Despite the industry's focus on families, RBC Wealth Management leader sees between 10 and 20 per cent of plans being drawn up for singles
One-person households are the most common household type in Canada. Since 2016, according to Statistics Canada, single person households amount to roughly 29 per cent of all household types in Canada. That reflects a long-growing trend towards single living, with 4.4 million Canadians living alone as of 2021, up from 1.7 million in 1981. It’s a statistical reality that would appear to run up against the traditional model of financial advice and financial planning.
This industry’s focus, at least in its nomenclature, is on ‘families’ rather than individuals. Plans are often made around a family’s goals, means, and risks. In everything from financial goal setting, to insurance, through estate plans the dynamics of a couple or a nuclear family predominate. Despite that tendency, Howard Kabot says he sees somewhere between 10 and 20 per cent of the financial plans at his firm serving singles. It’s not boutique shop, either. Kabot is the VP of Financial Planning at RBC Wealth Management. He explained some of the risks and issues that can arise with planning for single clients and how advisors can work to serve this growing market segment better.
“There is an awareness on the part of the single individual who doesn't have a partner that that they need to think about sort of the future a little more carefully,” Kabot says. “Not to say that they're going to remain single going forward, but not knowing any better at that point, they have to sort of assume if life stays the same then I need to think about, you know how their retirement is going to look.”
Kabot notes that the financial awareness many single individuals have to practice begins with their day to day expenses. Mortgage or rent payments, as well as groceries and other common costs can be more expensive for someone without a partner. Usually, too, couples are double income in some form. Tax issues are also sometimes harder to navigate. In retirement, the ability to split pension and RRIF withdrawals between a couple can help keep more money in the hands of a family. As can spousal RRSP contributions and even spousal loans.
In addition to those considerations, Kabot notes the need for some single individuals to designate powers of attorney as they age. Those questions are harder to answer than they are for a couple. The same goes for inheritance and insurance beneficiary designations. Kabot believes, though, that the more immediate issues that come with managing a financial life alone tend to make these clients more aware of what they have or don’t have. That can make opening these conversations easier for advisors.
Those single clients aren’t just young people starting their financial lives. Kabot notes that there are often seniors who live alone due to a later divorce or the early death of a spouse. Those clients come with their own unique considerations and risks. Survivor benefits and inheritances can’t be passed on in a tax-efficient manner to their designated heirs the way they could be from one spouse to another. Moreover, issues around powers of attorney and estate plans are more acute for these single older individuals.
Whatever the age and unique circumstances of a single client, Kabot believes advisors need to engage with the issues that these demographics grapple with and represent.
“Clients need to be aware of these issues. They often are, but if they're not, it's good to ask to the individual client, if they’ve thought about certain issues, if they know how they’re going to financially achieve their goals, and what the challenges are for them in the near and longer-term,” Kabot says. “The advisor can be a lot of help to the single client. Serving them is about building awareness, and then bringing the resources to bear for that client.”
