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Recessions and pressures on businesses leading up to them have led to widespread job losses in the past. Although Bank of Canada governor Tiff Macklem has gone on record saying he doesn’t think unemployment will reach the high levels of previous recessions, it makes sense for advisors to be prepared to guide clients who are let go in the coming months.
Michelle Connolly, senior vice-president, advanced wealth planning at Wellington-Altus Private Wealth Inc. in Toronto, Alim Dhanji, senior financial planner and senior insurance advisor at Assante Financial Management Ltd. in Vancouver, and Andrew Feindel, portfolio manager and investment advisor at Richardson Wealth Ltd. in Toronto share five tips on what advisors should do if clients lose their jobs.
1. Listen and empathize
“Before jumping in and talking about the financial aspect of their situation, I would first check in to see how they’re feeling emotionally and that they are doing okay,” Mr. Feindel stresses.
“[Clients] appreciate just having the opportunity to share their thoughts, feelings and reactions after going through such a life-changing event.”
No matter how long someone has been in the workforce, Ms. Connolly also thinks advisors need to get a sense of clients’ concerns before educating them on opportunities and potential paths forward.
With recent shakeups in the tech industry, she’s had several of these conversations over the past few months and has found it helps to remind clients that many people experience this life event, it doesn’t have the stigma it used to, and they’re not alone.
“I remind them of the positives – that they have a lot going for them,” Mr. Dhanji adds. “They have experience and likely an education, and the chance of being laid off for a long period of time is probably slim [as] the economy may be heading toward a recession right now, but the job market is still fairly strong.”
2. Cover the bills
Any client who has been working with Mr. Dhanji for some time already has an emergency fund available to bridge an income gap. He also encourages people who qualify to apply for Employment Insurance right away to generate supplemental income.
Then, he turns to cash management and tightening up the budget. It may be necessary to eliminate all discretionary spending (possibly including regular savings) for the time being, and clients with debt can consider the pros and cons of making interest-only payments.
“What you’re trying to do as much as possible is to stop any additional cash outflow until you can get back up on your feet and running again,” Mr. Dhanji says.
3. Assess the package
To make sure clients receive the compensation they’re entitled to, Mr. Feindel checks to see if there’s termination pay (required if there was no advance notice), vacation pay (typically 4 to 6 per cent of the salary), and severance pay (generally based on length of service).
He has a list of questions he asks about severance such as: Should we try to negotiate for more? Can the payment be deferred to the next year (an approach that recently saved a recent 20 per cent in taxes)? Can a portion of the severance be considered a retiring allowance eligible for a tax-free rollover to a registered retirement savings plan (RRSP)?
Mr. Feindel also explores the best use of severance. Depending on the client, this may mean taking advantage of RRSP and tax-free savings account contribution room, paying off debt, or adding to an emergency fund.
4. Check the benefits
Retirement and health benefits are other big topics to discuss with clients.
Defined-benefit pension plans are rarely commuted, but based on a review of the actuarial statement, it may make sense to do this with a defined-contribution pension plan, Ms. Connolly says. Look at other employment-related financial assets as well, including stock options and restricted stock units. Ms. Connolly has found that emotions (such as distrust of the employer) often factor into client decisions, alongside tax considerations.
When it comes to health, dental and life insurance benefits, it may be possible to extend coverage over a year or two – perhaps by opting for salary continuation rather than lump-sum severance. That can be critical for families, Ms. Connolly says.
Also, ask about other workplace perks. One of her clients was laid off while on vacation in Europe, with all his travel information stored on a work-provided phone. Suddenly, he couldn’t access flight and hotel bookings.
“It underscores our reliance on technology, [but] you really should have a personal phone and personal technology,” Ms. Connolly says.
5. Review the financial plan
Looking ahead, advisors can help clients build resiliency into their financial plans so they’re in a stronger position if job loss ever happens again.
Mr. Feindel points to an emergency fund in a high-interest savings account that will cover six months of expenses, a secured line of credit established while clients are working, and sufficient insurance coverage in case workplace benefits are not extendable or portable.
It’s important to learn from the experience and put checks and balances in place within the financial plan, Mr. Dhanji adds. Leaning into relationship-building and investing in career-related training can make it easier to find a new position following a future layoff.
After losing a job, clients often have different sightlines that may require adjustments to their financial plan, Ms. Connolly says.
Some see time away from work as a trial retirement and the experience may shorten or lengthen how much longer they want to stay in the workforce. Others may be more skittish about risk and seek more conservative portfolios.
“The financial plan is a living document and, in terms of going through this particular life event, if [the financial plan is] not affected, I’d be really surprised,” she emphasizes.
“This is where our value to clients really resonates. … It’s in helping them through these life events that we’ve planned for ... and they know we’re beside them to help them find their way.”
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