customers is when the price of a plan is discussed. Depending on its complexity, a plan could easily run from $1,000 to $3,000 or more. Roughly the cost of a summer vacation, in other words.

What people mainly want when it comes to their finances are ways to either save money or make more of it. Financial plans don't focus directly on those things, and that is maybe why people balk at paying for them. Given how good the investment industry is at hiding or talking around fees, people may also be unaccustomed to paying out of pocket for financial advice.

A properly done financial plan will guide you to the best possible outcome in trying to meet financial goals such as retiring comfortably. It's worth the cost.

4. The banks are full of financial planners, but they're often just adjuncts to the mutual fund sales effort.

With a bank planner, you will be expected to buy mutual funds at some point. The question is, will you get financial planning as well? For answers, ask a bank financial planner how he or she is compensated. A commission-based person will be focused on marching clients in and out, and not planning. A salaried employee may have more time for you.

Also, banks are big players in lending money. This suggests you can't expect objective advice from a bank planner about how you're using your line of credit or your plans to move up to a more expensive house.

5. People who get a plan often don't follow it.

One estimate suggests that just 20 per cent of people follow a financial plan received from a planner or investment adviser. Okay, people are busy and distracted. They're also using a lot of their household cash flow for borrowing, rather than saving. But if you pay serious money to a professional to map out your financial future, why wouldn't you follow the advice?

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The Financial Planning Standards Council, which administers the Certified Financial Planner (CFP) designation, lays out the planning process as follows:

1. Establish the client-planner relationship