The COVID-19 crisis has demonstrated just how important it is for Canadians to receive comprehensive advice from their financial advisors that focuses on all key aspects of their finances.
Although investing is still a key component of that advice, Canadians want their advisors to focus on helping them plan for a variety of other areas, including their taxes, insurance needs, estate planning, managing their debt and preparing for the worst.
As such, advisors who embrace holistic financial planning are demonstrating their value to clients.
Here are 10 articles that attracted the most attention from readers that focus on key areas of advice not related to investments:
Canada’s federal government is considering a wealth tax to reduce inequality and to pay for the relief measures that were implemented in response to the COVID-19 pandemic. Those measures have led to a record deficit and a ballooning national debt. If the new tax were to come to pass, it would present significant planning challenges for financial professionals.
Advisors are warning their clients – especially those who have higher levels of net worth – to start planning for higher taxes as all levels of government seek to repay their already historic, and still rising, pandemic-related debt. Some are already bringing up the expectation for a higher tax burden during client meetings and beginning to tweak their clients’ financial plans to prepare for that reality.
The coming tax season is expected to be even more complicated than usual for Canadians who took advantage of the federal government’s COVID-19 relief measures, throwing off projected payments based on income and deductions from years past. Advisors recommend Canadians pull documents together to prove eligibility for programs such as the Canada Emergency Response Benefit and set aside cash that might be needed to cover taxable benefits from them or the forgivable portions of business loan programs.
For U.S. persons living in Canada, navigating the tax-filing requirements around investments can be cumbersome and challenging. Advisors who serve these individuals need to ensure they have a solid understanding of the implications that their recommendations could have on these clients’ tax burden. That’s especially important as U.S. citizens, income-tax residents or green-card holders living in Canada have the “worst of both worlds” when it comes to filing their taxes, says Matt Altro, certified financial planner, president and chief executive officer at MCA Cross Border Advisors Inc., in Montreal.
Workers and business owners who have lost income due to the coronavirus shutdowns as well as retirees who are either relying on the markets to fund their lifestyle or need cash to support their struggling adult children may be facing a cash crunch due to the economic fallout from COVID-19. In turn, many advisors are working with clients on strategies such as tapping into savings to taking out loans. Withdrawing money from investment portfolios at this time, given the market volatility, is often considered the last resort.
The rule of thumb to set aside three to six months’ worth of living expenses in case of an emergency appears to be spot on. That’s because millions of Canadians face a cash crunch due to the loss of income from widespread business closures brought on by the COVID-19 pandemic. For advisors, it’s an opportunity to remind clients why having some cash set aside is a good idea.
Being asked to serve as executor of someone’s estate is a duty most people accept without question. A copy of the will is shared, possibly read, and tucked away until that fateful day comes. When it does, the task is often time-consuming, complicated and onerous. That’s why many people turn to financial planners for help. Having financial planners assist in the process can eliminate some of the steep learning curves and provide executors with some protection around their decision-making – particularly as executors are prone to make common mistakes, such as rushing and submitting incomplete information, which can lead to costly delays.
The massive push to get Canadians to work from home has put an already growing trend into hyper-drive. One small consolation for workers who are socially isolated – and an added benefit for those who have enjoyed their new reality – is the home-office related tax breaks. The extent of the workplace migration to home offices is unprecedented, and tax professionals are working with the Canada Revenue Agency for clarity.
As Canadians’ debt levels rise, so too do their worries over how to repay these obligations while achieving other financial goals. For advisors, addressing the liabilities side of a client’s balance sheet is crucial – and that often requires a deep dive into the reasons behind the debt and a custom strategy to tackle it. Kim MacDonald, investment advisor with MacDonald Advisory at Raymond James Ltd. in Edmonton, says the debt conversation has been coming up more often with clients because of factors such as divorce and greater borrowing as a result of low interest rates.
As millions of Canadians’ employment situations have been affected by COVID-19, many are turning to their advisors for help on how to manage both the short- and long-term financial implications. Barbara Knoblach, financial planner and money coach at Money Coaches Canada in Edmonton, says the number of clients affected by layoffs is larger than anything she has seen before. She’s also heard from clients about reduced hours or income – and even from those expecting an imminent layoff. “It’s important for clients to have someone [like us] to talk to during these challenging times.”