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I'm reprinting last year's column as I get many questions on the topic.
The financial planning process should be ongoing and undertaken at least once a year to ensure you are on track to meet your financial goals.
My experience is that for most people, financial planning is done in conjunction with an event, typically a severance package and pension decisions, inheritance, reinvestment decisions or this year's RRSP contribution.
These events are certainly excellent reasons to go through the financial planning process. Decisions surrounding what do with a severance package or inheritance cannot be made without looking at your whole financial situation, goals and objectives.
Who can help you with the financial planning process?
The Financial Planning Standards Council is a national body whose mandate is to standardize financial planning certification in Canada.
Without some standard of certification, any individual can call themself a "financial planner." But all "financial planners" are not created equal.
The council has representation from many associations, including the investment dealers, bankers, insurance, and accounting industries -- all bodies with members practising financial planning.
The council issues the designation Certified Financial Planner (CFP) to individuals meeting their requirements. This is the same designation used in the U.S. as the standard and is expected to be adopted in more countries. The council offers a standardized curriculum to individuals wanting this accreditation.
Certain individuals with other financial planning designations have been grandfathered into the new designation. In addition, certain other professionals with financial planning experience and required qualifications were permitted to take a six-hour exam in the past two years.
The Canadian Association of Financial Planners is another national body which extends the designation Registered Financial Planner (RFP) to individuals meeting their experience and educational requirements.
RFP designees were among others granted the new designation.
The Financial Planning Standards Council has not yet been able to achieve only one standard for Canada, however.
This process will certainly take time. Therefore, both the CFP and RFP designations exist.
In searching for a financial planner, it is important that you determine his or her qualifications. The CFP and RFP designations can be held by many different professionals including investments advisers, insurance representatives, bankers, trust officers, lawyers and accountants.
In dealing with advisers with these designations, you are assured that they have both the educational requirements and necessary experience.
There is also a requirement under both designations for ongoing continuing education, which ensures members keep current.
Most importantly, under both designations, a code of ethics, governing all aspects of conduct with clients must be strictly followed by these individuals. Members reported to not comply with the code of ethics will lose their designation.
Advisers without a financial planning designation are not necessarily without education and/or experience in financial planning.
In future, as the public becomes more knowledgeable about the financial planning designations, it will be increasingly important for advisers to ensure they are fully qualified to call themselves financial planners.
In dealing with any individual purporting to do financial planning, you should ask for his or her qualifications, what is the area of expertise and how is he or she compensated.
¾¾ Financial planning is an important process. Your adviser should be carefully selected.
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