New Canadians are the fastest-growing segment in the country, and advisors must be able to relate to their life and financial situations in order to help them successfully navigate their financial futures.
Canada has nearly 6.8 million foreign-born residents, representing about 21% of the population. Further, a recent BMO Harris survey revealed that 48% of Canadians with $1 million or more to invest are either immigrants (24%) or first-generation Canadians (24%).
Advisors can grow their practices by effectively serving this growing population segment. So how should you approach and manage relationships with clients from diverse cultural backgrounds?
1. Understand your client's cultural and personal background
To effectively serve your client, learn about her unique background, past financial experience and perspective. Ask questions like:
- Where did you immigrate from?
- What is your attitude toward money?
- What's your experience been with financial advisors?
- What type of financial institution did you bank with?
- Were your savings diversified?
- Have you ever invested in capital markets?
- What is your current financial situation?
- Are you planning to regularly send money to family overseas?
Read: Be a great advisor
Take time to research and understand unique cultural paradigms. For example, in many cultures:
- Discussing finances – particularly with strangers – is not a common experience
- Exhibiting signs of wealth is considered socially inappropriate
- Discussions about finances often happen in the presence of the family patriarch or matriarch
- Mistrust of financial institutions and financial advice providers may exist
Given the range of cultural differences, focusing on particular ethnic groups will allow you to build knowledge and credibility within those communities.
2. Articulate the advisor role
In your first client conversation, discuss what to expect from a financial advisor, and how both sides can make the relationship productive and rewarding. You should also talk about the client's financial and non-financial goals and jointly determine the best service options. In addition, agree on how you will communicate, how often you will review their portfolio and how you are compensated.
Read: Explain compensation
3. Encourage early planning and investing
Many new Canadians tend to focus on their immediate concerns – setting up essential banking and credit, buying or saving for a home, building a business, or continuing education. Through your network, you may be able to provide referrals to help address these broad needs. Cultivate relationships with mortgage brokers, bank representatives, lawyers, accountants, small business bureaus and loan officers to coordinate holistic service. From there, a key part of the advisor's role remains to facilitate the discussion of early long-term financial planning and investing.
Read: Explain compensation
4. Provide the Canadian context
Explain how clients can plan for their retirement using RRSPs, mutual funds, stocks, bonds and other investments detailing the tax implications of each. Educate clients about the unique programs and resources available to Canadians, such as CPP and OAS. Also, explain available tax credits, such as the GST credit and Canada child tax benefits. Encourage your clients to file their taxes early and accurately and suggest a settlement organization to help if language is a barrier.
5. Discuss immigrant-specific programs
Become knowledgeable about unique immigration issues and options, for example:
- Many Canadian financial institutions offer programs and resources specifically for new Canadians, like education on how to open a bank account or apply for credit.
- Canada allows immigrants to shelter their financial assets tax-free in an Immigration Trust for up to five years. Newcomers begin to pay tax on the investment income from the trust only after that time period, which gives them a unique opportunity to grow their investments tax-free.
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