When life throws us curve balls, whether it鈥檚 an unexpected career change or international crises like COVID-19, we might question the importance of planning for our financial future.
But circumstances like these are exactly why a comprehensive financial plan is vital.
鈥淲hen markets are volatile, like we鈥檝e seen now, the financial plan becomes vitally important to help my clients determine whether they continue to be on track to achieve their goals,鈥� explains 琉璃神社-based financial advisor . 鈥淭he financial plan adds in a lot of contingencies for negative years in the market to ensure that a significant market collapse doesn鈥檛 mean that my clients now need to go back to work.
鈥淢y clients have been very calm and logical through this particular pandemic, because they rely on their financial plan and know that their retirement income and future are still safe,鈥� Wilson says. 鈥淭his provides them with important peace of mind. They know exactly where they stand.鈥�
Creating a plan that鈥檚 unique to you
By helping clients articulate their goals together they can to meet those goals, one that includes strategies for tax, estate and retirement income planning.
For business owners, that plan also includes succession planning to minimize taxation and to enhance retirement income.
鈥淓very client has a financial plan and this becomes the roadmap for all of our investment decisions,鈥� Wilson says.
All plans and subsequent strategies are based on the required rate of return needed to meet goals 鈥� the most important determinant when deciding on what to invest in and why.
Reducing fear by accommodating the unknown
Wilson believes the fear created for investors right now isn鈥檛 because markets or their investment portfolios are down. After all, most investors know the markets and their portfolios will recover.
鈥淲hat people truly fear is that they鈥檒l run out of money in their lifetimes. Ultimately, this is the reason people invest 鈥� to make sure they have enough to pay for their lifestyle for the rest of their lives. Term deposits normally won鈥檛 do this for people because inflation rises faster than the rates we receive on term deposits. (Term deposits and GICs are among the only asset classes that guarantee losses when factoring in the effects of inflation.)
However, many who are fearful of investing resort to this strategy because they don鈥檛 have a proper plan to help guide them through their financial lives. 鈥淭hey allow fear to dictate their investment decisions, which means they ultimately can set themselves up to the biggest risk 鈥� outliving their money,鈥� Wilson says.
The solution is creating a financial plan and investment strategy that will withstand all market conditions, will provide them with their required rate of return, and will ensure that they have enough to last them their entire life. Revisiting this plan, especially in markets we are seeing today, helps clients know that they鈥檙e on track and that their biggest risk of outliving their money is still not a concern.
鈥淓ach plan is based on that client鈥檚 unique and special circumstances. Every person will have different spending habits, risk tolerances and needs to provide an inheritance, not to mention tax brackets 鈥� and their plans reflect this,鈥� Wilson explains.
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Tanya Wilson is a financial advisor with Raymond James Ltd. Information provided is not a solicitation and although obtained from sources considered reliable, is not guaranteed. The view and opinions contained in the article are those of the author, not Raymond James Ltd. Raymond James Ltd. member of Canadian Investor Protection Fund.
