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. That fee is 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.

A financial planner can be useful for someone that has a complex estate or tax situation. They’re also valuable if you have a high net worth or if you’re the kind of person that needs someone to keep yourself in check. They often provide useful financial advice on things like retirement and other major life events such as home buying. They’ll also help you stick to a plan and avoid making financial decisions based on your emotions.

If you think a financial planner doesn’t suit your situation don’t fret, there are a few other options. One of those options is automated investing. This option is totally hands-off. People with investing expertise invest your money, normally in a basket of many stocks, bonds and sometimes real estate (known in the investing world as ETFs). If you’re looking for some advice and low fees you might be best served with an automated investing service that offers access to financial planners.

The other option is to go it alone and make trades on your own. Unless you fancy yourself as the next Warren Buffet — that’s probably not the right option. Almost everyone needs some level of investment advice and help to diversify their investments. That’s because it’s very hard to predict where markets are going to go and pick a few winners. You should really only trade money that you’re alright losing.

Still in the market for a financial planner? You’ll probably be best served looking for one who is a “fiduciary”. That’s a legally binding term that means any decisions they make will be in your financial best interest, not anyone else’s.

Now that you’re well versed on financial planners, why not sign up to Wealthsimple. We offer state-of-the-art technology, low fees and the kind of personalised, friendly service you might have not thought imaginable from an automated investing service.

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