Money123: Finding a financial advisor, inflation’s up again, homebuyers are back

Do you need financial advice?

Uncertain economic times might push some Canadians to seek outside advice to manage their money.

But finding a financial advisor or planner that’s a right fit for you isn’t as straightforward as it may seem.

The differences between financial advisors, planners and the various designations out there can be overwhelming, but Global News spoke to a few experts this week to break down the space for those in need of guidance.

One of the first things you’ll have to understand is how your advisor or planner is paid.

Shannon Terrell, lead writer and spokesperson with NerdWallet Canada, says whether you’re paying a fee, a percentage of your returns or a commission to your advisor, the price of that service has to outweigh the value to your finances.

“Ultimately you need to consider, is that cost worthwhile to change your finances or your portfolio over to somebody else?” she tells Global News.

Read more to get the basics on financial advisors and planners, including how to find one you can trust.

Inflation is up, again. Do rates need to rise, too?

This past week’s inflation release from Statistics Canada came with a surprise for many economists: the annual rate of inflation accelerated again in April.

Inflation came in at 4.4 per cent last month, up slightly from 4.3 per cent in March, breaking a slowing trend seen since last June.

The agency said higher gas prices between last month and March, as well as growing pressures on Canadians’ mortgages, were behind the uptick.

The inflation surprise led some market analysts and economists to reconsider the odds of another interest rate hike from the Bank of Canada on June 7.

Scotiabank’s Derek Holt said the central bank would need to step off the sidelines of its rate hike cycle and adopt a “killer mentality” to “crush” inflation with a quarter-percentage point step next month.

Others, including Concordia University professor Moshe Lander, considered April’s inflation print “just a blip” that wouldn’t warrant a response from the central bank.

Bank of Canada governor Tiff Macklem was asked on Thursday how the latest data would affect the next rate decision, but he was tight-lipped about which way policymakers were leaning.

Read more here.

Home sales ‘surged’ in April

Canada’s housing market is showing signs of life this spring after the rapid rise in interest rates over the past year put it into hibernation.

The Canadian Real Estate Association (CREA) said this week that home sales “surged” 11.3 per cent in April from March.

Buyers are coming back in force amid some beliefs that interest rates have peaked and home prices have bottomed out, CREA’s senior economist Shaun Cathcart said.

Those buyers are currently contending for a limited supply of homes, Cathcart told Global News, but he said there are indications in the early days of May that more sellers are returning to the market as well, boosting the available stock.

He also said this phenomenon could be good news for prospective first-time buyers.

Find out more about the spring housing market here.

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– THE QUESTION –

“I have about six months of living expenses set aside in a savings account. It occurred to me that that money could be doing something else. Any value in investing your ’emergency savings’? Something lower risk, like dividend ETFs or something?”

— A Money123 reader 

“Six months of living expenses in a savings account seems like a lot. That said, everyone is different, so there is no right or wrong amount to keep as an emergency fund. It may depend on your income. A business owner with a volatile income may need a bigger cash cushion than a teacher with more stability.

If you invest your emergency fund, depending on the type of investment, you run the risk of it being down in value when an emergency arises. I would be more inclined to minimize an emergency fund and consider investing any excess for the long term. $10,000 in a chequing account at zero per cent could yield a $2,500 to $5,000 tax refund if contributed to an RRSP and could be earning a higher return over time.

I feel someone who is financially responsible could also consider a low-interest line of credit as part of their emergency fund. In other words, minimize cash in the bank, ensure access to a secured home equity line of credit or other low-interest option, and use excess cash to pay down debt or invest. That way, there is less dead money that could be put to better use. But if a line of credit is then frequently tapped for recurring emergencies, that may be a sign to look closer at budgeting and build a larger cash reserve.”

–  Jason Heath, managing director, Objective Financial Partners

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