January 19, 2019 7:00 am
Updated: January 26, 2019 8:03 pm

Can you get a financial plan for free?

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Even people with limited means need a financial plan. After all, everyone has to figure out how they’re going to retire. And it doesn’t take any money to make potentially costly financial mistakes — like not having enough insurance — that a good adviser could help you avoid.

But a financial plan — which covers things like budgeting, how much house you can afford, planning for retirement and insurance — usually costs between $2,500 and $5,000. And that’s a lot of money for a lot of people.

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So is there a way to get a financial road map for cheaper?

Some advisors who sell insurance or investments will provide you with a financial plan for free. The catch there, though, is that the plan is often meant to be a conduit to the purchase of the financial products the advisor is selling.

Another option is Planswell, a Toronto tech startup that recently started offering free financial plans online. After collecting information through a brief online questionnaire, the company’s software formulates a financial plan that includes borrowing, insurance, and investment. The whole process takes around three minutes.

The plans are bare bones. For example, if you have credit card debt, the algorithm might suggest that you add that to your mortgage, which has a much lower interest rate. But there is no guidance about how to avoid running up that credit card debt all over again.

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Still, users who have questions about their plans or would like some tweaks are invited to get on the phone with Planswell staff, Eric Arnold, the company’s CEO, told Global News.

And anytime clients need to update their plan — be it a home purchase, a new addition to the family, or changing retirement goals — they can do so at no charge.

Arnold, a serial entrepreneur and former investment advisor at one of the big banks, said he came up with the idea after he and his wife, who had just had their first child, received a pitch for a high-fee scheme to invest through a registered education savings plan (RESP).

Arnold said the experience inspired him to create a way for Canadians to get money advice that would be both unbiased and financially accessible.

Planswell also makes money by selling financial products. Its parent company also includes a robo advisor that can manage investments at a low-cost, as well as an insurance and a mortgage brokerage.

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As with a traditional advisor, the one-stop-shop setup can be convenient for clients, who can rely on Planswell to both draw up a financial plan and help them implement it. The company is upfront about how it makes money and there’s no pressure for users who want the free plan to buy into other services.

And all of the company’s licensed brokers receive a salary, not commissions, which eliminates the incentive to steer clients toward specific financial products, Arnold told Global News.

But Planswell is still using financial plans to attract clients to other businesses.

That model, in theory, also lends itself to a potential conflict of interest. Imagine, for example, someone who is leaving their job and wondering what to do with their company pension plan, said Sandi Martin, a certified financial planner, and partner at Spring Financial Planning. People in that situation often ask whether they should leave the pension funds untouched until retirement or to transfer them out, for example into a registered retirement savings plan (RRSP).

A business model that blends planning and investment management creates an incentive to tell the client to move the money over, Martin said.

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If you’re willing to pay, yet another option is Toronto-based Viviplan, where a standard plan costs $800. The company says it has managed to slash costs by using software to automate the onboarding process, which can easily take more than 15 hours of work by a traditional, flesh-and-bones advisor.

Getting a financial plan with Viviplan requires users to provide hundreds of pieces of information, as well as, possibly, scans of paperwork like investment account statements and tax returns.

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But the result is worth the legwork, said Viviplan co-founder Seyon Vasantharajan. Clients get a 20- to 50-page long customized financial plan crafted by a certified financial planner, who will also get on a 30-minute phone call to review the document.

The company focuses exclusively on financial planning by so-called fee-for-service financial planners, who usually charge for their time.

Even that model, though, isn’t intrinsically free of bias, said Jason Heath, himself a fee-for-service certified financial planner and managing director at Objective Financial Partners.

“Everyone has a conflict of interest in the financial industry. The conflicts are just varying degrees,” he told Global News. “I sell time, and I’d like to sell as much as possible, so I’m always very up-front with clients that that’s my conflict. Even though I don’t sell financial products, I do sell something.”

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Whether you’re willing to spend thousands — or nothing at all — on a financial plan, the key is to do your research and understand where the revenue comes from.

© 2019 Global News, a division of Corus Entertainment Inc.

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