Much is made in the media about whether Canadians are getting the short end of the stick when paying the fees advisors charge compared to those of robo-advisors or self-directing investing.
Yet, these comparisons only focus on investment management and avoid a major part of the value that advisors provide through holistic wealth planning. In fact, Russell Investments Canada Ltd.’s annual Value of an Advisor study released in June found the value a Canadian advisor who delivers comprehensive wealth management adds is 3.95 per cent. That’s much higher than the 1 or 2 per cent fee most advisors charge.
There are various ways advisors do much more than just manage investment portfolios, whether that’s through saving money on taxes, making sure clients have the necessary insurance in place to protect them in times of need, driving the creation of an estate plan, setting up a strategic philanthropic endeavour, or guiding clients through ups and downs in their lives and in the markets.
Here are 10 articles on wealth planning strategies that resonated with Globe Advisor readers in 2021:
The threat of a higher capital gains tax rate is resurfacing in conversations between advisors and their clients as Ottawa looks for ways to pay down a soaring deficit amid billions in spending on pandemic-relief measures. Jamie Golombek, managing director, tax and estate planning, at CIBC Private Wealth in Toronto, reminds investors that there was no capital gains tax until 1972 when it was introduced at the 50-per-cent rate. It was then increased to 66.67 per cent in 1988 and then to a high of 75 per cent in the 1990s. In 2000, it dropped twice, first to 66.67 per cent and then back to 50 per cent.
There’s nothing like a pandemic to drive home the potential financial impact of enduring a critical illness, yet awareness hasn’t turned into action for most Canadians. Advisors working to protect clients have seen slow uptake of critical illness insurance policies. Frank Valicek, co-president and financial advisor with the Upper Canada Capital Inc. team at Manulife Securities Inc. in Toronto, attributes that to critical illness insurance falling out of the budget as clients take steps to meet other higher-priority protection needs.
While more millennials have started to focus on estate planning due to the unsettling nature of the COVID-19 pandemic, those actual plans may look quite different from the wills of older generations. That’s because for millennials, digital assets are top, according to U.S. online estate planning firm Trust & Will’s recent study of 20,000 millennials between the ages of 25 and 40 who completed estate plans in 2020. In fact, all of the millennials surveyed named a digital executor to manage their digital assets such as online accounts and social media pages.
Advisors are preparing clients who are U.S. persons living in Canada, as well as Canadians who own U.S. assets, for proposed U.S. tax law changes that could impact these investors’ portfolios significantly. “What we’ve been telling our clients is to be prepared for an overall increase in taxation and additional tax complexity and innovation,” says Darren Coleman, senior vice-president, private client group, and portfolio manager at Coleman Wealth, a division of Raymond James Ltd. in Toronto.
With housing prices across Canada at an all-time high, advisors may be facing uncomfortable meetings with clients who are angry that their diligent saving hasn’t resulted in a large enough down payment. But some say these conversations can also be an opportunity to listen, empathize and run the numbers to help each individual make the right decision.
One of the unexpected upsides of the pandemic has been that many Canadians built up significant savings – to the tune of $220-billion, according to a recent BMO Economics report. As a result, some are now in a position to make substantial gifts to family members or charity and want to see the impact of those gifts while they’re still alive. However, some financial advisors say there are risks to giving while living that need to be considered.
Canadian families have become increasingly global as more people pursue careers and raise a family outside of the country. The pandemic-driven shift to remote work could also lead more Canadians to consider moving to different locales, adding complexity to estate plans for parents and their beneficiaries. Advisors need to stay on top of clients’ evolving family circumstances to ensure their estate plans take the potential tax implications of having an executor or beneficiary based in another country into consideration.
A remarkable 41 per cent of employees worldwide are considering leaving their employer this year, according to Microsoft Corp.’s Work Trend Index survey. The reasons for this rising trend are various – from some feeling more confident about the job market and considering switching positions or careers, while others may be fed up after more than a year of workplace uncertainty and looking at early retirement. For advisors, it’s likely that at least some of their clients will be joining what’s being dubbed “the Great Resignation.” That’s creating a pivotal role for advisors in ensuring financial plans stay on track when clients give their notice.
More charitably-minded Canadians are turning to donor-advised funds as a simplified, tax-efficient way to give, supported by advisors looking to help clients distribute their wealth to good causes. Data show the charitable-giving vehicles have gained significant traction in recent years. A recent report from Investor Economics says the value of donor-advised funds in Canada grew at a compound annual rate of 14.3 per cent between 2016 and 2018 from $4.4-billion to $5.7-billion. There was a 35-per-cent increase in the number of donor-advised funds set up at various foundations over the two-year period, according to the study, with a steady rise in donations to new and existing funds.
Everyone likes to talk about and plan for the future – especially when it comes to saving money for retirement. That’s not the case when it comes to death or its consequences, though. For advisors, bringing up the discussion of wills and estate planning with clients can be a gruelling task chock full of excuses for why they’re putting it off. “It’s so strange that people don’t want to talk about death. I think they don’t want to deal with all of the tough decisions that go with it, like naming guardians and trustees,” says Jim Greenwood, financial advisor with the BlueSky Financial Planning team at IPC Securities Corp. in Regina.
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