Most Canadians are worried about what an unforeseen event would do to their financial plans, according to a study released by the BMO Wealth Institute, but advisors can help their clients remain calm.
Financial plans help clients reach their goals, says Chris Buttigieg, senior manager, wealth planning strategy, BMO Financial Group in Toronto, but to be ready for anything advisors need to take those plans to the next level.
“A comprehensive plan will mitigate the risks of these life events,” says Buttigieg. “These three D’s as we call them: divorce disability and death.”
The study, entitled “The Biggest Life Events Can Derail Your Financial Plan,” found that 84% of Canadians believe they would face a major financial hit in the event of disability. As well, another 60% of respondents said they feel financially unprepared to deal with major life events such as retirement, the declining health of a spouse or the death of a spouse.
Furthermore, the study revealed that men and women typically worry over different things when it comes to their financial future. For instance, while 33% of men surveyed said they worry about having enough money for retirement only 23% of women were concerned. On the other hand, 24% of women worry about how their health or the health of their spouse would affect their financial plans compared with 21% of men.
Advisors can make sure their clients’ are ready for anything, says Buttigieg, by conducting a few stress tests on their financial plans. These stress tests, according to Buttigieg, would entail coming up with a few different scenarios that might change the parameters of the plan.
For example, if a person, or his or her spouse, were to become disabled what would happen to the couple’s income and their financial plan if they were forced to take early retirement and there was no disability insurance?
As well, a comprehensive plan should also include funds for three to six months of emergency expenses, says Buttigieg, and cover any and all insurances needs, such as disability or life insurance.
Finally, Buttigieg says advisors need to make sure they reassure worrywart clients who continue to fret over the future even if they have a comprehensive plan.
“The most important thing is establishing with that client that you’re there to help them get through this trying time, this hardship,” says Buttigieg.
“You’re there to help them, to provide them with advice and guidance, [that] there are individuals that you can also rely on as part of your team, as part of your centres of influence, that can also provide support with regards to addressing these challenges.”
The study results come from 800 online interviews completed by adult Canadians in March 2013.