Your client’s tax return can tell you a lot. It can tell you about support payments she’s making to her former spouse (T1, line 257), what sports her kids play (Schedule 1, line 365) or what charities she supports (Schedule 1, line 349).
More importantly, it gives you insight into planning opportunities. You can see from Schedule 4 or Schedule 7 whether she has investments at other institutions. This lets you ask for copies of statements to ensure her asset allocation is appropriate across all investments, including company pensions or group RRSPs.
This also increases the likelihood – or at least presents the opportunity – to attract more assets in the future.
Learn about cash
The tax return will also show if she’s sitting on cash in the bank – look at the ‘interest and other investment income’ section of their Schedule 4. If she is, this opens the door to different conversations.
If she has a mortgage, ask why she’s not paying it with the cash. If she likes having an emergency fund, you might refer her to a banker to set up a secured line of credit so she’s not hoarding cash.
Reading Schedule 4 can help spur a conversation about why you’re not managing that money. Maybe you have a better cash alternative than a savings account.
What about kids?
If she has children younger than 6, is she receiving the Universal Child Care Benefit? Find out by looking at line 117 of the T1.
High-income earners often forget to complete and submit the Canada Child Tax Benefit form to the Canada Revenue Agency. A friendly reminder from you could mean tax refunds as well as $1,200 of additional government benefits per child per year.
Maybe one of her children is disabled and it never came up, but you notice this because of the disability amount transferred from a dependant on line 318 of Schedule 1. A discussion about a Registered Disability Savings Plan account, even if you aren’t able to open an RDSP yet in-house, could be a great client touch-point.
Other tax savings
Tax returns also give insight into tax-planning opportunities. For wealthy clients, maybe there’s a big discrepancy between the two spouses’ incomes and they should be considering a spousal loan at 1%.
Or, if you find out they like to give to charity, suggest they donate those bank shares they’ve owned since 1977 to benefit from the capital gains exclusion.
Client tax returns can be very informative documents. Advisors who ask their clients for copies — or better yet, who do their clients’ taxes — have a marked competitive advantage.