This is Globe Advisor’s weekly newsletter for professional financial advisors, published every Friday. If someone has forwarded this newsletter to you via e-mail, or you’re reading this on the web, you can register for Globe Advisor, then sign up for this newsletter and others on our newsletter sign-up page. For more from Globe Advisor, visit our homepage.
For some retirees, leaving the workforce isn’t a choice. Some are forced into retirement due to a layoff, illness, or because they have to take care of a loved one – and returning to work isn’t an option.
Being “suddenly retired” brings financial and emotional challenges, says Laurel Marie Hickey, portfolio manager and wealth advisor with National Bank Financial Wealth Management in Calgary.
“Many people are nervous about retirement to begin with, so when it’s sudden, it brings that uncertainty to the forefront,” she says.
Globe Advisor spoke recently with Ms. Hickey about how advisors can help clients navigate an unexpected transition to their non-working years:
How should advisors start a conversation with a suddenly retired client?
The first thing we should do is listen. Let the clients tell their whole story because there are usually important nuggets that will help determine the next steps. Then, get right to the numbers. Clients in this situation want to know where they stand financially. If you don’t speak to the numbers early in the conversation, they’ll keep thinking about it.
What’s a top concern for clients in this situation?
Many are concerned about the ability to afford their lifestyle and pay off debt if they still have a mortgage or line of credit. They want to know where their cash flow will come from, if they need to cut back on expenses, and if they can live within a new budget. There’s discomfort with the unknown. Sometimes, depending on the person’s existing portfolio, they may not have to cut back. Sometimes, we have to talk about cutting back, and we will work with clients on how to do that.
What are some common strategies to help these clients with their cash flow?
It’s a perfect opportunity to do strategic tax planning. Clients don’t think about withdrawing from a registered retirement savings plan (RRSP) or registered retirement income fund until they’re in their late 60s or early 70s. However, if they have a low income on their tax return, early RRSP withdrawal may be beneficial in some cases. It helps to smooth out the taxable income over time.
We would also look at using tax-free savings accounts or non-registered accounts and determine what withdrawal strategy makes the most sense annually – because it may vary from year to year.
Do you have any other advice?
As advisors, we’re used to talking to clients about their net worth, but retirement can also bring up feelings of self-worth. Advisors should acknowledge with clients that retirement is a significant life transition. Beyond the numbers, we should also talk to them about how they’re feeling and the mental adjustment that comes with retirement. We need to do everything we can to help and reassure them.
– Brenda Bouw, Globe Advisor reporter
This interview has been edited and condensed.
Must-reads from Globe Advisor this week
How Canadians with certain mental illnesses qualify for the disability tax credit and other benefits
Some Canadians with disabilities don’t apply to receive the disability tax credit (DTC) because they believe they won’t be approved. But they could be leaving significant money on the table if they do, in fact, qualify. “Most people who inquire about the DTC have a more obvious disability, but many more people qualify,” says Chris Poole, certified financial planner with CWP Financial Services Inc. at Sun Life Financial Investment Services (Canada) Inc. in Toronto. “There’s a big gap in terms of education, and there’s no penalty to applying if you’re not successful.” Deanne Gage has more.
This advisor learned early on never to act on a friend’s unproven stock tips
In this new series, Behind the Advice, we ask advisors about their relationship with money from a young age, lessons learned over the years, and how their experiences influence the advice they give clients today. Paul Harris, partner at Harris Douglas Asset Management Inc. in Toronto, talks about the money lessons he learned when saving to buy his first bicycle and the personal investing mistake he made during one of his first jobs on Bay Street. As told to Brenda Bouw.
Why this $75-billion money manager is adding U.S. assets and selling Canadian banks
David Wolf is balancing his portfolios a little differently in today’s high interest-rate environment due in part to the uneven economic picture between Canada and the U.S. “Canada is going to have a much harder time with these higher rates than the U.S., given our higher household debt levels, and, ultimately, that’s going to be reflected in our economic policy, performance and the exchange rate,” says Mr. Wolf, a portfolio manager at Fidelity Investments Canada ULC in Toronto, who oversees about $75-billion of the firm’s $206-billion in assets under management across several funds. Brenda Bouw asks him what he’s been buying and selling.
Flows into fixed-income ETFs jump as investors hope interest rate hiking cycle nears end
With the Bank of Canada appearing to pause its steady interest rate-hike march at a benchmark of 5 per cent following 11 consecutive hikes since March 2022, BlackRock Inc.’s iShares Core Canadian Universe Bond Index ETF experienced the most inflows in its history in October – almost a whopping $1-billion. The exchange-traded fund’s (ETF) next highest month of inflows was $500-million in August 2023. In short, bonds are back in style. “That is quite compelling and showing us that flows are starting to build momentum and clients are becoming much more interested in taking advantage of these yield levels,” says Rachel Siu, director and head of Canadian fixed-income strategy for BlackRock Canada. Gillian Livingston provides more details.
Also see:
The complexity of modern financial planning
Five ways for advisors to accommodate clients with ADHD
How advisors are helping employers and their employees deal with financial stress
Is the cost of saving for financial independence and early retirement worth it?
U.S. economic data to show how consumers are faring in second half in this week’s Advisor Lookahead
What you and your clients need to know
At Emerge, fresh lawsuits are just the latest legal challenges for the company’s CEO
Emerge Canada Inc., its U.S.-based counterpart and the CEO of both companies, Lisa Langley, are facing multiple lawsuits tied to their failed business. Emerge and Ms. Langley face six suits from employees, governments, vendors and others in Ontario and New York State who say they haven’t been paid what they’re owed. The currently outstanding claims total more than $900,000. These have not been tested in court. And a Toronto law firm has filed a proposed class-action lawsuit on behalf of investors who held Emerge’s Canadian exchange-traded funds, which regulators have ordered liquidated. However, the legal trail for Ms. Langley goes back even longer. Clare O’Hara, Stephanie Chambers and David Milstead report.
Joint ownership of homes and other assets can lead to unintended problems
Why is joint ownership of a home – and of other assets more generally – usually a bad idea? When putting a person other than your spouse on title as joint owner of an asset, you’ll generally be deemed to have sold that portion of the asset at fair market value, which could give rise to a tax bill. You could avoid this by creating a bare trust arrangement in which the other person on title is considered to hold their portion of the asset for you, in trust. This gets complicated, however, in part due to new filing requirements for trusts. Tim Cestnick provides more details.
Report urges banking regulator to leave capital buffer unchanged for banks due to tough economic conditions
A new advisory group is calling on Canada’s banking regulator to refrain from raising the capital cushion that the biggest banks must hold, as a deteriorating economy weighs on profits. In the spring, the Office of the Superintendent of Financial Institutions increased the domestic stability buffer (DSB) – a capital cushion against a potential economic downturn – for the second time in a year, and is scheduled to announce its next decision in December. Stefanie Marotta has more.
Average rent in Canada hit $2,178 in October, the sixth consecutive month of all-time highs: report
The average asking price for a rental unit in Canada reached $2,178 last month, a 9.9 per cent year-over-year increase and continuing a trend that has seen asking rents hit new highs for six months in a row. That’s according to the latest rental price report released by Rentals.ca and Urbanation, analyzing monthly listings from the former’s network. The findings show while October’s annual rate of rent growth in Canada was down from the 11.1 per cent jump in September, it still marked the second fastest annual increase of the past seven months. The Canadian Press reports.
– Globe Advisor Staff