By identifying specific financial goals, there’s a much better chance that clients will

commit to invest.

• When dealing with more than one investment goal, help client prioritize.

• Determine how much money is needed to realize the goal.

• What’s the desired timeline to achieve the objective?

• Use available tools – online calculators or financial planning software - to establish investment strategy.

• Clients can have many financial goals and those goals will be different from one person to the next.

• One goal that most everyone has, is retirement.

• However, the definition of retirement is different for everyone.

Necessary information:• When will retirement start?• How do you see yourself living during retirement? What will

the expenses be?• What are the sources of retirement income that will be

available?– Government pensions– Employer pension– Personal savings– Severance pay / Retirement allowance– Sale of asset / Downsizing

• How long will retirement last?

Before determining a personal investment strategy for your client’s retirement, it’s important to take into account the various sources of retirement income your client will have.

CPP

OASEmployer

Pension

PersonalEtc.

• Depends on the amounts of retirement income from other sources, mainly pension plans.

• People without pension plans will generally need to contribute more to there personal investment plans (RRSP, TFSA, etc.) to reach their retirement goals.– Self-employed– Professionals (i.e. doctors, lawyers, accountants, dentists, etc.)

• People with generous pension plans may still need to contribute to their personal plans, especially if their retirement objective is high.– Retiring at a young age.– High annual income required.

• Many retirement calculators available on the internet– Financial Institutions such as banks and insurance companies– Service Canada website (

http://www.servicecanada.gc.ca/eng/isp/common/cricinfo.shtml)– Education websites (i.e. GetSmarterAboutMoney.ca)

• Your choice of financial planning software– Typically, you will have more flexibility with a financial planning

software to create more complex retirement scenarios and include two people in the same scenario (couples).

Scenario• Client is currently 45, would like to retire at 62.

• Current salary = $70,000

• CPP benefit estimated at $750 monthly in today’s dollars, starting at age 62.

• OAS benefit estimated at $500 monthly in today’s dollars.

• Employer defined benefit pension estimated at $3,500 per month. According to employee guide, this benefit is not indexed to inflation.

• Client expects to contribute $300 per month in his RRSP, which is currently worth $35,000.

• Goal = 70% of current income, indexed to inflation.

Enter information related to the retirement objective.

Indicate which pension amounts are indexed to inflation.

Quick response on goal achievement.

Indicates age at which personal retirement savings is expected to run out.

Will I have enough money to cover my expenses for the entire duration of my

retirement?

The retirement scenario will help answer this question.

Answer = Yes: Maintain the current strategy.

Answer = No…

SSTTEEWW

• Save more

• Take less

• Earn more

• Wait

• Once a list of priorities is set, select the goal you want to address and take the next step to building a recommendation.

Investor Profile Questionnaire

What types of investment are they comfortable with?

• Different options carry different levels of volatility.

• The Investor Profile questionnaire will help you and your client in this regard.

Customized approach

Simple, hands-off approach

Investor Expectations Investor Profile

Plan / Strategy

Financial Goal

GAPS

• Budget – Gap between what the client can contribute and the amount used in the scenario. To avoid this gap, address the budget element early on.– “So Mr. X, how much of your monthly budget were you thinking of

dedicating towards attaining your retirement goal?”

• Investment return – Is the client’s expectation realistic?– Ask your client what average annual return they are expecting on their

investments.

• Investment volatility – Does the client understand the potential short-term ups and downs of his investment portfolio?

Investor Expectations Investor Profile

To attain specific goal at a

certain date, needs average

annual return of 7%

Investor Profile is “conservative”. Expected rate of

return is 4% annually.

GAP

Gap should be resolved before implementing investment strategy.

• Possible solutions:– Stick with the investor profile risk level and accept to reach the goal at a

later date.– Stick with the investor profile risk level and accept to increase the amounts

being invested to reach the goal in time.– Accept more short term risk and adopt an investment strategy that will

potentially generate the required rate of return to reach the goal in time.

• What does the client prefer?

• A combination of solutions can also be applied.

Managing your clients expectations by addressing the gaps early on will prevent frustration and dissatisfaction.

• Remember, find out why your client wants to invest before making recommendations. Get them committed!

• Establish their goals (how much?, when?) and their investor profile, bridge the gaps between the two, and then implement an investment strategy.