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Retirement Planning

The Value of Advice

January 13, 2011

The ‘do-it-yourself’ mentality is flourishing.  Many of us use the Internet to obtain information and get the ‘best deal’, complete our own renovations (my wife cringes every time I haul out the toolbox!) and even make our own wine.  Self-help books such as “(Insert title here) for Dummies” are flourishing.

Investing is no different.  Journalists advocate do-it-yourself (i.e. self-directed) investing and encourage readers to ‘avoid the fees’ of mutual funds.  Repeatedly we are told that most managers fail to outperform the market and that most financial advisors are more interested in their own personal welfare than that of their clients. So it’s natural to ask the question “Is hiring a financial planner such as Certified Financial Planner worthwhile?” Below are some factors to consider:
1) Information vs. knowledge. There is a tremendous amount of information available via the Internet and other means...sifting through it all to make good investment decisions requires a rigorous and time-consuming process.  Many investors confuse information with knowledge.  Even the most successful money managers admit that they are right only slightly more than they are wrong.  
2) Stay focused on goals. A financial planner can help you determine what your goals are and develop a plan to meet your goals.  Finding an advisor who shares or can relate to your beliefs and values is an added bonus.
3) Proper diversification. A good financial planner will ensure ‘you don’t put all your eggs in one basket’ and will develop a portfolio to help achieve your life planning goals (e.g. retirement) by weighing factors such as tolerance for risk, return required and age.
4) Help manage your affairs. With the many different investment vehicles and acronyms that come with it (e.g. RRSP, RRIF, RDSP, RESP, TFSA, etc.), using a financial planner can help determine which investment vehicles are right for you.  As the baby boomers retire, a financial planner can help pull together RRSPs, public and private pension plans and other investments to determine investment strategy and cash flow during retirement.
5) Take the emotion out of investing. With the significant decline in stock markets around the world in 2008 and the corresponding worldwide economic downturn, it is easy to become disillusioned with investing.  A financial planner can illustrate that corrections have occurred in the past and recommend strategies to take advantage of market conditions (e.g. buy low). 
6) Avoid chasing returns.  Some investors are tempted by a feel-good ‘story’ and in time, find themselves owners of a long defunct gold mine, technology or drug company (e.g.  BreX, WorldCom, Nortel, 360 Networks, Lehman Brothers, etc.).  Many do-it-yourself investors who act on ‘hot tips’ are susceptible to gurus and respond emotionally rather than logically.  
7) Sense of invincibility.  Consider this statement “A rising tide lifts all ships”.  With the recent bull (i.e. rising) market, it’s easy to get fooled by a sense of invincibility.  This can lead to ignoring the underlying risks of the investment and/or being overexposed to one company or industry.
Red Adair, the world famous Canadian oilfield firefighter expresses the value of advice well.  When asked why he was able to charge such huge fees for capping out-of-control oil well fires, he said, “If you think hiring a professional is expensive, try hiring an amateur”. 
At Christian Credit Union our staff are willing and able to meet your financial needs. In addition, we are pleased to have two Certified Financial Planners on staff who have obtained a level of knowledge and experience to help members obtain their life-planning goals.  Kindly let us know if we can be of assistance.
Blessings in 2011!

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