Preet Banerjee and the Value of Advice


Photo by Jamie Templeton on Unsplash

Television host and personal finance blogger Preet Banerjee has launched a new survey on the value of financial advice. He’s been researching the subject since 2015. “I’m in the fifth and hopefully final year of this research,” he says. “My supervisor seems to be under the impression that I’ll submit my thesis before summer, and hopefully I can defend before the end of the year.”

Banerjee has chosen a difficult subject. A lot of people believe their financial advisor delivers value. Those who don’t often shop for a new one, which is another kind of belief statement. But actually quantifying what an advisor relationship is worth over a number of years has proven difficult.

“You’ll often see studies that say ‘people with advisors have more money.’ But generally speaking, financial advisors tend to only go after people with money, and people who have already accumulated some wealth or have high incomes are more active in seeking advice,” says Banerjee. “Who is really responsible for the client being in the good position that they are?”

The survey is designed to dig into causation. It asks respondents to disclose who made first contact (them or the advisor), how much money they had saved at the beginning of the relationship and what areas of financial planning they are being advised on.

“The conversation on the cost of financial advice and products is more well defined than the other big part of that equation: value,” says Banerjee. “To understand what represents a good trade off between what one pays and what one receives, is a very personal thing. There are some people who pay a lot and get poor value. But there are some people who pay a lot and get fair value in exchange.”

Banerjee says the research program will deliver insights to consumers, industry, regulators, and policy makers. “I would be very appreciative if people could take the survey. The only requirement is that you are 18 or older and live in Canada.”

The survey is easy to complete, and runs 5-10 minutes. You can access it here, on your computer or mobile device.

Kevin Press

Wiggle Room

Photo by Nadine Shaabana on Unsplash

HBO’s Bill Maher was on-point in the New Rules segment of this past weekend’s season premiere. “To me,” he said, “the real lesson of this government shutdown is that we found out that federal workers – quintessential middle-class jobs – can’t afford to miss one paycheque.”

No doubt that line resonated with more than a few Canadians. New data from the MNP Consumer Debt Index, a quarterly study conducted by Ipsos, shows that almost half (46%) of adult Canadians are $200 or less from insolvency at the end of the month. Almost a third (31%) say they can’t pay their bills.

Both results are up significantly over the September report. At that time, 40% said they were that close to going broke at month-end and 24% reported having difficulties paying their bills.

“Many have so little wiggle room that any increase in living costs or interest payments can tip them over the edge,” says MNP Ltd.’s president Grant Bazian. “For most, the cause of trouble appears to be long-term accumulated debt. … They just can’t carry it any longer at higher interest rates.”

Much has been written about the value of an emergency fund. Recommendations vary, but it’s not uncommon to hear professionals suggest three to six months in savings for a rainy day. What’s most important is that you make decisions based on your own ability to save and your current financial situation.

If you might lose your job this year, factor that in. How much severance are you likely to receive? The standard benchmark is one month of pay for every year you’ve been with the company, but you can’t count on that.

How much money do you need to get through the month and how long do you think it will take you to find a new job. It’s not uncommon for middle-managers and executives to be out of work for six months, a year or even more.

If consumer debt is piling up, pay that down as quickly as you can. Identify the rate of interest you’re being charged by each of your lenders, and pay down the highest interest rate debt first.

Kevin Press