Making Sense of Your Dollars & Cents

Recently, Scott Strapp from National Bank Financial kindly shared his time and knowledge with Widowed Friends at a Financial Health Information workshop.

Many expressed an interest in learning more about what Scott shared so we thought we’d do a brief Q&A with him to provide a little more info. If you’d like to contact Scott directly he can be reached at scott.strapp@nbc.ca.

Q. We all want a happy well-funded retirement. Some of us may be already retired, while others are still in the workforce. What do you suggest is the best way to prepare financially for a long and happy post work life?

A. There is no crystal ball about what is the best, safest path to take. I tell all my clients that the single most important thing anyone can do when considering their financial future is to focus on their goals, both long and short term. It’s only by identifying what is important to you and what you really want out of life that you can start to build your plan. Once you know what means the most to you – where you want to spend your time and available resources, we can then start putting together a plan which will help you achieve these goals.

Q. With all the political upheaval and change happening all around the world, is it safe to invest in the markets?

A. For every negative news story, there’s always a positive story somewhere that is being ignored. Negative sells ratings, positive often does not. Remember that with negative times or news comes potential opportunity. The speed of change is only increasing. We cannot be afraid of it, we must embrace it. An example is the explosive growth of Amazon. They are redefining retail today. Companies need to adapt or they will fade away. The decline of Sears Canada is a case in point. In modern retail, they are largely irrelevant. As a result, they are fading from the scene. Going back to the original question, there has always been global political upheaval and change throughout history. These occurrences have always provided for investment opportunities.

Q. What if I don’t have substantial funds but am still interested in the financial market?

A. The same principle applies to everyone. What are your goals and what do you need to do to maximize your funds to meet that goal. Everyone can benefit from going through a visualization exercise – identifying what’s important to you, determining what your goals are and then evaluating a route to achieve your goals.  Realistically evaluating your financials is important but the critical factor is to identify your goals and what is important to you. Everything else comes after that.

Q. Do you have any recommendations that anyone can do to improve their financial security?

A. I think TFSA’s (Tax Free Savings Accounts) are not utilized as fully as they should be. Everyone has the opportunity to invest up to $5500 a year to a current maximum of $52000. When you pull money out, it is tax free, unlike both RRSPs and RRIFs which are taxed on withdrawal. What is commonly not known is that if you remove funds from a TFSA, not only are you able to contribute the fresh $5,500 the following year, but you are also able to re-contribute every penny that you withdrew the previous year. In addition, you can hold most kind of investments in a TFSA. The Banks have been great having investors purchase GIC’s and High Interest Savings inside a TFSA. In my opinion, this is a poor use of a TFSA. There are other options which can provide greater cashflow and still meet risk tolerances. Overall, take advantage of this great savings tool. It can make a difference.

Q. As a widower or widow, do I have different financial considerations to be aware of than couples or singles?

A. The biggest issue we’ve found is that the widowed often receive too much advice from too many outside sources. These sources tend not to be objective as they could be, if they are looking at your financial resources as their’s. Surround yourself with one or two trusted advisors who focus strictly on you and what is best for you. Talk to them. Listen to them. Often, ideas are presented that you may not have previously considered.

Q. If someone is looking for a financial advisor, what questions should we ask to ensure the person is knowledgeable and working in our best interests?

A. There are a few do’s to ask your advisor and one don’t:

Do’s:

• Ask how they are paid (transparency with a client is very important)
• What is their process for managing money – do you agree with it or should you consider someone else
• What does your “gut” say – do you trust this person or not? Is it the right fit?
• Do they have a specialty? How do they put portfolios together. Some institutions may only have limited portfolio’s that the advisor must use – the cookie cutter approach – decide if that is acceptable to you.
• Do they have references?
• How will they communicate with you – what are your preferences?
• Will they put the time in to really get to know and understand you?

Don’ts

• Don’t ask what their rate of return is annually – it is a variable number that can change significantly depending the client’s goals and risk tolerances. Everyone is different. It follows that portfolio returns vary as well.

What do you think? Do you agree with Scott’s take on planning for our financial futures? Use the comments box to add your thoughts. Thank you Scott for taking the time to chat with us!