Don't Know What You Don't Know

I was planning on writing my next post on Mortgage Acceleration strategies. However, I have to address this.

Last week InvestorED.com released a survey that found that 46% or Ontario's adults have never taken the time to set out a financial plan on how to save for retirement. It also found that 58% do not have a plan to save for their children's education and 88% have never had a plan to save for their home. The overall results show that many are running the risk of spending too much today at the expense of tomorrow.

Here's the problem. People are starting to retire more and more as the boomers age. I see people who want to retire above their means. Little steps along the way would have made their retirement lives much easier. I have to tell these people that they just don't have enough to live on what they want to during retirement. Had I known them for longer this would be avoided.

So why are people not planning?

A comment on one of the articles reporting the results stated that many lower to middle income people do not feel that they have either the earned income and/or accumulated capital to bring to the table to get the advice from a financial planner. Not only that but they also feel that most planners would be unwilling to spend time on an individual basis without the means to generate the necessary business returns.

That brings me to the idea of a 'financial advisor'. There is no shortage of critics of the financial advice business. In fact, I have to opportunity to hear stories almost on a daily basis of unethical treatment of client's money by 'financial advisor's. These arguments against the industry has led many people to not have faith in the people who claim they have an individuals best interest at heart.

This leads some to a 'do it yourself' approach. However, the fact that many take this approach with little knowledge is a dangerous thing. Take the tech bubble of the late nineties. An argument can be made that if many had taken a quality advisor's advice that they may have weathered the storm of the bust.

The voice of the 'anti-advisor/do it yourself' approach is at times coming from the retired population that may have three to four hours per day to analyze the markets and be successful. These are the stories that dominate the yearly Money Sense that tells the story to the average millionaire.

The fact is this is a fraction of the actual population. The rest seems to not know what questions to ask in order to get the best out of a financial advisor. On the other hand since they don't there may be a feeling of distrust due to the alarming number of scandals that put a black cloud over the industry.

Many high net worth, highly educated, and innovative people use an advisor simply to implement the strategy they have taken the time to lay out. Not only that a second opinion by a professional never hurts.

With a lack of overall personal finance education and knowledge of the industry the average person sees 'financial planning' as a steep uphill journey. For example, it isn't uncommon to hear people that buy RRSPs without actually knowing what one is and how it works.

Take the time to know what you want from a plan and have the basis of knowledge to know what you want. If you don't make sure you take the time choose the right advisor. Do your homework. Don't be afraid to ask questions. Look up your advisor on the MFDA or IDA websites depending on who your advisor is governed through. You will likely find any dirt there if there is any to be found.

I posted an article regarding the idea of planning last month. The idea was to provide a ground up approach to someone who may be just starting out. It is not uncommon for someone to be well into their lives when they reach this point. It is never too late to plan, the trick it to just take the first step.