How a Financial Advisor can Lower your Financial Anxiety
Money is the major stressor for many Canadians. Over 40% of us consider financial worries to be the most stressful thing in our lives, according to the Financial Stress survey.
Finances cause us considerably more stress than personal health, work or relationships.
The same survey found that 51% of us are embarrassed at the lack of control we have over our own finances. An FP Canada poll also reveals that 81% of us have at least one financial regret. And yet very few of us work with a financial professional: only 34% of Canadians have the benefit of advice from a financial planner, investment advisor or insurance agent. The rest of us go it on our own.
People who have a financial advisor are far less stressed about money than those who go it alone. So, what is it about having a financial planner that can help ease financial worries? And what do they actually do?
Managing Your Finances
Possibly the most important service a financial advisor offers is to help you manage your finances. Far too few people know exactly how much they spend, what they owe and how much they have saved. Financial advisors are experts at helping you take full control of your finances.
They can help you to formulate a budget and a plan that will get you to a better financial place. Having a financial plan is essential for feeling confident with your finances — financial advisors will not only formulate one that fits your unique situation, they’ll also help you to keep to it. Being able to see your debts decrease and your savings grow is key to making you more financially confident and less stressed.
Good financial advisors look at your finances in a holistic way – that is, they consider every single aspect of your finances. This way, they can help you make the right financial decisions to reach your goals. For example, they can help you work out the fastest ways to pay off debt, so you can start saving more. They take care of all aspects of your finances, so you don’t have to.
Having a Comfortable Retirement
Workplace pensions have become increasingly rare over the last few decades. Currently, only 37% of Canadians have one. The Canada Pension Plan and Old Age Security will only cover the most basic needs, if you’re lucky, so it’s essential that Canadians without a company pension save enough to have a comfortable retirement.
This is where financial advisors really come into their own. They can work out how much you’ll need to save to afford the kind of retirement that you want and then put in place a savings plan to get you there.
Helping You Choose the Right Investments
Do you struggle knowing the difference between a REIT and an ETF? Don’t worry, your advisor can help you not only understand what they are, but also how they can help you and which ones are best for your situation.
Financial advisors can select the right investments to grow your money at a faster rate, while employing a level of risk that you’re comfortable with.
Developing an Effective Tax Plan
Good financial advisors work with in-house experts, such as tax accountants, to help you to legally pay as little tax as possible. They can help you choose the most tax-efficient ways to save money, such as investing in RESPs and TFSAs.
They can also recommend strategies such as income and pension splitting, spousal RESPs and taking advantage of tax credits.
Effective Estate/Inheritance Planning
A financial advisor could save your family thousands in tax by helping you to plan ahead for your inheritance in the most advantageous way.
They can also ensure that your assets go to the right people and help you to set up a legacy of giving.