Which is better?
Let’s first talk review the planning process.
The planning process as defined by FP Canada, simplistically, works like this:
We sit down and talk about the financial plan is and what it can do for you. We further outline and clarify what you can do for you and what you can expect AND outline how often we’ll can connect and what we expect from you.
Then we use a discovery process to gather information about you.
From that we crystalize and summarize your financial needs and your financial goals. This is typically detailed in the following ways:
- Retirement Income Projection
- Insurance Needs Analysis
- Education Funding Strategy
Once presented and agreed upon, we then draft an initial strategy to meet those needs and goals. (Our Absolute MAP.) This can include:
- Introductory Summary
- An Absolute Cashflow Plan
- Absolute Investment Mandate, either Broad or Specific
- Additional material as required
We talk about ongoing and regular reviews of this plan, every three years or as your situation changes.
For a more detailed explanation, please see the following page.
This is the same process for every client.
There are two ways we are paid for this planning process, either under fee-only or a fee-based model. This outlined in the Absolute Letter of Engagement.
Under this model, clients are charged directly for the creation of a financial plan (the Absolute MAP) with additional fees for later review and adjustment. The client is then responsible for taking the Absolute MAP documents and using them to set up their own investment accounts, RESPs, TFSAs, budgets etc.
Under this model, we take the Absolute MAP documents and use them as the basis for setting up the investment accounts, new bank accounts, the proper insurance, TFSAs, RESPs etc, whatever is required. This includes a specific investment strategy that is reviewed every three months, two of more meetings a year, assistance with paperwork and tax reporting, etc.
These investments are set up using one of three models:
- Managed Investment Pools (mutual funds, investment pools, segregated funds, etc)
- Exchange Traded Funds (index-based or active)
- Private Money Management Teams
After three decades of experiences, I believe the fee-based model is more effective in helping clients meet their needs and achieve their goals. The primary reason for this is because it means the clients have engaged The Absolute Group staff to nag, nudge and coax them into getting their plans set up. Either method CAN work, of course.