With tax season upon us, now is the ideal time for advisors to meet with their clients to clean up and dust off those financial plans, suggests one advisor.
Spring cleaning doesn’t have to be limited to emptying out closets and hosting garage sales, says Brent McKay of Sun Life Financial. A complete overhaul, or even minor adjustments, to a client’s retirement savings plan can set them on a better track for the rest of the year.
“As clients run around getting their receipts together, it’s a good time for them to meet with their financial advisors as well,” McKay told WP. “…and see how their investment plan is fitting in with their financial and tax plans.”
Sun Life offers three tips for the revamp, which include:
- Reviewing the Registered Retirement Savings Plan (RRSP) program and how it fits into the plan
- Establishing whether a Tax Free Savings Account (TFSA) could supplement the plan
- Forming new, or improved, spending habits, that allow for more saving opportunities
“It’s like a change in the weather forecast,” says McKay. “Advisors should take a look at their client’s time horizon (stage in life), their tax bracket and how to refresh their spending habits.”
Asked whether it is challenging to pull clients’ attention away from their taxes (and accountants) and onto their financial plans, McKay says he has experienced the exact opposite.
“On the contrary, it is easier to get their attention,” he says. “We are always trying to promote working in conjunction with the accountant and clients are looking to their advisor to make sure they have all their tax receipts for their investments.”
McKay does acknowledge however, that some clients, burdened by expenses, may be grappling with ways to save. “This comes under tip three, where we try to find some money that (clients) are unaware they are spending, and put that back towards their plan.” (continued)
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This could be as simple as strategically divvying up a tax refund or making an RRSP contribution and then using the tax savings down the line to pay off some debt, he suggests. "Clients will ask, 'If I have some free cash, where do I put it - debt repayment, short-term or long-term savings?' Often the answer is all of the above. A good advisor or planner will do all of those things (for clients)."
For small business owners, McKay points out the need to meet not only with accountants for tax purposes, but with their advisors to establish the next steps in their business plan, such as incorporating their company.
Mike Lakhani of Tax Matters for Dentists (TMFD) believes advisors may be hard pressed to get this spring cleaning venture off the ground, pointing out that clients have a loyalty to their accountants that overrides the relationship with their advisor, particularly at this time of year.
“The client’s most trusted advisor is the accountant. That’s always the case from what I have seen,” Lakhani told WP. “No matter what anybody says, I still say the client has more respect for the accountant than they do for the advisor.”
Do you feel now is the prime time to ‘spring clean’ your clients' financial plans? Tell WP your thoughts in the comment box below.
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