Wealth Management for Everybody

George Mancini has a dream: to help create enough wealth for his clients that they wouldn't need anything more than a GIC portfolio. For those who think that the job of a financial planner is to "push products" to investors, these words would come as a surprise. But they shouldn't, he claims. George is a Certified Financial Planner, with emphasis on the "Certified" part. He wants to shine some light on the work that he and his colleagues do and at the same time dispel some myths about the profession.

"Up to five years ago, planners had been in a product-based industry," George says. "Since then our profession has evolved into a comprehensive planning and advice service, or from investment advice to a focus on total wealth management." He knows that some investors are "once bitten, twice shy" about financial planners, or they found little value in their investment advice in the past, saying to themselves, "I could have figured that out myself." But George believes that investors who carry that attitude today are missing out on many valuable aspects that a Certified Financial Planner can bring to their overall situation, like tax and estate planning.

"Discount brokers can get you discount trades," he says, "but they are not there to look at your forward retirement planning." George reveals that in his business he sees a lot of clients who come to him after a stint of trying to do it on their own. "A do-it-yourself investor is too close to the situation," George says. "You need a critical eye, someone who is a bit removed to be able to give you perspective and direction." He says that most planners like their clients to be involved, meeting them three or four times a year to discuss their portfolio. They also want to hear what has changed in their life recently, "like changes in employment, birth of a baby, planning of a large purchase or important short-term goals like travel, education, etc."

George winces every time there is a story in the papers about a fraudulent "financial planner" who wasted, stole or lost his clients' money. "It's an abomination," he says. "I refuse to let our entire profession be painted with the same brush." George says that in most of these cases, it was apparent in hindsight that something was wrong. "Very often they are not CFPs," he says, "and there are other signs like when people are writing cheques directly to the planner, or they don't understand precisely where the money is being invested, or when the recommendation was based entirely on past returns."

So what should investors be looking for in a financial planner? George boils it down to two very important things.

"First, you should approach hiring a financial advisor as you would hiring an employee." Personal referrals are the best way to get a short list but then you have to go and interview them. Part of that means asking for their qualifications. "In Ontario, anyone can call themselves a financial planner," he warns. "All it takes is 50 bucks for a pack of business cards. People should look for an actual designation." There are many designations out there and it can get very confusing. The international standard is a CFP (Certified Financial Planner). "In Canada there is also RFP, which the Canadian Association of Financial Planners grants as a "Master's" degree above the CFP. "There is also Chartered Financial Consultant, and even the banks have their own designations," George says. One way or another, he says, investors should look for someone who has undergone the well-rounded, rigorous and comprehensive education and passed the tests to earn their designation. "They must have knowledge of investments, estate planning, and tax planning," he says, "not just product knowledge." As part of their designation, they would also be required to have liability insurance that protects clients against fraud and malpractice.

"Second," he says, "you should ask the planner what he or she specializes in." Some deal with planning issues only, coming up with a written financial plan, some deal in product sales, some do both. "Sometimes you can have two planners, one who provides the plan, another who provides the products, and thus get specialized advice from both," he says. But this can take more time to coordinate and you have to watch out that your plans are adhered to. And above all, do not give discretionary control of your money to your planner unless you have set out written objectives that specify the planner's discretion and then it should only be for portfolio re-balancing purposes. Don't expect your planner to be a hero by trading you into fortune. That is not what wealth management is about.

George Mancini is a Certified Financial Planner that works in the Burlington/Oakville area.

Levi Folk, Richard Webb and Peter Diplaros are Investment.com mutual fund specialists and editors of the Fund Counsel newsletter. They can be reached by e-mail at peterd@hqinvestment.com.