What is financial planning?


It’s the process of setting your financial objectives. But that can be a headache.

As concepts go, financial planning’s pretty easy to understand. It’s the process of setting your financial objectives — looking at how much money you have now, how much you’re going to need in the future, how much time you have to grow it, and how you’re going to reach these goals.

But as they say, the devil’s in the details, and you could easily drive yourself crazy trying to manage this task on your own. Most people find that they need help. They may choose to seek out a person with the most fitting job title: a “financial planner.” Financial planners are a bit like tour guides for money matters — they’ll lead you through the unfamiliar, occasionally scary, territory of investing, and charge you an annual fee for their service, usually in the neighborhood of 1% of your entire investment, maybe a little less if you’ve invested more than $1,000,000 with them. (Either way, it’s a significant haircut off the top of your yearly gains.)

Financial planners vary widely, both in skill and integrity, and a surprisingly large number of financial planners have been known to steer their clients into investments that prove ultimately more financially beneficial to their firms’ bottom lines than those of their clients. For this reason, those in the market might try to find a financial planner who is also a “fiduciary,” a legally binding term that means that any decisions they make will be in your financial best interest, not anyone else’s. The trouble is fiduciaries are actually harder to find than you might imagine.

Another option that has become increasingly popular is automated investing and since this is what we specialize in at Wealthsimple, it’s the roadmap to reach your financial goals that we recommend far above any other. So what’s so great about automated investing? Our fees are a fraction of what a financial planner will assess, and over the long term, the low-fee market-mirroring ETFs that we offer tend to outperform the investment returns of the vast majority of financial planners out there. We think it’s a no-brainer.

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