Financial Planners a Retrospective

Back in the dark days after I had been laid off from Nortel, I was given access to a Financial Planner (as part of my severance package), and at the time I had a Fairly Positive Opinion of that Financial Planner. As a retrospective, I will look back on what I was told and the advice given and see if my opinion is still positive.

Go faster it is catching up!

In Retrospective Neither of Us Knew the Dangers that lurked not too far behind us!

I think I agree with my overall verdict of Financial Planners who charge by the hour have a potential to be less driven by selling specific products, and more inclined to create a plan that fits the client (instead of making the client fit “The Plan”).

To refresh your memories, just after getting laid off I met with a Financial Planner, who was going to help me plan my Financial Future (which luckily went OK in spite of my own ideas).

Specifically he looked at:

He started by filling in some of the numbers he gave me about my yearly income, the size of the severance package, and the size of my pension pay out.

The variables to be dealt with are:

  1. Do I take my severance package completely when it is made available?
  2. Do I use the RRSP room I have now or later?
  3. What are the implications of me withdrawing from the pension plan?

The advice “Bill” gave me was fine, and in hindsight there was a large amount of blind luck in some of these decisions (i.e. circumstances changed drastically during the time I was laid off until all my financial decisions were complete), I will elaborate here.

I take my severance package completely when it is made available?

“Bill” gave some very sound advice, that almost ended up being catastrophic (through no fault of his own). I was laid off at the start of August, so my “package” would only be paid out as of mid-October, however, I could defer payment into two parts if I wished. “Bill” advised to split the moneys so that I didn’t have a massive tax bill in the year I was laid off, and then take the rest on January 3rd of the next year.

This was good sound advice, however, Nortel declared bankruptcy on January 15th, and luckily they paid the second part of my severance, or I might have been left like many folks with nothing to show for it.

Grade on AdviceB  but if he had said January 30th the grade would have been an F

Do I use the RRSP room I have now or later?

The advice given was use up all the RRSP room that I had to hide as much money as possible, which ended up being a good thing as well. I used most of the RRSP room in the year I was laid off to soften the tax blow on things, and I still have some of that money left, again good avice.

Grade on Advice : A

What are the implications of me withdrawing from the pension plan?

Initially “Bill” had very bad advice (in hindsight) because he said that I should leave my Pension with Nortel. He was quite insistent that Nortel’s pension plan was safe from Nortel’s imminent demise, but at the end of it he relented (a little) and said that I could take the money out and put it in a LIRA (and RRSP) if I wanted to, but he did say it would be smarter to stay in the Nortel Pension Plan.

Again, “Bill” couldn’t have known that the Nortel Pension Plan was going to unravel the way it did, but luckily Mrs. C8j and Michael James both advised strongly against keeping the money in anything with the word Nortel associated with it, and we did remove the money from the Nortel Pension Plan before it unraveled (as well).

Grade on Advice:  D- I can’t give him an F, but he was way to insistent on staying in the plan for my liking, I could be in a bad financial place right now if I had followed that advice.

Overall

I think it was good to talk with someone about our Financial Situation, and I think “Bill” did an OK job, didn’t try to “sell” anything to me, and gave me some good ideas on how to live on my severance package.  Yes, he almost cost me a great deal of money, but then again, can I blame him for not knowing about Nortel’s pension woes? Don’t know.

{ 4 comments }

{ 4 comments… add one }

  • My Own Advisor August 14, 2014, 4:39 PM

    Another truism, timing is everything…I think in the end you’ve done very well considering…

    FWIW – I took my old pension from my former employer and put it into a LIRA when I was about 28. I figured I might as well take it with me since I was vested, versus being tied to a company I was no longer part of, whether my former employer was wildly successful or a dud in the future. This way with the LIRA I have more flexibility but I can’t touch the darn thing for almost another 20 years.

    Mark

    Reply
    • bigcajunman August 14, 2014, 4:58 PM

      I knew someone at Nortel in the mid-90’s who said the same thing (and did the same thing) and at the time I thought he was insane but in hindsight, it was the right choice. As for the LIRA, at least YOU control it.

      Reply
  • Michael James August 14, 2014, 10:03 AM

    Unfortunately, when people encounter a factor that is hard to put an exact number on (such as the potential for loss from the Nortel pension plan), they often just ignore it. In the end they get an answer that is exactly wrong instead of approximately right.

    Reply
    • bigcajunman August 14, 2014, 10:16 AM

      As usual blind luck on my part took a helping hand as well. Nortel goes under a month earlier and I would have been in trouble.

      Reply

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