Brenda Miller, Special to Financial Post
Oct 01, 2021 • 4 minute read
During my 25 years as an investment and wealth adviser, I have learned many things about the relationship between advisers and clients.
My clients have taught me as much as I have taught them. The most important thing they have taught me is, in spite of differences in resources, needs and goals, we appreciate many of the same things.
First and foremost, trust is crucial.
Clients need to know that I care about them and am looking out for their best interests.
Second, respect. Clients and advisers must respect each other and like one another. This is a long-term relationship with regular contact.
Third is honesty, which means full disclosure. Incomplete or inaccurate information, such as an undisclosed debt having unforeseen impacts on cash flows, will hamper our advice and plans. Clients need to understand how the relationship benefits them and how advisers are paid.
It's important to understand a client's goals, financial situation and any obstacles that could hinder their success when we set out to make a financial plan. Family dynamics as well as personal and religious beliefs are other factors that can impact the plan.
Your life stage also has an impact.
Balancing current and future needs can be difficult when income and assets are finite. We often need to help clients decide which goals are most important versus those they are willing to sacrifice or delay.
In order to make those decisions, advisers should gather as much useful and relevant information as we can. For example, I ask to see tax returns and notices of assessment, as well as any employer group savings plans or pension plans that exist. These items provide information regarding marginal tax, registered retirement savings plan (RRSP) limits, possible homebuyer plan repayments and income-splitting opportunities.
Your adviser should also partner with your accountant and lawyer when compiling more detailed financial plans. Many of the larger firms have lawyers, accountants and insurance specialists on staff to ensure they provide a comprehensive plan that applies to your unique situation. This will include you, your family and any corporate holdings.
Service levels will not be the same for everyone. In my practice, everyone receives a semi-annual call or meeting and a comprehensive annual review at minimum. The comprehensive review covers taxes, cash flow, any material changes or upcoming large expenses. Our clients also receive regular statements covering transactions, performance and accounts.
We set up accounts based on the client's risk tolerance and regularly monitor for drift in the portfolio from our target asset allocation. If this happens, we will have another call with the client so we can rebalance their holdings.
Additional meetings may be required when there are significant life changes, planned or not. Examples include new children (or grandchildren), a job change or retirement, marriage or divorce, a new home or downsizing, the loss of a family member, and anything else that could have a substantial impact on your finances.
One of the most important considerations is cash needs and available income. For cash needs of three years or less, safety of principal is usually my investing preference. For cash needs with a four-to-seven-year horizon, income-oriented investments might be a good fit if the client is willing to take some investment fluctuations. For income required eight years or later, this is generally where we would look to income and growth.
This is also where your adviser can consider the tax advantages of Canadian dividends and capital gains.
Most wealth-management firms have access to products outside of their proprietary offerings that allow them to provide clients with access to the best investments to meet their needs. If appropriate, they may also discuss enrolling a client in a discretionary program, which will allow them to more quickly adjust their assets as market conditions change. As you approach retirement age, some other considerations will arise: Should you take your Canada Pension Plan early? Should you defer? Should you convert your RSP to a retirement income fund (RIF) before the mandatory age of 71? Is there income that will allow you to take advantage of the age and pension credits at age 65? Can early redemption of some assets help to prevent future Old Age Security clawbacks? Your relationship and your financial plan will develop and change over time as your needs do. The important thing is to work with an adviser you are comfortable with. Don't be afraid to ask questions.