My niche: Working with police officers

Martin Weiler is president of First Capital Financial in Fergus, Ont. About 25% of his clients are police officers serving the Toronto region. The rest are professionals, including accountants, lawyers and doctors.

Martin Weiler built 100% of his niche through referrals. The president of First Capital Financial in Fergus, Ont., says his Toronto Police Services (TPS) clients are a close-knit bunch: “They’re willing to take bullets for their partners.” This means they have confidence in their colleagues, he says, whether it’s on the job, or when they’re referred to an advisor.

His first police officer referral came five years ago, from a client who was the vet for an officer’s dog. The TPS member had questions regarding his financial plan and pension—a common challenge for these clients.

Since officers work in shifts, going from days to nights on a week’s notice, there’s not a lot of time to think about investing. “Because they’re plugged into a pension plan, additional financial planning is not first of mind,” says Weiler. It usually isn’t until their 40s that they start focusing on their financial health. That’s when clients will come to Weiler with limited knowledge. They’ll have small RRSPs or TFSAs, an OMERS pension, and some experience dealing with a bank or credit union. “But no one has taken the time to educate them.”

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It’s on this scenario that Weiler bases his approach, which he implemented with that first referral. He explained that the biggest decision the officer makes before turning 50 is whether to take his pension upon retirement, or commute it. “By age 50, they’ve put in 25 to 30 years of service and are looking at retiring,” says Weiler. “If they want to commute, pension legislation requires they make that choice before that age.”

The decision should be based on life expectancy, taxes and estate planning, and this opens the door to additional conversations. “I present the options and discuss the pros and cons of each,” he says, joking he rarely uses the word “con” with police officers. He instead opts for “strengths and weaknesses.”

Often, an officer will commute her pension and go into a second career, such as investigating insurance fraud. The commuted pension is usually put into a locked-in retirement account (LIRA), which gives clients a fixed income stream and the ability to pull lump sums for discretionary spending.

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Another DB pension consideration: if a client chooses to pass the pension to his spouse, the survivor benefit is reduced by one-third. If he passes it to his children, there is no survivor benefit, as stated in the terms of these plans. And, if both spouses die, there is no residual benefit to the estate.

Still, officers will frequently commute the pension and leave it to a spouse since their life expectancies are statistically below the general population’s. While planning for retirement is important, taking care of their families is the true priority. “Helping officers understand the reality of death enables them to make the most informed decisions concerning their pensions,” he says.

Other items that come up in initial discussions include updating wills, powers of attorney, and using life insurance as an estate-planning tool.

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“With any registered plan, there is an inherent tax liability, and it can be as high as 48.4%,” he says. “Life insurance is useful because it replaces the lump-sum that’s payable to CRA at the time the officer dies. Then, the full value of the pension or LIRA can transfer inter-generationally to the family.” He adds disability insurance is provided through the officer’s benefits. “We make a point of reviewing their existing coverage, but it’s usually pretty good.”

Referrals have come in about once a month since his first client.

Additional concerns

Since pensions are a key planning component, advisors must understand provincial pension legislation, including how a DB plan integrates with CPP.

“When you take a DB plan, you effectively lose CPP,” explains Weiler. For instance, a 64-year-old client would receive $50,000 that year from his pension. At age 65, he’d receive $38,000, and $12,000 from CPP. “You get CPP, but only at the cost of a drop in the pension—dollar for dollar.”

This makes the argument to commute stronger because “you’ll get full CPP, and an income stream and lump-sum from a LIRA if you have one,” he says, adding most officers will receive a CPP income of about $250,000 total from age 65 to 85.

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Another issue is that police officers hold most of their wealth in RRSPs, making them subject to tax on withdrawal. So, he advises placing about half the money in non-registered accounts and TFSAs. And, he refers to TFSAs as tax-free investment accounts.

Otherwise, clients usually assume they’re “like a regular savings account, and the money just sits there.” So he explains there’s an investment component that allows them to make a return. He suggests corporate class funds to all clients, which “allow you to accumulate money on a tax-deferred basis until you withdraw from the portfolio and put it in your bank account.”

When discussing plans, Weiler tells them to apply the same mindset they use in their day-to-day jobs. “The police don’t wing it. If there’s a 10-car pileup on the highway, they don’t say, ‘I wonder what we’re going to do here?’ They have standard operating procedures, discipline, professionalism and integrity.”

Advisors who want to break into this niche must do their research. For instance, many advisors have heard of Toronto police chief Bill Blair, but they also need to understand the hierarchy to have competent conversations.

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And attending events is key, since officers are community-oriented. Weiler goes to charitable events, dinners for retiring officers, and the annual Toronto Police Association golf tournament, where his firm is a gold sponsor.

“If there’s a charity fundraiser, you can be sure that I’m running a 10-kilometre race alongside my clients. You can’t just be a good financial advisor. You all but have to don the uniform, and do what they’re doing to really be accepted and welcomed within the community.”

Suzanne Yar Khan is a Toronto-based financial writer.