A meaningful and actionable financial plan is more than some notes scribbled on the back of a napkin. It's a thoughtful and dynamic process that helps ensure an investor's success.
by Alan Friedman
It's probably safe to assume that most of us invest for the same reason. To accumulate (and preserve) wealth—enough to live well in our retirement years and take care of our loved ones after we’re gone.
Investors tend to focus on short-term returns, so much so “performance” alone is often how advisors are judged by clients. What’s not often discussed—or even considered—is the value advisors provide that goes beyond returns—but does, in fact, play a very significant role in investors’ long term success—which is, at the end of the day, what investing is really all about. The long term.
Getting from here to there with the financial resources you need to live your best life doesn’t begin and end with your investment portfolio or your advisor. There’s a whole host of specialists—including expert financial planners—who also help ensure your financial wellbeing at every stage of your journey.
So let’s begin at the beginning and focus on the process that starts it all—a process not to be taken lightly.
What I’m referring to is a financial plan and I cannot stress the importance of having one strongly enough
Essentially a financial plan is a roadmap, a guide for you and your advisor to follow so you end up where you want to be, when the time comes.
Which brings to mind a pivotal question only you can answer. Where do you want to end up, and when? Everybody’s different, there’s no one-size-fits-all lifestyle, there’s no one-size-fits-all plan and, for that matter, there’s no one-size-fits-all investment portfolio either.
We often fantasize about what we’ll do when we retire, but when we become serious about investing—which we should do when we’re at least 30 to 40 years away from it, it requires some deep thinking—and probing by a specialist—a financial planner who knows which questions to ask, to make sure you end up with a custom-tailored financial plan that’s built on meaningful information.
And by that I mean a plan that is based on having a clear picture of your dream retirement and everything that encompasses, whether or not you have a business that will have to be dealt with, your family’s needs, your age, your health and any limitations it could impose, your time horizon, your risk tolerance, the impact inflation will have on your savings, emergencies that could crop up when you least expect them and a whole lot more.
Because without knowing all that, how can your Investment Advisor come up with an investment strategy and a portfolio that delivers what you need, when you need it? Which, incidentally, isn’t only about the future.
A financial plan also helps you manage your expenses and make sure you’re prepared for emergencies now
If COVID-19 has taught us anything it’s that life is uncertain, we can’t take anything for granted and we have to be ready for anything. People lost jobs, businesses shut down—some permanently, plans were cast aside, lives have been turned upside down, and no one saw it coming.
A lot of people have been forced to dip into their savings—and, depending on how close you are to retirement, that can present real problems. You don’t want that to be you.
Which brings up another important point. COVID-19 has done something else. It has forced us to re-think and re-evaluate. I don’t know about you, but a lot of people I know and a lot of people they know are doing a lot of soul-searching.
We’re questioning our choices, our priorities, our goals, our needs, our purpose, what we thought we wanted, and what really matters.
We’re considering—and making—huge changes to our lives—consequential changes. And there’s a lesson in that.
Even in normal times, non-pandemic times, life is not stagnant. Circumstances change, minds change, situations change, aspirations change.
Sometimes it’s because our thinking has evolved and sometimes it’s because life throws us a curve ball or two. Or, simply, because what was important to us when we were 30 or 40 or even 50 isn’t important when we’re 60 or 70.
So don’t think of a financial plan as a one-time event, or even a once-every-five-or-so- years event.
It’s something you should review every year—whether you’re just starting out or you’re already wealthy.
Take a pause and check in with yourself. Talk to your family, talk to your financial planner and your advisor. Make sure your financial plan is still relevant.
You just might discover that it needs some tweaking— which could lead to changes, or at least modifications, to your investment strategy and portfolio.
This is not something you want to put off. The point is investing, like life itself, is a dynamic process. Be proactive. Plan ahead. Make sure your investments are keeping up with your life. Because the last thing you want is to be caught short, with insufficient time to course-correct.
Make sure you don’t miss any of my posts. Follow the blog and you’ll receive email notifications every time a new post is published. See you soon!
Alan Friedman is an Investment Advisor with CIBC Wood Gundy in Toronto. The views of Alan Friedman do not necessarily reflect those of CIBC World Markets Inc. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Regulatory Organization of Canada. If you are currently a CIBC Wood Gundy please contact your Investment Advisor. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.
Insurance services are available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are available through CIBC Wood Gundy Financial Services (Quebec) Inc.
Commissions, trailing commissions, management fees and expenses may all be associated with hedge fund investments. Hedge funds may be sold by Prospectus to the general public, but more often they are sold by Offering Memorandum to those investors who meet certain eligibility or minimum purchase requirements. An Offering Memorandum is not required in some jurisdictions. The Prospectus or Offering Memorandum contains important information about hedge funds - you should obtain a copy and read it before making an investment decision. Hedge funds are not guaranteed. Their value changes frequently, and past performance may not be repeated. Hedge funds are for sophisticated investors only.