In the first 10 minutes of a meeting, your client says:

“Last month our friends Lee and Carol took us on an amazing tour of the Halifax coastline on their new yacht. I’d sell our cottage and sail the world like they do in a heartbeat.”

At that moment

  • Tell your client that if he really wants to do this, you can review his financial situation together. Even if he’s not serious, it’s a good way to demonstrate his plan’s flexibility.

Later in the meeting

  • Ask how your client thinks his existing retirement plans would be affected, and whether he’d sail all year or part of the time. If all year, would he sell his family home, too?
  • Explain that he and his partner would lose their eligibility for provincial health insurance if they’re outside the province for a majority of the year, and offer to look into the cost of private insurance.
  • Make sure he understands how upkeep of the vessel would cut into his income.
  • Explain the capital gains tax he would pay when he sells the vacation home, and potentially his family home. Offer to run an analysis on which property is better to designate as his principal residence. Go to advisor.ca/PRE for more.
  • Suggest alternatives that allow your client to try his dream on for size without making a big commitment, such as leasing a boat for a year.

Within two weeks

  • If he’s still serious about the purchase, present him with your principal residence analysis and an estimate of his after-tax yacht-buying budget, as well as estimates of annual upkeep costs. Show him researched alternatives for private health insurance.

Originally published in Advisor's Edge

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