PROFESSIONAL SALES - PROFESSIONAL FINANCIAL ADVICE - A FIDUCIARY ROLE

When a financial services professional moves from professional product sales to professional financial advice the financial advisory role becomes that of a fiduciary.



As a fiduciary, a track record of professional competence which includes character, integrity of purpose, ethical choice in every facet of financial decision making, unbiased client advice and a framework of practice management within an client centric focus is the de facto standard of professional practice. This standard is essential in ‘Raising The Bar’ from a transactional to a fiduciary level of practice..


In Great Britain, Australia and the US the financial services regulatory bodies are at various stages of implementing the legislation which will make a professional financial advisor’s fiduciary role a professionally legal responsibility.


Canada will follow.


It will have a profound impact on the delivery of professional financial services to the Canadian public.


When we seek advice on highly personal matters such as health, the law and finance the advisor/client relationship is one of mutual trust. It is values based. Trust is earned – not sold.


Whether a client wishes to acquire products or advice or both is a personal decision – for each client to make.


The financial services professional must be professionally prepared to deliver what each client needs, wants and expects.


14,000,000 boomers who are going through various stages of retirement for the next 18 years will need and expect nothing less than full confidence in the trust relationship they develop with their professional financial advisors.


Canadian financial professionals are quite capable of delivering.


Dan Zwicker
Toronto, Canada

CONTACT

Daniel H. Zwicker, Principal
B.Sc. (Hons.) P.Eng. CFP CLU CH.F.C. CFSB

Certified Financial Planner
Chartered Life Underwriter
Chartered Financial Consultant
Chartered Financial Services Broker
Professional Engineers Ontario


Bus: 416-726-2427
Email: ffcg@rogers.com


First Financial Consulting Group, Blog: http://www.dan-zwicker.blogspot.com/
Daniel H. Zwicker, CFP Blog: http://www.dzwicker.blogspot.com/
Beyond Risk, Blog: http://www.beyondrisk.blogspot.com

Daniel H. Zwicker, Principal

4261 Highway Seven

Suite 238

Markham, Ontario L3R 9W6

Chartered Financial Consultant
Lifetime Sustainable Income

Strategic Wealth Management

Specialists in Advanced Life Insurance Applications and

Lifetime Sustainable Retirement Planning Solutions

New clients are accepted by referral only

Financial Practitioner Designations


CLU - Chartered Life Underwriter



For more than 80 years, the CLU designation has been widely recognized as a mark of excellence in the industry. The Chartered Life Underwriter is a professional financial advisor specializing in developing effective solutions for individuals, business owners and professionals in the areas of income replacement, risk management, estate planning, and wealth transfer.


CH.F.C - Chartered Financial Consultant


A Chartered Financial Consultant is a financial advisor with advanced knowledge in wealth accumulation and retirement planning. An advisor with a CH.F.C. is an expert in retirement planning and capital accumulation strategies.


CFP - Certified Financial Planner


The Certified Financial Planner designation is an internationally recognized standard for financial planning. It is granted by the Financial Planners Standards Council (FPSC). An advisor with a CFP may help you with personal financial planning and offer advice on investment products and strategies.




ONLINE REFERENCES:


http://www.advocis.ca/ (Advocis),
http://www.iafe.ca/ (The Institute for Advanced Financial Education)
http://www.cfp-ca.org/ (Financial Planners Standards Council)
http://www.ifbc.ca/ (Independent Financial Brokers of Canada)
http://www.peo.on.ca/(Professional Engineers Ontario)

Capital Risk Management

‘Raising The Bar’

BEYOND RISK - FREEDOM AT 45 - 55 - 65 - 75 - 85 - 95?? - AT ALL OF THE ABOVE AGES - TO AGE 95 & BEYOND

Money is about freedom.


The criteria for freedom are:

• Lifetime sustainable Health

• Lifetime sustainable income

Everthing else is negotiable.


Beyond Risk is about people and their views on money....borne of over 30 years of front line experience and engagement in the arena of exponential corporate growth through financial practice building under 'fire' in a lifetime passion......the assuring of the financial value of our time.....to allow for the completion of our personal and business financial objectives. It is about character, integrity, people and their often complex and conflicting attitudes towards money.....its accumulation.....its preservation and its utility. It is about the leadership of high performance professionals who are committed to managing the capital risk and the lifetime financial well being of their families, business associates and clients. It is about coaching 'Olympian' class high performance empowerment. Above all it is about ethical choice in every facet of decision making and execution. It is remarkable that of all the basic life skill related subjects that we include in our children's early curriculum financial literacy is not one of them.......given that we live in a money economy.

It is said that we each have a "Money Personality".

Nothing could be more accurate and more life defining.


Dan Zwicker
Toronto

WILL YOU NEED 135% OF YOUR SALARY IN RETIREMENT?

Figuring out your income-replacement rate is no easy task


BOSTON (MarketWatch) — It is the mother of unanswerable questions in the world of retirement planning. How much of your current salary will you need after you retire?


The replacement ratio rule of thumb suggests you might need 75% of your current salary from a variety of sources — be it Social Security, personal assets (a 401(k) and IRA, for instance), earned income (yes, you’ll likely be working in retirement), and the like — to enjoy the same standard of living while in retirement as before.


How to haggle on medical bills


But according to research conducted by Dan Ariely, people need 135% of their final income to live the way they want in retirement. The reason for this astounding difference has to do largely with the way Ariely, a professor of economics and behavioral finance at Duke University, did his research.


Instead of asking people to ballpark how much of their final salary they will need, he asked the following questions: How do you want to live in retirement? Where do you want to live? What activities do you want to engage in? And similar questions geared to assess the quality of life that people expect in retirement.


Ariely then took the answers and “itemized them, pricing out their retirement based on the things that people said they’d want to do and have in their retirement.” Using those calculations, he found that people want to retire to a standard of living beyond what they currently enjoy. (Who wouldn’t if money were no object?) Read Ariely's blog post on the topic here.


Ariely didn’t respond to emailed questions about his blog post. But I am fond of Ariely’s body of work and have quoted him often.


Needless to say, Ariely’s blog has the financial-advice community up in arms. For one, he suggested in his blog that financial advisers are getting paid far too much (1% of assets under management) to help people build a nest egg that’s “60% too low in its estimation.”  


Two, he criticized the use of those ubiquitous risk-tolerance questionnaires that label investors as aggressive, moderate or conservative. His research showed that people cannot accurately describe their attitude toward risk and as a result, questionnaires about risk attitude are essentially useless.


From my perch, however, the questions that Ariely’s research raises have to do with the current salary replacement ratio. How much of your current salary do you really need to replace in retirement? Is the salary replacement ratio a good or bad rule of thumb? If it’s a bad rule of thumb, what’s a better way to determine how much you need in retirement? And, what are the pros and cons of that “better” method?


How much is enough?


Experts say it’s very hard to estimate with any precision how much income you’ll really need in retirement.


“In some ways, life after retirement is relatively inexpensive,” said David Laibson, an economics professor at Harvard University. For one, the expenses associated with working, raising a family and maintaining a home prior to retirement are typically much less after you retire.


“On the other hand, life after retirement is also a time when expenses might be high,” he said. For instance, costs associated with travel, leisure and health care might rise.


“At the moment we don’t know which argument wins the day. Do we need more income in retirement or less? It’s really hard to say,” Laibson said.


Some — including Stephen Utkus, a principal with the Vanguard Center for Retirement Research — say that 75% is as good a number as there is.


A good reference on this, he said, is a series of studies produced by Aon Consulting and Georgia State University, which put the replacement ratio at 81% for those with a final salary of $50,000 and 84% for those with a final salary of $150,000.


“They make the rational point that when you are retired, you aren’t making large 401(k) contributions, aren’t paying payroll taxes ... and living expenses are lower,” said Utkus. “Hence 75%, or thereabouts.” Read the 2008 Replacement Ratio study (PDF).


Adjustments are needed


But the oft-quoted 75% replacement ratio — while good — needs to be tweaked based on one’s income, said Peng Chen, CFA charter holder and president of Morningstar’s global investment-management division.


The typical amount of money one needs to maintain the same standard of living in retirement as before is roughly 100% of one’s income after taxes and 401(k) contributions, Chen said.


“This make sense, as that is pretty much how much one is spending today in the U.S.,” Chen said.


But that’s the average. The salary replacement ratio is closer to 100% or even higher for lower income households (as they get subsidies) while the ratio could be 80% (or lower) for higher income households, as wealthier people do not spend all of their income, Chen said, citing government survey data.


Looking for a ballpark estimate? “My personal view is that households should generate enough retirement income to replace about 75% to 100% of their pre-retirement income,” said Laibson. “This estimate is as much art as science.”


A good or bad rule?


Experts say the salary replacement ratio is neither a good nor bad rule of thumb. “It’s a quick way to come up with a ballpark estimate,” Chen said.


Like every rule of thumb, it has pros and cons. On the pro side, it is easy and everyone understands it, he said. On the con side, Chen said, it’s not very accurate, especially at the individual level.


Others agree. “Replacement-rate calculations are overly simplistic and potentially inaccurate because they often are based on methodologies limited to replacement of preretirement cash flow after adjustment for taxes, savings, and age and/or work-related expenses,” wrote Jack VanDerhei, a Temple University professor, fellow at the Employee Benefits Research Institute, and author of a 2006 research report on the subject.


“One of the biggest weaknesses of replacement-rate models is that one or more of the most important retirement risks is ignored: investment risk, longevity risk, and risk of potentially catastrophic health-care costs.” Read VanDerhei’s report, "Measuring Retirement Income Adequacy" (PDF).


Consider, for instance, just the risk of outliving your assets. Saving to replace your salary for life based on life expectancy is very different from saving to replace your salary to age 95. In the living-to-life-expectancy scenario, you might need to accumulate a nest egg of, say, $500,000 while in the living-to-age-95 scenario, you might need a nest egg of three times that or $1.5 million.


135% isn’t the number


While the experts quibble over whether the replacement rate is 75%, 100% or somewhere in between, they generally agree that 135% is not the right number.


“As for Ariely’s survey, one of the principles of behavioral economics is there is a difference between what people say and what they do,” Utkus said. “I don’t buy his study’s conclusions at all. I’d be curious to know: Were all of the people who wanted to retire at 135% of income saving 30% of their income each year...in order to achieve that goal? Probably not. So it’s just a wish list, nothing more.”


Others are of the same mind-set. “One shouldn’t glibly reject Ariely’s 135% number, but there are quite a few reasons to be skeptical of that calculation,” Laibson said.


“When economists do their best to work through these issues, we generally conclude that your annual income in retirement should be a bit lower than your annual income before retirement,” he said. “I use the word ‘should’ in the sense that an optimizing household would save enough during their working life so their income in retirement is a bit lower than their income before retirement.”


Another expert said it’s not reasonable to try to replace 135% of your current salary. One couldn’t cut spending and save enough now to generate that sort of income later, said Wade Pfau, an economics professor at the National Graduate Institute for Policy Studies in Japan.


“There are just too many trade-offs in getting to the point where a 135% replacement rate is feasible,” said Pfau, who wrote a blog and a paper on the subject.

 No magic number


There is no single, correct replacement rate, VanDerhei and others said. In fact, there’s really no substitute for doing precisely what Ariely did: crunching the numbers. It’s not quick, but it’s more accurate than any rule of thumb. According to Chen, individuals should look at their own spending habits to decide how much of their salary they’ll need to replace.


This is easier said than done. “Most people do not start to think about how they would live in retirement until they are close” to it, Chen said, “and this type of financial planning has to be done a number of years before that.”


Others criticize the use of salary replacement ratios altogether. “Ariely’s calculation is as bad as what he’s criticizing,” said Larry Kotlikoff, an economics professor at Boston University and president of ESPlanner, a financial-planning software company that uses the economic concept of consumption smoothing in its calculations.


“What people want or need is irrelevant. The only issue of relevance is what they can afford to spend on a sustainable basis. The goal is not a number,” he said. “The goal is a smooth living standard through time. If financial planners haven’t gotten this straight by this point, they should hang it up. They are disserving their clients using a methodology that not a single trained economist would endorse.”


Ariely raised another point in his blog that is at the crux all things money. In essence, he asked: How do we use our money to maximize our current and long-term happiness? And that of course prompts the question: Just how the heck is one supposed to do that?


“This is definitely the crux of the question,” Chen said. “I am not sure anyone knows for sure, just like everything in life. This not only touches on how much you should save for tomorrow or spend for today, but also on how much you should work to generate more income, or relax and enjoy life.”


For his part, Utkus said the key to striking a balance between saving more now to spend more later, and spending more now to spend less later is this: One, “we need some amount to make us feel secure (in other words, happy), and it’s not unreasonable that that is something like a 75% replacement ratio as a starting point.”


Second, we know that many affluent individuals want a more active lifestyle when they first retire. “If they aren’t willing to shift their consumption patterns — from Westin Resorts to the Ramada, from [first class] to flights in economy on Tuesday — then, yes, they’ll need 100% or more,” Utkus said. “But few actually seem to act on this desire by saving the requisite amount.”


Three, at the other extreme, it’s probable that many individuals can be just as happy with less (except for those with low incomes) because they can make choices about living on less.


Said Utkus: “Happiness is broadly tied to intangible elements beyond financial security...such as family and social relationships, purpose of life, spirituality, and so on.”




Robert Powell,
MarketWatch
09 23 2011

Robert Powell is editor of Retirement Weekly, published by MarketWatch.
Robert Powell has been a journalist covering personal finance issues for more than 20 years, writing and editing for publications such as The Wall Street Journal, the Financial Times, and Mutual Fund Market News.

ARE CANADIANS IN DENIAL ABOUT DEBT?

The boomer demographic has been conditioned to acquire whatever it wants - today.


Debt is the prevalent tool.


A sad part of the denial is the belief that markets move only up and to the right. ("I have time to pay it off").


"Paying it off" and saving concurrently are not likely. Health and economic contingencies get in the way.


As we know markets drop down and to the right unpredictably and precipitously


If you are a 47 - 65 year old and 40% of your lifetime accumulation disappears overnight the irreplaceable resource is time.


14,000,000 Canadians are in this demograhic age range - our boomers.


"I have enough time to make it up" is simply not true - certainly not if your focus is "Freedom at 55". Freedom at 70 is more likely.


The good news is that there are solutions and professional financial advisors who can help.


The difficult news is that they are in very short supply and most boomers do not have direct real time access to them.


For more details read...

http://www.linkedin.com/news?viewArticle=&articleID=735954044&gid=1843208&type=member&item=68407578&articleURL=http%3A%2F%2Fwww%2Eadvisor%2Eca%2Fnews%2Findustry-news%2Fcanadians-in-denial-on-lasting-debt-55942&urlhash=whuq&goback=%2Egde_1843208_member_68407578%2Egmp_1843208%2Egde_1843208_member_68407578


Dan Zwicker
Toronto, Canada.

JACK LAYTON - LEADER OF THE NEW DEMOCRATIC PARTY IN CANADA

Today with the passing of Jack Layton, Canada lost a major contributor to its compassionate and generous soul.



Dan Zwicker
Toronto, Canada

PROFESSIONAL FINANCIAL PLANNING - NATIONAL STANDARDS – THE FINANCIAL SERVICES INDUSTRY - CANADA

Enforceable proficiency requirements and ethical principles for anyone providing financial planning services are being established

Financial planning is a rare pocket within the financial services industry in that it lacks national supervision. But momentum is gathering behind efforts to create professional standards and oversight for financial planners across the country.


In an unprecedented level of co-operation among industry sectors, five organizations have teamed up to create the Coalition for Professional Standards for Financial Planners. The coalition is aiming to establish enforceable proficiency requirements and ethical principles for anyone providing financial planning services.

“We think that we really need to get together and agree on some fundamental principles and values that any future oversight or regulation of financial planning should be based on,” says Cary List, president and CEO of the Toronto-based Financial Planning Standards Council, one of the five member organizations.

The other members are the Canadian Institute of Financial Planners, Advocis (both also based in Toronto), the Delta, B.C.-based Institute of Advanced Financial Planners and the Verdun, Que.based Institut québécois de planification financière.

These five organizations share the common goal of providing investors with clarity and better protection when working with financial planners. Currently, List says, investors have no reliable way of identifying financial planners who are qualified, competent and held to an ethical standard: “There’s insufficient consumer protection. We have piecemeal regulation.”

Throughout most of Canada, anyone can claim to be a financial planner without meeting requirements for qualifications or professional oversight. One exception is British Columbia, where advisors holding themselves out as financial planners must hold either the certified financial planner designation or another financial services industry designation, such as chartered financial analyst, registered financial planner or chartered life underwriter.

Quebec boasts the strictest requirements in Canada: financial planners must earn a diploma from the IQPF, obtain a permit from the Autorité des marchés financiers and meet continuing education requirements. “[The financial planning sector in Quebec],” says Jocelyne HouleLeSarge, president and CEO of IQPF, “is better regulated than in the rest of Canada.”

But even Quebec’s model doesn’t go far enough, she argues, because the rules are not properly enforced: “It doesn’t prevent people from calling themselves financial planners or financial advisors or offering services pretending to be financial planners. So, our concerns are the same all across the country.”

Outside of Quebec, the only financial planners subject to oversight and professional standards are those who hold professional designations, such as the CFP or RFP; the bodies administering these designations hold their members accountable to specific practice standards and codes of ethics. Designation-holders who fail to meet the standards are typically stripped of their designation — but are not prevented from continuing to practice without the designation.

This leaves a substantial proportion of financial planners who are not subject to any oversight, says List: “For every one person who holds the CFP who’s calling themselves a financial planner, there are at least two others who don’t hold the CFP.”

List adds that six of every 10 complaints that the FPSC receives pertain to industry practitioners who do not hold the CFP designation and thus do not fall under the authority of the FPSC.

The coalition is pushing for rules that would force all financial planners to be held accountable to a professional oversight body. This is one of four key principles that the coalition’s member organizations have agreed upon as the foundation for their work.

The other principles stipulate that those holding themselves out as“financial planners” must: meet certain proficiency requirements, including specific levels of education and experience, and passing a financial planning examination; meet prescribed continuing education requirements; and agree to be held accountable to a code of ethics, practice standards, and the rules and regulations of a professional body.

The proposed principles also include a requirement for planners to meet a minimum professional duty of care by: putting their clients’ interests ahead of their own, avoiding conflicts of interest; and fully disclosing and fairly managing any unavoidable conflicts of interest.

Many financial planners applaud the establishment of the coalition. “It’s nice to have a uniform set of standards and proficiency,” says Kevan Herod, a financial planner and owner of Peterborough, Ont. based Herod Financial Services, which is licensed by the Investment Industry Regulatory Organization of Canada and operates under the umbrella of Burlington, Ont.-based Manulife Securities Inc. “There has to be a level of standard to make it fair. What bothers me is that somebody can open up a shop and call themselves a ‘planner’ and not have to take any courses.”

Having multiple sets of standards only creates confusion among the public, Herod says. He adds that most clients are unfamiliar with the various industry designations and the factors that differentiate them: “As a consumer, you’d probably feel more comfortable knowing that there’s one body instead of multiple bodies. I think it improves the perception [by] the public, in the sense that it’s one voice or one set of rules.”

Financial services firms have also expressed support for the coalition.Winnipeg-based Investors Group Inc. supports new national standards, provided that they don’t limit methods used to compensate financial planners or impose onerous new requirements on financial planners who already hold credentials such as the CFP.

“Investors Group strongly supports the development and education of advisors,” says Debbie Ammeter, vice president of advanced financial planning at Investors Group. “We support incremental evolution and development of standards that serve clients well but also don’t destroy the fabric of a system that today is delivering value.”

Regulators also support the coalition’s efforts, says List: “We’ve had very positive feedback.”

Megan Harman
Investment Executive
July 2011