Four financial events that can derail your plan
Success in any relationship is determined by the quality of information. Working with a financial advisor is no different. Your financial advisor should be adept at staying current with you. If things change, you have a responsibility too! We have asked John Soutsos, an advisor from one of our Mississauga branches to provide us with some examples of unplanned events that can quickly derail a clients plan.
Here are four examples:
1. Other Sources of Income
If you had unexpected gains, dividends, inheritances or proceeds from the sale of an asset your financial advisor needs to know. John Soutsos states “sometimes a client’s circumstance has changed and without realizing it, their investment objectives change too. Extraordinary financial events can have a trickle down effect that needs to be managed. A gain last year can inflict an unexpected tax pain the following year,” he said.
2. Family Member in Need?
Life happens. Oftentimes there are financial repercussions. Divorce, job loss or illness to a family member can result in unplanned financial dependence. Soutsos cites an example: “Recently a client’s son was downsized from his job. With a family of three young children and an inadequate package he and his wife struggled to keep their bills current. My client wanted to withdraw funds from her RIF so that she could lend a financial hand. When she informed me of the situation, I suggested she take the money from her open portfolio instead. This saved her both in taxes and the lost tax free growth she would have experienced inside her registered account.”
3. Spouse on a Different Page?
John Soutsos insists on meeting his household clients together. “I think it is important for both spouses to meet with me for their review. In the case that one spouse doesn’t attend a review; this can often lead to unnecessary concern or worry. It is normal for spouses to have different objectives when investing. If a spouse is not comfortable it is important for them to voice their concern to me.” These joint meetings also assist is gauging each person’s own knowledge level and risk tolerance – something that is critical in setting up a plan that meets both people’s needs.
4. Oops… Made a Mistake!
Clients make mistakes. It is not unusual for a client to spend more money than they had budgeted for. “I have seen this countless times,” Soutsos said. “A client budgets for a 10 day vacation and it becomes a 21 day all inclusive trip of a lifetime. This can also happen when renovating the family home or cottage. A client gets ‘the renovation bug’ and a minor project becomes a major transformation. If this happens, you should come clean with your financial advisor. There are short term strategies that can assist in these situations.
“For a financial advisor, our golden rule is ‘know your client.’ When something material has changed we need to know, particularly for clients on a fixed income. The best advice I can give is to always notify your financial advisor of changes. If you existing advisor doesn’t take the time keep in touch with you and review your plan, you should consider hiring one that does,” Soutsos concluded.