Creating a financial plan for your clients is one of the most impactful things you can do to prepare them for the future. Although financial planning isn’t one-size-fits-all, there are a few things you can do to make your plans clearer and easier to follow:
1. Write it down
Can you imagine trying to build a house without blueprints? Of course not! A financial plan is a blueprint for someone’s life. It is a comprehensive document that outlines not only short and long-term goals but also, financial potential and capability. Along with financial details, a financial plan should also include:
Assumptions: Inflation rates, rate of return on investments, tax bracket, years of work remaining, life expectancy, etc.
Recommendations: All finalized recommendations clearly stating the assumptions which they are based upon, projected benefits, and potential problems.
Implementation checklist: A checklist that defines the individual responsible for implementing each identified task, whether it is the client, financial advisor or a third party (such as an accountant or attorney).
A financial plan should be reviewed every year. Finances should be updated, goals should be re-assessed, progress celebrated, and mistakes acknowledged. Financial circumstances can change a lot in a year, and the plan needs to adjust and develop alongside it.
3. Include debt repayment
A financial plan focused on RRSPs, TFSAs and tax-efficient investments will be of little use if debt repayment is not included. Although growing wealth and preparing for retirement are important, debt in retirement can sabotage even the best-laid plans.
4. Make a plan, don't list products
Too often, policy illustrations, insurance quotes or investment policy statements are printed out, neatly organized and delivered as a financial plan. These related products could be part of a plan, but they are not a plan themselves.
5. Focus on cash flow
If your financial plan doesn’t include the household’s or individual's cash flow, there is a good chance it is more fairy tale than fact. Without a focus on cash flow, it’s impossible for the plan to be based on what the person actually needs to afford their lifestyle today and in retirement. Without an understanding of spending behaviour, any savings projections or investment strategies could be railroaded by monthly expenses and financial obligations.
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Consider CacheFlo Advise.
Based on a blog post originally published on 2013-07-18, by The Money Finder Blog.
Hyre Personal Wealth Advisors (n.d.). Essential components to a financial plan. Hyre Personal Wealth Advisors. URL
Ontario Securities Commission (2020, September 18). What your financial plan should cover. GetSmarterAboutMoney.ca. URL
Voight, K. & Yochin, D. (2021, April 20). What is a financial plan, and how can I make one? NerdWallet. URL