TAX in­cluded

Ad­ding tax-plan­ning to your menu of ser­vices can help you re­tain clients and gain new ones


tax plan­ning is in­creas­ingly be­com­ing a cat­e­gory through which fi­nan­cial ad­vi­sors can en­hance the value of the ser­vices they pro­vide to their clients.

In fact, 58% of Cana­dian in­vestors said they would fire their ad­vi­sor in favour of another who could ad­vise them re­gard­ing the im­pact of taxes on their in­vest­ment port­fo­lio, ac­cord­ing to a re­cent sur­vey by Toronto-based NGAM Canada LP (a.k.a. Natixis Canada).

Clients are be­com­ing in­creas­ingly aware of the ef­fects that tax plan­ning has on their ac­counts and, as a re­sult, are look­ing to ad­vi­sors for tax ad­vice to save money.

“The ad­vi­sor of the fu­ture — in or­der to be suc­cess­ful — is go­ing to need to an­swer that call,” says Robert Han­del­man, vice pres­i­dent of wealth and tax with Natixis Canada. “Peo­ple care about how much [money] they keep at the end of the day.”

And, ac­cord­ing to Han­del­man, many ad­vi­sors are of­fer­ing only the “tip of the ice­berg” when pro­vid­ing ba­sic ad­vice about max­i­miz­ing RRSPs and TFSAs.

Other top­ics on which you can pro­vide tax-ef­fi­cient in­vest­ment ad­vice in­clude in­come split­ting with a lower-in­come spouse or child, char­i­ta­ble giv­ing and as­set al­lo­ca­tion, he says.

Re­gard­less of whether you have the ex­per­tise to pro­vide ad­vice on com­plex tax is­sues your­self, ad­dress­ing the topic in­di­cates to clients that you are con­sid­er­ing their tax-plan­ning needs.

“It’s an area in which the ad­vi­sor can brain­storm a few ideas, then col­lab­o­rate with an accountant to con­firm that they’re suit­able and ap­pro­pri­ate, and work within all of the rules,” says Brad Coutts, a char­tered pro­fes­sional accountant and fi­nan­cial plan­ner with Ni­cola Wealth Man­age­ment Ltd. in Van­cou­ver.

Fur­ther, tax-re­lated in­vest­ment ad­vice is a cat­e­gory in which you can dif­fer­en­ti­ate your­self from robo-ad­vi­sors, Coutts adds.

And tax ad­vice is vi­tal for high net-worth clients. Wealthy clients can be par­tic­u­larly sen­si­tive about the amount of taxes they are pay­ing be­cause taxes rep­re­sent one of their big­gest bills of the year, says Rose­mary Hor­wood, vice pres­i­dent and in­vest­ment ad­vi­sor with Richard­son GMP Ltd. in Toronto.

Hor­wood rec­om­mends tack­ling the is­sue of tax plan­ning head-on with clients dur­ing the first meet­ing. If the topic doesn’t arise nat­u­rally, then bring it up.

con­nectwith your client’s tax pro­fes­sional

Of­ten, the first step in pro­vid­ing com­pre­hen­sive fi­nan­cial ad­vice is to ask if your client has an accountant, then for per­mis­sion to con­tact him or her.

Even when cre­at­ing a fi­nan­cial plan, giv­ing your client’s tax ad­vi­sor a phone call to dou­ble-check that the plan is ideal for your client’s fi­nan­cial sit­u­a­tion is a good idea, says Joanne Fer­gu­son, pres­i­dent and coach with Ad­vi­sor Path­ways Inc. in Toronto.

Con­nect­ing with your client’s tax pro­fes­sion­als also is im­por­tant for avoid­ing the fric­tion that can oc­cur when mul­ti­ple ad­vi­sors serve the same client, adds Tony Maior­ino, vice pres­i­dent, wealth man­age­ment ser­vices, with Royal Bank of Canada in Toronto.

“We tell our accountant: ‘Save us as much taxes as you can’ and we tell our in­vest­ment pro­fes­sion­als: ‘Make us as much money as pos­si­ble’,” Maior­ino says. “In Canada, if you’re mak­ing a lot of money on in­vest­ments, you’re pay­ing more taxes. So, the mes­sag­ing that we give to our pro­fes­sion­als as clients some­times can be con­flict­ing.”

For Maior­ino, a well-in­te­grated team can be the an­ti­dote to any dis­so­nance be­tween the two pro­fes­sions. Hav­ing an ad­vi­sor and a tax prac­ti­tioner who work well to­gether and can share in­for­ma­tion (such as un­re­al­ized gains or losses from previ- ous years) re­gard­ing their mu­tual client is ideal, Maior­ino says. de­velop new re­la­tion­ships Ad­vi­sors who don’t have a tax spe­cial­ist on hand — ei­ther through their client or through their firm’s tax and es­tate plan­ning divi­sion — still can cre­ate their own part­ner­ships to en­sure their clients’ tax plan­ning needs are met.

Many ad­vi­sors may need to look no fur­ther than their own book of busi­ness, Fer­gu­son says. For ex­am­ple, if you re­peat­edly see the same accountant’s name on your clients’ in­for­ma­tion, you and the accountant prob­a­bly serve the same de­mo­graphic group, ge­o­graph­i­cal re­gion or client niche.

“If there is an accountant who is work­ing with quite a few of your clients,” Fer­gu­son says, “that would be a good place to start.”

The next step is in­tro­duc­ing your­self to that accountant and ask­ing ques­tions about his or her typ­i­cal process with clients. This dis­cus­sion will help you as­sess whether this per­son is a good fit for client re­fer­rals. You may form a re­la­tion­ship with this accountant, mak­ing him or her a cen­tre of in­flu­ence (COI) and, po­ten­tially, a valu­able source of re­fer­rals. seek mul­ti­ple part­ner­ships Tax plan­ning is rarely “one size fits all” ac­tiv­ity, as each client has unique tax plan­ning needs. So, you may need to network with sev­eral tax pro­fes­sion­als as COIs, Fer­gu­son says, es­pe­cially if you serve more than one client niche.

A wid­owed client, for ex­am­ple, wouldn’t share the same tax needs as a small-busi­ness owner; there­fore, both clients would be un­likely to use the same accountant.

Coutts rec­om­mends pro­vid­ing at least three op­tions for clients who need help find­ing an accountant. “Any time we do a re­fer­ral, it’s good to have op­tions so the client can in­ter­view each of them and make their own de­ci­sion and find which one is most suit­able for them,” he says.

Sim­i­larly, Hor­wood’s firm may uti­lize more than one tax pro­fes­sional for one client fam­ily if there is a busi­ness in­volved.

“I think it’s re­ally im­por­tant that the com­plex­ity of our client’s sit­u­a­tion is well matched with the so­phis­ti­ca­tion of the pro­fes­sion­als they’re work­ing with,” Hor­wood says. find­ing the per­fect match Lo­cat­ing a good tax ad­vi­sor to work with is no dif­fer­ent from find­ing a good match for any­thing else in life, Han­del­man says.

“If you’re in­ter­view­ing a ten­ant for a rental build­ing, you’re call­ing past references to check to see if they are a rea­son­able per­son,” he says. “You can do the same thing with any pro­fes­sional.”

Adds Han­del­man: “Al­ways fol­low your gut.”

If you are un­cer­tain of an accountant’s qual­i­fi­ca­tions or back­ground, ask another accountant or a fi­nan­cial ad­vi­sor for a sec­ond opin­ion.

“You’ll be able to sniff out if there is some­one who isn’t do­ing some­thing right,” Han­del­man says.

Also note that re­fer­ring your client to an accountant doesn’t mean that you re­lin­quish con­trol of your client’s ac­count. Rather than out­sourc­ing your client’s tax needs, Han­del­man says, you should re­main the fi­nan­cial ad­vi­sor, act­ing as a “quar­ter­back” for your client’s fi­nan­cial af­fairs. win/win re­la­tion­ship Ide­ally, part­ner­ing with a tax pro­fes­sional should be a “win/win” sit­u­a­tion, Fer­gu­son says. This re­la­tion­ship might in­volve passing re­fer­rals back and forth, so that you will be help­ing each other gen­er­ate new busi­ness.

One way of work­ing with an accountant to gen­er­ate re­fer­rals to­gether is to col­lab­o­rate on a client news­let­ter. You can work on such ve­hi­cles with an accountant and other pro­fes­sion­als such as lawyers, real es­tate agents and busi­ness coaches, Fer­gu­son says. Each pro­fes­sional would be re­spon­si­ble for a sec­tion of the news­let­ter in which they share their ex­per­tise on a par­tic­u­lar topic. The par­tic­i­pat­ing pro­fes­sion­als can dis­trib­ute the news­let­ter through their net­works, ide­ally gen­er­at­ing in­ter­est in the ser­vices of the other pro­fes­sion­als in­volved in the project. meet reg­u­larly To keep your part­ner­ships with tax pro­fes­sion­als run­ning smoothly, Fer­gu­son rec­om­mends meet­ing on a quar­terly ba­sis — even if the meet­ing is just a chance to touch base over lunch.

“It’s im­por­tant with any cen­tres of in­flu­ence that you treat them al­most like a client,” she says, “and have a process that you’re fol­low­ing so that you en­sure you’re on top of what’s new with [that COI].”

These meet­ings also can present an op­por­tu­nity to dis­cuss is­sues your shared clients face — as long as those clients have given you per­mis­sion to dis­cuss their ac­counts, Fer­gu­son adds. Keep­ing the other pro­fes­sional abreast of sig­nif­i­cant changes in your shared client’s file en­sures the client will re­ceive the best pos­si­ble ad­vice from both par­ties.

This ex­change of in­for­ma­tion is par­tic­u­larly im­por­tant for ac­coun­tants who may not have as in-depth a re­la­tion­ship with your shared clients as you do, Coutts says. For ex­am­ple, you know more about how clients are spend­ing their money, as well as any con­cerns they have about fam­ily mem­bers and de­pen­dents. Says Coutts: “You need to have ev­ery­body work­ing to­gether for the client’s ben­e­fit.”

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