Everything had been unfolding according to plan. The client had owned a business for 25 years in St. John's, sold his business and was living off the proceeds. Then, a year after that sale, Jim Templeton received a visit from his client and the client's wife.
"Remember the 10-year plan for visiting 10 different countries and seeing 10 different things?" the client asked. "We've got to make that five years."
The client explained that he had been diagnosed with Parkinson's disease, and didn't want his wife to be pushing him up to the Great Wall of China in a wheelchair.
"What you do then," says Mr. Templeton, Financial Advisor and Branch Manager for Manulife Securities Incorporated in St. John's, "is you sit down and try and figure out what are the 'must haves' and what are the 'gives.' His health care costs are going to be higher than we anticipated. Can he achieve his life goals without too much taxing of the financial resources?"
Mr. Templeton describes the recalculations that occurred as "a bit of gymnastics. The immediate-term spending had to go up. If the normal income stream of the portfolio was $50,000, maybe they wanted an additional $5,000 to go on this particular trip. Or if they need to try to do two trips, then the additional five might have to be an additional eight. That's a material change to a very short-term goal. If you can rejig it so it still works, then we're good. It's a little more challenging."
In his 15 years as an advisor, Mr. Templeton has learned that advice matters to people in many different ways: the key is knowing a client's goals and values.
"The general industry question is: what's most important about money to you and what would you like it to do for you and your family. The other thing you need to know is the resources available to the client. If the goal is to have a million dollars in your RRSP (Registered Retirement Savings Plan) by the time you turn 60, is that feasible? Are you going to be living in a box under a bridge because you can't afford to do anything else in your life if you're so determined to have that money in that RRSP?"
Mr. Templeton points to five key areas for a financial advisor: setting goals; planning for retirement; education planning; business succession planning; and estate planning.
"An advisor should be trying to help clients prioritize those goals, put a cost on them and then work backwards to life and reality to figure out what level of savings and rate of return are required to get as close to certainty as you can."
Being an advisor isn't for everyone. His father, a financial advisor himself, inspired him to follow in his footsteps.
"My father used to come whistling down the stairs on Monday mornings," he says. "When you grow up around it you can witness some of the intriguing aspects of this field."
Many of Mr. Templeton's clients are small to mid-sized business owners. One such owner who provides engineering services (with several partners) had been working toward a retirement date, but 10 years before that date arrived, while he was still in his late 40s, the client received an offer for his firm from a national company looking to expand to Newfoundland and Labrador.
"That significantly changes the plan," Mr. Templeton says. "It requires input from the tax advisor and the legal advisor. The relationship with his business partners changes. The relationship with the person making the business decisions changes. While the end goal may not have changed, the plan requires rejigging. That's a happy situation."
Mr. Templeton worked with his client to adapt to the changes.
"Instead of being the principal owner of this engineering firm, now he's a manager of a much larger firm and he has much larger liquid assets. When he owned a private equity firm, the growth was much more in his control; the income from that was much more in his control. Now what we have is a liquid asset that he puts in an investment account, but he's got a bit more of the vagaries of the stock market to deal with and a very low interest rate environment. His business was growing at a faster rate than I can guarantee him in a fixed-income environment. It changes the risk profile."
Mr. Templeton says he bumps into people at hockey rinks (his three boys play hockey) who know he's an advisor and who ask what they should do with the money in their Tax Free Savings Account (TFSA).
His answer is – it depends on the individual's goals.
"If someone said, 'Jim, it's very important that I be able to put a down payment of $40,000 on a cottage in five years,' then you should take absolutely no risk inside your TFSA. It's a very reachable goal and a very short time horizon, so the advice should be conservative. You don't want to say to them in four years and 11 ½ months: Sorry, but the markets haven't behaved very well and we don't have $40,000, we have $22,000 or $35,000. You've let that person down."
"On the flip side, if the individual says: 'Ideally, my TFSA will be part of an income plan, and buy me five years of earlier retirement without having to take money out of an RRSP,' the horizon might be 15 to 20 years, and my advice could be very different. Then a TFSA is a good place to try to achieve capital gains or dividend income because you won't pay any tax on it."
Ultimately, when it comes to providing financial advice, everyone is different and has unique needs that must be addressed, Mr. Templeton says. There is no one-size-fits-all solution.