mid-50s-couple

Client expectation:

“I want an advisor who can help me choose the right investments so I can retire in 10 years, but I don’t want to be penalized if I need to cash in the investments earlier. Also, should I have life insurance?”

–Becky Rhyno, 50, outdoor adventurer, photographer, dog lover; Yarmouth, N.S.

Advisor solution:

Janine Guenther portfolio manager and investment advisor at CIBC Wood Gundy, Vancouver

I’d ascertain if Becky can continue to be adventurous in retirement: What are her current resources and future expenses? Does she have a mortgage and family? Will she take CPP early? How much should her drawdown be? Ten years is a good time horizon to be in stocks; a dividend growth strategy will keep up with inflation and grow her portfolio. A bank stock, for example, yields 3% to 4.5% just on dividends. With a portfolio of over $250,000, she can achieve growth using a combination of stocks and ETFs—the latter for diversification.

Becky might be concerned about penalties if she has a history with DSC mutual funds. I don’t use those because I want to provide flexibility at a proper price; further, I charge a fee on AUM, so I don’t want to double-charge clients. I’d discuss fees with Becky. A legacy planning discussion will reveal what her life insurance needs are, as well as if she has a will, an inheritance, a financial PoA and a healthcare PoA. Life insurance could be used as a way to pay her mortgage, other debt, taxes upon death, or as a way to create a legacy for family or charity. With current low interest rates, permanent insurance could be used as fixed income.

Client expectation:

“I want investments that minimize taxes now and in retirement. Also, I’m a natural saver, so I want to know if I’m saving too much.”

–Corinne Wasilewski, 50, occupational therapist, author; Sarnia, Ont.

Advisor solution:

Bev Moir associate director of wealth management and senior wealth advisor at ScotiaMcLeod, Toronto

An RRSP and TFSA are musts for tax-sheltered growth.

In her unregistered accounts, Corinne should avoid interest income in favour of capital gains (i.e., from mutual funds, stocks). The next best option is dividend-paying stocks, so she can take advantage of the dividend tax credit. Corporate-class funds also minimize taxes because they allow managers to minimize taxable distributions.

If Corinne requires insurance, she should hold a permanent policy that provides a death benefit and allows additional cash savings. Such a policy can be borrowed against and provides tax-free withdrawals, within limits.

To discover if she’s saving too much, I’d model scenarios within a financial plan based on various expenses—a big trip every five years, or long-term care—to show her cash flow and estate value. Seeing she’s on track might provide the comfort she’s looking for.

Finally, I’d ask if she’s enjoying life. Reflecting on her quality of life and values can help assess her tendency to save and provide permission to spend now.

Client expectation:

“Films like The Big Short (about the 2008 financial crisis) are sobering. I’d like to know if there are corrective measures in place to prevent another crash. Can I have confidence in market watchdogs and, thus, in my investments?”

–Jerry Ostrzyzek, 59, hiker, naturalist; Toronto

Advisor solution:

David Chalmers advisor at Nicola Wealth Management, Vancouver

The 2008 crash was in part due to a U.S. regulatory shortfall, and there’s since been an increase in compliance and disclosure requirements.

We’ve had crashes before, and we’ll have them again. Ongoing turbulence is caused by economic cycles, fear and greed, and by black swans (unexpected events, like terrorist attacks), from which market watchdogs can’t protect Jerry or anyone else. To build Jerry’s confidence, I’d create a diversified portfolio for him with tailored asset allocation. With equities, for example, I would include stocks as well as private equity and real estate.

We review portfolios every 90 days, and our rebalancing models include the best trades to execute for rebalancing. When markets drop, I’d show Jerry how his portfolio dropped comparatively less, thanks to disciplined rebalancing. I’d also provide Jerry with meaningful disclosure, showing him exactly what he pays for effective management.

Client expectation:

“I expect my advisor or other soliciting advisors to take no for an answer. Why must they badger me with repeated followups when I’ve declined their services?”

–Paul Cipywnyk, 56, streamkeeper, sustainability buff; Burnaby, B.C.

Advisor solution:

Darren Coleman senior vice-president and portfolio manager at Coleman Wealth, Raymond James, Toronto

It sounds as though Paul met advisors who weren’t respectful.

When an advisor and potential client meet, they start a relationship process that might last decades. At any point, if there’s no fit (the advisor doesn’t have the needed skills to help) or chemistry, the advisor should be honest and say so.

Our number one rule is: we deal only with nice people. Forget minimum account sizes, fees and performance; first, we talk about the relationship. If we ask clients to be nice, they know we’ll also be nice; we both rise to meet that explicit expectation.

To make sure we always take on clients who fit, my firm understands what problems we solve efficiently and who we serve best (those with cross-border finances).

Client expectation:

“With one full-time income, our RRSP savings are modest, but my wife has a DB pension. Should we use my RRSP to pay down our mortgage? I’m in the first tax bracket.”

–John Schofield, 55, father of one, freelance writer; Toronto

Advisor solution:

Rhonda Sherwood financial advisor, Raymond James, Vancouver

RRSPs are for retirement. I wouldn’t advise touching them (even at a low tax rate) unless the pension and CPP/OAS cover John’s retirement expenses. Also, if he (or his spouse) dies before retirement, or early into retirement, the remaining pension may be insufficient for the survivor. What if they divorce and have to split the pension? What if John’s spouse loses her job? Without savings, RRSPs may be needed as emergency funds.

I’d also want to know why John is asking this question. There may be an underlying issue, such as a cash flow problem. I’d ask about his current versus desired lifestyle: Does he want to travel in retirement? If so, and the pension income pays only basic expenses, more savings are needed.

I’d gather detailed information and do a cash flow analysis. John could consider downsizing, increasing his income or increasing mortgage payments to reduce amortization.

by Michelle Schriver, assistant editor of Advisor Group.

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Originally published in Advisor's Edge

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