Increase Your AUM with TFSAs

Tax Free Savings Accounts present an excellent opportunity to provide financial planning advice to clients while increasing assets under management. Here are a few strategies we have been using in our practice to accomplish just that.

Add a TFSA discussion to your review meeting When you manage every aspect of a client’s financial wellbeing, it’s hard to remember everything that needs to be discussed at a review. We use a meeting agenda for every client review so we don’t forget to cover anything. In 2008 we added “Discuss TFSAs” to our meeting agenda as a systematic way to introduce TFSAs to every client.

Start an emergency fund A high interest TFSA is the perfect vehicle to save funds for an emergency. Clients can start their emergency fund by switching a few hundred or thousand dollars from their bank account and then scheduling an automatic monthly contribution.

We then add the emergency fund to our review meeting agenda and to our Client Dashboard™ to monitor its growth. If each client family accumulates 3 months of take home pay, your clients will have great protection against unemployment and your AUM will increase.

Top up contributions starting January 1, 2010 On January 1, 2010, every adult Canadian will be allowed to contribute an additional $5,000 to their TFSA. This means that every client and their spouse, if they have one, will be able to move money from a taxable account into their TFSA. Sources of the funds can be their bank account, another high interest account currently held at another institution, or even their 2009 tax refund.

Re-contribute funds withdrawn in 2009 Clients who deposited $5,000 January 1, 2009, and withdrew $5,000 to pay for the family vacation June 30, 2009, had to wait to until 2010 to re-contribute the funds to their TFSA. We are sending a note in January to clients who withdrew funds in 2009 reminding them that they can now re-contribute the funds they withdrew.

Include a TFSA article in your client newsletter TFSAs are a relatively new option so there still needs to be more education on the subject. Reading an article on TFSAs can help clients better understand the accounts and why it’s important to have one. If writing isn’t your forté, you can send clients a link to one of the many excellent TFSA articles put out by fund companies or the media.

Meet the next generation of clients Just like the annual RRIF report for clients turning 71, a report should be run to determine which clients will have children turning 18 in 2010. A TFSA is usually the best savings vehicle for a young adult still in school and being the advisor who helps open that account will help you connect with the next generation of clients.

Don’t let the TFSA contribution limit restrict opportunities The $5,000 initial contribution limit in 2009 restricted early TFSA strategies. With each passing year, however, TFSAs will become an increasingly large factor in every client’s financial plan. Taking the time to choose the right TFSA strategies will no doubt benefit your clients and reward your practice with increased assets and revenue.

Mathieu Paradis, B.Comm., CFP, CLU, FMA is co-founder of AdvisorPractice.com which offers advisors practical solutions to transition to a financial planning practice and offers a 12-week training program. He is a financial advisor and offers his clients comprehensive life goals financial plans.