Fee-Only, Advice-Only Financial Planning

Financial planning is the integration of all aspects of your family’s finances, including retirement, tax and estate planning, combined with investment and insurance strategies. True financial planning is a process, not a product.

It is important to note that Quebec is the only province that requires any training for someone to call themselves a financial planner. The title is not a regulated one. So be sure when you hire a financial planner that you are hiring a Certified Financial Planner (CFP).

Fee-only, advice-only financial planners are comprehensive advisers who can help you fit together all the different pieces of your financial puzzle and don’t sell any products whatsoever.

It is estimated there are 150 financial planners (individuals, not companies) providing fee-only, advice-only financial planning in Canada. In contrast, there are 18,000 Certified Financial Planners, 25,000 financial planners and 90,000 financial advisers in Canada.

That means about 1/6 of 1% of this country’s financial advisers provide fee-only, advice-only financial planning.

Even less are completely independent, selling only their advice (no product sales either) and even less still have obtained the extensive educational training to become Certified Financial Planners.

For most Canadians, investment advice is the only real financial advice they get. Even tax planning advice is elusive, given that most people’s accountants simply do their tax return and nothing more.

Fee-only, advice-only financial planning brings the integration of all areas of personal finance to the forefront and makes it the sole goal of the client-adviser relationship. True fee-only, advice-only financial planning ensures that the planner and their company are compensated solely by agreed-upon fees paid by the client. This means there are no hidden costs, third party financial motivations or kick-backs – the planner represents the client and only the client.

Objectivity is the name of the game, which is important in a global financial market that can be fraught with conflicts of interest.

Fee-only, advice-only financial planning should not be confused with fee-based investment management, where an investor pays an annual fee to their investment adviser based on a percentage of their investments. A fee-based approach is simply a way to pay your investment adviser.

Fee-only, advice-only financial planning keeps advice and potential products separate, so most clients who work with a fee-only, advice-only financial planner will also have a separate investment adviser and insurance agent.

Some people are reluctant to add another adviser to their repertoire. They already meet with their investment adviser in February to make their RRSP contribution. They meet with their accountant in April to get their income taxes completed. They have an insurance agent who has arranged their insurance policies. They have a lawyer who updates their wills and powers of attorney from time to time. The problem is, even though these various professionals may be great at what they do individually, collectively, there is often little or no integration of their recommendations.

Fee-only, advice-only financial planning fees are charged for comprehensive financial advice and are based on expertise required, complexity and time required. Fee-only, advice-only financial planners are professionals and charge their fees much like other professionals such as lawyers or accountants. The fees have nothing to do with a client’s income or assets, meaning every client is just as important as the next and that our advice is totally unbiased. This is in contrast to the traditional provision of financial or investment advice, where minimum investment levels apply and compensation is paid to the adviser based on product choices. It means fee-only, advice-only financial planning is accessible by anybody on a completely objective basis.

What’s the return on investment from working with a fee-only, advice-only financial adviser? It’s hard to say because we never know what we’re going to find under the hood until we get started. In many cases, there are explicit returns by achieving goals like better tax efficiency, for example, but most clients would also tout the implicit benefit of working with a trusted adviser with no conflicts of interest who can answer many of the questions that others cannot or will not.