Why independent and affordable financial advice is so hard to find
There are certain perplexities in life that are hard to figure out: a nagging mysterious pain, a feeling of general anxiety, or your child’s worrying behaviour. It’s not always obvious what to do about it and who to go to for advice.
Money is another one of life’s perplexing issues. You have questions like, “Should I put money in my RRSP or pay down my mortgage?”, “Can I afford to retire?”, “Should I join my company pension plan?” and “Why do we feel like we’re on a financial treadmill getting nowhere?”
What you need is someone to ask. Someone who is unbiased, who knows what they’re talking about, and is willing to take the time required to understand you and make personalized recommendations. Also, it needs to be affordable. This combination is really hard to find.
Financial advice isn’t plug and play
There is lots of affordable and even free advice out there but often it’s not enough. Financial planning books and blogs give information, but the question of how to apply that to your own situation can be really hard to figure out. You can read about strategies and tactics for managing your spending, creating savings plans, and investing your money but when it comes to actually doing it, it’s not that simple. All kinds of things get in the way and you can’t ask the author how to they’d handle your particular complexities.
It’s a lot like parenting books: each book has a theory about your kids’ concerning behaviour and provides a method for handling it, like when my three year-old son had a penchant for hitting people during a tantrum. I would read a book, buy into the ideas, and think “Yes, here’s the fix!” But when it came time to implement the technique, somehow it wasn’t so easy and didn’t go the way the book says it should. I would soon abandon the sticker chart/point system/time-out chair and go back to being frustrated.
I never did figure out who to ask about my three year-old’s hitting problem. Fortunately, he stopped being three and the phased passed. Money issues, however, don’t usually just disappear with time. They linger and need addressing.
The flaws in advice
If you seek out advice, there are several options available. You can go to a bank branch and talk to someone there. They should be able to answer some basic, factual questions for you but they will not provide an analysis of your situation and will not lay out any kind of plan for you. What about going up a level at the bank, and using a financial planner? Better, but you need to be aware of the biases inherent in their job, like wanting you to invest with them, even if it would be better to pay down your debt.
Financial advisors can provide all kinds of financial planning advice, but they likely won’t work with anyone with less $250,000 to invest (and that’s 86% people in Canada).
Family members? Maybe you have a relative who is willing to give you advice. Some of it might be good but some might be terrible - how can you know?
Faced with a lack of advice options, what do people do with their financial questions?
Nothing.
They focus on all of the other things in their lives, and say they’ll get to it later. Maybe. This is a shame because a little good advice and guidance can make a huge difference in someone’s life.
The advice conundrum
Why is it so hard to find a financial expert who is independent and affordable? Ironically, it comes down to money. The business of offering this kind of advice is not profitable enough. It takes a lot of time and energy to help people - there’s no template and it can’t be automated so it’s an inefficient business. As a result, financial advice usually comes from someone who works for a financial company like a bank or an investment firm because the real money is made by offering other products and services to you, the client.
There are some great financial planners in Canada who are independent and unbiased, offering excellent, personal advice. The problem? Planners who only offer advice without selling anything rely solely on the fees you pay them. To be profitable, they have to charge fees that not everyone can afford. The cost is well worth it when the advice pays for itself in the form of investment returns on money that might have otherwise sat in cash, paying lower interest rates on your borrowing, and paying less in taxes because of smart tax planning, but the upfront cost may feel prohibitive. (Encouragingly, many of these planners have waiting lists, a positive sign that people are seeking and value this kind of advice.)
It’s a conundrum.
No easy answers
There is no easy solution for this problem. A financial expert who has invested time and effort into building their knowledge needs to make a living but without commissions or revenue streams from selling products to supplement their income, how can they survive?
I’ve given a lot of thought to why I quit my job to offer financial advice. I understand how the financial advice industry works, and I knew from the beginning that it was never going to be a lucrative business. Every person’s list of questions and their plan needs careful attention. Each spreadsheet has its unique format. The process can’t be automated. Every report I write starts with a cursor blinking at me on a blank page without a pre-filled template. The amount of time I spend on each person’s report can’t be compromised.
There are people doing this kind of work in various forms – so why are they so hard to find? Because a Google search doesn’t bring us to the top of the results. We don’t have money to spend on advertising and we don’t hire experts in search engine optimization. There’s no social media specialist generating views and likes. We’re just individuals sitting at a home office desk, updating our own websites, editing our own blogs, and doing the in-depth work of creating personalized financial advice for regular people.
If we want this kind of financial advice in Canada, we need people willing to do the work without being motivated by money. And like any other service, that’s uncommon.
If you’re looking for tailored financial advice or simply answers to specific questions, you can have a look at this directory of Canadian fee-based financial planners and coaches. Not everyone on this list is independent and not everyone is super affordable, but you might find the right person for you. (And yes, you’ll find me on this list.) Spread the word. Tell your friends. Follow these folks on social media. Share posts. Forward helpful emails. Get the word out –financial questions deserve answers!
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