Tax season is over. But that doesn’t mean your clients should forget about their taxes until next year.
Tax planning should be an integral part of the overall financial planning process. And consider this: people are often more forthcoming with information when doing their taxes.
What that means for you is you’ll get a more complete understanding of their financial lives and goals. That, in turn, will help you frame better discussions and plans in future sessions. You’ll also be able to explain investment solutions and their benefits more effectively.
The investor wins by receiving better advice and you win by potentially boosting your share of the client’s assets as a result of your increased involvement.
How to get the whole picture
Investors often deal with more than one financial institution, and this almost guarantees you won’t have a client’s complete financial picture. It also means you’re in perpetual competition with other industry professionals.
Since clients often use several institutions, they don’t look at their portfolios holistically. By becoming their main resource—through offering additional services like tax planning—you’ll be able to show them how to close gaps in their portfolios and eliminate overlaps in their investments.
Since tax is usually one of the largest expenses in any household, that’s a prime gap to close. Here are some ways to do it:
1. The basics
RRSPs are generally preferable over TFSAs when the top marginal tax rate in the year of contribution will exceed the rate in the year of withdrawal.
And ensure clients are aware of all the basic tax deduction and credit opportunities they’re entitled to.
2. Income splitting
As Canadians retire, chances are, one spouse will be working while the other isn’t. That’s a prime opportunity for income splitting.
Clients can also split business income with spouses and children.
They can also split income with children or grandchildren using RESPs and other types of trusts as well.
3. Non-registered accounts
When clients can’t use registered accounts, research the benefits of products like corporate-class structured funds for non-registered accounts, which allow tax-deferred switching of class funds within the same corporate structure.