Is it time to consider using an advisor?

Article provided by MONEYTALK Wealth
Written By Mark Brown
October 2024

These Days, you can find the answer to just about any question online. Want to fix a wall? Watch a self-help video. Planning a dream vacation? There are endless reviews and guides to help you map out the perfect trip. Saving for retirement or managing your money? That’s where things can get more complicated.

Sure, you can find a lot of decent financial information online, but if you want to push your portfolio to the next level, you may need a professional’s help.

And while some investors truly enjoy doing it all themselves, others may feel stressed and overwhelmed by the prospect. If you fall into the latter camp, an advisor can help you plan for the future and build a portfolio that helps you meet your goals. 

To learn more about the role of advisor, we spoke with Nicole Ewing, Director, Tax and Estate Planning with TD Wealth.

How do I know if I need an advisor?

Ewing says there are many situations in which you might reach out to an advisor, but that it's most common when someone is facing a big milestone in their life. “It might be the result of a marriage, separation or divorce, a time when you really need professional insight into the value of your assets and the options available to you,” she says. “Maybe you’re transitioning to a different stage of your career, and you simply don’t have the time to manage your money. Taking your eyes off your financial situation can have pretty serious implications.”

While you may think an advisor simply focuses on investing, that’s not always the case. In fact, many now also help their clients look at the big financial picture — including how they’re spending their money and where they might be able to save when it comes to their taxes. Strategy is the name of the game. “You don’t know what you don’t know,” Ewing says. “You could be a brilliant investor and see great returns for yourself, but not realize that some of the other decisions you’re making are undermining your plans. An advisor takes a much broader approach.”

That’s part of the reason investors who have worked with an advisor tend to outperform those who don’t. A study by the Investment Funds Institute of Canada (IFIC) found that investors who have worked with an advisor for 15 years or longer grew their savings by 2.3 times more than those who hadn't yet sought advice¹. 

What's something that surprises people about working with an advisor?

One of the little-known benefits of working with an advisor is that having a third party present can make it easier to broach difficult subjects with a loved one — such as the need for a pre-nuptial agreement or long-term care. “Having somebody else be responsible for raising the awkward questions and navigating the conversation for you can be very helpful,” Ewing says. “They can help normalize subjects in a way that doesn’t feel threatening or scary.”

Research shows that investors who have worked with an advisor for 15 years or more accumulate 2.3 times more in savings than comparable investors without advice.

SOURCE: IFIC, "Financial Advice in Canada," November 2022

What if an investor is doing well on their own? Why should they consider speaking to an advisor?

Even when an investor is doing well on their own right now, Ewing suggests that an advisor can help by looking toward the future so that current success can be the foundation for long term prosperity.

An advisor can take the time to really get to know you and your long-term goals, and help you build a plan. They will also likely raise issues that might not be top of mind for you right now, but warrant serious consideration — including estate planning and charitable giving. Even when it comes to investment decisions, they can help take some of the load off you.

Ewing emphasizes that delegating some of the responsibility to someone with expertise in wealth planning won't mean you're cut out of the decision making. It just helps takes some of the pressure off, knowing there is someone else looking out for you.

What else do advisors bring to the table?

When you work with an advisor, you're also working with their entire team and network, and you'll be able to take full advantage of the advanced tools they have at their disposal. Ewing points out that advisors can help clients better understand how significant economic events — like a move in interest rates — might impact their planning decisions.  

While your choice of advisor is important, so too is your choice of financial institution. Each has different strengths and some can offer clients more than others. For example, Ewing says that many TD advisors take pride in setting up plans and support for aging clients or educating less financially-confident family members. These are things that might otherwise hinder long-term goals. “Even if an advisor isn’t personally equipped to handle a particular issue, their team of experts can help navigate,” she says. “And they can use their experience helping similar clients to offer ideas or advice.” 

What if I need help, but still want to be able to do my own thing?

When it comes to working with an advisor, it doesn’t have to be all or nothing. “Very often, people will have what they consider, for lack of a better word, a ‘play account,’ somewhere they’re willing to take a little more risk,” Ewing says. “Maybe they have a particular interest that wouldn’t necessarily fit into their overall portfolio, but they’ve carved out some money to see how they do.”

While an advisor will always respect your wishes, Ewing suggests moving with caution when it comes to these sorts of investments.

“In the short term, people may look at their amounts and feel they’re outperforming their advisor,” Ewing notes. “They may be getting higher returns because, for example, they’ve gone all in on one particular stock. Then it just takes one correction for reality to kick in.”

Is there anything investors tend to overlook when managing their own money? 

People may fail to consider the tax implications of their investment decisions until after the fact, explains Ewing. “There’s a tax element to basically all of the decisions you make with respect to your finances, whether it’s which account you should put your money in or whether you’re going to have dividends, interest or capital gains. These are important considerations.”

Certain types of investment income, for example, can have an impact on your Canada Old Age Security (OAS) entitlements. Although your tax picture may be relatively straightforward now, the older you get, the more complicated it can become — particularly as you near retirement and begin to draw down your investments. “You can have two people who are the same age and in similar circumstances but, because of their priorities, what is most effective for each of them will be different,” Ewing says.

What if I don’t like the idea of sharing my financial information?

“I know it feels intimate to share that information, but advisors are governed by rules that require them to keep your privacy,” says Ewing. At the end of the day, an advisor should make you feel more, not less, comfortable. If you’re not happy with the first advisor you find, you can always seek out another who may be better equipped to meet your needs. Some advisors have specific areas of focus or only work with people in certain occupations — meaning there’s almost certainly someone out there for you.

“If it doesn’t work with one individual, don’t let that be the end of the journey,” Ewing says. “There's no judgment there, they just want you to succeed. That’s their business.”

SOURCES

¹ The Investment Funds Institute of Canada (IFIC), Financial Advice in Canada, November 2022, https://www.ific.ca/en/policy_topics/value-of-advice/

Disclaimer

The information contained herein has been provided by TD Wealth and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual's objectives and risk tolerance.

TD Wealth represents the products and services offered by TD Waterhouse Canada Inc., TD Waterhouse Private Investment Counsel Inc., TD Wealth Private Banking (offered by The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company).

TD Wealth Private Wealth Management represents the products and services available through TD Wealth Private Investment Advice (a division of TD Waterhouse Canada Inc.), TD Wealth Private Investment Counsel (offered by TD Waterhouse Private Investment Counsel Inc.), TD Wealth Private Banking (offered by The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company).

TD Wealth Financial Planning is a division of TD Waterhouse Canada Inc., a subsidiary of The Toronto-Dominion Bank.

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