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Financial advice pays off: report

By AdvocateDaily.com Staff

Recent research shows working with a financial advisor is the key to asset accumulation, says Dawn Marchand, vice-president of marketing and direct distribution for CBIA/Lawyers Financial.

The report, conducted by the Quebec-based Centre for Interuniversity Research and Analysis Organization, found that within four years of availing themselves of financial advice, investors’ assets grew almost twice as fast as those who went it alone.

By the 15-year mark, advised investors accumulated almost four times more assets than comparable non-advised investors, after adjusting socio-economic and attitudinal differences.

Though the numbers are striking, the reasons for the disparity are relatively simple, Marchand tells AdvocateDaily.com.

“Working with an advisor helps to establish a plan,” she says. “From there, it’s much easier to determine how much you can and should put aside, and it also allows you to make better use of tax-saving strategies.”

Without an advisor to help set an appropriate risk profile, she says individuals are unlikely to be investing at the optimal level.

“If you’re in your 30s and you’re only investing in bonds and treasury bills, which are relatively low-risk activities, then you’re losing out on opportunities for growth,” Marchand explains. “Or you could be the other way — throwing everything into equities and penny stocks your uncle tipped you off about, which is very risky.

“You need a balance, which changes as you get older and your risk profile changes,” she adds.

Marchand says she understands why some people have trouble clearing the psychological barriers when it comes to seeking financial advice.

“Before setting a plan, you need to have a full picture of your financial situation. Many of us have no idea how much credit card, mortgage and other debt we have,” she says.

What’s more, some would rather not know the details of their financial health, fearing they’ll be overwhelmed by bad news.

“We probably think it looks much worse than it actually is,” Marchand says.

In fact, she can speak from personal experience about the fears and benefits associated with finding sound financial advice. After receiving a severance package, Marchand sought out an advisor who guided her through her investment options.

“It can be scary, but it’s worth it to lay it out on the table and know what you’re dealing with,” Marchand says. “I received some terrific advice.”

One of the most common reasons for avoiding financial advice is also one of the most frustrating, she says.

“People say they don’t know enough. They’re afraid to look unknowledgeable in front of an advisor,” Marchand says. “To me, it’s a bit like the people who clean the house before the maid service arrives.

“It’s something people should try to get over because the whole point is for an advisor to help. You may not know everything, but they will help you become more knowledgeable and more involved,” she adds.

In addition, she says people mistakenly think they need to be very wealthy in order to justify hiring an advisor.

“Roughly 80 per cent of Canadian households are what we consider moderate investors, which means less than $100,000 of investable assets,” she says.

“That’s the time to start working with an investor, even if it’s just to create a plan to work on your debt. It’s important to start early because you build important financial discipline.”

Despite a reticence to seek advice, Marchand says she’s encouraged that attitudes are changing, noting that one of the most popular posts on the Lawyers Financial website touches on some of the important questions to ask your advisor before you get started.

“It means people are thinking about these issues, which is good news,” she says.

Marchand says the decision to seek advice pays off psychologically as well as materially, according to further studies.

“Canadians with access to an advisor have been shown to be more comfortable about retirement than those without,” she says.

“We should all be thinking about retirement much earlier than we typically do," says Marchand. "You don’t want to hit 50 and suddenly turn your mind to it. If you’re thinking about it at 30, you can set yourself up for the best retirement possible.”

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