Brian Poncelet

Financial Planning: Do it or Die!

Yes, that maybe over the top but not quite.

A properly executed financial plan is evidence that an adviser has taken the time to familiarize herself with a client in order to make suitable recommendations. At a time of increasing scrutiny on how advisers conduct business, that’s significant.

A case summary supplied by Ms. Bessner (lawyer) described the plaintiffs as a married couple in their 50s who were anxious to retire and had already determined that they could live off an income $35,000 per year. In 1999, they asked their duo of advisers when they could retire and be in a position to draw that level of income until age 90.

The advisers produced a four-page financial plan that used several assumptions to lay out a path to retirement in 2000. Instead of following the plan, the couple put it in a drawer. Years later, after retiring and realizing they would run out of money at some point, the couple was forced to go back to work in jobs that paid them less than they made before they stopped working.

The husband and wife then sued their advisers for income lost as a result of the decision to retire.

In 2011, a judge found in favour of the couple and awarded them damages based on several years of lost income. This past June, the decision was overturned on appeal.

One further suggestion from Ms. Bessner – review your plan on your own at least once per year to make sure it still reflects your needs. You should also have regular reviews with your adviser to see whether you’re on track.

Ms. Bessner said the case of the couple who sued their advisers offers some lessons on how to get the most from a financial plan. Most importantly, clients should understand that their plan is not an inviolable document.***

*** Merriam Dictonary 

:   Inviolable means Too important to be ignored or treated with disrespect

An odd detail in the case of the retired couple is that they continued to deal with their advisers after deciding not to follow their financial plan, and the advisers themselves never referred to the plan, either. The appeal court rejected the claim that the advisers were negligent, but Mr. Richards said there is still some responsibility on the part of the adviser. When an adviser asks a client to invest the time to prepare a financial plan, there’s an implication that both parties will act on it.

Source:  Globe and Mail (September 06, 2013)




PS.  The take away here is you need a updated plan every year.  Rates of return change, life changes, families changes, job changes and so on.

Brian Poncelet, CFP


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