Client expectation:

I supplement my income with withdrawals from a lump sum. Should I invest a portion of that sum? If so, how?
– Sheila Bull, 76, grandmother of two, expert baker, Bulls Creek, N.B.

Advisor solution:

Andrea Thompson, senior financial planner at Coleman Wealth of Raymond James, Toronto

Deciding on investment products is a last step, after a broad assessment of Sheila’s needs, including cash flow requirements, potential care costs and estate planning details.

For example, I’d assess her monthly income, including whether it’s indexed to inflation; her monthly costs; the proportion of those costs funded by the withdrawal; the length of time the lump sum will last, given the current withdrawal rate; whether she intends to leave money to heirs; and her health status.

One of her biggest risks is longevity. Regardless of whether she remains healthy or requires long-term care, she could outlive her money. To assess Sheila’s longevity, I’d ask about her and her family’s health history, how long her parents and siblings lived and whether she lives an active or sedentary life.

Generally, potential investments include a life annuity, which provides guaranteed income without longevity risk, or a reverse home-equity line of credit, which allows her to subsidize her monthly income using her home’s capital but is less punitive than a reverse mortgage.

Client expectation:

My second wife could outlive me by 20 years or more. I have three grown children, and she has two nieces. We have no children together. How do we create a meaningful inheritance for those we love while ensuring financial security for my wife?
– Michael Steeves, 78, birdwatcher, reader, cyclist, Amherst Island, Ont.

Advisor solution:

David Chalmers, advisor at Nicola Wealth Management, Vancouver

Generally, Michael must calculate the proportion of family assets to remain with his wife and to bequeath to his children. If needed, he could increase his estate’s value by purchasing life insurance, but, given Michael’s age, that might not be cost-effective.

To determine the capital required to support his wife, I’d take into account pensions, government benefits, their home, the desired standard of living and his wife’s greater life expectancy (being female).

Also, I’d explain that some assets are more efficient to pass on (e.g., an RRIF rolls over tax-free to a surviving spouse).

To ensure any money or property left to his wife is subsequently passed to his children when she dies, Michael’s will could be structured so that money is held in trust, with income going to his wife and, when she dies, capital going to his children. He can also grant his wife right of occupancy in the family home, with the home passing to the children when she dies or no longer occupies the home.

However, to ascertain this plan’s feasibility, Michael could consider the children’s potential ages when his wife dies. Possibly, one or more of the children could die before his wife, or the children might be elderly upon inheritance. These scenarios require further planning.

Client expectation:

How do advisors show appreciation for clients who have faithfully used their products and services?
– Stephen Walsh, 71, UNICEF volunteer, hockey player, joker, Toronto

Advisor solution:

David Wm. Brown, partner at Al G. Brown & Associates, Toronto

We show our appreciation by providing excellent service, which includes paying attention to clients and consistently keeping in touch with them.

Perhaps Stephen wants more personal communications, which is something some of our clients have expressed in market downturns.

To address that, we touch base with clients about six to eight times a year. For example, clients receive our newsletter four times a year, and they might receive birthday phone calls, regular calls, cards or holiday gifts. These things vary according to each client and the shifting demographics of our clientele.

For example, we’ve given gift certificates for ice cream to clients with children. Once, we provided CPR lessons — something potentially more valuable than a tangible good.

What’s critical is the regular contact, not the gift. We’re friends with most of our clients, and that’s a result of attention and good service.

Client expectation:

How do I know I have enough income to last my whole life? To what age should I plan?
– Brian Everett, 70, grandfather of two, Scout leader, Toronto

Advisor solution:

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

I’d ask Brian how long his parents lived. If his parents lived to 85, he should probably expect to live to 90. I’d assess all his income sources — pensions, RRSP, CPP and OAS. Because he’s so close to 71, I’d include what he expects to withdraw from his RRIF. (If required, withdrawal minimums can be lowered based on the age of a younger spouse.)

Saving should be motivated by a plan, so I ask clients, “What’s your money good for?” Brian may be interested in donating to Scouts Canada, for instance.

The assessed income sources would be matched against his expenses, as well as his plans, like donating.

Finally, I’d ascertain whether his investment portfolio produces sufficient dividends and interest income, accounting for yearly withdrawals, to meet his goal.

Generally, clients can be assured that if they withdraw 4% of their savings each year, a prudent investment plan lasts more than 20 years.

Client expectation:

What’s the best way to fund final expenses? I’m making monthly prepayments to my funeral home.
– Eve Brown, 79, former opera singer, dedicated volunteer, chaplain, Markham, Ont.

Advisor solution:

Beth Hamilton-Keen, director of private wealth management and senior portfolio manager at Mawer Investment Management, Calgary

Such a plan has advantages. Eve now has peace of mind knowing her funeral is looked after the way she wants and, at her death, her family members […] won’t have to second-guess Eve’s wishes or wonder how to pay for the funeral. The plan is also beneficial if settling the estate is contentious or challenging because funds are tight.

But Eve must understand the details. If paying into the plan until death, she should consider her health and longevity. Also, what protection does she have if the funeral home ceases to do business? And is she paying for services or accumulating a balance to be used against services?

Another option is setting aside a monthly amount held jointly with her executor or power of attorney. The disadvantage is she won’t be locked in to a service price, as she may be with the funeral home’s plan.

The cost of each option could be compared, but the convenience and peace of mind from the funeral home’s plan may be worth the premium.