The Friday Rant: I Am Not A Financial Planner


6 minute read

July 15, 2011

No, I’m not. But by the same token, financial planners are not Realtors!

I don’t give out stock tips, so I’m not sure why financial planners are giving out real estate advice…

First, the disclaimer

The following is merely my opinion, and I don’t expect all of my readers to share my views.

If you are a financial planner, financial advisor, life planner, life coach, stock broker, bond trader, investment banker, investment planner, investment counselor, investment assistant, investment associate, investment dude, investment gal, or anything in between, chances are – you might take issue with some of my thoughts.

If this is the case and you don’t share the following views, then I encourage you to fight fire with fire; grill me on discount brokerages, commissions, the Competition Bureau, dual agency, confilicts of interest, misleading advertising, shady Realtors, and anything you see fit.

It’s only fair, right?

A few weeeks ago, I got a sign-call on one of my listings from young kid that I would say was about 23 or 24 years old.

He came to see the property that I had listed at $329,000, and he said that while he absolutely loved it, he didn’t think he could afford it.  He told me he was looking “around three-hundred; maybe a bit more” and that this just fell out of his price point.

I didn’t get into a discussion with him about how a $329,000 condo only carries for about $89 per month more than a $310,000 condo because I felt that he clearly had a price ceiling, psychological or otherwise, and I didn’t want to rock the boat just yet.

We looked at another condo at $314,900, and he decided this was an excellent fit.

I had him speak with my mortgage broker for a pre-approval, and my broker told me that this kid wouldn’t be able to buy the condo.

Here’s the thing about my mortgage broker: he’s the best in the industry and he’s a huge part of my business, but he never discusses my clients with me.  I forward them to him, and he works on their behalf.  But I don’t ask about their personal finances and he doesn’t tell me.

So when my broker told me that he couldn’t get this kid approved, he said, “Sorry but for the parameters he’s set and taking his objectives into account, he can’t get this condo.”

That got me thinking, so I asked the kid what his financial situation was like.

I said, “Do you not have 5% to put down?”

I assumed that perhaps given his age, he was one of these first-time-buyers that underestimate the cost associated with buying real estate; the land transfer tax, legal fees, moving, furnishing, etc.

He said, “No, I’ve got more than 5% down.  That’s no problem.”

So I asked, “What are we talking here?  Are you trying to get to 10%?  Are you at 20% – are you trying to avoid high ratio?  Because I can tell you that likely 80% of my first-time-buyers don’t have 20%.”

He said, “No that’s not the problem.”

Then he dropped this bombshell on me – one I have yet to recover from.

He said, “I need about $110,000 to buy this condo, and I only have $90,000.”


I was speechless.

I couldn’t make sense of the numbers!  We were looking at a property priced at $314,900, and he “needed” to have $110,000 in order to buy it?  What was I missing here?  I was incredibly impressed that at his age, he’d already amassed $90,000 in savings!  This money wasn’t coming from his parents – believe me, I asked!

So I inquired rather directly, “How did you come to determine that you need $110,000 to purchase this condo?”

That’s when he dropped bombshell #2; the words that will lead me into a rant from which my blog might never recover:

“Because my financial planner tells me I need to make a 35% downpayment on any condo I buy.”

I’m sorry, but I disagree.

Financial planner?  Huh?

Call me biased since I sell real estate for a living and I get paid when people BUY, but I don’t think anybody really “needs” to put down a certain percentage, let alone 35% for a first-time-buyer.

The fact that I’ve had 10-12 clients this year alone buy with 5-10% down has no bearing on my opinion.

The fact that I had a client purchase for $1,100,000 last year with 5% down also doesn’t matter.

And the fact that in 2005, I had a client purchase a $1,160,000 house with zero down and cash back via the 107% financing option also won’t factor into my opinion.

Every buyer has his or her own level of comfort when it comes to the amount of debt they take on, and we’re all born with different risk tolerances.

I am NOT suggesting that every buyer put down 5-10%, or even suggesting that people who have 5% down should even be in the market at all!

But I vehemently disagree with a financial “planner” that tells a 24-year-old kid, who has accumulated $90,000 in savings, that he can’t buy a $300K condo.

It’s ridiculous.

So I asked the kid a few questions…

“Who is your financial planner?  How old is he?  How long has he been in the business?  What’s his real estate portfolio like?  Where does he live?  What kind of car does he drive?  Do his kids go to private school?  How does he dress?”

Sure, these things are all material, but far be it for me to say that a “financial planner” could be some 28-year-old shlub with no money to his name, who merely dishes out advice over the phone.

“How much money does this guy make for his clients?  What is his track record like?  What is his client retention rate?”

I think these are all fair questions.

The kid told me, “My financial planner is leaning more towards the stock market and he’s shying away from real estate right now.”

Really?  Based on what?

When you’re picking a stock broker, financial planner, financial advisor – or whatever they’re called, I don’t think it’s unreasonable to ask the ‘tough’ questions.  Ask them what they bought for their clients yesterday.  Ask them what they bought for their clients four months ago, and how those investments have done.  Ask them what they bought for their clients two years ago, and why they did so.

If somebody asks me for a reccomendation, I won’t just say, “Buy at 230 King Street East.”  I’ll give them an hour of my opinion, if they can stand me that long.

When I was 19 years old, I sought the advice of a 60-year-old financial advisor who had been through three different market downturns.  He told me to put all of my money in the world into ONE single stock: Nortel.

I bought at $50/share, and he didn’t tell me to sell it at $45, or even $40.  At $30, he said, “It’s just a paper-loss.  If you sell now, you’ll end up losing $6,000!”  At $25, I had lost half my money, but he urged me to hang on.

I sold it for $2.00 when I transferred my RBC account into what was then E-Trade, and began managing my own finances.

No, this story does not encompass the whole industry, and I’m aware that not everybody is equipped to manage their own portfolio.

But to say that I have little faith in miracle-worker stock-pickers is an understatement.

Arrogant, unsophisticated 27-year-olds were primarily responsible for the tech-bust in 1999 and the sub-prime crisis a decade later.  The grey-hairs were responsible too, but just from a higher floor with a better view.

Three years ago, a guy I knew from high school asked me to lunch so he could “earn my business.”  I agreed to meet with him.

He pitched me on himself, his company, and his “knowledge base,” and I failed to be impressed.

He raved how he “only” smokes pot twice per week now, instead of every single day like only yesterday.

He said that he managed “Millions and Millions of dollars” worth of portfolios, and again, I didn’t see how this related back to me.

But it wasn’t until he told me what he was buying for his clients that I wanted to throw up.  You see, the fact that he was buying anything was the problem in the first place.  The S&P and TSX were both down over 30% that year alone and had been trailing for 18 months.  I told him that I had short positions out on every single Amercian bank, financial, and tech stock that I could get my hands on, and that it was treating me well.

That’s when he said, “Oh, well, at my company – we’re not allowed to short sell.”

That made absoluley zero sense to me.  Shorting is half of the market.  For every buy, there is a sell.  How can you ignore one half of the equation?

More importantly, how could you make money BUYING in a market that was doing nothing but go down?  Sure, perhaps he had a 3-5 year outlook and I was only focused on the next 1-2 years, but I truly don’t think he thought that far ahead.

However, the icing on the cake was when I found out from an industry colleague that his firm, wait for it……only sold equities which they underwrote themselves.

Talk about a conflict of interest!  They were being told from management to only sell companies which they had a stake in!

That’s like me only showing properties that I have listed myself!

If there are one-million companies you could buy stock in, these guys were only selling a hundred!

I have very little faith in “financial planners,” but that’s just me.  That’s based on my own experiences, and basically every book I’ve ever read about finance in the last fifteen years.

For a financial planner to tell a 24-year-old kid that he MUST make a 35% downpayment on a property is the worst advice I’ve ever heard.

But what really irked me was that this financial planner didn’t back up his advice whatsoever.  He told this kid things like, “Just trust me.”  That’s what I heard, ver batim.  If you’re going to make a statement like “Only buy with 35% down,” then you should give, you know, a reason!

I’m not a financial planner, and I don’t give out stock tips, nor do I take part in long-term weath planning.

I don’t think that financial planners should be giving out real estate advice.

I had another client whose financial planner told her, “I really don’t like that building.  I don’t think you should buy there.”  But that’s a topic for another day…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

Find Out More About David Read More Posts

Post a Comment

Your email address will not be published.


  1. Michael

    at 7:40 am

    I agree with you. There is no reason to throw all of your savings towards a mortgage. if 20% isn’t ALL your savings, then 20% would be ok if you really have a grudge about paying the insurance.

    However, even basic GICs offered by retail banks are comparable to the variable rate mortgage rates. Spread your money over some GICS varying in length which offer early redemption and some equities/ETFs instead. When interest rates go up, cash some out and throw against the mortgage to keep payments the same. OR, maybe some of your equities/ETFs grew quite well and you can throw that against your mortgage and the monthly payment reduces as a result.

    ha, and if interest rates go down (unlikely these days), your payments on the mortgage either go down, or you pay it off faster.

    win/win i see it. Plus you have cash available should you need it and it’s not sucked in your home. And if you were depending on the home line of credit, that would be interest barring too.

    gotta get rdy for work

  2. Moonbeam!

    at 8:24 am

    Did you offer your opinion to your young client… what did he end up doing?

  3. Kyle

    at 9:00 am

    Both RE Agents and FP’s have a fiduciary duty to serve their clients, and both need to offer views, opinions and advice. Ultimately, clients need to decide just how much faith they want to put in these views, opinions and advice. So you’re right, your mutual client should be asking for the rationale?

    If the FP is basing the 35% down on his own unfounded opinions and outlook on Real Estate, then i would agree with you. However the FP is legally obligated to “know his client”, and probably has a lot more financial info on your mutual client then you have. So i suppose he could be basing the 35% recommendation on other factors (e.g. how stable the clients work is, the client’s risk tolerances, is most of his income from bonus or salary, does the client have other future goals like returning to school or possibly starting his own business, etc).

  4. LC

    at 9:15 am

    I have zero faith in the stock market, especially in today’s world where anyone with a computer and internet connection is an “investor”. This financial planner sounds like he’s looking out for his own interests. Funny how the public has this perception that realtors make too much in commissions for a person’s home but they never stop and look at how much they are paying these financial planners to (mis)manage all their money with basically no accountability at all.

    1. Jeremy

      at 2:29 pm

      LC how exactly is the financial planner benefiting from telling a 24 year old kid to put 35% down? FP’s are paid based on a percentage of total assets invested- or less frequently, based on an hourly rate. Either way, there is no benefit to the FP to recommend a larger down payment. It would be in the FP’s best interest to tell the kid to pay with 5% down and invest the rest in pricey mutual funds.

  5. Marina

    at 9:34 am

    The problem, I think, is that most people think of their financial planners as financial managers, which should NOT be the case. A financial planner should help you evaluate different scenarios. They can go so far as to make a recommendation.
    But at the end of the day, they should be giving you the tools to make your own financial decision.

    “Trust me” is not a useful tool to make any decision. In fact, I make it a point not to trust anyone who says “trust me”.

  6. Joe Q.

    at 9:54 am

    Both realtors (as a group) and financial planners (as a group) often give out advice that needs to be taken with a grain of salt. The mistake is not necessarily in listening to a financial advisor, but in listening to one without “considering the source” and without getting a second opinion. The same goes for realtors.

    “The fact that I had a client purchase for $1,100,000 last year with 5% down also doesn’t matter.

    And the fact that in 2005, I had a client purchase a $1,160,000 house with zero down and cash back via the 107% financing option also won’t factor into my opinion.”

    Ah, the fruits of the 2003 and 2006 CMHC rule changes. If anyone wonders why housing in Toronto has become so expensive, there’s your answer.

  7. Vincenit

    at 10:41 am

    The biggest culprit is the financial planner basically telling the kid to put all his eggs in one basket, either all in stocks or real estate. There is no reason for this kid to put all 35% into the condo considering the low cost of borrowing. The kid is better off putting the 20% down for the condo and investing the rest of his money for a better return.

    PS: I agree with Joe Q

  8. Potato

    at 10:46 am

    I’d be leery of a justification of “just trust me”, but given that this financial planner helped get this kid $90k in savings by 24, I’d say he’s probably earned the right & leeway to help this kid decide what he can afford.

    On a more general sense, FPs shouldn’t get into the specifics of a purchase (which particular unit to get), but since RE is such a large part of a person’s financial plan, then they absolutely can and should be advising there: how much can the client afford, when does a purchase fit into the rest of the picture, etc.

    Oh, and with few exceptions, they shouldn’t be stock pickers at all.

  9. George

    at 1:07 pm

    I agree with Marina. A good planner conducts scenario analyses and lets the client decide the course of action.

    Of course, a good financial planner might be difficult to find. They are usually experts in the way they want to do things, not in analyzing alternative scenarios.

  10. Stan

    at 11:21 am

    I’m going to take a wild guess that Mr. Financial Planner told the kid he should have an impossibly high downpayment so that the kid wouldn’t be liquidating his securities any time soon -securities which Mr. FP likely earns trading commissions and asset management fees…Well, I suppose than Mr. FP could have given him the advice to put 5% down, and keep the rest invested…Either way, 20% down is more than sufficient unless you primary financial goals involve paying as little interest as possible, ever.

  11. Finance

    at 7:58 pm

    “”unsophisticated 27-year-olds were primarily responsible for the tech-bust in 1999 and the sub-prime crisis a decade later”

    You are not serious about this comment. That is purely taken out of thin air.

  12. Finance

    at 8:02 pm

    “That made absoluley zero sense to me. Shorting is half of the market. For every buy, there is a sell. How can you ignore one half of the equation?”

    If half of the market are short positions, please explain to us how short positions are much lower in percentage terms than long positions.

    First of all somebody can sell their long position to another long, so there would be no short position created. Second of all shorts positions are borrowed shares from a long position that was established, so in theory you can only create short position on shares that can be borrowed for shorting.

Pick5 is a weekly series comparing and analyzing five residential properties based on price, style, location, and neighbourhood.

Search Posts