Do You Really Need a Financial Plan?

A  financial plan  will address all your business related issues.  If you need to take bank loans for starting a business, then it's ess...

financial plan will address all your business related issues. If you need to take bank loans for starting a business, then it's essential to have a written plan. Even for developing a small business, having a written plan is key to success. But the whole document is not useful to everyone. 

Do You Really Need a Financial Plan?
It sounds pretty simple: certified financial planners should produce financial plans for all their clients. Do you occasionally ask yourself why things are not so? Here are the reasons:

You do not need a plan

A financial plan is a detailed document that coherently explains the individual's goals and provides specific recommendations. Some plans can be up to 40 pages long. Does everyone need these masterpieces?

Not necessarily, despite what some advisers and some financial institutions may say. It may just be that clients need advice on financial planning, "said Heather MacDonald, a regional financial planning consultant. "It varies according to their situation in life," she said. The whole document is not useful to everyone. People might just need advice on proper planning for cash flow, for example. " 

A student probably does not need a full plan, says Derek Moran, a paid fee-based financial planner registered with the Smarter Financial Planning firm of Kelowna. "For a young person whose life is undergoing many changes, who has to repay his student loan and go from one job to another, it does not make sense," he says.

A person in this case, who probably does not have a lot of assets to invest anyway, would rather make some conversations with a financial advisor or guide. "Young people simply need to be put in the right direction to make sure they do not make gross mistakes," he says. You could focus on a savings plan, talk a little bit about investments or find a person with whom they can be in regular contact and ask the right questions at the right time. No need for an elaborate document."
Also read: How to Write a Business Plan Step by Step Guide to Launch Your Own Startup

Who needs a plan? 

Essentially those who go through certain phases of life like a marriage or children, or want to focus on retirement savings. As Scott Plaskett, Managing Director and Senior Financial Planner at Toronto-based IRONSHIELD Financial Planning, said, "those who have more responsibilities on their shoulders than when they were younger."

You do not want a plan

Some investors have managed to survive at best without a financial plan under the guidance of an advisor, spending less than they earned, saving tons of money and investing in low-priced index funds. And frankly, they have time to manage their affairs themselves, so why bother now in a financial plan? That's what some consumers think.

For example, when Mr. Plaskett inherited some clients from a retired adviser, some of them did not want to get involved in a financial plan, or they were dithering, waiting for the right moment. "They did not have a plan with their other counselor, so we encourage them to have one, but we do not make it an obligation," he said. If you are starting out with us, you need a financial plan because it is the tool we use to determine what you need to do to make your goals come true. "

You do not want to pay for a plan.

A financial plan costs money, no matter how you look at it. Sounds like it's free because the financial planner told you there was no entry fee. In reality, a commission-paid planner is paid by any investment or insurance product you purchase as part of your plan.

Sterling Rempel, a certified financial planning specialist with future values?Estate and financial planning in Calgary find that people are more comfortable with a commission payment structure that allows them to avoid the shock of the bill.

A 2011 study by the Investment Funds Institute of Canada supported Mr. Rempel's assertion. IFIC found that 59% of investors who already had funds preferred that fees be included in the price of mutual funds. "No need to disclose how much money is paid to the customer and I find that clients agree, at least from the outset," Rempel said.

This assumes, however, that there is first and foremost money to buy these products. Not everyone has it. Other people are uncomfortable with what they see as a conflict of interest. Does my advisor sell me a product that actually meets my needs or the one that will get him the most important commission?

There is still the possibility to pay directly for the financial plan, which can cost from $ 700 to $ 10,000 depending on its complexity. According to the IFIC report, 33% of investors in mutual funds prefer to pay separately for the advice they receive.
Also read: 5 Reasons Why You Should Write A Business Plan

Other planners like Mr. Plaskett choose the latter form of compensation to show the value and work invested in the plan. "Creating a link between the idea and the product can create an inherent bias," he explains, "and we do our utmost to avoid it. We, therefore, charge for the development of a financial plan, and the customer chooses how he wants to buy the product and from whom. In most cases, it will do it for us, but it is not an obligation."

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