Do I Need a Financial Plan? | Northern Asset Management.

A practical look at what financial planning can help you understand.

It's a fair question.

For some people, the words financial plan bring to mind a giant binder filled with charts, assumptions and numbers that will probably never be looked at again.

But that really isn't the point of financial planning.

A useful financial plan should help you answer some fairly normal questions:

•  Am I on the right track?

•  Can I afford to retire when I want to?

•  Am I saving enough, or perhaps more than I need to?

•  What happens if life doesn't go according to plan?

•  How do my investments fit with everything else?

•  Am I making financial decisions in the right order?

•  What happens to the people and causes I care about when I'm gone?

You may not need a complicated plan to answer every one of those questions. But as your financial life becomes more complicated, having a coordinated plan can become increasingly valuable.

A Financial Plan Is More Than an Investment Plan

This is probably the biggest misconception I see.

Investments can be an important part of financial planning, but they aren't the entire plan.

Knowing what investments you own doesn't necessarily tell you whether you can retire comfortably,

whether your family is financially protected, or whether your estate is structured the way you intend.

That is why good planning starts with the person, not the product.

In the investment context, Canada's Client Focused Reforms reinforce the importance of understanding a client's circumstances before making recommendations. Know Your Client requirements and suitability obligations are intended to help registrants understand their clients and make suitable recommendations when those obligations apply. [1][2]

A broader financial plan can bring several areas of your financial life together:

Cash flow and savings

What is coming in, what is going out and what are you trying to accomplish with the difference?

Debt

Which obligations need attention and how do they interact with your other priorities?

Retirement

What might retirement look like, what sources of income could you have, and how might different

decisions affect that picture?

Investments

Are your investments aligned with your objectives, circumstances, time horizon and willingness and

ability to take risk?

Risk and insurance

What could disrupt the plan if something unexpected happened?

Tax considerations

How could the tax consequences of various financial decisions affect the overall picture?

Estate and legacy planning

What do you ultimately want your money to accomplish for your family, the people you care about and, for some people, the charitable organizations or causes that matter to them?

The value is often not in looking at these questions individually. It is in understanding how they interact.

You Might Already Be Doing Pieces of Financial Planning

You may already be planning without calling it a financial plan.

Maybe you contribute to an RRSP every month. Maybe you have a TFSA, a workplace pension,

emergency savings, life insurance or a Will.

Those can all be useful pieces of your financial life. The question is whether the pieces are working

together toward the same destination.

The Government of Canada recommends defining financial goals that are specific, measurable,

achievable, relevant and time-bound. [3]

The Financial Consumer Agency of Canada also identifies emergency savings as a way to deal with

unexpected expenses without relying on debt or high-cost borrowing. Its general educational guidance discusses gradually working toward approximately three to six months of regular expenses or income. [4]

Sometimes planning simply starts with figuring out where you are,

where you want to go and what needs to happen next.

When Does a Financial Plan Become More Important?

There isn't one magic age or account balance where everyone suddenly needs a comprehensive

financial plan.

Regulatory guidance recognizes that understanding a client and determining suitability is not a one-size-fits-all exercise. [1]

The same principle can apply to the depth of financial planning.

Someone starting a career may need straightforward answers around cash flow, debt, emergency

savings and getting started with long-term saving.

Someone approaching retirement may be dealing with several decisions at once:

•  When can I afford to retire?

•  When should I begin drawing different sources of retirement income?

•  How much can I reasonably spend?

•  What happens if markets don't cooperate?

•  What happens if I live much longer than expected?

•  What do I want to leave behind?

The Government of Canada encourages Canadians to plan for retirement and provides tools such as the Canadian Retirement Income Calculator and the FCAC Budget Planner to explore retirement income and expenses. [5]

Financial Consumer Agency of Canada research using the 2024 Canadian Financial Capability Survey reported that 49% of Canadians who had not yet retired were preparing financially for retirement, either independently or through an employer pension plan. The same research reported that 32% of non-retirees had a good understanding of how much they needed to save for retirement. [6]

There can be a meaningful difference between saving for retirement and understanding your retirement plan.

Sometimes the Most Valuable Answer Is "You're Okay"

Financial planning isn't necessarily about finding a problem.

People sometimes assume that meeting with a financial planner will result in being told to save more, spend less or change everything they're doing. That doesn't have to be the objective.

Sometimes planning identifies gaps or trade-offs that deserve attention. Other times, it can help someone better understand the path they are already on.

The real question may not be, "How much money can I accumulate?" It may be, "What do I want this money to allow me to do?"

A Plan Should Change When Your Life Changes

A financial plan is based on assumptions about an uncertain future.

Careers change. Families change. Markets change. Tax rules change. Priorities change. People receive inheritances, sell businesses, lose spouses, help children, support parents, retire earlier than expected or decide they would rather work longer.

That is why financial planning is better thought of as a process rather than a one-time document.

CIRO's investment regulatory framework similarly recognizes that Know Your Client information needs to remain current and that suitability decisions depend on information about the individual client rather than a universal formula. [1][2]

A plan should give you something to return to when circumstances change.

So, Do You Actually Need a Financial Plan?

Maybe. But I would ask a slightly different question:

Do you have important financial questions that you aren't confident you can answer?

If you can clearly explain where you are financially, where you're trying to go, what you're doing to get there and what you would do if circumstances changed, you may already have much of the framework you need.

If you have accounts, investments, pensions, insurance, competing goals and estate considerations, but aren't entirely sure how they all fit together, going through a financial planning process may help bring those pieces into focus.

The plan doesn't necessarily need to start out complicated. Sometimes you need a map. Sometimes you need a much more detailed analysis.

The important thing is that the planning should match the complexity of your life rather than forcing your life into someone else's template.

Financial planning isn't about creating the biggest binder. It's about making financial decisions with a clearer understanding of where those decisions may take you.

Ready to see how the pieces fit together?

Northern Asset Management works with individuals and families to build financial plans that match the complexity of their lives. If you have questions you aren’t confident you can answer, book a free introductory meeting or explore our services.

Important Information

This article is provided for general educational and informational purposes only. It is not intended to

provide investment, financial, tax or legal advice, and the information may not be appropriate for

every individual. Tax and legal rules can change and individual circumstances vary. Investment

decisions should be based on individual circumstances, objectives, time horizon and risk profile.

Where appropriate, individuals should consult qualified financial, tax and legal professionals

regarding their specific circumstances.

Investment products and services are provided through Global Maxfin Investments Inc., a Mutual

Fund Dealer regulated by the Canadian Investment Regulatory Organization (CIRO).

Sources

[1] Canadian Investment Regulatory Organization (CIRO), Know-your-client and suitability determination for retail clients.

[2] Canadian Investment Regulatory Organization (CIRO), Client Focused Reforms (CFRs), and Joint

CSA/CIRO Staff Notice 31-368.

[3] Government of Canada, Office of the Superintendent of Bankruptcy, Setting your financial goals.

[4] Government of Canada, Financial Consumer Agency of Canada, Setting up an emergency fund.

[5] Government of Canada, Prepare for retirement.

[6] Financial Consumer Agency of Canada, Saving early for retirement readiness, based on the 2024 Canadian Financial Capability Survey.