Transcript | Financial goal setting

Sarah Widmeyer 0:16 

Welcome to conversations on wealth, a podcast dedicated to helping Canadians with your total financial picture. I’m Sarah Widmeyer, Director of wealth strategies at Richardson Wealth. Today I’m joined by Maureen Glenn, Vice President of tax and estate planning at Richardson Wealth. And Pascal Alonzo, a senior financial planner at Richardson Wealth. Thank you both for being here today. Happy to be here. Thank you for having us. So let’s talk about financial planning and goal setting, because that’s what financial planning is really about, isn’t it? The core elements of your financial plan are closely tied together. As you paint your ideal scenarios with your family or advisor, your goals play a major part in the decisions that help structure your plan. So Maureen, why is financial planning and goal setting that we do so important to Canadians?

Maureen Glenn 1:15 

You know, Sarah, I think goal setting is one of the most daunting parts of financial planning, trying to look into the future and setting a goal and being tied to achieving that goal in the future. It seems like a pretty restrictive approach. But frankly, without a financial goal, then how would you know that you’ve achieved success? So you need to know whether you’ve made it or not. And if you don’t set a goal or a vision for the future, then how would you ever know when you’ve reached it?

Sarah Widmeyer 1:48 

So how do you create this financial plan?

Maureen Glenn 1:51 

I think the most important thing is setting realistic and achievable goals. That’s paramount. Too often, we as Canadians have a vision in our minds of what retirement will look like. And we’ve been told over the years that retiring early would be a great goal. But often we’ve realized that the reality is much different than the goal that we said. What if we haven’t saved enough to achieve the goal to take that early retirement, or worse yet, we set a goal, and then we realize we’re not enjoying it. I always like to tell the story of a family member who was so excited to retire at the age of 55. That was always his financial goal. But when he actually retired, he realized he didn’t really have anything to do. His lifestyle was about cutting the grass. And that just wasn’t what he wanted to do for the last 40 years of his life. So think of it like deciding you want to buy a boat, and then realizing that you get seasick. If we don’t set realistic and achievable financial goals, and also tie them to our lifestyle goals, then we’re really not going to be happy in the future. We call this really a humanistic goal. So it’s a different approach to financial planning, we set the financial goal, which is a number, perhaps, or a lifestyle, but then we tie it back to what we really want to do with our lives. And those two have to be intrinsically connected.

Sarah Widmeyer 3:22 

Hmm, that’s interesting. So Pascal, at Richardson Wealth, we have a financial planning software called My NextGen Plan. Tell me about this tool and how it helps individuals plan for different scenarios.

Pascal Alonzo 3:37 

Oh this, this is a great question. Actually, when we are crafting a financial plan, we use the state of the art planning tool that we mentioned My NextGen Plan to help engage the client. And basically this plan is very interactive and collaborative with our clients. We start by gathering information from the clients and then we go live with a collaborative session with the clients to help extrapolate a wide range of planning scenarios, for instance. And then what we do is we zoom in on the best planning scenario that ultimately provide the client with the best possible path to achieve their financial goals.

Sarah Widmeyer 4:15 

Do you have any success stories with My NextGen Plan that you can share with us?

Pascal Alonzo 4:20 

Oh, yeah, I have lots of them actually, every year, every day actually, I have retired many clients. And one of my favorite stories is I have a couple who are about 10 years difference in age. The older spouse is about 70 years old, and still working and waiting patiently for his wife, younger spouse 60 to retire at age 65 so still have another five years to work. And they can’t wait until they both retire together and enjoy what retirement life has to offer for them. So they came to us and they want to find out if they can even retire at age 65 when their spouse is at age 65, or they need to work even longer to meet their retirement goals. And they were extremely worried. So what we did, we reviewed all their financial details. And we input that information, we set up a virtual meeting with the clients, and looked at different retirement age scenarios. The most fulfilling choice for the clients was to both retire by the end of this year, actually, and enjoy their retirement together, they could not believe that by making minor adjustments to their lifestyle spending, they were able to retire four years sooner than expected and fulfill their retirement goals. I just want to add one more thing, while the software is very visually pleasing and easy to use, and the clients enjoy the interaction. It doesn’t mean that this software cannot handle complex planning, it does handle very nicely handle complex planning, such as if the clients have stock options they need to look at, they have corporations, such as holding companies or regular companies, that professional corporations that they have, even this can handle private mortgages, they’re lending out to other people outside the family, for instance, they’re lending funds to third party for mortgages and private investments, that software can also tackle this as well.

Sarah Widmeyer 6:18 

That’s awesome. So Maureen, it’s wonderful that we have such a great software tool to help with the financial planning process. But it really is more than just a software, isn’t it, it really does start with the conversation. And I love your analogy of buying a boat and then finding out later that you’re seasick and don’t like to boat. It’s about the conversation and the conversation uncovers the goals. And then setting the goals, that’s critical to the whole art of financial planning. And it is a bit of an art, isn’t it? It’s kind of more of an art than it is, you know the number crunching, although the number crunching tells you if you’re going to make it or not in terms of retirement and making those goals that you’ve set. But anyway, I think you know where I’m going with this. It really is about the conversation, the ongoing conversation and about the goal setting. Any closing thoughts?

Maureen Glenn 7:20 

Yeah, absolutely. Sarah, you know, the best financial planners in Canada are those who can interact with their clients in a way that draws out the qualitative aspects of the plan. We can all put numbers on paper, we’ve all had a budget that we tried to stick to, and then maybe missed it one month, spent a little bit too much that one month. But the reality is, if we don’t keep trying, we’ll never reach the goal. So it’s about the blue sky thinking as I call it, looking ahead with a vision, and then tying the numbers to it. In the past, we thought of financial plans as a bunch of charts and numbers. Our new software really draws that up to a picture. And I think the picture is much more telling because it can change over time. And you know, as Pascal said, this tool is interactive. So while we want to start from a place of accuracy, we need to understand the assets you hold today, the spending that you need to reach your lifestyle goals, and what you want to do in the future, we have to identify those things, then we can start to think about, okay, well, how much would I need to achieve that spending goal in the future. So there’s a number, if we want to retire at 60, there’s a number. And that number is what we need to have invested to provide income in the future. If we’re not at that number yet, we have to save more. And so we can calculate that number and help you understand how much you need to save to get to the goal. That kind of creates the roadmap. That’s what we call it. But then we need to review and tweak and review and monitor. So with our financial planners and our advisors that Richardson Wealth, this plan is not static. It is not a binder with a bunch of paper and numbers. It is about the conversation Sarah, and it’s really about that regular review, to see well last year I really wanted to buy a boat. And then I went on my friend’s boat and realized that wasn’t really what I wanted to do. Maybe I’m going to buy that really cool car instead, or the RV. But it’s going to change over time like our lifestyle does, and our lives do and our family changes over time. So with regular review of the plan, we can tweak the numbers, adjust the goals reset, and then look forward again to a positive picture.

Sarah Widmeyer 9:49 

So Maureen, it sounds like if you’ve taken the time upfront to craft a great financial plan around your goals. You’re set for life. Or is that the case? Have you seen some times where either people have left it too late to sit down and revise a financial plan, or even got to the end of the rainbow and discovered that it isn’t what they had hoped for?

Maureen Glenn 10:16 

Of course, I mean, I think that’s why we hesitate or procrastinate actually setting financial goals. There’s a little bit of fear and maybe a little shame. What if you don’t reach the goal? What if you haven’t saved enough when the time comes and you’re supposed to retire? Or worse yet? What if your life changes so drastically that your entire plan needs to be turned over? So for example, you become ill, or your spouse becomes ill, goodness forbid, how do you adjust the plan in order to accommodate the things that life throws at us? And this is where, by working with a financial planner, working with an investment advisor who can professionally help you adjust, I talk about adjust your plan. So I talk about pushing and pulling different leavers. When we create a plan with My NextGen Plan software, we use very conservative assumptions intentionally. So we’re going to use a very conservative assumption for the rate of return we’re going to achieve on your investments. We’re going to use a longer lifetime. So longevity, we’re going to push out to maybe age 95, maybe even age 100. Because we want to make sure that your plan and your finances don’t expire before you do, what if we live a long life? These are all elements of the plan. If we assume a higher rate of return, well, we might be painting a rosy picture that you might never achieve. Because let’s face it, we don’t really have control over the markets. And our investments in some cases, even with great advice. So what we need to do is revisit the plan and adjust. I’ll tell you a story of one family where there was an illness in the family and it came on suddenly, they didn’t expect to have to sell their business as quickly as they did. Perhaps they didn’t actually get as much on the sale of the business as they had hoped in their original financial plan. And in adjusting that, using the software, we were able to paint a picture for the clients that was achievable. So for example, in this situation, because they had to retire early, and they didn’t have as much funds coming from the sale of the business as expected. We looked at their plan again, input the new numbers, and then thought about what can we do differently to meet their lifestyle goals? The software has a concept of insights, which are really kind of neat, they automatically run different potential alternate scenarios, to help the client decide which lever to push or pull. So in this situation, the clients were really spending about $120,000 in lifestyle expenses every year. They recognized with the illness, they had to change their spending pattern. So we were able to run an insight in their plan, which quickly calculated how much they could afford to spend, instead of the $120,000 goal. It ended up they only needed to reduce their spending by about $15 to $20,000 a year. And then with conservative assumptions on the rates of return, we could make the plan work. And that was actually okay. The clients were able to decide that they could spend a little less because they weren’t going to be traveling as much as they originally planned anyways, and the plan all of a sudden starts to work again. But this is where the conversation being realistic about your goals. And then understanding which levers you can push and pull to adjust the plan when the time comes. That’s really gives you a lot of power and control over your future planning.

Sarah Widmeyer 13:59 

Sounds really simple doesn’t it? For many people It feels like going to the dentist because it’s revealing the numbers and where you are relative to where you need to be. But it really just starts with a conversation doesn’t it?

Sarah Widmeyer 14:21 

Pascal, anything you’d like to add before we close off?

Pascal Alonzo 14:27 

I’m helping my advisors and financial planners also to look at the software in general now that we have the new tool here and we always improving on it and enhancing it. And anytime we come across a situation where, for instance, the clients have a certain need for some sort of financial planning and we don’t have that capability, we’re always looking at adding that and helping the client to get a fuller picture of their financial planning needs.

Sarah Widmeyer 14:56 

That’s awesome. So while it starts with the conversation, And then it starts with goal setting. We have the tool at Richardson Wealth to help facilitate that discussion and deal with the complex planning scenarios, and it sounds like it’s something that we’re continuing to work on, and add on to, and enhance. So thank you both. There are many layers to financial goal setting as we’ve discussed today. If you have any questions about your goals, or how My NextGen Plan can help you visualize your path forward, please reach out to your Richardson Wealth advisor. And visit our website for more information on planning tips. Remember to follow Richardson Wealth on LinkedIn for the latest and wealth strategies. Conversations on Wealth is available wherever you get your podcasts. Thank you all again for listening. Thank you to my guests Maureen and Pascal. And join me again next time.