Wedding bells — or alarm bells?
What to do when you suspect an elderly client is being manipulated in a late-life relationship
By Allan Janssen |May 27, 2024
4 min read
News and resources for Canada's top financial advisors
- The pension credit entitles individuals to 15% credit on $2,000 of eligible income. We ensure our 65+ clients have eligible pension or RRIF income or alternately, they purchase an eligible annuity type product with non-registered investments. Savings: $300/year; $600 per couple.
Converting interest to capital gains
- A $100,000 non-registered mutual fund portfolio generating 2% interest as part of an overall 6% return could be invested in an equivalent corporate class investment. The interest income could be converted to capital gains reducing the tax bill by approximately 50%. Savings: $400/year (40% MTR).
Income splitting
- Even with income splitting allowed at 65, Spousal RRSPs are still very important because many clients want to retire well before age 65. Setting up a spousal plan can create thousands of dollars of savings from split income prior to age 65. Savings: Potentially thousands of dollars.
Motivating clients to save
- Having an easy to understand plan that shows clients how much they need to save for retirement is a great motivator. Clients are more willing to save what it takes once they know the true cost of creating their own personal retirement “pension”. Savings (example) : $6,005/year. An extra $5,000/invested per year at 5% grows to $173,596 in twenty years, which could generate additional income of $8,579/year (at 5%), or $6,005/year after tax (30% MTR in retirement).
Eliminating credit card debt
- We all know that credit card debt is bad but having your advisor ask you if you have been overspending every 6 months at a formal financial planning review really keeps you honest. Eliminating even a small recurring credit card balance of just $1,500 at 20% interest can save clients significant money. Savings: $300/year.
Unused capital losses
- On occasion a new client arrives with massive unused capital losses (i.e. A Nortel bet gone bad). In these cases we restructure where investments are held to ensure interest earning investments are held inside registered plans and capital gains earning investments are held in taxable plans. This can often eliminate all taxation on non-registered investment income until the losses are used up. In a few cases where losses were very big, this can potentially mean decades of tax-free investment income. Savings: Potentially tens of thousands of dollars.
Avoiding account fees
- We use fee-based accounts in our practice. Our dealership waives all registered plan fees for these accounts, which amounts to a significant saving for the average family. Savings: Over $400/year.
Prioritizing spending
- Cash flow management doesn’t necessarily mean spending less. It means spending your money on things that are really important to you. If we can show a client with our interactive budget worksheet how reducing their cable package from 300 channels to 150 channels can allow them to visit Machu Picchu down the road, we’ve done a good thing. Savings: potentially hundreds of dollars…and accomplishing a life goal is priceless.
Every plan is different. Presenting different opportunities to save clients money or increase their after-tax income. In our practice we created QuickPlan cards as a quick reference where we can scan an extensive list of planning ideas to start our brainstorming when preparing a new financial plan.
As fee transparency progresses, justifying our fee will become more important. Sometimes the savings we find can completely offset our fee and other times the savings are more modest. In most cases however, the savings our advice generates brings the net full service fee we charge our clients below the range paid to other firms offering much less.
