Most people assume when they hire a financial planner, they’re paying for performance, or for some kind of specialized knowledge about which way the market is about to move, and they’re hoping to find the person who can get them into the next big run before everyone else figures it out. I understand why that expectation exists, because the financial industry used to hold onto information that regular investors simply couldn’t access without going through an advisor. But time’s different today, and with discount brokerages like Wealthsimple and Questrade, along with robo-advisors, everyone has access to almost any market they want with a few clicks. The reality is that the one thing most people think they’re paying for is the one thing this industry can’t consistently deliver. The research isn’t close on this either, since the vast majority of actively managed funds underperform a basic index fund over the long run, and yet people are still handing over one or two percent of their entire portfolio every year hoping this time will be different.

So what are you paying for?

The real value of a good financial planner has almost nothing to do with squeezing out a higher rate of return, and the actual value comes from three places most people have never had explained to them, which are the circuit breaker, the Lego strategy, and the clear game plan.

Before getting into those, it’s worth acknowledging that money is just a tool, and we often talk about maximizing RRSPs and TFSAs like they’re the goal, when really they’re just buckets meant to help you reach something else entirely. Your real goal is likely freedom, like being able to say no to a project that’s draining you or being able to say yes to three weeks in Japan with your family without wondering whether you’re overspending. I care far more about why you want to retire at 55 instead of 62 than I do about the decimal points on your rate of return, because if the numbers don’t serve the life you’re trying to build, the numbers themselves don’t mean much.

Research from places like Vanguard and Morningstar has spent years asking what a good advisor is worth, and it consistently lands in a similar spot, which is roughly three percent per year in additional wealth. To be clear, that doesn’t mean beating the index by three percent, since that’s close to impossible to do consistently over thirty years, but rather that the three percent comes from undervalued supports that have everything to do with behaviour and structure rather than stock picking. The circuit breaker accounts for nearly two percent of that on its own, and the remaining percent or so comes from intelligent structuring and a clear game plan working together, which is worth unpacking one at a time.

The first support: the circuit breaker

Believe it or not, the single biggest threat to your wealth isn’t the stock market, it’s the human behind the investment, and the data on this is sobering. DALBAR, a research firm that’s been tracking investor behaviour since 1985, has found that the average equity investor has underperformed the market every year for the past 15 years, and in some years that gap has been enormous. In 2024 alone, while the market returned around 25 percent, the average investor took home just under 17 percent, a gap of nearly nine percent in a single year, and that gap has nothing to do with picking bad stocks, since it comes entirely from bad timing, buying after markets have already run up and selling after they’ve already dropped, repeated over a lifetime of investing. Over a 30-year window, the average investor ended up with around $800,000 from a starting point where the index itself would have returned over $2 million, and that’s not a rounding error, that’s a completely different retirement.

Vanguard calls this the behavioural coaching opportunity, and their Advisor’s Alpha research estimates that helping clients manage their emotions during market volatility can contribute up to two percent in additional net returns annually, which is why it makes up the largest single piece of that three percent figure I mentioned earlier. We have a natural tendency to want to buy when things feel safe and prices are high, or to bail when things get scary and prices are low, and having someone to call in the moment you’re about to make that emotionally driven decision is the single most valuable thing a planner does. I think of it like hiking a ridge in the Rockies when a storm rolls in fast, where you don’t need a geology lesson about the rocks underneath you, you just need someone to grab your shoulder and tell you that we’ve seen this before and the best move is to stay the course.

The second support: the Lego strategy

The second undervalued support is about intelligent structuring, or what I call the Lego strategy. Most people treat their finances like a bunch of separate pieces, like a TFSA over here and a corporate account over there and maybe an old LIRA (a locked-in retirement account from a previous employer’s pension) sitting there collecting dust like the old golf clubs you keep meaning to sell. The reality is that having all the pieces isn’t the same as having a plan, and simply by putting the right investments in the right accounts, like maximizing your registered accounts before your non-registered accounts and choosing low-turnover ETFs or corporate class funds for your corporate and non-registered investments, you can add a meaningful amount of wealth over time.

Here’s a simple example of what getting this wrong looks like. Say you hold a broad market ETF that pays a regular distribution inside your non-registered account, while you also have RRSP room sitting unused, and every distribution that lands in that non-registered account becomes taxable income the year you receive it, whereas if that same ETF were sitting inside your RRSP instead, that distribution would compound untouched until you need the money. Over a twenty or thirty year window, the difference in after-tax wealth from that one decision alone can run into the tens of thousands of dollars, and most people have never been told to think about it that way.

Then there’s the silent killer, which is tax drag. The CRA is essentially your biggest uninvited business partner, and it’s actively taking a piece of your T4 income and your corporate dividends if you aren’t being intentional about where things sit. If you hold a dividend-paying ETF inside your corporation or a non-registered account, every distribution that lands there is a taxable event, and at the top marginal rates most of my clients are paying, you’re handing back thirty, forty, sometimes fifty cents on every dollar of income before that money even has a chance to compound. And that’s just the income piece, because if you’re actively trading, or even sitting in a fund with high internal turnover (which simply means the fund manager trades a lot inside the portfolio), realized capital gains get triggered every year whether you asked for them or not, and every time that happens, the compounding clock resets on that portion of your money.

The math on this is brutal over a long time horizon. A lot of smart DIY investors I see are good at picking investments, but very few are optimizing for tax efficiency across a thirty-year window. To give you a rough sense of scale, if you have a two hundred thousand dollar non-registered portfolio earning seven percent annually, the difference between a tax-efficient structure and an inefficient one, think high-turnover funds versus a low-turnover index ETF with proper asset location, can conservatively run fifty to one hundred thousand dollars over thirty years, and that’s before layering in the corporate account dynamics that most incorporated professionals are dealing with. The difference between paying attention to that and ignoring it is often the difference between a vacation property and a very large, involuntary donation to the government.

The third support: the clear game plan

The third undervalued support is what I call the clear game plan, and I want to be specific about what that means, because it isn’t a document that sits in a folder somewhere, it’s having someone who holds your full financial picture together and keeps you accountable to it, and the research on what that does to your life is worth talking about directly.

FP Canada surveyed 2,000 Canadians earlier this year and the numbers are striking. Half of all Canadians have lost sleep over financial worries, but among those who work with a financial planner, that number drops to 28 percent, and money remains the number one stressor in people’s lives by a wide margin, more than twice as stressful as whatever comes second on the list, while people without a financial planner are nearly twice as likely to say money is their biggest source of stress. And when it comes to optimism, two-thirds of people working with a planner feel hopeful about their financial future, compared to only half of those going it alone.

Vanguard looked at this from a different angle and surveyed over 12,000 investors, and the finding that stood out to me was about time, since three in four advised clients reported saving around two hours a week on their finances, which adds up to over 100 hours a year. When Vanguard asked what people did with that time, the top answers were leisure, time with family, and exercise, and I often wonder what you would do with 100 extra hours, like playing 25 more rounds of golf or being fully present at bedtime instead of half-present with your phone, and that’s the kind of return you can’t put on a statement, though everyone who’s experienced it will tell you it’s worth every dollar.

There’s a third study that makes this point better than I could on my own. The Financial Planning Standards Board surveyed over 15,000 consumers globally and measured something most investment statements will never show you, scoring things like quality of life, financial confidence, and life satisfaction on a scale from zero to one hundred, and people working with a CFP professional scored higher across every category, and not by a small margin either. The people with a plan felt better about their health, their sense of purpose, their ability to hit their financial goals, and their overall satisfaction with life, and while you can’t put that on a pie chart, it’s the shift almost everyone who’s gone through a real planning process will tell you was the biggest one.

Why this gets missed so often

The truth is the traditional advisor model often works against you on all three of these fronts, because when someone is paid based on the size of your portfolio, they aren’t always incentivized to tell you to pay down debt or fix a corporate structure that’s quietly bleeding money. I’m advice-only, which means I don’t sell products or earn commissions, and my only job is making sure your corporation, your investments, and your family goals are all pointed in the same direction.

If this way of thinking about financial planning resonates with you, I’d be glad to have a conversation about what it could look like for your own situation.

Simply start here: https://tally.so/r/3XXaBj