It was time for a new mobile phone, one with more memory and a bigger screen. Bob, the salesman, was very helpful and even transferred all the data from my old phone to the new one. While we were waiting for the data to transfer, Bob told me that he was counting down the months to retirement and found it fitting to ask me for financial advice since he went out of his way to save me some money on a new phone plan.
Bob managed his own finances at the bank and limited his investment options to Guaranteed Investment Certificates (GIC's) and high-interest savings. Bob said he needed interest rates to go higher, or he would be forced to make some changes to his current lifestyle, which included moving to a less expensive house. He was looking to me for my thoughts on the direction of interest rates and advice on investing some money that was coming due soon.
I shared with Bob a few stories of how some of our clients can live out their retirement dreams without having to rely solely on interest rates for their income. Bob was interested in some of these strategies and asked some smart questions but was not interested in strategies involving mutual funds.
"What is it about mutual funds that you don't like?" I asked Bob. "I tried those years ago and lost money, so after that experience, I decided to play it safe and only invest in guaranteed investments," said Bob.
After sharing more details surrounding his bad luck with mutual funds, I began to understand what caused his pessimistic bias. Bob got caught up in the technology bubble in 2000 and invested at the market's height because all his friends were invested and he feared missing out. He bought high and sold low. Now he blames mutual funds for his investment losses and predicts that if he were to invest in mutual funds again, his outcome would be identical. Bob missed out on owning some of today's largest and most successful companies in the world by not learning from his mistake and seeking out professional investment advice.
When my phone data transfer was complete, I tested my phone. I pulled up the current investment interest rates and future interest rate projections. Bob said, "It looks like I'd better look at those mutual funds again. What do you think about getting into technology, now that the whole world has gone digital?"
I told Bob, "If you were to buy mutual funds again, you need to reflect and learn from your past investment victories and failures. Don't just buy a mutual fund at its high price expecting it to go higher, without a plan."
I then gave Bob a few strategies on incorporating mutual funds into his retirement plan. Still, it was clear that he did not fully understand what I was saying. Then I gave him the best advice I could. "Bob, I don't expect you to implement these strategies because they are outside of your expertise. You need to hire a professional to help you. This is no different than why I have come to you for expert advice on a new phone purchase. You asked me what, when, where, and how I used my phone and guided me to the best option. I could have tried to do what you did, but after researching my options and learning how to set up the new phone, it would not have been a pleasant experience. And it would have wound up costing me more money."
We then talked about Bob's retirement plans to travel Canada and his dream to take his family on a Disney cruise. I said, "Bob, you only retire once, so you need to rely on your investments to provide income for at least the next 25 to 30 years. This needs to be designed and implemented by a financial professional. When I come back in two years for a new phone, I want to see pictures on the wall of you and your family on that Disney cruise."
Like many Canadians planning to retire, optimizing cash flow by minimizing tax and reorganizing investments can be outside their skillset and expertise. This is a full-time job, and during retirement there are other passions to occupy your time. A financial planner will provide you with a comprehensive questionnaire that allows you to begin organizing components that affect your personal financial life and visualizing your future self. After reviewing this information, they will provide you with the advice you need to put you on the right path to achieve your life goals.
This article discusses several strategies, not all of which will apply to your particular financial circumstances. You should obtain professional advice from a licensed financial planner or financial advisor before acting on any information in this article and to help navigate your options. Then you can enjoy life & have fun.
John Niekraszewicz (Nick-ra-shev-itch) BMath, FCSI, CFP, FMA is the Certified Financial Planner specializing in Wealth & Estate Planning that is responsible for the AHIP Association Health & Dental Plan provided by JVK Life & Wealth Insurance Group that receives a sales commission. John is also the Principal of JVK Life & Wealth Advisory Group - provider of mutual funds and investments. John welcomes your questions and can be reached at 1-800-767-5933 or email@example.com