How financial planning software companies are prepping for June 25

Some of Aravind Sithamparapillai’s clients are doctors affected by the proposed two-thirds capital gains inclusion rate announced in the 2024 federal budget.  

But Conquest Planning, the financial planning and analysis (FP&A) software he uses, hasn’t yet integrated the proposed capital gains rule. Projecting the rule’s impact on a separate Microsoft Excel spreadsheet takes him four to six times longer than usual. 

“You got to make sure that your model is right every single time,” said Sithamparapillai, an associate with Ironwood Wealth Management Group in Fonthill, Ont. 

FP&A software companies have different approaches to software updates. Conquest Planning is waiting until the capital gains legislation, which has not been tabled as of press time, receives royal assent before updating its software. Meanwhile, Snap Projections has already released an update.  

Conquest provides monthly software updates, said Ken Lotocki, chief product officer with Conquest Planning in Winnipeg. The firm consults its users and an in-house accountant to help build updates. The team is waiting for royal assent to avoid needing to reverse changes. 

“The biggest thing there is there’s no prescribed forms from the CRA yet,” Lotocki said.  “There’s no sense of how to handle it.” 

Last year’s proposed changes to the alternative minimum tax (AMT) were an example of when premature changes would have ended badly, Lotocki said. The 2023 federal budget included the AMT changes, but they didn’t become part of tabled legislation in November.  

Lotocki argued that accuracy trumps speed, likening FP&A software to a carpenter’s tools. “Doesn’t matter how great of a carpenter they are,” he said. “The more sharp, the better constructed the tool, the better they’re able to harness it and come up with better outcomes.” 

On the flip side, Snap updated its software to model the new capital gains inclusion rate on April 22 — eight days after the budget was released. Since the legislation hasn’t been tabled yet, the new rules aren’t applied by default, come with a disclaimer and are placed under a section labeled “experimental,” said Jim Kort, product manager with Snap Projections in Kelowna, B.C. 

Snap provides bi-weekly software updates by breaking bigger features down into smaller components, Kort said. The team prioritizes what to release first based on client feedback. 

“The day the budget came out, we had advisors writing us going, ‘Guys, when is this coming out? Am I going to have to hold off on all my corporate planning?’” Kort said. 

Advisors can toggle between the existing and proposed capital gains rules in Snap to see how each set would impact a client’s financial plan. 

If the actual inclusion rate or other details change between now and June 25, Kort said his team can launch an update “really quickly” since the framework already exists. 

In the meantime, advisors whose software haven’t updated yet can work with colleagues to check whether their Excel projections are accurate, Sithamparapillai said. He’s shared his spreadsheet with other advisors to talk through his interpretation of the proposed rule changes and calculation methods. Some firms share their calculators publicly, which helps advisors verify their work. 

“Having a peer group where you’re bouncing off of each other — I think those advisors or planners are going to jump ahead a little bit quicker in terms of their ability to execute or communicate to clients,” he said. 

While modeling with Excel is “painful,” it still works for finding the breakeven point for selling assets and making surgical decisions on dispositions relatively quickly, Sithamparapillai said. For example, he calculated the portfolio breakeven point under the proposed rules for a physician client using Excel, and asked the client’s accountant to confirm the calculations. 

In the weeks leading up to June 25, advisors should let clients know whether the proposed capital gains inclusion rate will affect them, Sithamparapillai said. Advisors can prioritize communicating to clients who will be affected while still sending a note to whose who won’t be affected explaining why they shouldn’t worry. 

“Staying connected and sharing is incredible,” he said. “I get a lot of my information from other planners.” 

After publication, Conquest Planning informed Advisor.ca that they are working on an interim model for the capital gains inclusion rate, which is not yet available for users as of May 1.

Are you an advisor or software provider? Tell us how you’re helping clients plan for the new proposed capital gains inclusion rate.