What is Financial Planning?
Rob:
Financial planning; why it makes sense for you, what to make sure you have, and what are the pitfalls to avoid?
I'm Rob Tétrault from robtetrault.com, Head of the Tétrault Wealth Advisory Group here at Canaccord Genuity Wealth Management. I'm here with Adam Buss. He's a CFP wizard with this kind of stuff. Senior Wealth and Estate Planner here at Canaccord Genuity Wealth Management. Adam, thanks for being here.
Adam:
Thanks for having me, Rob.
Rob:
All right. Adam financial plans. Who needs to have a financial plan?
Adam:
Well rob in my opinion, I think everybody needs to have a financial plan.
Rob:
Is your opinion biased?
Adam:
(Chuckles) Well, because I do the financial planning it's automatically biased, but yes, as a financial planner, I believe everybody needs a financial plan, but everybody needs one for different reason. Everybody's at different stages of life. The ones that we often come across are those approaching retirement.
Rob:
They're approaching retirement. You're thinking, oh my goodness, do I have enough cash for where am I going and do I have enough cash for retirement?
Adam:
That is often the biggest question – can I retire? Sometimes it's us giving the client permission saying, yes, you have enough financial resources or cash at your disposal to retire comfortably and live that lifestyle.
Rob:
The financial planning process is all about giving the client peace of mind that they can accomplish their retirement goals. Let's talk about the actual financial planning process here at the Tétrault Group for example. How does it go?
Adam:
Well, we have a fairly dedicated process. It generally involves a couple of different meetings with the client. We want to sit down, we want to get to know you. We want to know what your unique goals and objectives are.
There's no cookie cutter approach here. There's no one size fits all when it comes to financial planning, because unless I sit down with you and learn what's important to you, I can't try to accomplish those goals for you.
We first want to do a fact finding and we want to sit down. We want to gather as much information as possible from the client.
Then I go back and I work on building the financial plan. Perhaps I need to get some additional information, coordinate with the client's accountants, lawyer, anybody else that's important in that decision making process. And then I have the plan ready.
We'll sit down with the client. We're going to go through everything step by step, educate them on the entire process. What's important. And then of course, it's not just simply done at that point.
We want to do annual reviews. We want to make sure that we're keeping up with any changes that happen in the client's life.
Rob:
If someone sells an asset perhaps, or there's a death, or maybe there's a new grandchild – those are goals that would for sure form part of the review portfolio.
Adam:
We call it major life events. A death in the family and inheritance, or retirement and birth of somebody, all of those different things may change how the client views their financial goals going forward.
Rob:
Okay. Let's take a look at the kind of questions on people’s minds. Cashflow, or do I have enough to retire? What are some of the other questions that you would look at when you're doing the financial plan?
Adam:
Often, nobody wants to pay more tax than necessary, and everybody wants to pay the least amount of tax possible. We always take that approach with clients, whether it's an incorporated individual that asks the question if they should take dividends or salary, or draw down their corporation, or start taking money from my RRSP.
That's a very common one that we get. Often, it's how much money is left for my beneficiaries down the road? Can I leave more money to the family? What's my tax bill when I pass away?
Those are all some of the aspects that we look at.
Rob:
What are some of the pitfalls that you've seen that you're able to avoid or you're able to advise people to avoid? I'm imagining income splitting and taking money from the wrong corporation. I'm taking dividends instead of salary. What are some of those other ones that you sometimes see?
Adam:
Well, those are certainly a lot of the big ones, but another is not planning ahead of time. Coming to us after you've already retired and then wondering, well, did I make the right choice? Should I have waited to retire? Should I have waited to take my Canada pension plan?
Rob:
The world-famous - "Should I take my CPP" question?
Adam:
That is a world-famous question and one that we see multiple times per day.
Rob:
Sometimes it's too late. Once you've made that decision,
Adam:
Once you decide, that's it. You're stuck with whatever choice you made.
Rob:
We would take a look at that. We would take a look at income splitting. We would take a look at the tax efficiency in corporations. We would take a look at to see, I would imagine if there's any life insurance that can be used to kind of optimize wealth and what does the actually look like? So what do you actually do in a plan - it's number crunching and it's cashflow projection?
Full Video and Blog Article on Income Splitting
Adam:
That's the basis of it. Maybe we come back with a nice detailed report saying, okay, what does your cashflow look like in retirement? That's great. You want $6,000 per month, but where do we take that from? We're going to look at your Canada pension plan, your old age security, your work pension, your corporate dollars, your RRSP or RRIF or your tax free. Where is the most logical and efficient way that we can get to that goal of $6,000 per month
Rob:
And then you will build that year by year.
Adam:
Yes.
Rob:
Until you’re 90-95 something like that.
Adam:
Yeah. We generally try to use fairly conservative planning projected out until mid-nineties to ensure that the client does not run out of financial resources.
Rob:
What about this comment I hear all the time that you need 70% of your income in retirement to live? What do you think about that?
Adam:
I would view that as a common misconception. If I'm working today and retire tomorrow, my lifestyle and expenses are probably the same. I can't say that I need 70% of my income. Perhaps I want to travel more in retirement time. My expenses may actually go up.
There is no one size fits all. It's about us getting to know the client, their goals, their objectives, their cashflow needs to make sure that we are achieving their target number that they want to spend.
Rob:
The great thing is, is that it's truly a year by year breakdown. If there is a year where you would maybe sell the home or sell the cottage or get an inheritance, that can be factored into the plan.
Adam:
Absolutely. We want to update it as time goes on as well. You may know that you're going to get an inheritance down the road, but we don't build it in. We wait for it to have actually happened. If we have a real dollar, we'll factor it in.
We can estimate when you're going to sell the cottage or when you're going to sell the house. Perhaps you want to downsize, or you want to sell the family cottage down the road.
Rob:
I imagine that there are some years where there's going to be less expenditures potentially down the line. These plans are very nimble and you're able to front load them for some clients, with more cashflow needed in years 1 to 10 and less cashflow needed potentially at the back end.
Adam:
We see that very often with clients. They have a higher need for the first 10 to 15 years of retirement. They're more active years, they want to travel more. You want to do a lot of fun things while you're healthy and able to do these. You need more cash to do that. We want to add more cash to the budget for the first couple of years and then reduce that down over time.
Rob:
See, at the end of the day, our goal here is to protect the wealth. Makes sure that we can answer the question as to can I retire? Like the financial planning process is initially is going to be, can I retire? That's the question. And then it's going to be optimized.
Adam:
Absolutely.
Rob:
Which accounts? Tax efficiency, leaving more to the estate, protecting the wealth. It truly is a fun process. We've gone through it so many times with clients and I find that it brings me great joy because when we do deliver that plan to the clients, they are so thrilled.
They're so excited, they have an answer, they know they have peace of mind and they tell us how unbelievable it is for them to get this peace of mind.
Thanks for, thanks for coming Adam today. I appreciate you taking the time to chat with us about financial planning and how important it is for clients.
