A few months ago, I found myself doing something I thought I would never do as a twentysomething in Toronto: I bought a home.
I was standing in a mall parking lot when my realtor called to tell me that the bid I’d made on a condo just one hour before had been accepted. I remember thinking, “What have I done?”
As my real estate agent started to explain next steps, I looked up and saw a department store logo outside the mall. Instead of asking the unanswerable (“Is this the right choice?”), I blurted out that I’d spent longer comparison-shopping shoes than I had making the biggest purchase decision of my life. Realistically, that wasn’t true, but it certainly felt like things were moving fast.
I started to panic.
I was surprised by my reaction because, as a financial journalist, I thought I was more prepared than the average homebuyer. I had been tracking my investment portfolio, the housing market and the economy obsessively, and I had written step-by-step articles about taxes for first-time homebuyers. I had even combed through financial literacy websites and tried mortgage calculators for fun. And I had a financial advisor.
So I thought I was above making behavioural investment mistakes. I was wrong.
Here’s everything my advisor did and didn’t warn me about when it came to buying a home for the first time.
Forgetting the basics
When I started looking for a condo, my agent explained that sellers typically require a 5% deposit within 24 hours of accepting an offer. So it’s best to have the money on hand before bidding.
To achieve this my advisor recommended withdrawing money from my registered accounts immediately, as the process would take a few days. I’m glad she did because, a few weeks after I bought my condo, a friend had to scramble when she couldn’t come up with her own condo deposit because her cash was in registered accounts – her advisor hadn’t warned her of the lag.
I found out even before I bought my condo that my analytical skills were slipping; I asked my advisor to take my deposit from a Canadian income fund that hadn’t fully recovered from the oil correction. She patiently explained why it’s unwise to sell investments at a loss — and I still cringe at myself in that moment.
The lesson for you? Be prepared to non-judgmentally re-explain the fundamentals of investing and saving to your clients.
Win the battle of the experts
I could have done an exhaustive search for the best lawyer, real estate agent and mortgage broker. Instead, I craved security and familiarity, and used my family’s referrals.
This was a missed opportunity for my advisor.
If she’d sent a shortlist of professionals, I would have used her recommendations. For an advisor the goal doesn’t have to be earning a referral fee (CRM2 doesn’t require advisors to disclose referral fees for non-registerable services, though as a client I would want to know that). Instead, the benefit is the established relationship with your client’s professionals throughout the buying process.
In the days after my offer was accepted, I was busy signing paperwork, completing mortgage forms, collecting documents and running to the bank for drafts. During that period I turned to my mortgage broker, not my advisor. It was a relief when the broker sent me a list of all the documents I needed to gather.
My advisor did make one referral: to her in-house mortgage specialist. I told my advisor and the specialist I was also working with a broker, hoping this would spur prompt service and a better rate, but that didn’t happen. Instead, it took more than a week, and multiple reminders, for my mortgage application to be processed.
Meanwhile, my broker was quick and responsive. He always had time to answer my questions. He was up front about being paid by commission. Though my advisor’s firm eventually offered me the same rate, I went with the broker because I felt he’d earned it.
I’ve paused my investment plan for a few months while I see how mortgage payments, condo fees and utility bills impact my budget. To help with this, a proactive advisor can run through a client’s costs and devise a budget with an updated savings rate. That budget should take into account the question I’m now grappling with: how do I balance saving for retirement with paying off my mortgage? The wrong approach would be to pressure a client to jump back into investing without helping establish new goals.
After this experience I’m not sure that when I return to investing, I’ll be doing it with an advisor. As my investments sit near zero and with a major financial goal behind me, it’s an easy time to end my relationship with my advisor.
A first-time homebuyer goes through a financial coming of age and, as it turned out, I went through most of mine without my advisor – if I were with a robo firm, I’d have gotten a similar level of service. But if she had called to check in and run through the different kinds of mortgages with me, I might feel differently.
The takeaway for you is to focus on ensuring the longevity of your client relationship by helping to navigate the stresses of homebuying. If you handle this time well, your client will not only have a new home, but also a lifelong partner for their financial plan.