As much as do-it-yourself investing and financial management has taken off in recent years, it’s clear that many people still want to talk to an expert. In fact, they’ll line up to do it.
Financial planner Julia Chung got in touch recently to report that there are waiting lists as long as six months to see experienced professionals who, like her, work on an advice-only basis. That means clients pay directly for planning services, rather than having the cost covered through fees applied to the sale of investment products or portfolio management.
To hear more about the demand for advice-only planning, I invited Ms. Chung to do an e-mail Q&A. Here’s an edited version of our exchange:
Q: Julia, can you tell us about your background as a financial planner?
A: I’ve been a certified financial planner since 2009, and I have worked in financial services for much longer than that. I founded my advice-only financial planning firm, now called Spring Planning, in 2012. At the time, there were very few firms offering this structure of planning and not a lot of options. In addition to being a CFP (certified financial planner), I’m a CLU (Chartered Life Underwriter), FEA (Family Enterprise Advisor), and TEP (Trust & Estate Practitioner). I’m trying to stop collecting initials now that there are more letters after my name than in it.
Q: It’s clear that people are really opening their minds to paying directly for financial planning. How long a waiting list do you have for clients seeking a plan, and what do you hear from other planners?
A: Personally, I have about a two- to three-month waiting list for initial discovery calls. Should someone decide to proceed with the proposed engagement, we start gathering information right away but the first meeting to review and verify that information is going to be about six months in the future. Part of that, on my end, is because Spring provides is a lot of income planning support for existing clients in the fall, so my October-December tends to be prebooked.
I asked for input from the advice-only planners. Those who have been working in this space the longest or work with specific areas like cross-border and corporate planning, like me, are seeing four- to six-month waiting lists. Those who have newer practices or don’t support those specific areas have anywhere from two-week to one-month waiting lists.
Q: What’s driving the surge of interest in financial planning?
A: Some of it is awareness that you can work with a financial planner in a pure advisory, product-free space. Other factors include:
- Demographic changes in which an aging population is facing the realities of retirement and estate planning in a much more specific way that they did 10 years ago.
- An ability to invest on a “DIY” (do-it-yourself) basis that previously didn’t exist; this helped create an active separation between financial planning advice and investment management.
- Interest rate and market volatility.
- Consistent and intense tax legislation changes.
- And, of course the impact of the pandemic on how people think about what they really want out of life.
Q: What’s on the mind of your clients – what are they worried about and what are they asking you?
A: Retirement is a big topic with clients. Transitioning from having a paycheque that you don’t really have to think about is really complex. Retirement income planning has a lot of rules, tax considerations, and just complexity. Thirty years ago, most people had pension plans that sort of figured it all out for you. Today, we have fewer defined benefit pension plans, a bunch more types of investment accounts, more complex tax legislation, earlier retirement hopes and much, much longer lives. Also, over the past 50 years we went from a retirement period being perhaps five to 10 years long to now being about 30 to 40 years long. It’s hard stuff to figure out.
This complexity impacts people at all life stages, of course. Saving and investing towards your retirement or financial freedom and making decisions is much more difficult than it used to be.
Q: What are the different ways planners are paid, and how much do you charge for your services?
A: Traditionally, financial planning has been provided through financial institutions as a ‘value add.’ This means that the advisors are being paid for providing you with investment and/or insurance implementation and management. The financial planning component is an additional service that is offered without additional fees.
Advice-only financial planners are paid for providing advice and often bill in ways that might be similar to a consultant, tax accountant, or lawyer. Some planners provide fees at an hourly pace. Some planners provide project-based fees. Some planners provide an annual fee, others provide a modular fee based on various components. Some planners partner with investment and insurance companies, and receive a percentage of the fees from placing assets with those companies.
I generally work on a project basis for initial plans, and then an annual fee for ongoing support. I tend to work with clients who have corporations, trusts, international assets and family members, so my fees tend to be higher than the planners who work with people who do not have that complexity. Depending on the service type and structure, fees can range from $1,600 through $15,000.
Q: Can you offer some tips for finding a planner, preferably one that can take new clients without a long wait?
A: Start with knowing what kind of advice you really want. What questions are you asking, and what kind of expertise might you need to answer those questions? What kind of relationship do you want? Is it ad hoc, one-time, or ongoing? Do you want to have a one-stop shop like those offered by major financial institutions, or do you want to keep this component of your financial decision-making separate?
From there, look for the CFP and QAFP designations, which I consider “table stakes.” QAFP stands for Qualified Associate Financial Planner. If you are looking for advice-only comprehensive planning, get comfortable with knowing that the current number of planners (about 100 or so, from what I can tell) does not yet meet the number of clients (41 million Canadians). Also, understand that financial planning isn’t necessarily regulated, so a lot of people can call themselves financial planners. There is title regulation in Quebec and some in Ontario, but it’s limited. That’s why I lean towards the designations, which have education requirement to get and maintain.
Consider working with planners outside of your province, because it doesn’t need to be in person. My clients are right across the country. If you are open to a newer planner, that would be great because I’d like more planners to come to the advice-only side.
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A: I’m throwing this one out to the financial planning community in the hope that I get some replies that can be passed along to this reader.
Do you have an answer - or question - for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
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