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Can’t afford a financial plan? You can get a money check-up

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Getting quality financial advice isn’t easy, but Canadians with money questions now have a new option to get answers.

Financial industry expert and TV personality Preet Banerjee is trying to bring robots and financial advisors together with a fintech product called MoneyGaps. His hope is that algorithms will help make sound financial counsel affordable.

Currently, Canadians can get money advice from independent financial planners, investment advisors or through financial institutions like banks and insurance companies.

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Financial planners who charge an hourly rate or a flat fee for their services can provide detailed guidance on anything from whether you can afford to buy a house to how to make the most of your registered retirement savings plan (RRSP) and tax-free savings account (TFSA). But this kind of in-depth advice comes at a cost.

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Hourly rates can go from $150 to $500 for someone with the proper qualifications. And a full financial plan — a road map to your financial goals that can be 20 to 50 pages long — may cost $1,200 to $5,000 and more, according to Jason Heath, managing director at Thornhill, Ont.-based Objective Financial Partners.

Investment advisers may provide some guidance on things like retirement planning, but mostly they focus on managing funds, according to Heath. Most small investors don’t hear from their advisor more than once or twice a year, according to a recent survey published by the Ontario Securities Commission.

And many advisors, who generally charge a fee equal to a percentage of the assets they manage, won’t take on clients with less than $500,000 to invest, Heath said.

Canadians can also find some free counsel at their bank or through an insurance company, but those advisors are usually paid a commission or fee for selling financial products. And that remuneration structure tends to colour the advice they give, whether that’s conscious or unconscious, according to Heath.

“At the end of the day, when they are presented with a problem, the solution will always end up being what they’re selling.”

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For those who want sound advice but have a limited budget or few investments, the options can be slim.

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“There’s a void in the marketplace for people who have less money,” Banerjee said.

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That’s where MoneyGaps, which officially launched in September, comes in.

The web-based platform allows advisors to quickly generate a financial scorecard for clients with a fraction of the work that goes into a full-fledged financial plan.

Producing pages and pages of customized advice and projections is “not economically viable for people who don’t have a lot of money,” Banerjee said.

MoneyGaps is meant to make it faster and easier for advisors to gather information from clients and spot any issues. The idea is advisors will be able to price the service for mass-market consumption.

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If you’re the customer, using MoneyGaps is a matter of filling a series of online questionnaires. Once you’ve found a financial advisor who offers the service, you take a 90-second introductory survey that’s meant to provide a quick snapshot of your financial situation. The questions ask things like whether you carry a credit card balance or whether you’ve ever run the numbers to determine how much life insurance coverage you need. The results are colour-coded, with green for areas in which you’re likely on track and orange and red for those that probably need attention.

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From there, you can choose to tackle a specific concern or get an overall assessment. The comprehensive MoneyGaps analysis spans eight areas: debt, emergency fund, disability insurance, estate planning, life insurance, retirement planning, education planning, and cash flow.

For each one, there’s a more in-depth set of questions that Banerjee recommends clients and advisors fill out together to ensure accuracy. This can be done in person or remotely via video conference.

For every section, the software gives out a grade from A to F that’s meant to reflect how well you’re doing. The platform also generates what’s called a reasons-why letter — the same type of document that is currently required for life insurance recommendations — detailing the rationale for the assessment and any recommendations from the advisor, who can also override the MoneyGap grade.

The entire exercise takes up to 45 minutes, said Banerjee.

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‘Quick and dirty’ financial plan

Financial planner Robb Engen calls the MoneyGaps report card “a quick and dirty financial plan.”

Engen, who’s been offering the service to readers of his blog, Boomer and Echo, said he is seeing “really good uptake.”

Engen is offering to analyze one specific problem area for $199. So far, most of the interest has been in retirement planning.

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The software takes into account a client’s expected Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, their investments and current contribution rate and generates an assessment of whether they are on track to meet their retirement goals, need to catch up or are overachieving.

“For me, then I get to offer some advice or observations on what they could do to improve that situation,” Engen said.

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MoneyGaps assessments are based on certain generalized assumptions, he added. For example, the software assumes that clients will start to take government pension benefits when they retire, which isn’t always the case.

“You might … want to retire at 55 or 60 and defer CPP until 70,” Engen said. “And that’ll make a difference in how you withdraw your investments and tax efficiency and all that.”

Overall, however, “I think the clients are finding it beneficial to see the [scorecard] numbers in front of them,” Engen added.

MoneyGaps may also well serve clients who want a quick check-in every year.

The platform is one of just a few in Canada that seek to use technology to provide more affordable financial advice.

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Other options include Planswell, a Toronto tech startup that uses software to provide free bare-bones financial plans online, and Viviplan, which uses human advisors to provide traditional financial plans but which relies on software to automate the onboarding process.

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[Editor’s note:  On Nov. 4, after publication of this article, Planswell announced it ceased operations.]
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Heath, for his part, said he was invited to test MoneyGaps but decided not to adopt it for now, as his clients generally want more in-depth advice.

However, MoneyGaps could help advisors who don’t offer much financial planning to provide clients with some general guidance, he said.

He compared it to the kind of screenings dentists sometimes perform in schools.

It’s not a full examination, he said, but it will catch glaring problems like cavities or a lack of flossing.

It’s a light checkup to help identify some potential risks or gaps,” he said.