In August 2016, the Centre interuniversitaire de recherche en analyse des organisations (CIRANO) published a study by Claude Montmarquette and Nathalie Viennot-Briot on the value of financial advice. This recent study showed that households with a financial advisor accumulated 69% more assets on average over 4 years and 290% more over 15 years than households without a financial advisor.
The term "alpha" refers to the portfolio manager's added value and choice of securities in a portfolio relative to its benchmark.
The term "beta" refers to a coefficient that measures the volatility or sensitivity of a security or portfolio relative to the reference market. This beta consists of determining the asset allocation to be made by the investor between the different portfolios. The risk tolerance of each investor will then be the barometer for knowing how to make these choices.
In a 2013 study, Morningstar Canada researchers (David Blanchett and Paul D. Kaplan) developed a method to measure the percentage of additional value generated by financial and tax planning and found that working with a financial planner represents an average additional annual return of 1.82% for investors.Comprehensive financial planning involves not only guidance on fund and manager selection (alpha) and asset allocation (beta), but also taking into account an individual's overall financial situation, i.e. taking charge of his or her tax situation, managing wealth (including debt management), setting financial goals, coaching emotional behaviour and implementing strategies to achieve goals (gamma).
Financial planning is a multi-step process that consists of rigorously evaluating an individual's personal financial situation, comparing it to the desired future situation, and then developing strategies adapted to the individual's needs and priorities that will enable him or her to achieve goals by aiming for the optimal allocation of resources. The interdependence of the different areas of intervention in financial planning must be taken into account in the formulation of appropriate strategies. Possible areas of intervention are legal aspects, insurance and risk management, finance, taxation, investments, retirement and succession. Financial planning is an ongoing process that includes a regular review of an individual's progress in achieving his or her goals and changing needs and priorities, a re-evaluation of existing financial strategies and updates when warranted.
A financial planner is a person who has the knowledge, skills, abilities and professional judgment to provide objective financial planning advice at the highest level of complexity required by the profession. He or she must apply the standards of practice and adhere to the code of ethics of a supervisory body, which includes the duty to ensure that the client's interests are put ahead of his or her own.
The financial planning report is a written report on an individual's goals, needs and priorities. It takes into account the relevant areas of financial planning intervention and the relationships between them. The areas of intervention are legal aspects, insurance and risk management, finances, taxation, investments, retirement and succession.
The various sections of the report cover the individual's financial situation at a given date, the analysis process used to identify issues and opportunities, the evaluation of relevant strategies and the recommendations developed to achieve the individual's objectives, taking into account his or her needs and priorities.
A financial planning report includes the client's personal information and the financial assumptions on which it is based, as well as a disclaimer stating that its preparation is based on the use of the information provided by the client and the assumptions made. It also includes a step-by-step list of who needs to do what and when.