Do certified financial planners make a difference?

Cary List, the president and CEO of the Financial Planning Standards Council of Canada, might be biased when it comes the value of financial planning. But new research provides some compelling evidence that having a certified planner in your corner makes a difference: both for one's peace of mind and pocketbook.

Sixty- two per cent of people with comprehensive plans say they’ve improved their ability to save in the last five years, compared to 56 per cent with limited planning and 40 per cent without a plan, according to the new study commissioned by the FPSC.

“I’ve always believed strongly in the importance of taking a comprehensive, holistic, integrative approach to your future from a financial perspective,” List says. “People who go get a physical every year and deal with things early before they become problems … have greater peace of mind. It’s a preventive approach."

Got a nagging pain? Fear can be a powerful motivator to do nothing. “It’s actually worse because when you’re not getting professional … advice or going for a checkup, you forever have that uncertainty hanging over your head. It’s the same with finances," List says.

Highlights from the study include:

• People with comprehensive financial plans are substantively more likely to report feeling on track with their financial affairs (81 per cent) compared with those who do limited planning (73 per cent) or none at all (44 per cent).

• Of the respondents who cited retirement as an important goal, 50 per cent of those with a comprehensive plan say they feel confident that they’ll be able to retire when they want to, versus 39 per cent with limited planning and 22 per cent with no help from a professional.

• More of those with comprehensive plans (60 per cent) feel that they can deal with unexpected financial emergencies, compared to 53 per cent of people with limited plans and 28 per cent of people without a plan.

What’s in a name?

The study also found that Canadians who work with certified financial planners reported having greater peace of mind and worrying less about money than those who work with non-certified advisors.

However, List cautions that Canadians should be mindful to ask the right questions when signing up with an advisor.

“Anyone can call himself an advisor, a financial planner, a wealth manager, or a strategic wealth consultant,” List notes. “Because anybody can call them anything they want, people need to do their due diligence. Look for designations.”

Official, protected terms include “investment advisor” and “certified financial planner”.

“It’s buyer beware out there,” List adds. “Ensure they have appropriate licenses to operate under securities or insurance regulations. If you’ve never heard of their qualifications or don’t know what it means, ask where you can find out more. And if they have real qualifications, where’s the database to show they’re in good standing?”

To earn the CFP qualification, which is the only internationally recognized financial planning designation, people must complete education in financial planning, complete standardized exams, have financial-planning-related work experience, and obtain continuing education credits, among other requirements. For a full list of requirements, check out the FPSC website.

More homework

“Even if someone is qualified [as a CFP], they may not be a perfect fit for a client,” List says. It's important to ask for references and establish what specific services the advisor is willing to offer to meet your needs.

“A lot of consumers go to so-called advisors and they don’t even know why they’re going to them. Make sure whoever you’re going to see clearly explains to you what they’re bringing to the table.”

The takeaway?

“The overwhelming conclusion here was that across all categories and all ages, the results were consistent: those who were undertaking a comprehensive approach to their finances with a single point person were far higher in feelings of well-being and lower stress, feeling prepared for emergencies and unforeseen circumstances, than those only getting advice about a single product or doing nothing at all,” List says.

The longitudinal study involved more than 8,500 Canadian participants. It was designed and analyzed to eliminate net worth as an influencing variable while evaluating the impact of financial planning.