Corporate Financial Planning: Mutual Funds and Fees

How much do you really know about your financial planner? Here is an individual that you have entrusted with the care and well-being of your financial portfolio. Are you truly getting the best value for your hard-earned money?

Let's begin by examining the role of the financial planner. Do you actually need an expert to advise you where to best invest your money? The truth is that financial experts can predict the future as well as you. If you're like most Canadians, you invest primarily in mutual funds. However, nobody can accurately predict how a mutual fund will react. Perhaps a crystal ball will tell you about the future activity of a particular stock. True, the financial planners spend a good deal of time and energy studying trends, monitoring market activity, and keeping an eye on the financial world. But, predicting the future is not a human trait.

When you pay an advisor to direct you to the best mutual fund, you're actually paying twice. The average Canadian annually pays the mutual fund roughly $2,000 for every $100,000 invested. You don't notice the fee because it's deducted by the fund before their report to you of the fund's results. In real terms, this "fee" amounts to anywhere between a quarter to a half of the after inflation gains on your invested funds.

Returning to your planner, most planners are paid on a commission basis – the more they sell you, the more they earn. Thus, you're paying percentages to both the mutual fund and the person who directed you there. Aren't the majority of the gains supposed to stay in your pocket? One suggestion is to hire a planner on an hourly basis. This removes any conflict of interest. The planner will help you get the most for your money, especially if you have complicated tax issues to address.

It's your money! Be in control by hiring professionals who work for your best interest.

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Are You Prepared for Retirement?

If you are a small business owner, the answer to this question may be a resounding "no." In studies conducted recently by the Royal Bank of Canada (RBC), the RBC surveyed small business owners across Canada. Almost a quarter of small business owners expressed a desire to retire within the next five years. However, only a small number are properly prepared or have any idea what the impact will be.

One of the primary stumbling points for retirement planning by small business owners is the question of succession planning. In the business world, transfer of the company to the next generation within one's family is most common. Only a third of small businesses survived succession to the next generation and only one third of these businesses were then passed on successfully to the grandchildren.

It is not always a question of poor planning. It may be that one's children are not qualified to take over the helm of the family business. Or, on the other hand, they may simply not be interested.
Sometimes, the founder is the business. Remove that dominant figure and the business ceases to exist. If one built a business and failed to make financial plans for leaving the business, he could face serious financial problems should the business cease to function.

The RBC study revealed that 62 per cent of small business owners in Canada were age 50 or older. This translates into a large number of future retirees in the next decade that must start planning for the golden years as soon as possible, if the transition from business owner to retiree is to be smooth and well provided for.

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