Toronto Star

Up your financial literacy game

Choosing the right adviser who works with your needs and goals is key to investing

- JACLYN TERSIGNI SPECIAL TO THE STAR

A confession: At nearly 28 years of age, I know very little about investing. Sure, I have a TFSA and an RRSP, and if I remember correctly they contain some mutual funds (“think of your accounts of financial baskets — they can hold things,” a wellmeanin­g bank-appointed adviser once told me).

But if I were instructed to reorganize my baskets, even slightly, and maybe add another one or two to the collection, I’d be making blind, maybe disastrous moves.

A conversati­on with Shannon Lee Simmons made me feel better, and, inspired me to fix it.

The 32-year-old founder of New School of Finance, a fee-only financial planning firm based in Toronto, works largely with people between the ages of 25 and 45 and is wellversed in the struggles of new investors who feel intimidate­d about their low investing IQ.

“You’d be surprised at how often people self-deprecate and selfshame about how little they know. They’re embarrasse­d about it. And I’m like ‘How are you supposed to know this? That’s why I have a job,’ ” Simmons says.

But, she adds, that knowledge deficit about the when, where, how and why of investing poses significan­t challenges.

“I don’t know the first thing about the language or the jargon around brain surgery, but no one expects me to because brain surgery doesn’t affect my daily life. Finances do affect your daily life and therefore you’re supposed to be armed with all the understand­ing, jargon and intricacie­s of how this all works,” she explains.

“The lack of literacy is a huge problem for overall well-being because it makes finances intimidati­ng and then people don’t want to move forward . . . They believe they’re bad with money, and that belief is so bad.”

It’s not just a lack of knowledge that’s hurting rookie young investors, it’s misconcept­ions about the urgency to invest and where to put their money.

“People think they should just be putting money into an RRSP and that’s the end of it, and if they can’t do that, they’re being fiscally irresponsi­ble. But sometimes an RRSP is not the best thing for someone,” Simmons explains. “You have to make sure you’re using accounts strategica­lly, in a way that makes sense for you.”

To begin investing strategica­lly, responsibl­y and without the intimidati­on factor, Simmons offers advice that sometimes runs counter to what clients are used to hearing. Maybe don’t invest at all In an ideal world, we’d all be investing from the moment we took on part-time, after-school jobs. But, as Simmons reminds me, many under-40s have leftover debt from school, are experienci­ng precarious work arrangemen­ts, and live in cities with high costs of living. We have to prioritize our financial considerat­ions.

“Investing is wonderful but it should be your third order of operation,” Simmons advises. She recommends paying down debt first — consumer debt, like credit card bills, not a mortgage — and then building up a non-invested emergency fund that can be easily accessed if and when it’s needed. Once those items are crossed off the list, then look to investing.

Seek unbiased, personaliz­ed advice Know the difference between what type of financial adviser whose help you are seeking.

With a commission-based financial adviser, for example,; instead of paying an out-of-pocket fee for his or her services, you’ll pay fees on the investment products that he or she suggests. A fee-only, on the other hand, charges a fee for the advice and assistance given.

It’s a distinctio­n that Simmons says is important, depending on your particular situation.

Be smart about the accounts you choose RRSPs are great — but only if wielded correctly, Simmons advises. However, they’re not a one-size-fits-all investment solution for everyone.

Simmons reminds me to keep three things in mind about RRSPs:

Money contribute­d reduces income tax charged, so a young person who’s earning a low income and adding to an RRSP is effectivel­y wasting future contributi­on room on an income tax that doesn’t need lowering;

RRSP savings goals should be earmarked for first-time home purchases, a return to full-time school, or retirement; and because RRSP money is taxed upon removal, it makes it less accessible for other needs, such as a wedding or an emergency.

“One piece of advice is not good for everybody,” she says, later adding that investment­s should always be driven by personal financial goals.

 ??  ?? A lack of financial literacy can make investing seem intimidati­ng, financial adviser Shannon Lee Simmons says.
A lack of financial literacy can make investing seem intimidati­ng, financial adviser Shannon Lee Simmons says.

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