Tag Archives: investments

The Real Secret to Making Smart Investment Decisions

By Tom Feigs, CFP®, CET

As a fee-for-service financial planner it’s not unusual to be approached for a “quick” portfolio review. “Can you just look over my investments?” or “Can you tell me if I’m saving enough?” As much as it’s in my nature to want to help people, it would be unethical and unprofessional to advise someone without a comprehensive look at their finances and a clear understanding of their goals.

The idea that investments are priority one is a by-product of how traditional financial advisors are paid – commission on investment sales. In fact, where and how to allocate your funds are decisions that should only be made after reviewing your personal situation and needs.

Imagine your financial journey. The destination is your retirement. Your personal framework (income, obligations, health, family commitments, risk tolerance, age) represents your vehicle and the road map is your various goals. Your investments and savings are the fuel to get your vehicle to your destination.  You wouldn’t be looking for fuel before having a car and directions.

I work with individuals and couples that earn upwards of $150,000 a year, and because of the possibilities their income allows, they will all have their own set of priorities and cash flow needs for retirement. They also have various personal situations (for example, some people may have family in distant locations, others have no children, others have health concerns and still others have various complexities in their personal and business lives.)  All this information is vital to the financial plan we create together. Continue reading →

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Three reasons to stick with a defined benefit pension plan

Karin M byline photo

By Karin Mizgala, co-founder and CEO Women’s Financial Learning Centre and Money Coaches Canada

Retirement planning can raise a lot of questions and feel overwhelming to many Canadians, so I was very pleased when The Globe and Mail newspaper asked me to be one of the go-to experts for their Retirement Q&A section.

Here is my most recent contribution.

globe and mail

pensionQuestion from Derrick Alstein, Port Elgin, age 60:

I have a number of friends and a relative who are considering cashing in a defined benefit pension plan. I think an article on the pros and cons of a cash out strategy versus taking normal payments would be informative. Many people I know that have cashed out are taking advice from people that want to invest their money, have not done well and have had to go back to work.

Answer:

While the lump sum offered to people who consider cashing out their defined benefit pension can be very tempting, I rarely advise clients to withdraw from their pension and invest the proceeds with a financial adviser. Here’s why:

1. Ease of Management

With a defined benefit pension, your employer hires an investment company to manage the pension assets and is responsible to ensure that employees receive the monthly Feb 3 tweetpayment they are entitled to based on a formula that considers earnings history, years of service and age. You have no direct involvement in the management of the investments and there is no need for you to make any investment decisions before or after retirement. At retirement you receive a regular monthly payment from your employer for life. Simple. Most people who want to weigh the pros and cons of a lump sum withdrawal turn to their financial advisers for advice. Of the almost 100,000 financial advisers in Canada, 99% have a vested interest in directly or indirectly managing your investments. I’m not saying that it’s impossible for advisers to provide unbiased advice on whether to stay with the pension or not, but when the potential investment dollars are significant, let’s face it, it’s not easy to remain impartial. To avoid any potential conflicts of interest, it is best to consult an accountant, actuary or fee-for-service financial planner on pension decisions.

Read points 2 & 3 on the Globe and Mail website

 

 

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5 Tips for Surviving Economic Uncertainty

Karin M byline photo

By Karin Mizgala, co-founder and CEO Women’s Financial Learning Centre and Money Coaches Canada

It has been a tumultuous start to the year for the stock market and for the various governments trying to keep the world’s economies on the straight and narrow.  For the ordinary person it’s confusing and worrying.

calculator-385506_1280But what we have to remember is that markets always have their ups and downs.  Easier said than done I know, but it’s best not to succumb to emotion or panic selling.

It’s now especially important to take a longer view of investments. If you weren’t planning to cash in all your stocks or mutual funds now, it’s no time to panic and change those plans. Markets move in cycles and this is unlikely to be any exception. There are even some investors, quick to see a silver lining, who are snapping up stocks at these lower prices.

There are things that you can do to cope and we’ve compiled our top five tips to reduce stress during economic uncertainty.

1. Focus on the things you can control — like living within your means and paying down debt

Take interest rates for example. There’s little you can do about them except make sure you’re prepared for whatever may come. If you’ve racked up credit card debt, make a workable plan to pay it off and cut up your credit cards or at least put them in deep freeze. Use cash for your discretionary expenses like eating out and entertainment. Figure out what you spend on those and other frills and take that cash out at the beginning of the week. Once it’s gone, it’s gone — no going back to the ATM before next week’s installment of ‘fun money.’ Continue reading →

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Money Coaches in Conversation – What you should understand about fees and financial advice

Recently Women’s Financial Learning Centre and Money Coaches Canada co-founder Karin Mizgala sat down with Money Coach Noel D’Souza to discuss the changing landscape of financial advice in Canada.

Women's Financial Learning Centre and Money Coaches Canada co-founder Karin Mizgala

MCC & WFLC co-founder Karin Mizgala

Karin: As someone in the financial industry, it’s very common to be asked by people outside the industry, to explain the different fee structures of financial advice. So, Noel, let’s start with an overview of the common compensation models available to Canadians today.

Noel: The most prevalent model we see in the industry is the commission-based advice model, where an advisor sells products, typically mutual funds or some other investment product, they may also sell insurance, and they receive a sales commission for making the sale and also quite likely receive a trailing commission which is supposed to cover on-going advice and services. Usually the client never sees the commission fees, and we’ll be discussing how that may change in the future, but usually those fees are hidden within the cost structure of the product they are buying.

The second type is fee-based. An advisor will charge the client fees based on the size of the assets under management, a percentage of the total portfolio.

The third model, which is up and coming, is the model we work under; fee-for-service. Clients pay a fee directly and explicitly to the advisor for services rendered and it’s not tied to product sales, or size of assets, in any way.

Karin: So that will sound pretty straight forward to most people, why does it become murky, what are the implications for someone seeking financial advice? What are the benefits and shortcomings of each model? Continue reading →

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Podcast – Consumer Information for your investments: Investors-Aid Co-operative of Canada

Are you looking for better information about investing? Do you wish there was a consumer report like the “Lemon-aid” guide for buying cars?

Garth Rustand Nanaimo BCOur guest speaker this month is Garth Rustand, Executive Director of Investors-Aid Co-operative of Canada and he will introduce you to a different way to get information and make decisions about your investments.

Let’s Talk Money Podcast

Garth Rustand can be reached at www.investors-aid.coop

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Do Financial Experts Really Know Anything?

One of my clients was recently shopping for a new investment advisor and, on my recommendation, interviewed several to see if she could find a good fit. While she found all of the advisors she spoke with to be approachable and very knowledgeable, none of them could assure her that they would be able to predict the next market downturn in time to protect her investments from a drop in value. She was also a little disconcerted that one advisor’s prediction about the market was the exact opposite of what another said. Disheartened, she came to this conclusion – “basically they have no idea”.

While this statement may be a little jarring, I think she accurately captured how people are feeling these days. If advisors don’t know, what are we paying them for and where does that leave us? As a consequence of the breakdown of trust in our “experts”, there’s been a big movement to the “do-it-yourself” model. This works well for some, but it leaves a lot of folks who are already feeling maxed out with life responsibilities feeling stressed, vulnerable and unable to move forward with their finances. Clearly there is still a need and important role for advisors to play.

Fortunately there is a new advice model evolving in the market place. The old “expert-client” model where the advisor “knows all” and the client “knows nothing” is being replaced by a more collaborative relationship. This profound paradigm shift can be troubling for both the advisor and the investor who aren’t prepared for this monumental change in how we do business. On the other hand, it can lead to a much healthier approach to money management. Let’s face it; financial advisors are neither soothsayers nor all-knowing experts (as this past year has certainly demonstrated). And, thanks largely due to the internet, clients are much better informed than ever before. Financial advisors are still a valuable resource – we simply need to get more involved, redefine our expectations and learn how to work together better.

Become an Informed Consumer of Financial Services
By becoming educated, involved and on top of your money, you will be in a better position to work more collaboratively with your financial advisors. You’ll have the confidence to be an active partner in your financial affairs rather than a passive observer or helpless victim.

So, how do you choose a financial advisor under this new model? The first task is to find someone you can trust. This can take some time and research. It starts with you being clear with your goals, the type of advice you are seeking and an awareness of what your expectations are of your advisor.

It’s best to ask for referrals and interview 2 or 3 potential advisors.  Ask hard questions and remember – the advisor is there to serve you so make sure they are listening to you and treating you with respect.

Questions to ask:
Can you describe the type of clients you serve?
Do you have a minimum investment or net worth requirement?
What are your qualifications?
What are the fees for your services and any products/investments you sell?
How are you compensated?
What products and services do you offer?
How often will we meet and how much contact will we have?
Will I be working with you or with your assistant?

More questions for advisors who manage investments:
What is your investment philosophy or approach?
What can I expect from you in market downturns?
How will I know how much money I’m making?
How is my rate of return reported to me?
How often will I receive my statements?
Will you explain them to me?

Even if you work with a financial advisor, it is up to you to educate yourself so that you can delegate, not abdicate responsibility for your money. And trust your gut – if you don’t feel good about your connection with the advisor then move on to someone else. – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-only financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

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Are you Friends with Your Money?

How many of us see our money as a trusted, supportive friend who is there for us at all stages of our life? Or, is your experience with money more like a trip to the dentist – you know it’s good for you, but oh, so unpleasant. Maybe you’re more like Scarlet O’Hara with your money – “I’ll think about it tomorrow”. For some of us our money plays out like a controlling parent who spoils our fun and restricts our freedom. Or perhaps your dreams of comfort and ease in retirement are eclipsed by visions of yourself as a bag lady?

I know I’m not painting a pretty picture here, but I’ve been in the financial planning business for over 20 years and I am constantly amazed by how few people I meet that have a joyful, healthy, supportive relationship with their money. Even people who have a lot of it! With so much focus on money in our culture, it strikes me as tragic that we spend so much energy on it – either avoiding it, obsessing about it, worrying about it, controlling it, but where’s the joy, the satisfaction, the reward?

Most of us have very complex relationships with money and it has a very powerful influence on our life – on the work we chose, our personal relationships, our sense of self. So we certainly have lots of reasons to a have good, healthy relationship with money. So why don’t we? What stops us from making friends with our money?

Mostly I don’t think that it’s cash that we lack, but an awareness of what role it plays in our life, what our beliefs are and what emotions are tied into our dealings with money. Most of us also lack good role models – we see corporate greed on the one hand, poverty on the other – god knows many of our parents didn’t know how to handle money successfully. We aren’t taught about it in schools and we don’t often get a chance to talk openly and honestly about money and our feelings about it.

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