Alison Griffiths

Many consumers are familiar with consulting an accountant come tax time or an investment advisor at their bank when contributing to a retirement or education savings account. But utilizing the services of a financial planner periodically can actually pay far bigger dividends over time. Consider doing so when faced with major life changes such as marriage, children, divorce or retirement. Once you have a complete financial plan in place it can be tweaked through the years as circumstances dictate.

Be aware that there are many shades of the profession, also known as designations. Some FPs sell mutual funds, insurance and other financial products. Others operate on a fee-for-service or fee-based basis (less than two per cent of the profession), meaning you pay out-of-pocket for their advice. Still others will charge you nothing for a financial plan if you also invest through them.

The most common designation in Canada is the very thorough CFP (Certified Financial Planner) but you will also see PFP (Personal Financial Planner), primarily held by those employed in banks, or RFP (the less common Registered Financial Planner). High net worth advisors may hold the CSWP (Chartered Strategic Wealth Professional), CIM (Chartered Investment Manager) or the highly regarded CFA (Chartered Financial Advisor).

Many financial planners provide no specific investment advice, as in, "buy this fund and sell that one." Rather, they will help you organize and streamline your financial life, then pass you on to a recommended investment advisor who will invest your money in mutual funds, exchange-traded funds, stocks or bonds. Depending on the relationship, your planner may also receive payment from the investment advisors in the form of shared trailer fees and commissions.

A planner who doesn't make investments for you (i.e. they aren't licensed to sell products) may, however, be skilled in evaluating risk, asset allocation, diversification and balance in your investments. They can tell clients if they have underperforming funds, too much risk or insufficient fixed income. Such a second opinion can be very valuable for those who are investing through RRSPs or Tax Free Savings Accounts (TFSAs) and aren't sure if they are going in the right direction.

Don't discount this kind of advice. For one thing, advisors without an investment product to sell are more likely to provide independent advice. As well, a big reason consumers lose money is not because their investments are bad but because they are poorly diversified or their investment strategy is wrong-headed.

One hugely valuable service a financial planner can provide is to help you structure your investments even if they don't offer specific investment recommendations. For example, a couple with a new family will have all kinds of things to consider about how to parcel out their savings among the various options such as an RRSP, a spousal account, TFSA, RESP, debt payments or perhaps a home purchase savings account.

An FP can also help you make decisions about whether to use an RRSP to finance buying a home and how to income split with a spouse or children. And if everyone starting a business spent $2,000 to $2,500 to consult with a financial planner, I suspect there would be far fewer bankruptcies.

There are many other areas of expertise that a financial planner may have such as wills and estates, philanthropy, debt management, tax and insurance. It all comes down to what you want. While all financial planners should have a broad understanding of the basics in the above areas, most will also have a stable of experts for those who need more in-depth service in specific areas.

The first meeting with an FP, usually free, should cover the following topics — compensation (how much and by whom does the advisor get paid), the advisor's particular area of expertise, the cost for retaining outside experts and samples of financial plans which roughly match your situation.

You will be amazed at how many important financial details are uncovered in the course of a thorough financial plan. If you have money problems or concerns (and who doesn't?), a complete plan should provide you with a variety of routes to take as you move through life. And you should easily save enough to offset the cost of the advice.

Alison Griffiths' latest book is Count on Yourself: Take Charge of Your Money. You can reach her at www.alisongriffiths.ca, and on Twitter at @alisononmoney.