Academic asks

(November 4, 2003) Sometimes it’s easy to overlook the obvious, like taking into consideration your client’s job when designing a financial plan for them. Clearly their income will play a key role in planning, but have you factored in their job security?

You should, according to York University professor Moshe Milevsky. In the cover story for the November issue of Advisor’s Edge, he asks, “Is your client a stock or a bond?”

“It’s all about considering your client’s human capital before you try to lump them into cookie-cutter solutions,” says Deanne Gage, managing editor of Advisor’s Edge. “What their occupation is plays a huge role in the kind of investments that your clients should be placed in.”

For example, someone working in a less stable technology environment probably should not be too heavily invested in the tech sector. An industry blowout could not only cost them their job in the short term, but affect their long-term outlook as well.

In this case, the client’s job is their “stock,” providing enough risk to their financial well-being that perhaps their investments should be more conservative.

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Conversely, a client that has a more stable career, such as a tenured professor like Milevsky, can afford to accept more risk in their investments.

The November issue also features Dan Hallett’s in-depth look at wrap accounts.

“Wrap accounts have been around for at least five years — they’re a great product but there are a lot of problems with them,” says Gage. “Hallett does a really great job of exposing what those problems are and how they need to grow if they’re going to continue to evolve.”

Gage says wrap accounts have sometimes been dismissed as “over-glorified mutual funds” which need to offer something more to high net worth clients.

“As more advisors are considering these managed products, the question does come up ‘what do I need you for?'” says Gage. “I think Darin Diehl’s editorial addresses how you need to have that discussion with your clients and have some kind of solution.”

The magazine also includes the first of a four-part RRSP Survival Guide. In this issue, Jamie Golombek examines tax-loss selling and the superficial loss rule, and offers strategies for making the most of your client’s capital losses. Heather Evans looks at year-end tax planning as a whole, from tax planning to charitable contributions, RESPs and collapsing RRSPs.

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Read Advisor.ca’s extension of the first part of the RRSP Survival Guide in the Practice Zone. Click here to find out what’s new this tax season and a template letter you can use with your clients about year-end tax planning opportunities.

For more information online about any topic covered in this month’s Advisor’s Edge, click here.

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Filed by Steven Lamb, Advisor.ca, slamb@advisor.ca

(11/04/03)

Steven Lamb