Do clients confuse a financial plan with an investment plan?

New IG Wealth Management study shows 80% get them confused – and advisors can help them sort it out

Do clients confuse a financial plan with an investment plan?

Canadians need to learn a lot more about what a financial plan is – and whether they’ve actually got one, according to a new study that IG Wealth Management released today to mark Financial Literacy Month.

“The survey really highlighted the fact that a lot of people – more than 80% – mistakenly believe a financial plan is just about investments when there are many more elements in a holistic financial plan,” Aurele Courcelles, Assistant Vice President of Tax and Estate Planning at IG Wealth Management in Winnipeg, told Wealth Professional.

“So, there are a lot of people who, rightly or wrongly, believe they have a plan who do not have a full financial plan and may have some surprises later on, and that’s worrisome.”

The study found that, while 61% of Canadians reported having a financial plan, most said it focused almost exclusively on their investments. The study also showed that almost three-quarters of Canadians who use a financial advisor and say they have a plan reported that the plan focuses exclusively on investment.

“That means a lot of them are working with a financial advisor, but all they’re getting is possibly some investment advice and not a holistic approach to ensure that they, and their loved ones, are taken care of,” said Courcelles.

If that’s all they’re getting, they may not have a will and power of attorney or the right life, disability, or critical illness insurance. They may not be minimizing their taxes or budgeting to live within their means and manage their debt. They may also not be planning sufficiently to meet their retirement goals or, if they run a business, ensuring that they’re meeting both their personal and business needs.

The study, which Pollara Strategic Insights conducted for IG, surveyed 1503 Canadians from across the country online in mid-September. It also showed that only one-third of the Canadians surveyed had a good understanding of what a financial plan was and those with a holistic plan were three times more confident that they’d reach their goals.

IG released the results to increase awareness.

“The fact that three-quarters of Canadians who both use a financial advisor and have a plan focused exclusively on investments means that some of those working with advisors are not getting full financial planning,” said Courcelles. “So, hopefully, that pushes them to have that discussion with their advisors or, if they’re not working with an advisor, find one to have that discussion.”

He also hopes that advisors who aren’t doing holistic financial planning will “look in the mirror and ask: ‘am I doing everything I can to help my clients?’ Consumers are asking for this, so you have to be in a position to deliver this or they’ll go elsewhere.”

Courcelles also hopes advisors will help to raise awareness about what a holistic financial plan is and prompt more to seek the support they need to get one.

“Financial literacy is about building knowledge and awareness with consumers, so they know that everybody deserves a plan. Some are simpler. Some are more complex,” he said. “But Canadians need to start insisting they get more holistic planning and not just that investment advice.”