Tips for surviving next year’s RRSP season

With the RRSP contribution deadline for the 2021 tax year arriving next week, some advisors are already looking at how to better prepare for next year’s season.

Aleem Visram, co-owner of Multi Insurance Retirement & Financial Planning Inc. in Toronto, hired an extra temporary administrative assistant ahead of this year’s RRSP season.

“That helped me a lot because she was calling clients, booking meetings for me and doing a lot of the paperwork, which saves [me] a lot of time,” he said. That allowed him to focus on investment strategy, he added, suggesting that advisors may benefit from hiring additional support for future seasons.

Visram also suggested advisors begin conducting client meetings in January or plan for contributions during annual reviews taking place prior to RRSP season.

“A lot of people leave it to the very last minute, and that’s where it’s really difficult for an advisor. Because you have all these people last minute trying to contribute to their RRSPs [and] you don’t have enough time,” he said.

Julia Easey, a financial advisor with Investment Planning Counsel in Simcoe, Ont., recommended that advisors do general outreach calls ahead of RRSP season and inquire about contribution room.

“We’ve had a few surprises this year of people that we just reached out to, who [we] didn’t think they had contribution room this year, and we were wrong,” she said. “They were actually ready to do business. There’s probably more out there ready to do business than we realize.”

In Visram’s meetings, he works with clients to optimize their RRSP contributions. “A lot of the times, I’ll use income tax calculators with clients and show them, based on [different] contribution amounts, [the] different amount of tax refunds they can get.”

His average client is in their mid-to-late 40s and is generally concerned about volatility: general market volatility, volatility brought on by historic inflation and volatility prompted by Russia’s invasion of Ukraine. Specific to those geopolitical tensions, Visram said clients are thinking and asking more about the geographical diversification of their investments.

As a result, Visram has suggested funds that invest in emerging and developing markets, such as Singapore, Taiwan, Malaysia and Brazil.

“Most Canadian [investors and institutions] have focused only in Canada or the U.S. There’s some huge growth opportunities in the Far East and emerging markets,” he said, adding the upside potential in emerging markets is “something to look at.”

Easey said her clients occasionally bring up the issue of inflation as well as geopolitical concerns. However, overall, clients are most concerned about portfolio performance and if they’re on track with their returns.

“We remind them that we have strategized their portfolios to weather those storms,” she said. “We don’t have all their eggs in one basket. We ensure that what they need in the next few years, if they’re nearing retirement, is protected with whatever investments are suitable to their investment style, to their risk tolerance.”

How Visram positions investments against inflation depends primarily on the client’s age and stage. If the client is older and will soon be converting their RRSPs to RRIFs, Visram said he chooses relatively low-risk inflation-resistant funds. Funds he has recommended to older clients are inflation-focused or have tactical high income, with a balance between fixed income and equities.

Visram said “the vast majority” of his clients are still choosing to hold their RRSPs in mutual funds, but a growing minority are using ETFs. “There’s been a bit of a shift [compared to previous years],” he said. “Before, [it] was predominantly all mutual funds. Now, there’s some ETFs for some smaller clients.”

Visram said this shift has occurred, in part, due to management fees and the mainstream media attention on fees. “[For] clients who have a lower investment amount, and who want liquidity, ETFs are an easier option for them because they can just invest in the index.”