Take Control Of Your Finances After An Illness

Change is inevitable, and certain life situations present challenges. An illness in the family can be an emotionally difficult time, especially when it involves taking on new expenses and altering your financial plan. Franklin Templeton Investments’ Own Your Future program is designed to help you and your family prepare for life’s challenges so that you are able to take control of your financial well-being.

What are my financial needs following an illness in the family?

Leave from work

Depending on the nature and severity of the illness, you or your family member may need to take some time off work. That may include a short-term leave, a long-term leave or permanent leave. You may need to adjust your financial plan to accommodate a potential loss of income.

Disability payments

You may need to reassess your budget to make the best use of disability payments and/or a reduced income.

Medical payments

Medical treatments, prescriptions and other types of care associated with your illness can be expensive. You may need to assess your budget to accommodate added expenses.

Lifestyle continuity

An illness or disability injury can have a severe impact on you’re the quality of life for of you and your family. Putting a financial plan in place today can help you prepare effectively for events and challenges that may come. A financial advisor can help.

How do I create a financial plan for the future?

You need to ensure financial stability for yourself and your family. In the short term, you need to thoroughly understand your family’s current financial situation, take care of your immediate financial needs and start planning for the future.

Take care of immediate cash needs

Work with your advisor to prepare a household budget for short-term needs. At a later stage, development of a projected budget will help you understand how to support your family on your own and/or with your partner’s income when his or her situation has stabilized. If your partner is able to work again, you can then re-evaluate your financial plans.

Take stock of your financial situation

You need to have a solid understanding of your partner’s assets as well as your own. Compile all important information and leave a copy in your firebox, and another copy with someone you trust, in case of emergency.

Consult your financial advisor

Set up a meeting with your advisor to see where you stand financially. If you don’t feel comfortable meeting with the advisor alone, ask another family member or trusted friend to join you. Your financial advisor can help you determine your priorities in preparing for a worst-case scenario. Open communication is critical.

You could discuss the following topics:

  • Establishment of a fund to provide extra money for your partner’s health care and compensate for lost income-earning power
  • Topping up the household emergency fund (in the event you lose your income)
  • RESPs for your children
  • Reviewing and updating insurance coverage in light of your partner’s situation
  • Strategies to strengthen your retirement plan

Develop and regularly update your plan

Your advisor can help you develop a comprehensive written financial plan that can be referred to periodically to help ease your financial concerns. It can, and should, be updated regularly to reflect changes in your partner’s health status.

How do I find the right financial advisor?

If you don’t have a financial advisor, now is the time to find the advisor who is right for you. You need an advisor who can help you and your family create a plan to deal with the added expenses and responsibilities that are associated with treating an illness. Understanding the designations for financial advisors, areas of expertise and different methods of compensation can help you make an informed decision when searching for the right financial advisor.

What are common designations for financial advisors?

The financial services industry encourages continuing education for all financial advisors. Here is a list of some of the industry’s most common designations that you can speak to your advisor about:

  • Canadian Securities Course (CSC)/Conduct and Practices Handbook Exam (CPH)
  • Certified Financial Planner (CFP)/Registered Financial Planner (RFP)
  • Chartered Financial Consultant (ChFC))/other insurance training
  • Certified Retirement Planner (CRP)
  • Chartered Financial Analyst (CFA)
  • Chartered Accountant (CA)/Certified Public Accountant (CPA)
  • Mentorships (ask about any mentoring programs your advisor has participated in)
  • Additional education/certifications/courses/training

What areas of expertise do financial advisors specialize in?

You want an advisor who can not only help you make a financial plan that deals with an illness in the family but also help you at every stage of your life. Your needs may include day-to-day investment activities or longer-term tasks such as retirement and estate planning. Regardless, your advisor should be able to help you get your finances in order; here are some areas you can ask them about:

  • Retirement planning (e.g., Registered Retirement Savings Accounts [RRSPs], Tax-Free Savings Accounts [TFSAs], etc.)
  • Estate planning
  • Tax planning
  • Education planning (e.g., Registered Education Savings Accounts [RESPs], etc.)
  • Pensions
  • Household budgeting
  • Insurance
  • Banking/mortgages

How are financial advisors compensated?

Advisors can be compensated in a number of different ways. How they are paid depends on the type of products and services advisors offer and the way they work. Common forms of compensation include:

Commission-based advisors are paid each time a transaction is made on your behalf. For example, when the advisor buys or sells a security or fund for you, he or she is often paid by the company that offers the investment product or is facilitating the purchase.

Percentage of assets
Some advisors charge a fee that is based on a percentage of the total value of the investments you have with them. This type of pay structure is common for advisors who have clients with larger investment portfolios.

Fee-based charges
Fee-based advisors charge a quarterly or annual flat fee for their services based on performing a certain task for you, such as creating a financial plan.

Hourly rate
Some advisors who provide a very specific service may be paid an hourly rate, similar to how other professionals are compensated. This option is not as common in the financial advisor industry.

Some advisors may be compensated with a blend of commissions and fees.

Who do financial advisors work with

Talk to your advisor about what relationships he or she has with different types of professionals whose services you might also require. These other professional could include:

  • Lawyers (estate, divorce, corporate, etc.)
  • Accountants
  • Insurance brokers
  • Mortgage brokers
  • Bank managers
  • Other professionals as needed

What are the roles and responsibilities of a financial advisor?

Advisor teams come in all shapes and sizes. If you are working with a single advisor, you will probably be in contact with that person most of the time. However, some advisors have a team of people who work with them, and it may be beneficial to gain an understanding of how they all work together to serve you.

Ask your advisor about the different roles and responsibilities each team member has and how these individuals’ roles might affect you. For example, you may want to ask who will handle administrative issues, such as a name or address change, and who will handle your investment/portfolio questions.

What should I expect from my financial advisor?

You can expect your financial advisor to provide regular updates on your plan and investments. This will help you understand how often you should be meeting with your advisor and what other contact you can expect throughout the year.

Here are a few “touch points” you may want to speak to your advisor about:

  • One-on-one portfolio and update meetings
  • Market update information (e.g., newsletters, emails, etc.)
  • Statements and other reporting
  • Client events

Advisors are as varied as the individuals found in any profession. Training, philosophies and areas of expertise can vary greatly from advisor to advisor. It is very important that you feel comfortable with the person with whom you are working, and that you trust this individual to put your best interests first.

What questions should I ask my advisor?

Now that you have a better understanding of what to look for when searching for an advisor, you need to put this information to use. Here are a few questions that you should consider asking when you meet your potential advisor for the first time to make sure he or she is the right fit for your needs:

  1. What professional designations do you hold?
  2. Are there any educational areas you plan to pursue in the future?
  3. What service do most of your clients come to you for?
  4. What would you consider as your area of specialty?
  5. Can you describe your fee model and how it would apply to me?
  6. Do you have professional partners you refer your clients to (such as an accountant or lawyer)?
  7. How does your practice/team operate?
  8. How often will we meet for a portfolio review?
  9. How often will I be contacted by you or your office?
  10. Do you have references that I can contact?