A New Fee-Only Financial Planning Service
My mom and I have written more than 1,000 articles on personal finance and investing over the last three-and-a-half years. The articles speak, for the most part, to the general “you” but aim to make readers think about their own finances and how it can apply to them. We receive countless emails from our readers asking that very question – what about me and my unique situation?
Reading those emails, and the comments on our posts, is by far the most enjoyable part about writing this blog. What we’ve learned is that many people aren’t getting the type of advice they need from their financial advisors – the ones who focus more on selling products rather than developing a financial plan for their clients.
The financial services industry has done a poor job addressing this problem. Clients walk into their bank, sit down with a financial advisor, fill out a boilerplate questionnaire assessing their tolerance for risk, and then get sold investment products which are suitable, but may not be in their best interest over the long term.
This experience drives many to go the do-it-yourself route, but again, the focus is on investments and not goal setting and planning. The trouble for those who go it alone is that many are not capable of handling the ups-and-downs of the market and could use a financial advisor to provide a sober second opinion before they push the panic button.
If fact, Nobel Prize-winning economist Robert Shiller said that everyone should have a financial advisor and that “a lack of good financial advice was one of the problems that led to the financial crisis.”
An alternative to the commission-based bank advisor is to look for a fee-only planner, a role that has been talked up in recent years, but is still difficult to find in Canada. A fee-only planner works with you to develop a financial plan and offers investment advice for a set fee, often charged per hour or per project. They don’t sell products and won’t execute trades for you, which is a good thing because it means there’s no conflict of interest in this relationship.
As Preet Banerjee wrote in his excellent piece for MoneySense on how to find the perfect financial planner, “low-cost couch potato strategies coupled with planning and coaching from an adviser is a model set to grow by leaps and bounds in the next five years.”
The article goes on to describe why the fee-only financial planning model has struggled to catch on. It’s not that there’s a lack of demand from consumers, it’s that advisors make far less money in this model than they would make by charging commissions or a percentage of your assets.
“For advisers, the pure fee-for-service model is economically unattractive. A commission-based or fee-based practice has tremendous scalability. The heavy lifting in a relationship is performed early on. Aside from moderately intensive reviews every three to five years, an established relationship becomes less work and is more lucrative for advisers as time marches on. Assets grow and compensation models tied to asset growth clearly exhibit ever-rising compensation. By contrast, a pure fee-for-service model implies a direct relationship between an adviser’s work and compensation and is effectively capped by the number of hours an adviser can work.”
Our New Fee-Only Financial Planning Service
Too many consumers are now aware of the outrageous fees and conflict of interest present when they deal with a bank advisor, yet they don’t have enough assets to meet the minimum that many fee-only asset-based planners require. That leaves them in limbo and prone to make the kind of mistakes that can derail even the most steadfast do-it-yourselfer.
Consumers are ready for and deserve a change. That’s why we’ve added our names to the “rare” list of fee-only financial planners in Canada who operate purely on a fee-for-service model. We separate the advice from the product sales and will help you create an unbiased financial plan that gets you on the right path to achieve your financial goals.
Visit our fee-only financial planning page to find out more about our service and see if it’s the right fit for you.
Congratulations – this has been a hard secret to keep!
Wow, great stuff!
Unbiased, customer-focused and pure fee-for-service.
No doubt this service will help many Canadians. Nice.
Mark
Congratulations on your new enterprise. I always avoided advisers because of their obvious conflict of interest. Hopefully people will see the value in your approach.
My Very Best Wishes on your new venture!
It’s really important for people to have sound advice. Not too sure if we can count on government pensions or even job security, these days!
Congratulations Robb and Marie, and welcome to the club!
Congratulations and good luck!
Congratulations!! I am a “fee only advisor” and I feel that it best aligns me with my clients. I am not trying to “push product” on them, my only goal is for their financial success. If they are financially successful, they will keep paying my fee, and I work hard everyday to earn it.
Congrats to the two of you on this new endeavour! You’re very knowledgeable and make a great team so I’m sure any clients would be lucky to have your guidance!
Sorry about this, but tried several time to contact you regarding your service, but kept getting an error message.
Can someone contact me regarding this?
Thanks,
Brian James
I agree that most people need an “accountability buddy” to maximize the chances of financial independence. Even the DIY financial zealot can benefit from partnering with different people to enhance their financial position.
That being said, I am always cautious when throwing around titles and explaining services provided. A financial plan includes risk analysis in regards to a comprehensive look at in the case of injury, illness, or death. Estate and tax planning is also an essential part of a financial plan. Asset/investment analysis and planning is is just one part of a financial plan but it cannot be discussed or evaluated properly without a comprehensive risk tolerance assessment. Without this, investment allocation is impossible.
Will your service actually be Financial Planning? or will it be investment planning?
I have also had this discussion with Sandi a while back but what are the qualifications of the individuals completing the plans? Will the financial planning be reviewed by a CFP or the investment portions by a CFA?
Congratulations Robb and Marie on your new business venture! This is a great idea, and a much needed service.
I wish you all the best!
Welcome to the official financial planning world! I’m always excited when people take the steps to formalize their role and help people make sound decisions. I’m going to fire you some questions and try not to be ‘that guy’ but coming at the personal finance blogosphere world, I come from the opposite direction as you, I have licenses and affiliations that put restrictions on the activities I engage in in the online world, and I am honestly curious how you and your mom have considered addressing some of the common problems that you may run into as you formalize your practice.
I’ve been interested in the ongoing discussion of the professionalization for the financial planning profession for a number of years. The Coalition For Professional Standards For Financial Planners has come out with a statement of principles that I think are a great foundation for establishing credibility in the industry. http://www.coalitionforprofessionalstandards.ca/statement-of-principles
1. I am curious how you are planning to address the issues of professional accountability in experience, continuing education, and (my understanding is you don’t currently have any licenses, designations, or are affiliated with a group that will hold you accountable if you deviate from quality advice or make sure that you are staying current with your educational requirements). Also, are you going to be carrying Errors and Omissions insurance as part of your practice?
2. Licensing is a tricky thing. While the IFIC, CSC, Life and A&S licenses give you the ability to sell certain products, they also serve as a basic qualifying standard to comment and give advice regarding a clients holdings. For example, if I hold a mutual fund license, but not a securities license, I cannot comment on securities in my meetings with clients without the possibility of sanction. How do you plan to address the issue that people are going to come to you and while you can make asset allocation recommendations, you currently don’t have the licensed authority to tell if their holdings are ‘good’ or ‘bad’ or make specific recommendations on them?
3. The Fee Only tag is also something that is tricky. The CFP board defines it as “A certificant may describe his or her practice as “fee-only” if, and only if, all of the certificant’s compensation from all of his or her client work comes exclusively from the clients in the form of fixed, flat, hourly, percentage or performance-based fees.”
So for example, if I am doing debt counseling as part of my financial planning practice, I cannot direct the client to an affiliate link to sign up for a mortgage, credit card, high interest savings account, or discount brokerage that I receive affiliate payment for and still call myself fee-only. I assume at least some of your blogging income comes from affiliate links. What are your plans with that?
All the best on your journey. As I said, I’m not trying to be ‘that guy’ but really just curious about the journey of how people get to their destination.
FPG
Awesome!!! I hope to one day run my own fee only financial advisor firm. I’m headed over to your page now to check it out. Could a future article entail how one could setup their own fee only type of service like this? I wouldn’t know where to start with it…
This is amazing news guys and I’m very excited for you both! I’m sure you’ll make a great team and have a positive impact on many people’s financial futures.
Sounds like a great new service! Where did you go to school, what firm did you article at and how long have you been giving professional financial advice?
Congratulations! The industry will evolve in this direction with great leadership from you and those like you. Blaze the way.
I work with clients (in Southern Ontario) using a Financial Goals Analysis – the clients needs and interests always come first and there are no fees unless they agree to the program put in place.
Yes we get commission from the companies we broker, but that is not put in place unless the client sees value in what we offer. This, I think may be the best approach as the client does not pay up front and receives value for the services I provide
Congratulations on your new fee-based planning services!
So nice to see more fellow Canadian advisors focused on helping clients and putting their needs first (rather than selling products!). I share many of your views on the current state of financial planning and always enjoy reading your blog.
Keep up the great work!
Many questions have been raised. How are you dealing with those issues?
Hi Keith, anyone can call themselves a financial planner or advisor – it’s not a term that is regulated in Canada.
What is regulated – and what we don’t offer – is advice related to specific investments and products. To bridge that gap, we point clients to the model portfolios listed on the Canadian Couch Potato website (http://canadiancouchpotato.com/model-portfolios/) and compare the returns and fees to their own portfolio.
A quick glance at the MoneySense directory of fee-only planners shows that many fee-only planners don’t hold a CFP designation – http://www.moneysense.ca/directory-of-fee-only-planners.
We offer basic coaching and planning advice and are upfront with clients that we don’t handle complicated issues with respect to taxes, estate planning, small businesses, etc.
We want to disrupt the current advice model in the industry, which is more geared toward selling products than providing sound planning advice. Even asset-based advisors can be expensive – siphoning off 1% per year – and many won’t look at you unless you have at least $250k in assets.
There’s clearly a gap that needs to be filled.
In the meantime, I have started the CFP course online through http://www.cifp.ca/
By the way, there are many CFP’s employed at Investors Group, Sun Life, and the like, who do nothing more than push expensive and complex products that under-perform their benchmarks.
I guess the only sure reference is a list of happy clients.