Your Advisor Needs to Know About More Than Just Financial Things

For financial advisors, being able to adapt to the unique needs of clients is integral to deliver sound, relevant advice. Increasingly savvy clients with easy access to technology – online information, advice and investment tools – continue to challenge the financial industry to prove the value of professional, face-to-face advice.

At the same time, changing social and cultural norms are redefining certain needs advisors have historically associated with specific life stages and genders.

Each successive generation of Canadians is forcing us to reconsider our notions of things like wealth, marriage, homeownership and retirement.

Depending on your situation, finding an advisor who understands and can adapt to the evolving needs of different generations can be the key to realizing your financial goals.

Here are two groups of Canadians who are redefining societal norms and in doing so, challenging wealth management professionals to stay relevant.

Millennials

We have all read headlines like: “Millennials are killing the (blank) industry.” From diamonds to department stores, millennials have earned a reputation for rejecting industries and practices traditionally viewed as culturally important, even necessary.

Younger generations are approaching homeownership, marriage and divorce – key events when it comes to wealth management – differently than previous generations. When it comes to homeownership, many millennials are waiting longer to take the plunge: 30.6% of young adults aged 20-34 in 2001 lived with at least one parent whereas 34.7% did as of 2016.[1]

Younger adults are also putting off getting married and having children. This means when it comes to divorce, “Millennials tend to have fewer assets to divide, and they’re more likely to have similar incomes,” making spousal support a nonissue. Our society – advisors included – tends to view divorce as an event which should take a substantial financial toll on one or both partners.

When you combine inconsistent incomes due to freelance or “gig” work, high rates of student debt, and the cost of raising children, the reality is many married millennials can’t “afford to buy [their partner] out of the matrimonial home.”[2] Millennials’ finances are requiring them to be more frugal, even democratic, than previous generations and advisors should be prepared to accommodate their unconventional situations.

As the largest generation in Canada,[3] millennials have a huge impact on our economy and, despite their purported financial irresponsibility, spend a lot of time thinking about and managing their money. A 2019 report from BMO found, “millennials [are] outpacing [their] baby boomer counterparts” when it comes to retirement savings and “continue to hold higher amounts [in RRSPs] over time, accounting for the highest percentage increase with 87 percent since 2016 ($28,821 vs $15, 377 in 2016).”[4] Millennials may not be buying diamonds, but they are being mindful of their finances.

Women

Today, women account for approximately half of the labour force (up from less than a quarter in the 1950s[5]) and “directly control no less than $2.2 trillion of personal financial assets.” By 2028, that number is expected to rise to $3.8 trillion.[6]The archetypal investor – historically a man – is quickly changing to reflect the increased number of women, both married and unmarried, who are directly participating in the Canadian economy and making more household financial decisions.

In fact, a 2019 CIBC study found, “three-quarters (73 per cent) say they’re actively involved in their own long-term financial planning – a number that grows higher the older they get, rising to 82 per cent among women aged 55+.”[7]

Most Canadians need better-defined retirement plans (about 90% do not currently have an adequate one[8]) however, advisors should be prepared to provide advice which accurately reflects women’s needs, especially given their burgeoning control of financial assets.

Employed married women “in the core-working age demographic… now account for a record-high 47% of family income, almost double the share seen in the 1970s.”[9] Women also live, on average, four years longer than men[10] meaning many will likely inherit assets from their spouses later in life. 

Yet, despite women having more (control over) money, they are also more likely than men to forgo incomes and therefore pensions for the sake of their families. “Almost 1 in 3 (30 per cent) women say they’ve reduced or stopped saving as a direct consequence of childcare or eldercare responsibilities.”[11] A good financial plan will account for and work to minimize the impact these kinds of events have on women’s retirement savings.

Take Away

When it comes to wealth management, finding a professional who understands the unique situation and need of each individual client makes all the difference between stellar and just average financial advice. Millennials and women are two demographics frequently on the receiving end of stereotypes – most of which have the potential to impede their ability to achieve their financial goals if their advisor subscribes to them.

Advisors who approach common milestones like homeownership, marriage and divorce from an outdated standpoint and disregard the way social norms are changing, will likely have a harder time relating and remaining relevant to those clients whose circumstances challenge them to go above and beyond “business as usual.” Make sure your advisor is a fit for you.

Connect with us to learn how an advisor and a customized financial plan can benefit you.


[1] https://www12.statcan.gc.ca/census-recensement/2016/as-sa/98-200-x/2016008/98-200-x2016008-eng.cfm

[2] https://www.advisor.ca/my-practice/conversations/offering-money-advice-when-millennials-divorce/

[3] https://www150.statcan.gc.ca/n1/pub/11-627-m/11-627-m2019029-eng.htm

[4] https://newsroom.bmo.com/2019-01-29-BMOs-Annual-RRSP-Study-National-Attitude-Shifts-On-Retirement-As-Average-Amount-Held-Increases-by-21-Per-Cent-Since-2016

[5] https://www150.statcan.gc.ca/n1/pub/89-503-x/2015001/article/14694-eng.htm

[6] https://www.advisor.ca/my-practice/conversations/womens-growing-share-of-assets-to-change-wealth-management/

[7] http://cibc.mediaroom.com/2019-02-21-7-in-10-women-make-significant-financial-sacrifices-for-the-sake-of-others-new-CIBC-study-finds

[8] http://cibc.mediaroom.com/2018-02-08-Am-I-saving-enough-to-retire-Vast-majority-of-Canadians-just-dont-know-CIBC-poll

[9] https://www.advisor.ca/my-practice/conversations/womens-growing-share-of-assets-to-change-wealth-management/

[10] https://www.cibc.com/en/personal-banking/advice-centre/women-and-wealth.html

[11] http://cibc.mediaroom.com/2019-02-21-7-in-10-women-make-significant-financial-sacrifices-for-the-sake-of-others-new-CIBC-study-finds

Financial Planning is for Everyone

With millennials entering the global workforce and baby-boomers on the cusp of retiring from it, the world is experiencing a substantial transition; one accompanied by rapidly changing technology and social norms.

It can become easy to focus on perceived generational differences instead of similarities with many generations of people interacting and working alongside each other. This is especially true with finances and financial planning.

Despite what media headlines might say, financial literacy – or the lack thereof – is not exclusive to one group of people. General unease with the intricacies of financial planning coupled with the highly complex emotions surrounding money means many Canadians of all ages are reluctant and/or unsure how to seek professional financial advice.

According to a September – October 2018 survey done by the Financial Planning Standards Council, “one-in-three Canadians fail the [financial] stress test, meaning they somewhat or strongly doubt their bank account can withstand a financial emergency… [and] nearly three-in-ten are not confident they will achieve their financial life goals.”

The same survey found “two-thirds of Canadians have not engaged the services of a professional financial planner.”[1] Many Canadians clearly share a reluctance to seek professional financial advice and this reluctance is having a serious impact on their sense of financial stability and well-being.

The survey listed the following reasons for why Canadians avoid seeking financial advice:

  • I don’t have a big enough portfolio
  • I do not know who to trust
  • It is too confusing and overwhelming for me to consider at this time
  • I’m embarrassed by my financial situation
  • I do not know where to find one

Although those who reported having never sought professional financial planning help were predominantly Gen X and Gen Y (18 – 44), a lack of financial know-how is not exclusive to younger generations.

50% of the respondents who had not sought financial advice stated not having a big enough portfolio as their reason why. This misconception was significantly more of a concern for individuals 45 years and older.

Remarkably, this tells us that from millennials to baby boomers, a major reason why Canadians are avoiding seeking financial advice is because of the misconception that they don’t have enough money to warrant it.

We only need to look at the reasons listed above to know guilt, shame and mistrust are emotions with a profound impact on our ability to make healthy financial decisions. Moreover, the way these emotions impact us can differ depending on social demographics.

For example, the survey found although significantly more women than men listed feeling too confused and overwhelmed to consider seeking financial advice, significantly more women than men also felt confident in their ability to achieve their financial goals and withstand a financial emergency. Likewise, significantly more people listed being too embarrassed by their financial situation to seek help if they made less than $40,000 annually.

The take away is: regardless of age, gender or income, many Canadians are stressed about their finances to the extent that it impacts their ability to secure their financial well-being. A good financial advisor will be understanding of the unique challenges faced by different generations and will craft a personalized plan based on his or her client’s lifestyle, timeline and goals.

If a fear of judgement is preventing you from seeking financial advice, you are not alone. Advisors understand the emotions experienced by investors and should take care to meet each person where they are today.

Connect with us to learn how you can start working towards securing your financial well-being.


[1] http://fpsc.ca/docs/default-source/FPSC/news-publications/fpsc-cross-country-checkup.pdf

5 Ways to be Better Prepared for Tax Season Next Year

The more organized you are, the less stress you will feel. Start thinking about how you can make next year’s tax season easier with these tips to keep your finances in order.

1.     Review Tax Filings from Previous Years

For most people, the changes from one tax year to the next are relatively slight. Previous tax returns are great reminders of areas that can easily be overlooked, such as interest or dividends, capital loss carry-forward balances, and infrequently used deductions. If there were any problem areas last year that were extra complicated, try to brainstorm how you can simplify the process and better prepare yourself for this next tax season. This could mean being better organized this year, filing earlier in the year, or even deciding to get professional tax help instead of doing taxes yourself.

2. Keep All Your Tax Information Together

Have you ever gone through a drawer and found a receipt from several years ago but cannot remember if you deducted it or not? Keeping your returns and documents together year to year will help you remember what items you have deducted, what you need to track and what you don’t. Start a new folder or filing system now for 2019 and keep everything in one place. The most important thing is to create a system that works for you. Tracking documents can be the most stressful part of tax season. Some items most commonly tracked are:  charitable donations, medical expenses and business expenses.

3. Save and Track Business Expenses

In general, if you are running a side business, small business or start-up, and are trying to claim certain items as business expenses during the year, you are going to have to justify these expenses. Save or track, any items you think you might want to claim as a business expense. You may not end up claiming them, but it is easier to discard receipts and documentation than wish you had them.

Tax software can be your friend. If you have software like QuickBooks or Zero you can put a system in place to track expenses, all those small missed deductions can add up. If your business can justify hiring a bookkeeper or accountant, consider outsourcing the burden of taxes and the stress of month-to-month tracking so you can focus on running your business. 

4.  Go Electronic

Many of your monthly bills or receipts are now e-statements or electronic PDFs. Start an electronic folder to track bills or monthly statements for credit cards, bank accounts, charitable donations and expenses. Many companies provide an option to have the receipt sent to you electronically after a purchase. If that option is not available, take a photo of the receipt with your phone and save it your electronic folder. Be sure to back up your files in the case of a crash or accidental deletion and to add extra protection password protect your folder or individual files.

5.     Prepare Yourself for Any Taxes You May Owe or Plan for Your Refund

Not everyone will get a tax refund. Many will actually owe money in taxes after filing. If you will likely owe on your taxes, take steps and budget to ensure you can pay the amount owed. You don’t want to be caught off guard when filing and be unprepared to pay the taxes owed. Depending on your finances, what you do with your refund could change each year. Is there a debt you need to pay off? Is there a vacation you want to use your refund for? Do you want to save your refund money for an emergency? Do you want to deposit to your RRSP or TFSA? Take a look at your finances or consult with your financial advisor when determining what your refund should go towards.

Feel free to connect with us to discuss your tax planning needs.

Budget Update March 2019

On Tuesday, March 19, 2019, Finance Minister Bill Morneau presented the Government of Canada’s 2019 budget. Here are some highlights of these proposals for individuals. Please note, these are not yet law.

Highlights for Individuals

Employee Stock Options: The current tax rules provide preferential personal tax treatment to holders of employee stock options in the form of a stock option deduction which, if available, can effectively tax the stock option benefit at a personal tax rate similar to a capital gain.

Budget 2019 proposes to limit the tax-preferred treatment of employee stock options to annual grants of $200,000, based on the fair market value of the underlying shares at the time the options are granted. This limit will only apply to stock options issued to employees of large, long-established, mature firms, and is not intended to apply start-ups and rapidly growing Canadian businesses.

It should be noted draft legislation, including definitions of these terms, has yet to be released. Stock option benefits realized on options in excess of this limit would not be eligible for the stock option deduction and will be fully taxable at the employee’s personal tax rate.

Annuities for Registered Plans:  To provide greater flexibility for retirement planning, the 2019 budget is proposing to permit two new types of annuities for certain registered plans: Advanced Life Deferred Annuities (ALDA) and Variable Payment Life Annuities (VPLA).

  • Advanced Life Deferred Annuities will be permitted under a Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), Deferred Profit-Sharing Plan (DPSP), Pooled Registered Pension Plan (PRPP) and defined contribution Registered Pension Plan (RPP); and
  • Variable Payment Life Annuities will be permitted under a PRPP and defined contribution RPP.

With the creation of an Advanced Life Deferred Annuity (ALDA) under an RRSP, RRIF, DPSP, PRPP or defined contribution registered pension plan, life annuity payments under the ALDA can be deferred until the end of the year in which the annuitant turns 85, which is an extension from the existing age 71 requirement.

The measures will apply to the 2020 and subsequent taxation years.

Home Buyers Plan: The 2019 proposed budget proposes measures that might help first time home buyers an ability to better manage buying a home and ongoing costs. The budget proposes to increase the withdrawal limit from $25,000 to $35,000 for 2019 and subsequent years. As a result, a couple will potentially be able to withdraw $70,000 from their RRSPs to purchase or build their first home. The changes also propose other measures to protect home ownership after the breakdown of a marriage or common-law partnership, couples who separate or divorce no longer have to be a “first-time home buyer” to qualify.

First Time Home Buyer Incentive: The proposed budget recommends an incentive for first-time home buyers an option with The Canada Mortgage and Housing Corporation (CMHC) to help finance a portion of their home purchase through a shared equity mortgage with CMHC, with maximum limits of 10% for a newly constructed home or 5% for an existing home for household annual income of less than $120,000. This may reduce the mortgage and borrowing costs for first time buyers. Additional details on any required repayments and the plan are still to be communicated.

Individual Pension Plans: Individual pension plans (“IPPs”) are registered plans which provide retirement benefits to owner-managers in respect of their employment. If an individual terminates membership in a defined benefit registered pension plan, there’s a tax-deferred rollover available. The pension’s commuted value is transferable to another employer-sponsored defined benefit plan or up to 50 per cent of the commuted value can be transferred to an RRSP or similar registered plan.

Planning is being undertaken that seeks to circumvent these prescribed transfer limits. This planning is affected by establishing an IPP sponsored by a newly incorporated private corporation controlled by an individual who has terminated employment with their former employer. The individual then transfers the commuted value of their pension entitlement from the former employer’s defined benefit plan to the new IPP. This planning seeks to obtain a 100-per-cent transfer of assets to the new IPP instead of the restricted transfer of assets to the individual’s registered retirement savings plan.

To prevent this type of planning, the budget proposes to prevent tax-deferred transfers of assets from a former employer’s defined benefit plan to an IPP. The proposal would prevent an IPP from providing retirement benefits in respect of past years of employment that were pensionable service under a defined benefit plan of another employer. Any assets transferred from a former employer’s defined benefit plan to an IPP that relate to benefits provided in respect of prohibited service will be considered to be a non-qualifying transfer that is required to be included in the income of the member for income tax purposes.

These measures apply to pensionable service credited under an IPP on or after March 2019.

Canada Training Credit (CTC):  One of the main reasons, according to the OECD Survey of Adult skills, why people don’t upgrade or learn new skills is that the expense of getting additional training or education is due to the cost. The budget proposes a new refundable tax credit intended to cover up to half of eligible tuition and fees associated with postsecondary or occupational-skills training. Eligible working adults between the ages of 25 and 65 will accumulate $250 each year in a notional account, which can be claimed in the year eligible training expenses are incurred. The CTC accumulates automatically each year up to a lifetime limit of $5000, and is designed to offset training costs at colleges, universities and other eligible institutions. In order to be eligible for the CTC in a year an individual must meet certain criteria.

Canada Student Loans – Lower Interest Rate: The budget proposes a significant reduction in the interest rate charged on Canada Student Loans and Canada Apprentice Loans. Starting in 2019-2020, the fixed rate will be reduced from prime plus 5% to prime plus 2% and the popular variable interest rate will drop from prime plus 2.5% to only prime.

Currently there is a six-month grace period after graduation, where the new graduate does not have to make any payments, but interest still accrues. The budget proposes to eliminate interest charges on student debt during this six-month grace period.

Tax Credit for Digital Subscriptions:  The Budget proposes a 15% non-refundable tax credit for eligible digital news subscriptions up to an annual maximum of $500 in costs for an annual maximum credit if $75. This includes combined digital and newsprint subscriptions for amounts paid after 2019 and before 2025.

Medical Expense Tax Credit: The budget proposes to expand the range of cannabis products eligible for the medical expense tax credit, applicable for expenses incurred on or after October 17, 2018.

Guaranteed Income Supplement: The budget provides enhancements to the Guaranteed Income Supplement (GIS), including making self-employment income eligible for the earnings exemption; and increasing the exemption of annual employment or self-employment income for GIS or allowance recipients and their spouse by:

  • Increasing the full exemption from $3,500 to $5,000 per year for both the recipient and their spouse; and
  • Introducing a new exemption of 50% of an additional $10,000, beyond the above-mentioned $5,000 exemption for both the recipient and spouse.

Registered Disability Savings Plans (RDSPs): A Registered Disability Savings Plan (RDSP) is intended to assist with the long-term savings and financial security of individuals eligible for the disability tax credit (DTC). Savings in these plans are supplemented with Canada Disability Savings Grants and Canada Disability Savings Bonds.

Currently, once an individual beneficiary of an RDSP is no longer eligible for the DTC, they cannot make additional contributions to the plan, and no government grants or bonds will be paid into the RDSP. In addition, the plan must be closed by the end of the year following the first full year that the individual is no longer eligible for the DTC, unless a medical practitioner certifies that it’s likely the beneficiary will once again qualify for the DTC.

Closure of the plan will result in repayment of government grants and bonds paid into the plan within the preceding 10-year period, the “assistance holdback”. The budget is proposing to remove the two-year time limit on the period that an RDSP can remain open after the beneficiary is no longer eligible for the DTC and eliminates the requirement for medical certification.

As a transitional measure, financial institutions will not be required to close an RDSP on or after Budget Day and before 2021 simply because the beneficiary ceased to be DTC-eligible.

There are detailed rules and criteria proposed in the 2019 Budget for the above items and all other proposed changes that can be accessed at www.budget.gc.ca.

Feel free to connect with us for clarity or to understand how some of the proposed changes may impact you.

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What Makes a Farmer?

Where the famed work/life balance is an aspiration of many business owners, it can be virtually unattainable – and even undesirable – for farmers. “Farming life throughout the world is characterized by the almost inseparable, intimate integration of home, work, memories and family.” [1] More than just a job, farming is the locus of many families; a foundation that informs identity and gives purpose. 

As with anything business related, the financial side of farm succession often eclipses the equally valuable, personal side of the process. If you were to ask Revenue Canada Agency, a farmer is “the person who is assuming all of the risk in a farming operation.”[2] While useful for tax purposes and estate planning, this definition grossly understates what it means to be a farmer.

Agriculture and farming contribute an impressive amount to the Canadian economy – roughly 6-7% or $111.9 billion of gross domestic product (GDP) annually.[3] The economic importance of farming, coupled with the “greying” of farmers as a demographic (globally, not just in Canada), means intergenerational farm succession is increasingly lauded as the key to future agricultural viability.

Much of a farmer’s assets are in the form of physical capital – land, animals, and machinery – which tend to have substantial sentimental value.[4] Some farmers may shy away from transition planning given how emotionally and personally invested they are in their farming identities.

How does one begin to answer questions about what life after farming might look like when it is all life has been? For many, answers to these difficult questions come only after seeking outside help.

Financial advisors who understand farm succession is equally an emotional and financial process can help farmers envision and plan for a life after farming that invokes feelings of comfort, even excitement, and ensure the continued success of the family farm.

If you have questions about your farm succession plan or if you need help making yours, connect with us.

Sources

1, 4 – Whitehead, I., Lobley, M., and Baker, J., 2012. “From generation to generation: drawing the threads together”. Pp. 213-240 in Farm Succession, inheritance and retirement: Challenges for agricultural futures. International Farming Systems Association (IFSA), 2012, pp. 2-16.

2 – Canada, Growing Opportunities, et al. “A Legal Guide to Farm Estate Planning in Manitoba.” Manitoba Agriculture, 202, pp. 1-64.

3 – “An Overview of the Canadian Agriculture and Agri-Food System 2017.” Statistical Overview of the Canadian Fruit Industry 2017 – Agriculture and Agri-Food Canada (AAFC), 10 Nov. 2017, www.agr.gc.ca/eng/about-us/publications/economic-publications/an-overview-of-the-canadian-agriculture-and-agri-food-system-2017/?id=1510326669269.


[1] IFSA pp. 4

[2] Legal Guide, pp. 4

[3] “Overview of Canadian Agriculture”

4 IFSA pp. 4

Debt and Retirement

A great deal of time is spent considering and planning for income during retirement. However, there are other factors that go into a successful retirement plan. Debt management is one of those factors.

The closer we get to retirement the more effort should be focused on reducing or ideally eliminating debt, especially consumer debt. More and more Canadian seniors are beginning their retirement years still in debt – either mortgage or consumer (credit card, etc.)

According to a 2017 Sun Life Financial survey, one in five retirees are making a mortgage payment, one in four are making a car payment and about two out of three are have unpaid credit cards (consumer debt). While a home is an investment that will likely grow in value, the consumer debt and vehicle payments are for items that depreciate in value and typically have much higher interest rates.

As much as you spend time defining and building a financial savings plan, it is also important to determine a debt payment plan so you can transition into your life after work with only necessary or minimal debt. Afterall, your retirement income plan was likely not designed to support debt.

When we are in the working phase of our life, usually a substantial part of our monthly budget goes to paying off debt – mortgage, car loans, credit cards, lines of credit, etc. Debt is one of those things that is very easy to find ourselves in and can take a long time to get out from under.

In the years leading up to retirement, it is recommended we avoid adding consumer debt whenever possible. Pretty much everything outside your mortgage is considered consumer debt. If you borrowed money to consume a product that isn’t appreciating in value, pay it off as soon as you are able and avoid carrying it into retirement.

Like all financial planning, debt repayment should take all areas of your current financial situation and future goals into account. As mentioned, paying off debt is important but so is saving for retirement and planning your future income.

To build a debt repayment plan, first you need to gather all the information for your current debt. This includes interest rates you are being charged and all current outstanding balances.

There are two methods recommended for paying off consumer debt:

The first one is called the snowball method. This method has you pay the minimum on all but your smallest debt. Add whatever extra money you can afford onto the smallest debt until it is paid off. Then add the amount you were paying on that debt to your next smallest until they are all paid off. As you continue to pay off more and more debt, the amount you are paying off begins to build like a snowball rolling down a hill.

The other method is similar but is based on the size of the interest rate rather than the size of the balance. Once again you pay the minimum on all, except this time you pay more on the one with the highest interest rate. You begin by paying off the debt with the highest interest rate and snowball the payments onto the next highest interest rate until they are all paid off.

This second method makes the most sense mathematically since you are saving more interest payments by doing it this way. However, the psychology at play with seeing results quicker can make the first option better for some. Being able to eliminate your smallest debt quickly allows you to see results early and helps motivate you to continue paying off debt at an accelerated pace.

Either option will get the job done. Choose the right one for you. The one that will help keep you motivated. Most importantly, stop using your credit cards and line of credit if you are not able to pay off balances on a monthly basis. After all, if you find yourself in a hole, the first thing you should do is stop digging. Some debt is better than others. To find out if you have the best debt re-payment and retirement income plan in place, feel free to connect with us.

Will I have enough?

‘Plan for retirement.’ This phrase is something many of us have heard since the time we landed our first full-time job. But even now, as it was back then, it is a pretty vague directive.

When we are younger it translates to putting money away, likely into a registered account. And for anyone under 25 that’s a great first step. Sock away money and let compound interest work for you. Perfect. Done and done.

However, as you get older this approach to retirement planning should evolve and become more formal, with defined goals and a clear plan. A plan that can grow and change as we do, adapting to our lives and goals. This is when the question ‘will I have enough’ begins to become part of the discussion.

If we peel everything away, each of us faces the fear of NOT having enough saved by the time we retire to live out our retirement years in relative financial comfort and provide enough income to meet our lifestyle goals. For some, this fear can stop us from working with an advisor to build a plan. Check out our blog ‘There is No Time Like Now’ to learn more on this topic.

The easiest way to face any fear you have about the retirement nest egg you are building is to learn the facts. Work with a financial advisor to build a retirement plan based on both your current reality and your future goals.

One of the first considerations is the type of retirement you want. Do you hope to travel? Will you move into a different home? Do you or will you have a vacation property? How many vehicles will you have? All choices have an impact on your income needs during retirement.

Any company-based pension plans or savings plans and their income during retirement need to be considered, in addition to RRSPs, non-registered and TFSA savings you are putting aside for retirement. Company-based pension plans are less common today than in the past, but if you have one, the income they will generate during your retirement need to be factored in to your retirement income planning.

In addition, any government income you will be eligible for during your retirement need to be taken into account for retirement income planning. Old Age Security (OAS) and Canadian Pension Plan (CPP) are two common government benefits many of us look forward to receiving. There are some options in terms of when you can begin receiving these benefits. Your specific situation should be reviewed to know what is in your best interest. There are strategies available to ensure you maximize your income options and minimize annual taxes.

For many of us, the concept of retirement planning feels like a distant concern; one that ‘future me’ will be better equipped to deal with. In fact, the earlier you can start, the better. There’s a Chinese proverb that says, “The best time to plant a tree was 20 years ago, the next best time is right now”.

Find a financial advisor you trust and connect with them to help you build your retirement income plan.

A study of Canadians done by the Investment Fund Institute of Canada found households who worked with an advisor had as much as 2.73 times more assets after 15 years compared to identical non-advised households.

You will benefit in many ways from having a financial planner — an expert in your corner keeping your best interests as their priority. They will work with you on a customized plan, help you stay on track and modify as needed. To review your personal financial plan and projection for your retirement income, please feel free to connect with us.

A Focus on Customers can Drive Value and Grow Your Business

Whether you are planning on selling or transitioning your business or are simply evaluating how you can grow or expand your business now, a focus on customers will help your business determine how to drive value.

There are many value drivers that can be considered and evaluated before you think about selling or transitioning. A potential buyer will analyze all aspects of your business: financial, sales, leadership, marketing, operations, technology and customers among other factors when determining transferable value.

How your business is engaged in marketing, branding and building customer relationships are important value drivers that can increase the attractiveness to a potential buyer.

Understanding that your business value is dependent on customers, their willingness to pay for your product or service and keep paying, is the first step. You may have already built great customer loyalty and brand awareness, but you may not have it documented or measured it in a valuable way.

Working with an exit planner or strategic value builder in advance of a sale (three to five years ideally) will provide a process to evaluate your existing marketing plan and put actions in place to build out the plan and increase your value proposition.

A well-developed, written marketing plan can help you build on what you have and implement strategies to maximize growth opportunities and increase sales. Boosting sales from existing customers, bringing in new customers and standing out with a strong marketing presence will build a stronger more attractive business.

Focus on your customer, find out what they value in your product or service and document it. Customer relationship management (CRM) tools and processes can help capture and analyze client data. Implementing techniques like customer surveys, client follow-up processes and customer reviews provide quantitative and qualitative data on what you do well and what can be improved.

Also, an in-depth view of your client segments, geographical segments, buying trends and client behaviour will help determine where there are opportunities for growth or possible risks. For example, there may be a risk if your customer base is highly reliant on a few customers or if they are all located in a single market. Another potential risk to consider is your sales process and who holds the key relationships with key clients.  Is there a process to train and transition the client relationships on an exit of an owner or loss of a key employee? A potential opportunity may be that most of your referrals come for a specific client segment that can be further developed.

Take time to research your competition. When it comes to products, services, marketing, pricing and distribution, ask yourself:  

  • What do you do better?
  • What do they do better?
  • What can you improve upon? 
  • What do you want to be known for?
  • What makes you stand out?

Understanding your market and developing your ideal client profile with a clearly defined value proposition will provide the foundation for your marketing strategies. Sales and marketing strategies can be developed to ensure you allocate your efforts in the right places.

When you create more value in your business than your competition, you have a more sustainable future.

If you have any questions or want professional advice on how to build value in your business, connect with us.

Giving an Unexpected Gift

The holidays are upon us.

Annual holiday gift guides have been circulated. Wish lists have been compiled and shared. The annual review of gift-giving and the intentions connected to why we give gifts and to whom is well-underway.

For many of us, we give gifts to people who are important to us and try to focus on things they want or need. In today’s world, gifts tend to be geared towards instant gratification.

Rather than get caught up in the season’s hottest trend or coolest gadget, this year consider giving your children or grand-children a gift that will help them achieve future success.

Permanent life insurance and child critical illness may not be at the top of their wish lists, but they will be a gift much appreciated the older they get. Insurance is a wonderful foundation for them to build their dreams upon.

A child’s insurability will change with age and other factors, as will their insurance needs. One of the highlights of permanent life insurance and critical illness insurance for children is locking in insurance while the child is young.

When you purchase the policy, you can add on the ability to increase or extend coverage in the future even if insurability has changed. This option can prove very valuable should your child’s insurability become a factor as they go through life. Occupation, hobbies, travel and health issues can impact the ability to buy more insurance in the future.

Your child’s permanent life insurance policy contains a cash value that grows with time and can be accessed, allowing for opportunities that may have otherwise been financially difficult. This cash value can help with education costs, a down payment on a home or income when they need it.

Child critical illness insurance can include a return of premium option, if no claim is made it allows for premium payments to be paid back in a lump sum and to be used to support your child’s dreams and future plans.

Permanent life and critical illness insurance give you the opportunity to set your child or grandchild up for success and help them be prepared for unexpected events.

Learn how insurance can be one of the greatest gifts you give by connecting with us.

Are you protecting one of your most valuable assets?

We protect the things we find valuable – the things that are difficult or impossible to replace. We insure our homes and vehicles because most of us can’t afford to lose them.

Consider the average price of a new Canadian vehicle is $33,00011, the average price of a Canadian home is $437,6992 and the average earnings over a 30-year career is $2,008,1543.

Over a 30- or 40-year career, your accumulated income is likely to be far more valuable than any other asset you’ll own. It may be time to think about what you’re doing to protect your ability to earn a living.

Disabilities are a fact of life, one in four people4 will be disabled for 90 days or longer at least once before they turn 65. The average length of a disability is 5.75 years5 if it lasts longer than 90 days.

Questions to consider:

  • Could you maintain your lifestyle?
  • Could you continue to run your business?
  • Could you meet debt obligations?
  • Could you pay ongoing expenses?
  • Could you continue saving for retirement or a child’s education?
  • Could you take the time to recover?
  • Could you afford any additional expenses related to a disability?

Most of us don’t want to think about it, but it’s something to consider. Some of the most common causes of claims are due to disabilities we can’t plan for, injuries like: fractures, dislocations or sprains, depression and anxiety, heart attack or stroke and cancer.

The good news is there are ways to plan for the unexpected. You can keep your earnings uninterrupted with proper insurance planning. Proper plans will help you avoid having to use your savings, sell your assets or surrender RRSPs to meet your day-to-day living expenses. Disability insurance is a plan that works when you can’t. If an accident or illness prevents you from working, disability insurance provides monthly income to help pay ongoing expenses. It can replace a per cent of your earnings – short term or long term.

Two common types of disability insurance are group and individual. Group insurance is arranged by an employer, association or union to help financially protect its employees/members. It focuses on general coverage for all employees/members. Premiums are usually paid for by the employee, so any benefits can be received tax-free. Benefit coverage is generally based on a percentage of earnings and will typically last for two years if you cannot work at your own occupation but may be extended depending on the plan if you cannot work in any occupation. Premiums are not guaranteed and may change depending on the claims experience of the group of employees covered in the plan.

Individually owned disability insurance generally provides control and choice to help you financially protect what matters most. And it’s all about you:  you own it and you choose the products and options you want that are customized for your needs. You should consider individual disability insurance if your employer does not offer group insurance with disability coverage, you are self-employed, and/or a business owner. There are also circumstances where your group coverage does not provide adequate coverage. If you are not covered for bonuses or sales commissions, if you are drawing income in the form of dividends instead of salary or if the maximum monthly income coverage does not provide sufficient income replacement.

Together or on their own, individual or group disability insurance can help protect you, your family and your lifestyle should the unexpected happen.

Working with a financial advisor to review your coverage and ensure your earnings are properly protected lays the groundwork for you to continue meeting your financial goals and to maintain your lifestyle, even if a disability prevents you from working or running your business.

If you have any questions about your current insurance plans or how to find a financial advisor to work with you to develop your financial plan, connect with us.

 

1 Jeremy Cato, Savvy shoppers knock about $4,000 off car prices in Canada, The Globe and Mail, May 2014.

2 The Canadian Real Estate Association, July 2015, http://crea.ca/content/national-average-price-map.

3 Assuming annual income of $45,741 with a 2.5 per cent increase annually for 30 years. Peter Harris, So, how much are we earning? The average Canadian salaries by industry and region, Workopolis.com, February 2014.

4 Calculations prepared by Great-West Life using a blend of occupation classes, genders and age ranges based on data obtained from the Society of Actuaries – Individual Disability Experience Committee (IDEC), 2012 IDEC Claim Incidence Rate Table.

5 Canadian Institute of Actuaries (CIA) 86-92 Agreement Table & 2012 Society of Actuaries – Individual Disability Experience Committee Table.