FORUM Magazine - December 2020 by Advocis

FORUM DECEMBER 2020 • $5.50

The Magazine of Influence for Financial Advisors

ADVOCIS SYMPOSIUM

2020

COVERAGE

HOW TO PROSPECT IN THESE TIMES WHY WHO KNOWS YOU MATTERS Shannon Tatlock, CFP, CLU, with son, Jack Proud Advocis member since 2011

DOUBLE DUTY How five women advisors with kids survived lockdown and why the status quo just doesn’t work anymore

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FORUM VOLUME 50, 4

DECEMBER 2020

ISSN 1493-826X

FEATURES

Double Duty

The pandemic has set women’s careers back decades. Tamar Satov explores how women advisors with children fared during the spring lockdown and why there needs to be a societal shift

DEPARTMENTS

COLUMNS

26 TAX UPFRONT

EDITOR’S JOURNAL Reducing barriers for women financial advisors

OPENERS Recovering from COVID-19; distanced festive parties; why who knows you matters

34 ADVOCIS NEWS Association updates, events and memorial tributes

How to best adopt an income splitting strategy for clients BY JAMIE GOLOMBEK

28 ESTATE DILEMMAS CRA challenges capital dividend amount arising from insurance proceeds BY KEVIN WARK

29 CORPORATE INSURANCE Ontario court decision’s potential impact on beneficiary designations BY GLENN STEPHENS

38 THE FINAL WORD Hindsight in 2020 BY GREG POLLOCK

32 LEADERSHIP & GROWTH How to motivate new advisors to create referable businesses BY RANDY LITTLE

33 GUEST COLUMN Having the philanthropy conversation with clients BY MARK HALPERN Publication Mail Agreement # 40069004 Return Undeliverable Canadian Addresses to FORUM Magazine Circulation Department, 10 Lower Spadina Avenue, Suite 600, Toronto, Ontario M5V 2Z2

Pandemic Prospecting

Title Debate

How do advisors grow their businesses in the new normal? As April-Lynn Levitt, Kim Poulin, and Patricia Giesbrecht explain, there’s no going back to yesterday

Where does regulation of “financial advisor” and “financial planner” currently stand? Susan Yellin reports from Advocis’s first-ever virtual Symposium

Policy Analysis

Richard Parkinson outlines two methods for getting clients to reconsider how much insurance is enough DECEMBER 2020 FORUM 3

BY DEANNE GAGE

Removing Barriers

’ll never forget my first advisor conference 21 years ago. In a crowd of 100 people, I counted just nine women. That included myself. Later, I would learn that less than a quarter of all Canadian financial advisors were women, but not even this percentage was reflected at that conference. When my former magazine first started its own conference division a few years later, part of our mandate was to increase female delegates to represent the percentage of women in the industry, but ideally even more than that. In fact, our invite-only symposiums were often an even 50/50 ratio. During that time, many women advisors would pull me aside and proclaim what a pleasant surprise it was to see more female speakers and delegates at industry functions. Sadly, a recent StrategyMarketing.ca report from Judy Paradi and Paulette Filion shows that more than two decades later, the percentage of female financial advisors has not changed. The reasoning comes down to systemic issues, according to the report entitled Why There Are So Few Female Financial Advisors and What Needs to Happen to Grow the Numbers. “There’s no question financial organizations understand the benefits female financial advisors represent — they dedicate enormous resources to grow their numbers,” the report states. “The problem is that not enough is being done to help those on the front lines … to identify the women who are best suited for the job, what’s required to set them up for success and what they need to launch their practices once they become advisors.” One anecdote came from a female financial advisor who didn’t start in financial services at the beginning of her career because she had worried about the juggling act of managing a family and high-demanding job expectations. Which leads me to the topic of this month’s cover story. At the start of the pandemic, schools and daycares shut down, leaving parents — but notably mothers — struggling to do their full-time jobs from home while simul4 FORUM DECEMBER 2020

FORUM PUBLISHER: Peter Wilmshurst advocisforum@gmail.com EDITOR: Deanne Gage dgageforum@gmail.com COPY EDITOR AND PROOFREADER: Alex Mlynek ART DIRECTOR: Giselle Sabatini artdirector@forum-mag.ca ADVERTISING: Peter Wilmshurst advocisforum@gmail.com Tel: 416-766-4273 Fax: 416-760-8797

TFAAC BOARD OF DIRECTORS CHAIR Abe Toews, CFP, CLU, CH.F.C., CHS, ICD.D VICE CHAIR Rob Eby, CFP, RRC PAST CHAIR Al Jones, CFP, CLU, ACCUD, ICD.D SECRETARY Catherine Wood, CFP, CLU, CHS TREASURER Eric Lidemark, CFP, CLU, CH.F.C., CHS CHAIR, CLC John McCallum, CFP, CHS CHAIR, THE INSTITUTE John W. Hamilton, CLU, FEA, CPCA DIRECTOR AT LARGE Stephen MacEachern, CFP, CLU, CH.F.C., CHS

taneously homeschooling and minding their children. I’m no exception. I’ve worked at home for the past decade, and in the early years, my kids were in daycare. People who worked outside of their residences used to always ask why our kids weren’t home with me while I worked. My answer was always the same: “So I can actually work.” Funny thing: now that more people are working from home this year, not one person has asked me that question. Women financial advisors with kids are no exception, either. It’s not as though the demanding workload disappears when kids are in tow. If anything, the amount of work has increased for advisors, since a pandemic is uncharted territory. Clients need to take care of loose ends in their financial plans (estate planning comes to mind), investment selection, or just want someone to listen to their mounting financial concerns. Thanks to the five advisors who shared their stories, allowing us a sneak peek into their days and nights during the spring lockdown. As we potentially gear up for future lockdowns, they have great suggestions for how to move forward. *** This year definitely wasn’t one any of us envisioned. On behalf of the staff at FORUM, wishing you all safety, health, hope, and comfort during these times. Until next year.

DIRECTOR AT LARGE Wendy Playfair, CFP, CLU, CHS PUBLIC DIRECTOR Geoffrey Creighton, BA, LL.B., C.DIR., CIC.C PUBLIC DIRECTOR Sara Gelgor, LLB, LLM, MBA, ICD.D PRESIDENT & CEO Greg Pollock, CFP FORUM is published four times annually by The Advocis Publishing Group, 10 Lower Spadina Avenue, Suite 600, Toronto, Ontario M5V 2Z2 TEL: 416-444-5251 or 1-800-563-5822 FAX: 416-444-8031 FORUM is mailed to all Association members, the subscription price being included in the annual membership fee. Address changes can be made through info@advocis.ca or by calling member services at 1-877-773-6765. The opinions expressed in articles and advertising are those of the authors/advertisers and not necessarily those of FORUM or the Association. Material of a technical or semi-technical nature may become invalid because of later changes in law or interpretation. The Association is not responsible for obsolescence of FORUM articles whose content should be checked by the reader before implementation. Requests for permission to reprint articles are to be addressed in writing to the editor of FORUM. ™ Trademark of The Financial Advisors Association

of Canada carrying on business as Advocis.

FORUM EDITORIAL ADVISORY BOARD MICHAEL BERTON, CFP, RFP, CLU, CHS Assante Financial Management Ltd. LEONY DEGRAAF HASTINGS, CFP, EPC deGraaf Financial Strategies NICHOLAS LANDRY, CEBS, CHS, RCIS BFL Canada - CSI ROBERT MCEACHERN, CFP, CLU, CH.F.C. McEachern Financial IZUMI MIKI-MCGRUER, CFP, CLU, CH.F.C., CHS Freedom 55 Financial

PHOTO: DANIEL EHRENWORTH

EDITOR’S JOURNAL

Financial Horizons Group is committed to independent advisors and their communities.

Leading with heart

COMMUNITY CHAMPION

Terri Kwan

Terri Kwan will tell you that a successful career isn’t defined by money. “You need two very important things to thrive: a heart to help and the ability to help.” It’s exactly this sentiment that motivates her approach with clients. Terri invests two to three hours with each new client to understand their pain points and to discover where she can add value. Terri prefers a face-to-face approach, making herself available to clients whenever they need her. Working through a pandemic has changed that somewhat—

3T FINANCIAL SERVICES INC. MARKHAM, ON

as in-person conversations have migrated to phone and video platforms—but her commitment to staying connected with clients hasn’t wavered. While she has only been partnered with Financial Horizons Group for one year,

Family first

When speaking with Allan Burgoyne, one thing is clear—family is everything. His voice perks up when he talks about his wife and three sons. “When my middle son was in grade four, he wrote me a letter declaring he would one day be my business partner,” he shares. Today, two of Allan’s sons work alongside him at Burgoyne Insurance, adding what he describes as a “whole other level” to the business. Financial Horizons Group has been instrumental in Burgoyne’s career— his relationship with the company has deep roots. “I feel very lucky to have such a close relationship with a

Terri has already noticed a positive impact on her business. “I think it’s great that Financial Horizons Group always wants to hear from advisors to learn and improve. It feels good to know they’re always there and committed to offering support, in addition to providing regular training and the most up-to-date industry information.”

COMMUNITY CHAMPION

Allan Burgoyne A.M. BURGOYNE INSURANCE ASSOCIATES INC. CHARLOTTETOWN, PEI

company that treats my business, and every agent’s business, like it’s their own.” Having been in the industry since 1989, Allan has seen a lot. From pivoting through changes to stop-loss rules and demutualization in 2017, to now navigating the 2020 pandemic. “Our insurance business came to a complete

stop in March when providers stopped doing medicals. We were able to keep things going through the wealth management side of the business that my sons have been growing.” His sons have also helped advance the business from a technological perspective. Burgoyne Insurance is well known in the community and gives-back generously, supporting various charities in Prince Edward Island.

You define success. We’ll help you achieve it. For the past thirty years, we’ve opened offices across Canada to better understand your local perspective, unique needs, and most importantly, your definition of success. As the financial industry continues to evolve, understanding your objectives and delivering personalized service is more important to us than ever. Your goals are our goals, and together we can make them a reality.

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OPENERS Fodder For the Water Cooler COVID-19 LONG HAULERS LOOKING FOR RELIEF

6 FORUM DECEMBER 2020

FESTIVE PARTIES DIFFERENT THIS YEAR

here’s no doubt COVID-19 has thrown a wrench into holiday parties with clients this year, but that hasn’t stopped people getting creative. Donna Wadsworth, owner of Savoury City Catering, says one financial firm in Vancouver is planning on having a party that is staggered so as to maintain distancing requirements. Employees will receive a custom-designed hors d’oeuvres box, labelled and wrapped with twine and season greenery and a can (yes, a can) of wine from B.C.’s JoieFarm Winery. “It’s really festive and fun. They can either eat it in the office or take it home. We’re seeing lots of this happening,” she explains. An executive dinner could include prime rib, potato pave, and Yorkshire pudding. The meals are delivered to employees’ homes where they just have to be heated up. Other ideas Wadsworth has come up with for corporate clients include individual boxes of beef or salmon Wellington with a little package of frozen hors d’oeuvres that can be warmed up. Even festive breakfast boxes or group lunches on Zoom can be put together. “It’s a whole different mindset, but we are transforming,” says Wadsworth. “We’ve done a big switch — but I think we’re in it for the long haul.” — S.Y.

PHOTO: ISTOCKPHOTO

iriam couldn’t understand what was happening to her. She felt great one day and totally confused the next. Headaches arose out of the blue, and along with these symptoms came severe tiredness and memory fog. On top of everything else, she was hit with sudden bouts of depression. Miriam was 100% positive that she had fallen ill with COVID19 while visiting her parents in the U.S. shortly before the virus became a pandemic. She returned to Canada with her three young children but was unable to find any solace until she was told about a support group website called COVID-19 Long Haulers for those who had apparently recuperated from the novel coronavirus but still suffered long-term aftereffects. “While doctors may not have been able to help me, the support from this group has been tremendous,” says Miriam. Scientists have discovered that people who did not know they had COVID-19 or have been given the medical green light after hospitalization suffer from a variety of lingering lung and heart illnesses as well as chronic fatigue. In Facebook forums, some long haulers say they originally received little or no support from doctors, potentially because they didn’t have severe symptoms and weren’t hospitalized. In Britain, the government has announced the launch of a major £8.4-million research study into the long-term health effects of COVID-19 on hospitalized patients. The study is looking into patients diagnosed with COVID-19 who have been discharged. It is particularly looking at the medical, psychological, and rehabilitation support they need to be able to make a full recovery. Evidence from other illnesses, notably SARS, showed that even after 15 years, a number of former patients were still suffering effects. A report by the Centre for Addiction and Mental Health in Toronto says COVID-19 survivors have a range of experiences and uncertainty about their illness, and many experience a severe impact on their mental as well as physical health. A spokesperson for Canada Life expressed empathy for those who have lost a loved one to COVID-19 or who are struggling themselves with the virus “that has so many unknowns.” The spokesperson said disability arising from COVID-19 is eligible for coverage under Canada Life group and individual disability insurance policies. If someone meets their plan’s definition of disability and is functionally unable to work because of the long-term effects of COVID, this would be covered under their disability plan, provided all other contractual provisions are met. — Susan Yellin

BRANDING & SOCIAL MEDIA BY ERIN BURY

WHO KNOWS YOU MATTERS MORE THAN EVER

n 2020, word of mouth is still the most powerful form of marketing, and that’s especially true for professional services. And in the past decade, reviews have become one of the most powerful forms of word of mouth marketing — a strategy advisors should be employing to drive their business. Reviews have become commonplace on ecommerce sites like Amazon, travel platforms like TripAdvisor and Airbnb, and for local restaurants and retailers on Yelp. A one-star review means stay away, while a five-star review can drive up prices and demand, and confirm that we should invest our time (and money) with that business. For financial advisors, reviews can be a powerful way to leverage happy clients into brand trust. While a potential client may not find you through your reviews — rather they may find you through a Google search, a recommendation from a family member or friend, or an advertisement —reviews are typically how people research whether you’re the right fit. They’re faster than reference calls, and as long as they’re positive, they provide an extra layer of comfort before they book their appointment. Knowing how important reviews can be to closing business, it’s essential to develop a strategy for collecting and promoting reviews. While some people may go out of their way to leave a review even if they’re not asked, most people need a nudge — so here are a few ways to build a great review strategy:

Pick a platform While you can collect them on multiple platforms, typically, businesses pick one channel to focus on for their reviews. If you’re a tourism company, it’s likely TripAdvisor. If you’re a restaurant, it might be Yelp. For advisors, you may want to consider AdvisorSavvy.com, a platform dedicated to advisor reviews; a dedicated review platform like TrustPilot; or you might collect reviews on Google or Facebook. At Willful, we focus on Google reviews since we know most of our customers

start their search on Google. We’ve collected hundreds of fivestar reviews on Google, and it’s the first thing you see when you search for us. Think about the behaviour of your clients and how they find you, and focus on driving reviews where your customers are most likely to see them.

Ask for reviews Getting reviews from your clients is as simple as asking. You likely already have testimonials from clients on your website, so you can reach out to those clients to ask them to repost on a review platform, or you can reach out to clients to ask them to share a new review. It should also be part of your client experience — you can include it in email follow-ups after appointments after a key part of a financial plan is finished, or on an annual basis. While not everyone will leave a review, many will be happy to share their experience. Just remember to aim for unbiased, truthful reviews. No reviews is better than fake reviews, and the web is good at sniffing those out.

Promote your reviews Building up reviews on a platform like Google is great for people who happen to find you while they’re searching — but you should also be leveraging reviews in your marketing. At Willful, we promote our reviews on social media via a review of the week, showcase them on our website, highlight them in our marketing emails, and they’re even in our investor pitch decks. Our reviews help to showcase our product and user experience, and they’re something that we’re extremely proud of. We make sure to show them off, and you should, too.

Be ready for the one-star review Asking for reviews can make business owners feel vulnerable. It’s inevitable that for every 10 positive reviews, there will be one that is lukewarm, or even negative. Sometimes it’s warranted, sometimes it’s out of your control (for example people don’t like printing their wills on Willful, but it’s the law), and sometimes it’s inaccurate or — worst case — it’s a competitor posting something false. My approach with negative reviews is always to acknowledge the review by replying: share the facts as to why something isn’t correct or is out of your control, or acknowledge their concern and thank the person for sharing feedback. Ultimately having only five-star reviews makes it look like your reviews are fake, so having a negative review in the mix can make your business look more human. As we face a long winter spent indoors, Canadians are increasingly going online to shop, find service providers, and take care of daily tasks. Reviews are a core part of how we research, vet, and choose products and services, and investing in your review strategy can be a way to ensure you can build out your client list in 2021. ERIN BURY is the CEO at Willful.co, an online will platform that empowers advisors to help clients with estate planning. She has more than a decade of experience building brands.

DECEMBER 2020 FORUM 7

First-time homebuyers counting on financial assistance

OPENERS

DID YOU KNOW? More Canadian investors edging toward responsible investing • One-quarter of both mutual fund and ETF investors currently own responsible investments. • Both mutual fund (61%) and ETF (61%) investors who do not currently own responsible investments indicate they are somewhat likely, likely, or very likely to include these investments in their portfolio over the next few years.

• Some 59% of homebuyers in British Columbia and 58% in Ontario are the most likely to look for financial assistance. • Nearly a quarter of homebuyers are looking for between $10,000 and $50,000. On average, these first-time buyers are looking for more than $44,500 in assistance. • To help them get into their first homes, some buyers are counting on a generous financial prop up from family: Millennials are expecting the most help: nearly a quarter of Millennial buyers (23%) are expecting $100,000 or more. SOURCE: BMO (WITH SURVEY CONDUCTED BY POLLARA STRATEGIC INSIGHTS), OCTOBER 2020

SOURCE: CANADIAN MUTUAL FUND AND EXCHANGE-TRADED FUND INVESTOR SURVEY BY IFIC AND POLLARA, 2020

About 40% of Canadians are worried that COVID-19 will impact their savings and retirement plans • 32% no longer plan on travelling • 30% believe they will have to work longer than expected • 26% say the pandemic has increased the cost of retiring SOURCE: CIBC, OCTOBER 2020 SOURCE: OSLER REPORT ON DIVERSITY DISCLOSURE PRACTICES, OCTOBER 2020

Connections That Count In 2020, hundreds of Advocis members volunteered their time and expertise through Advocis Connect - a unique program established to help small business owners across Canada manage the impact of COVID-19. By providing everything from advice on government relief programs to insights on how to maintain business continuity, our members also offered something greater: An encouraging voice in a difficult time. Thank you to all members of Advocis who participated, helping fellow Canadians protect their livelihoods and communities.

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COVER STORY

Shannon Tatlock, CFP, CLU, and son, Jack

10 FORUM DECEMBER 2020

DOUBLE DUTY The pandemic has set women’s careers back decades. Tamar Satov explores how women advisors with children fared during the spring lockdown and why there needs to be a societal shift

hen New Brunswick imposed sweeping measures in March to prevent the spread of the novel coronavirus, Shannon Tatlock had a problem. While the storefront offices of Kevin R. Williams Financial Services (Sun Life) in Moncton — where she works as a financial advisor — could stay open, her toddler’s childcare centre would close. “I had no daycare at all for six months,” says Tatlock, CFP, CLU, who stayed home to look after her three-year-old son, Jack, while trying to squeeze in her paid work during the hours that he slept. Making the situation even more stressful, she and her ex-husband decided he would see Jack only once a week to reduce their virus exposure risk. “It fell on me to manage the house, my job, and a three-year-old,” says Tatlock, 36. Similar scenarios played out across the country as the lockdown left parents — predominantly mothers — in the untenable position of trying to supervise and often help teach their kids while concurrently performing their jobs. Canadian women took on an average of 27 additional hours of child care per week during the pandemic — or an astonishing 95 hours of child care per week in total — according to a McMaster University study published in October. (Men put in an extra 13 hours of child care per week during the lockdown, for a total of 46 hours on average, the research finds. That’s still 22 fewer hours than the average woman performed each week before the crisis.) Frances Donald, Manulife Investment Management’s global chief economist, was one of the first professionals to

call out the child care issue in a March 13 appearance on TV Ontario’s current affairs program The Agenda: “You can tell a parent to work from home, but if they’re taking care of a six-year-old at the same time, are they going to be productive? Are they actually getting their work done? Do they need to bring in extra support? There aren’t enough resources to deal with the fallout of that.” Donald herself is the mother of a three-year-old boy. With the looming possibility that schools and daycares could close again as the pandemic wears on, there’s a growing sense of rage among mothers who are compromising their careers — and their well-being — in a system that’s blind to their plight and expects them to do it all. To help us understand how the spring lockdown affected mothers, FORUM spoke with five financial advisors across the country, including Tatlock. Here’s a snapshot of what a typical day looked like for them during that time.

5 A.M. With her office at IG Wealth Management in Regina closed and her husband struggling to save his equipment resale business, Nadège Koskamp is left to work from home while caring for her two daughters, ages 2 and 4. And, given that the younger one rises before dawn, the 38-year-old CFP gets up at 5 a.m. for an hour of uninterrupted work time. “I power through my most important task before the kids get up,” says Koskamp, who has a $63-million book with her associates. “Even if I don’t return to work until nap time, I feel a sense of accomplishment and less overwhelmed.” DECEMBER 2020 FORUM 11

COVER STORY

10 A.M.

6 A.M. Trixie Rowein, CFP, CIM, has two daughters (ages 12 and 15) who sleep in, so she waits until the comparatively late hour of 6 a.m. to begin her workday. “Before, I would get up at 6 and get to the office for 8,” says the 45-year-old founder of PAX Portfolio Advisory Team and VP of Raymond James Private Client Group in Edmonton. But once schools closed in March, she started hammering out emails early each morning to get a head start on work before the girls’ online classes. “And maybe do calls with my farmer clients, since they’re up early,” she adds.

7 A.M. Seema Sharma, CFP, CLU, another mom of two daughters (ages 9 and 19) starts her day in full-on parent mode. That was the deal that the 49-year-old president of Wealth & Estate Financial Canada in Mississauga, Ont., struck with her husband, also a self-employed advisor (specializing in commercial lending), so he could start work at 7 a.m. and trade off shifts with her later in the day. Both of Koskamp’s kids are now up, so she gets breakfast ready.

Nadège Koskamp, CFP

With her daughters now “in school,” Rowein spends an hour or two on the phone with clients, mostly retired business owners. For everyone else, the long morning of parenting continues. “The TV was my babysitter if I had meetings before naptime,” says Rousseau, although she tries to avoid that as much as possible. “With the nineyear-old, I can give him a task to keep him busy. But a two-year-old can’t stay on task for more than 15 minutes and needs attention and my eyes on her at all times.” Koskamp might also get an hour of work in if she parks the kids in front of the TV, although she’s more likely to use five minutes here and there to give the room a quick vacuum or put in a load of laundry. “Before the pandemic, I hadn’t cleaned my own house in two years,” she says, highlighting the additional burden of losing domestic help during the outbreak.

11 A.M.

Sharma, at last, starts her workday, as her husband takes over on the parent Trixie Rowein, CFP, CIM front at 11:30. She’ll keep at it until 8 A.M. 4:30 — five hours in total instead of Tatlock, no longer in her usual routine of her usual 10 — which is a sacrifice to dropping Jack off at daycare at 8:30 and then heading to the office, her business. “Our bottom line was cut in half for sure,” she says, is also in mommy mode until at least 1 p.m., when naptime theobut with family vacations and other outings off the table, they retically begins. haven’t needed to tap into their savings. Similarly, divorced mom Melanie Rousseau, 39, is home caring 12 P.M. for her daughter, age 3, and son, age 9, while also keeping her It’s lunchtime for everyone (aside from Sharma, who is now deep Toronto-based financial coaching business, Money Mama, afloat. into the work zone). Rowein spends the hour with her girls, who “Before, they were at school and daycare from 8 to 5,” she says. “I have a break before their afternoon classes online. Meanwhile, the had to come up with a new routine — dealing with their online toddler moms begin their countdown to the worktime opportuschooling and involving them in chores, like laundry, cooking, nities afforded by naptime — or as Koskamp calls it, “the only and baking.” As is the case for many mothers working through the lockdown, she’ll complete most of her paid work in the evening time I can talk without a little person screaming.” after the kids are in bed. But first, Tatlock and her son head outside to wave at the oncoming garbage truck. The workers wave back and honk, mak9 A.M. ing the boy’s week. “Toddler life is hard, but these simple moments While Rowein and Sharma help their girls set up for virtual are everything,” she posts on Twitter. school, the toddler moms do what they can to keep their children 1 P.M. active. When weather permits, that could be going for walks, playWith the kids down for their nap, Koskamp does a quick check of ing in the backyard, trips to the park (if open; many playgrounds her appearance to make sure she looks presentable before settling closed during the pandemic), excursions to conservation areas, and bike rides. in for a series of Microsoft Teams or Zoom meetings with colIf conditions are too harsh for outdoor activities, everyone’s leagues and clients. “Glasses are the new mascara,” she jokes. “You just put them on — no need for eye makeup!” As for her hair, it’s stress level rises. “When the kids are stuck at home and can’t do usually in a tight bun — another time saver, she says. all the things they love, like going to the playcentre, swimming, Tatlock typically books client calls for 2 p.m., with an email conor gymnastics, I find they need more cuddles,” says Koskamp. firmation at 1:30 to report if the nap “took hold” or if they need “Home life is more emotional than usual.” 12 FORUM DECEMBER 2020

to reschedule. “Most clients are really understanding,” she says. After all, several are also moms dealing with similar issues. One client, for example, confronted her spouse about having to work from home as a customer service rep and care for their five-year-old while he continued to work outside the home. Now they’re getting divorced. “That’s what happens sometimes when women put their foot down and say, ‘No, I’m not doing it all by myself anymore,’ ” Tatlock notes.

Melanie Rousseau

2 P.M. Sharma, who’s become an instant expert at sending online documents and setting up Zoom meetings (“it was like tech training on steroids,” she says) carries on with her work. Among her clients: a family physician expecting her first child who continues to put in 10-hour days while in the ninth month of pregnancy despite the risks of COVID; and the female owner of a chain of specialty grocery stores in Peel that imports ethnic foods from around the world. “Because of the pandemic her stores are busier than ever, but now she has no nanny,” says Sharma. “So, she took her three-yearold on her back from store to store. Women are just rolling up their sleeves and getting the job done.”

3 P.M. With naptime now over, Koskamp and Tatlock have finished their meetings and are back to mommy mode. That tight window of opportunity means there’s barely enough time to service existing clients, let alone build new business. “My income is down 25% to 30% compared to what I could have been earning,” says Tatlock, who made up the shortfall by

accessing the Canada Emergency Response Benefit (CERB) and lowering her expenses. “But my male counterparts, who have a spouse or someone to help at home, can continue to build their businesses. It’s the thing I have the most difficulty with — that I can’t do the advancement that I want to.” Koskamp, whose new business is down 17% over the same time last year, echoes those sentiments. “It’s really difficult to find the time to prospect,” she says, adding how infuriating it is when people

COVER STORY talk about using their extra time at home to binge shows on Netflix and bake their own bread. “All you hear is how great it is to be working from home. But it’s not great for everybody.”

Koskamp, who hopes to keep working at home some of the time even after all the lockdowns are over.

9 P.M.

With both kids now asleep, Rousseau meets with clients virtually. But she’s had to reduce her client load to keep up the 4 P.M. quality of her work. “It takes time to Unless it’s Wednesday or Thursday, build a plan and prepare for meetings, so Rowein closes shop for the day. “I tell instead of four to 10 client appointments clients that if I’m going to work late, those a day, I’m down to that number per are the days. Not everybody takes me up week,” she says. The Canada Emergency on it, but they know they’ve got the Wage Subsidy and her own emergency option,” she says. savings have helped bridge the gap. Unlike our other advisors, Rowein says Koskamp tidies the kitchen, makes herself a cup of tea, and buckles down her bottom line has actually increased this with a pile of paperwork. “I can do all year due to an influx of referrals. She that administrative stuff in the off attributes this to two possible factors. First, Seema Sharma, CFP, CLU hours,” she says. “I work as late as 11 or she recently hired a junior advisor who is 12 sometimes.” good at attracting younger clients. Second, Similarly, Tatlock tackles the bulk of her practice work after her in addition to the newsletter that she was already writing and sendson is down for the night, but she also uses this time to prepare for ing to clients every Wednesday, Rowein now emails them a weekend update. “With the pandemic, many clients had the same questions the CLU exam (which she subsequently writes and passes in June). about their investments, estate, and retirement planning, what hap“I am now the only woman at Sun Life in all of New Brunswick with both the CFP and CLU,” she says. “And I need both these pens when someone passes away,” she says. “Things were changing credentials to compete with a man who has none.” quickly, and it helped to keep them calm and in the loop.” Of course, Rowein’s experience also underlines the fact that par10 P.M. TO MIDNIGHT enting responsible teens can be far less time-consuming than mindWhen they can no longer keep their eyes open, the moms call it a ing younger children, who cannot be left alone for even a moment. day and get some rest — before they do it all again tomorrow. As Tatlock comments on Twitter in late March: “There is nothing more terrifying than a toddler out of eyesight who is silent.” *** Sharma also starts to wrap up the professional part of her day, As parts of the country reopen — or shut down for a second time allowing her husband to resume his second shift of work at 4:30. — the advisors we spoke with are hoping for change. Aside from her reduction in work hours, Sharma says she’s had to “A lot of household duties are seen as feminine, but we need give up self-care activities, such as exercise, and cut back on community commitments (she previously sat on four boards, now she’s to look at these duties as equal and raising a family as a partnership,” down to two). says Koskamp. She moved back to her home province of Ontario in September to be closer to her aging parents, and transferred 5 P.M./6 P.M. to IG’s Kitchener-Waterloo, Cambridge office in the role of division Rousseau multi-tasks her way through the evening by making supdirector. She continues to work from home, but has sent her per, preparing client quotes, and helping her son with homework. daughters back to in-person school and daycare for the time being. At casa Rowein, her partner — a former chef — is usually the Sharma agrees that there needs to be a societal shift. “One hunone cooking dinner. “It’s a big bonus,” she acknowledges, adding dred years ago, women were responsible for 100% of the household that she still handles cleanup. duties. Today we’re still responsible for about 80%. It’s cultural conditioning. We see our mothers do it and push ourselves to do 7 P.M./8 P.M. the same,” she says. While she’s been back in the office since her As the littles start getting ready for bed, their moms gear up for daughters returned to the classroom in September, she’s limiting more work. But not before counting their blessings. “We do a herself to eight-hour days instead of her previous 10. “This is a new moment of gratitude every night to remind us of what we have,” world, I would never go back to my old schedule,” she says. says Rousseau. “Yes, we have days when we struggle and all cry Tatlock, who also returned to the office full time when her son’s together, but that’s OK. We’re a family and no matter what, we’ll daycare reopened in September, thinks industry needs to be part always have each other.” of the solution. “I would love to see businesses offer a 50-50 split She and all the other moms make a point of saying how much on working in the office and at home, for both women and men,” she says. And, yes, she has discussed this with her boss — her 58they’ve appreciated this extra time with their children. “The panyear-old father — who she describes as a little more old school but demic gave us the opportunity to really get to know our kids — open to the idea. that was amazing,” she says. “I didn’t get a mat leave with either of my girls, but I got to spend TAMAR SATOV is a Toronto-based writer and editor. this time with them and watch their personalities change,” concurs

14 FORUM DECEMBER 2020

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PRACTICE MANAGEMENT

Pandemic Prospecting

uring the last nine months of this pandemic, business owners were left with two choices: adapt or get left behind. One of the biggest questions we are currently hearing from financial advisors is about how to prospect for new clients when they can’t meet people in person. Prospecting challenges were real for advisors pre-pandemic so the added physicaldistancing challenges have left advisors and business owners scrambling to figure out how to adjust their process so they can still find prospecting success. Here are the challenges we are seeing: 16 FORUM DECEMBER 2020

Building trust with prospects over the phone or video calls: A lot of advisors aren’t confident they are putting their best foot forward with selling their value via phone or Zoom meeting. Advisors may feel especially vulnerable if they have technical issues while on the call, concerned their message could get “watered down” with poor audio or video on either end. Some prospects and clients are also not comfortable with the new technology. Approaching prospects who have been negatively affected financially: Whether you are trying to acquire a prospect or crosssell to an existing client, it can feel poorly timed, especially if you

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How do advisors grow their businesses in the new normal? As April-Lynn Levitt, Kim Poulin, and Patricia Giesbrecht explain, there’s no going back to yesterday

are speaking with someone who is in an industry that has been hit hard by COVID restrictions and safety measures. Canadians all have a lot on their plates right now. No time to prospect: Advisors themselves may feel like they have less time to devote to prospecting. Many are checking in more with existing clients or have experienced process changes within their office that they are still ironing out. If advisors were having trouble prioritizing their prospecting at the beginning of 2020, it’s safe to say that it would become even more challenging now. Throughout history, shocking events have led to great transformations. This may sound cliché, but many opportunities have arisen through challenges. Growth and change can be a wonderful thing if you can find those opportunities. We have seen many advisors continue to prospect throughout the pandemic, and despite not being able to meet face to face, they have added new ideal clients. How do you manage these challenges? First, realize there is no magic solution. The things that worked before the pandemic are the things that work now — the strategies remain the same with a few adjustments. 1. Adjust your mindset and attitude. We have seen some of our coaching clients have their best year ever in 2020. One advisory team acquired a multimillion-dollar client virtually from an introduction from a strategic alliance. If you are having a challenge with prospecting right now, you first need to convince yourself it can be done. Talk to colleagues who have been having a successful year to see how they are doing it. Create some positive affirmations for yourself to work on your mindset. For example, “I am a rainmaker and I am attracting new opportunities every day.” Read some books or blogs on marketing and prospecting. A coach can also help you work on negative beliefs you may have in this area. 2. Use a multi-channel approach. Try a combination of phone, email, video, social media, text, and some in-person communication. Consistently share valued content through multiple channels to remain top of mind and enhance your credibility. Recent research by Fidelity in the U.S. found several factors that led to prospecting success for advisors during the pandemic. If you see prospects have an interest in a specific communication channel, you can focus where they are most comfortable. In addition to social media, include a phone conversation. Connect and provide value wherever possible.

Many people may have made some poor investment decisions driven by emotion this year. With an advisor, you are less likely to make decisions in haste. Those who stay the course are likely to be rewarded for their patience. Prospects who do not have an advisor, or perhaps have an advisor who doesn’t connect with them regularly, will be feeling even more in need of advice now versus before. So now is a good time to connect, and we have seen some advisors go back to reach out to former/cold prospects as well. 5. Persevere. The same old challenges exist. Some prospects are hard to reach, and they may have objections, and your reluctance may remain the same. Find time in your calendar on a daily basis to focus entirely on prospecting. Prospecting is difficult for most, but the delayed payoff is worth it — be patient. One advisor we work with in Alberta reported adding several new group and insurance clients despite the pandemic and a struggling economy, but his comment to us is that it takes “hard work.” 6. Embrace technology. The more you use it, the easier it becomes. Zoom meetings are easy to navigate. You can always go in and do test meetings, and try out the features and audio. That is what The Personal Coach did when we started using the tool three years ago. Make sure you ask questions that boost positivity or help you get to know each other on a personal level. Always take a few minutes to do an introduction before getting down to business. You can gauge this introduction time frame based on how much your prospect is talking. Make time for questions and comments. You can learn even more about your prospect by doing this. Other tips to help with making good impressions online: a. Use visual aids and send them ahead of time if meeting by phone or have them onscreen for video b. Utilize imagery to create variety with your background c. Slow down your pace and annunciate clearly d. Ask good, emotional-connecting questions e. Use humour if that’s part of your personality f. Use the prospect’s name g. Have the person who referred the prospect join the call or video for the first couple of minutes to break the ice.

3. Build awareness. Although 77% of advisors have an established social media presence, only one in four advisors have used social media to prospect during the crisis. The main tactics that we see working are still primarily word-of-mouth and relationship-driven: • Referrals and introductions from existing clients • Targeted client events • Introductions from centres of influence (COIs) • Virtual and strategic networking It continues to be important to understand your ideal client profile so you can communicate that effectively to COIs and other people who could provide you with introductions.

7. Be referable. Do an excellent job with your existing clients and have a process in place for introductions. Many of the advisors we work with have expanded their level of service to their existing clients over the past few months with increased communication, including phone, email, and video. Some have provided educational webinars, and others have been hosting fun virtual client events as a distraction and a way to build community such as hosting yoga or cooking classes or bringing in a comedian. Advisors have also been able to show appreciation to clients with gestures such as delivering flowers on Thanksgiving to those clients that were alone without family. All of these things go a long way toward your referability. Many people are concerned about their finances right now and may not have even heard from their advisor. This is a prime opportunity to ensure your clients are aware you are there as a resource to help their family and friends if they have questions. Don’t be the best kept secret.

4. Know your value. Remember that advisors are needed more than ever. In times of uncertainty, it can be very helpful for investors to have an advisor to show them the big picture and stay on track.

APRIL-LYNN LEVITT, KIM POULIN and PATRICIA GIESBRECHT are business coaches at The Personal Coach, providing customized coaching to financial advisors and their teams. DECEMBER 2020 FORUM 17

SYMPOSIUM

Title Debate Q

uebec has its advisor titles list. Saskatchewan has recently taken steps to bring in its own. But in Ontario, where the titles issue is also on the table, one insurer is warning that if the Life Licence Qualification Program (LLQP) doesn’t make the credentialing grade in the province, businesses and advisors alike could be in for some major hardship. Ali Ghiassi, vice-president, Industry Affairs and Government Relations at Canada Life, told the Advocis Regulatory Affairs Symposium 2020 that his firm is committed to title designation and making advisors more professional.

18 FORUM DECEMBER 2020

Ghiassi said he believes the LLQP represents the kind of professional designation that is sufficient for a person to be called either a “financial advisor” or a “financial planner”— the two titles most frequently mentioned by regulators and insurers. The requirements to get one of the monikers includes training in ethics, conflict of interest, an understanding of the stock markets and products, detailed financial information, product suitability, and period reviews, among other topics, he explained. But Ghiassi said if the Ontario regulator doesn’t find the LLQP satisfactory, there could be issues. “If the rule ends up being that the LLQP licence is not sufficient,

PHOTO: ISTOCKPHOTO

Where does regulation of “financial advisor” and “financial planner” currently stand? Susan Yellin reports from Advocis’s first-ever virtual Symposium

Greg Pollock

Sara Gelgor, moderator

Laura Tamblyn-Watts

Huston Loke

we are going to end up in a position where there will be likely thousands of advisors throughout the province, in small towns and medium-sized and large cities that will have their businesses disrupted,” said Ghiassi. “They will be required to ‘credential up.’ That’s a disruption to advisors and also to consumers.” Quebec was the first province to institute professional guidelines in 1998, regulating the “financial planner” designation and restricting other titles. And just this past July, the Saskatchewan regulator moved to begin regulating the titles of “financial planner” and “financial advisor” in that province. The Financial and Consumer Affairs Authority of Saskatchewan (FCAA) has now set about clarifying definitions for those two professions, as well as credentials, credentialing bodies, and transitioning policies for current planners and advisors. The Ontario government has also been at this for a while, introducing legislation in its 2019 budget to limit the use of the titles of “financial planner” and “financial advisor” to those who receive the proper qualifications from a credentialing body approved by the Financial Services Regulatory Authority of Ontario (FSRA). Huston Loke, executive vice-president, market conduct at FSRA, said a new framework will help promote confidence in consumers by ensuring “advisors” have the proficiency, professionalism, and accountability to go along with their title. However, FSRA has said that the LLQP “is not likely” to qualify someone as a financial planner or advisor. Loke told the virtual symposium that the titles topic is all about protecting investors by setting a threshold that establishes a consistent standard. “We want consumers to have confidence in their financial planner or advisor. We also want to leverage existing programs so that there is an appropriate balance between the benefits consumers

will receive and the cost that will be borne by market participants.” For some time, Advocis has also been concerned about the overall quality of advice Canadians receive, said Greg Pollock, Advocis’s president and CEO. Investors may not be clear on what kind of knowledge and background individual advisors or planners bring to the table. On top of that, he believes that government oversight will help to create the kind of standards everyone seems to be looking for when it comes to advice. All of those who go through Advocis are considered “financial advisors,” he said, while the “financial planner” designation is usually for the few who only develop financial plans and then pass them on to advisors to update and implement, he said. Designations through Advocis include CLU®, CFP®, QAFP™, CHS and PFA™. While the titles are a big concern to those in the industry, it’s an even bigger deal to the average investor, many of whom find current titles confusing and unclear, said Laura Tamblyn-Watts, president and CEO of seniors’ advocacy group CanAge. “These titles don’t mean anything,” said Tamblyn-Watts, who is also one of the two leads for the Consumer Advisory Panel with FSRA. “They are, in fact, so unclear as to cause reasonable confusion, and other titles are challenging as well.” What people really want, Tamblyn-Watts said, is someone they know has their best interests in mind and possesses the expertise, credentials, and trustworthy standards for a person handling their money. She said there are many who like the idea of Quebec’s model because very few titles are allowed. It’s crucial for the public to have clarity and understand what it means to be a financial advisor, agreed Pollock. As it now stands, anyone can call themselves a “planner” or “advisor” but there must be a credential beyond a licence that provides that assurance, he said. DECEMBER 2020 FORUM 19

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SYMPOSIUM

Richard Hogeveen

Pollock does not believe that getting a mutual funds licence with the Mutual Fund Dealers Association of Canada (MFDA) would be high enough for someone to hold themselves out as either a financial advisor or a financial planner. Alone, an MFDA licence would qualify a person Robyn to sell mutual funds, he said. Mendelson However, the Investment Funds Institute of Canada (IFIC) has recommended that members of the MFDA and the Investment Industry Regulatory Organization of Canada be exempted from the proposed rule. Currently, there are no grandfathering plans being considered for those who have only the LLQP. However, there will be a transition period to give those who don’t have the necessary credentials time to get them. Without the proper qualifications, those using the financial planner and financial advisor titles are breaking the law, said Loke. Pollock noted it could still take some time before all the pieces fall into place — perhaps as long as 10 years to let the changes take hold and have consumers understand what they’re getting. While the FP/FA Title Protection Framework churns forward, Ontario and federal regulators have provided relief to insurers in terms of late filings, prospectuses, RFPs, and financial statements because of hardships dealing with the COVID-19 pandemic. The conflict-of-interest portion of the Client-Focused Reforms has also been deferred until next year, said Robyn Mendelson, vice-president, legal and procurement with Fidelity Investments. As part of the Burden Reduction Initiative, Mendelson said Fidelity has also recommended that regulators eliminate some requirements dealing with investment funds to prepare, file, and deliver interim management reports and fund performance. “These reports are costly, are labour intensive, take so much time to prepare, and when the industry take-up is less than 2%, we don’t think they’re read and meaningful to investors.” She said Fidelity also wants to combine all fund facts into one document instead of by series. This way, said Mendelson, the funds are easier to compare across the country — that, she noted, was the primary goal of fund facts. In the meantime, Manulife Financial and other insurers are providing relief to some clients during COVID-19: anything from deferring mortgage payments, premium deferrals, pension relief, and help for those trying to access their savings. Richard Hogeveen, vice-president and chief compliance officer at Manulife, said resources remain stretched, and with no end in sight to COVID-19, it’s up to the industry and regulators to assess what has to be done right away and what can wait. Meanwhile, the entire industry has breathed a sigh of relief on how to onboard new customers, moving from the old paperbased, face-to-face model and into the light of new technology.

Rob Eby, moderator

Ali Ghiassi

Hogeveen said FINTRAC and OSFI have always had the flexibility not to go through face-to-face onboarding. “What COVID provided was that immediate urgency to do that,” he said. “I think that was a real win for the collective industry.” SUSAN YELLIN is a Toronto-based writer specializing in the financial services industry.

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DECEMBER 2020 FORUM 21

INSURANCE

POLICY ANALYSIS

Richard Parkinson outlines two methods for getting clients to reconsider how much insurance is enough

tend to use two concepts to illustrate to clients the benefit of one or more insurance plans. The first concept focuses on net present value (NPV), which is used to show the impact of inflation over time on a dollar amount today. It’s an opportunity to express the value of money in the future, especially when considering inflation. NPV can answer two basic questions:

Present Value of a Current Amount, and of a Future Amount A technical definition of Net Present Value (NPV) is: “Net Present Value (NPV) is the value of all future cash flows (positive and negative) over the entire life of an investment discounted to the present. NPV analysis is a form of intrinsic valuation and is used extensively across finance and accounting for determining the value of a business, investment security, capital project, new venture, cost reduction program, and anything that involves cash flow.” The importance of this concept with regards to life insurance is how inflation will impact the death benefit over time, i.e., $1 million of coverage seems like a good number today when a person is age 35, but the question you shouId know the answer to is what will that $1-million death benefit be worth years from now, and will that be enough? In this hypothetic example, a person age 35 dies 40 years later at age 75. Considering inflation over the last 20 years, which has been 1.94%, that $1 million of initial coverage 40 years from now will have the equivalent purchasing power of $463,676 in today’s dollars. This calculator allows you to determine the NPV for a given number of years, or the amount of coverage you will need to apply for today, to give you a future value you feel you will need “N” years in the future. For the inflation rate for a given time period, visit https://www.bankofcanada.ca/rates/related/inflation-calculator/ 1. Net Present Value of a current life insurance benefit "N" years in the future Enter a dollar amount below to see what a current investment wiII be worth in the future

Years of inflation to consider

$100,000.00 20

Enter the coverage amount Enter how many years on which you want to base your calculation

Annual rate of return, if any

0.00%

Enter the annual compound interest rate you expect ot earn on the investment

Rate of inflation (Aug. 2000 – Aug. 2020)

1.81%

Enter a projected annual rate of inflation, default is 2.0%

Future value before inflation

$100,000.00

This value represents the actual money you would have in the future, before taking inflation into account.

Net Present Value of future amount

$69,854.00

This value represents the present value of money (purchasing power) you would have in the future, after taking inflation into account.

2. The amount of coverage needed today to provide the desired future amount in today’s dollars Future value desired

$100,000.00

Enter the amount of money you want to have in today’s dollars 20 years in the future (after the effects of inflation have been calculated).

Coverage needed today to provide $100,000 of coverage 20 years from now

$143,155.73

This displays the amount you would have to apply for today to achieve your future target, or alternately, the present value of a future amount.

22 FORUM DECEMBER 2020

PHOTO: ISTOCKPHOTO

Life insurance coverage amount

• What will the future purchasing power of a life insurance benefit be in the future compared to today, given a specific inflation rate? or • What does a life insurance benefit need to be today, in order to provide a specific amount in the future, at a given inflation rate? To calculate this, we need the following inputs: • Life insurance benefit: e.g., $100,000 • Years of inflation you wish to illustrate: e.g., 20 years • Inflation rate: e.g., from August 2000 – August 2020 (over those 20 years, the inflation rate is 1.81%) I created a spreadsheet to calculate these two numbers, which looks like this: In the charts to the right are the formulas to replicate these results yourself. Let’s examine the application of NPV for any insurance with a defined future benefit. Clearly, we want to ensure our clients understand the longterm value of any insurance plan we sell. A recent example was a couple with a two-year-old son. They wanted a critical illness policy for him and themselves. They were originally thinking of a $50,000 benefit. I pointed out that if their son had a claim 50 years later, at age 52, the future value of that $50,000 benefit would be around $18,576 in today’s dollars, assuming an inflation rate of 2%. To have the benefit be $50,000 50 years from now, they should look at a benefit today worth $134,579. Of course, the son could have a claim at age 30, or one at age 90, so the numbers will be different, but it’s certainly worth pointing out these issues with clients. The clients ultimately decided on a $100,000 policy. The same NPV calculation can be used for life, disability, and long-term care insurance. Also, for whole life and overfunded universal life, it is a bit more complicated. If the death benefit increases over time, you need to use the future death benefit value that the illustration shows in today’s dollars.

VALUES A

1. Net Present Value of a current life insurance benefit “N” years in the future Life insurance coverage amount Years of inflation to consider

Annual rate of return, if any

0.00%

Rate of inflation (Aug. 2000 – Aug. 2020)

1.81%

Future value before inflation

$100,000.00

Net Present Value of future amount

$69,854.00

2. The amount of coverage needed today to provide the desired future amount in today’s dollars Future value desired

$100,000.00

Coverage needed today to provide $100,000 of coverage 20 years from now

$143,155.73

FORMULAS A

1. Net Present Value of a current life insurance benefit “N” years in the future Life insurance coverage amount

$100,000.00

Years of inflation to consider

Annual rate of return, if any

0.00%

Rate of inflation (Aug. 2000 – Aug. 2020)

0.0181

Future value before inflation

Internal rate of return (IRR) is a second concept that’s related to NPV but is a metric used to estimate the profitability of potential investments. If you run a whole life illustration, the data view of the illustration will provide you with the IRR for both the death benefit and the cash values. I used IRR for a family with an 84-year-old mother who was paying an annual premium of $790 for a whole life policy, with a current annually increasing death benefit of $38,692 in 2020, and cash value of $28,221. Her adult children wondered whether it was worth keeping, or to just cancel it and take the cash value. The adjusted cost base was $1,641, so most of the cash surrender value would be taxable at her high average tax rate of 38%.

$100,000.00

Net Present Value of future amount

=B2*(1+B4)^B3 =B7*(1+(B5))^-B3

2. The amount of coverage needed today to provide the desired future amount in today’s dollars

Future value desired see note below for formula

=B2 =B11*(+(B4-B5)/(1+B5))^-B3

Formula for A12 ="coverage needed today to provide "&TEXT(B11,"$###,###)&" of coverage "&TEXT(B3,”##)&" years from now"

DECEMBER 2020 FORUM 23

INSURANCE So, when I showed the family the chart below, it was obvious to them that they were best off keeping the policy as she did not need the cash value, and the annual premium was not a burden. A 16.26% IRR at age 100 looked good considering to duplicate this with an alternative investment would be taxable and to improve on the guaranteed IRR from the death benefit made no sense to them. Fortunately, Microsoft Excel has a built-in formula to calculate the IRR, so let us start there. The function is =IRR(values,[guess]).

On the next page is an example of the Excel IRR function that will allow you to create any spreadsheet you like to represent what you wish to illustrate. I have about half a dozen sheets customized to show various applications of the IRR calculation, such as: • A policy is several years old, and you cannot obtain the IRR from the in-force illustration, and need to show, as in the example above, whether it makes sense to keep the policy for the death benefit. • When the policy has a lot of cash value, compare where the client continues to pay the premium versus having the cash value pay the premium.

Determine the viability of a permanent life insurance policy as an investment – Client pays premium Preparation date: Client name: Client sex: Date of birth:

October 20, 2020 Valued Client Female February 21, 1937

Actual age:

Nearest age:

Days before age change:

306

Smoking status:

The purpose of this sheet is to answer the question, “Is buying a life insurance policy on a person a practical investment opportunity?” It is also to determine if keeping an existing policy is worth it. The Internal Rate of Return is one way to show whether it is. Depending on the situation, you may want to consider all previous payments as “water under the bridge,” i.e., ignore it. The question is, is it worth continuing to pay for this?

Data input for calculator Client age:

Annual premiums for chosen plan Coverage amount

Term 10

Term to 100

$30,000

Initial coverage amount, e.g., $250,000:

$30,000.00

Plan choice (10, 100, or UL):

whole life

Internal rate of return for up to age 100

Monthly premium:

$69.88

Annual premium:

$790.00

Number of years + age to start:

Number of years to determine IRR:

Number of years to increment IRR:

Maximum years:

Years remaining to life expectancy

Age at life expectancy:

Whole Life (UL) $790.00

The paper titled “Life Tables, Canada, Provinces and Territories, 2016 to 2018,” is available from https://www150.statcan.gc.ca/n1/pub/84-537-x/2019002/xls/2016-2018_Tbleng.xlsx. It provides many statistics, and one of interest for a life insurance person is, at a given age, what is the statistical life expectancy of someone having lived to that age?

IRR Year

Age

IRR – Death benefit

IRR – Cash value

236.83%

200.36%

96.08%

84.03%

56.78%

52.01%

Your average tax rate is zero for life insurance proceeds: Before-tax rate of return from other investments to match insurance policy return:

39.23%

36.54%

29.52%

27.78%

23.46%

22.40%

19.32%

18.70%

100

16.26%

IRR at life expectancy, based on current age or age nearest

SOURCE: STATISTICS CANADA. TABLE 13-10-0114-01. LIFE EXPECTANCY AND OTHER ELEMENTS OF THE LIFE TABLE, CANADA AND PROVINCES

After-tax rate of return at life expectancy:

39.23% 0.00% 39.23%

250.00%

200%

150.00%

100.00%

Note: this is a whole life policy that had an initial death benefit of $30,000. By the time this analysis was done, the death benefit was $38,692, and increasing each year. The numbers in the graph reflect the actual values for the death benefit and cash values from an in-force illustration.

24 FORUM DECEMBER 2020

50.00%

0.00% 86

100

• Comparing two whole life policies, one using paid-up additions versus the enhanced lifetime option. Ensure you are using the same annual premium for both policies for the IRR result to be realistic. (Note: the data sheets from the illustration software provides the IRR, but not necessarily presented in a form you may want to illustrate to your client). • Comparing lifetime pay versus accelerated pay whole life (same note as the preceding). • Comparing lifetime pay versus 15-year pay for a critical illness policy. You will want to perform a reasonableness check with your output, and perhaps review with the local complex case consultant of your managing general agency or insurance company. With the basic Excel formulas provided here, you can build your own custom spreadsheets to provide insight to your clients that few agents are able to duplicate. There are several other situations where you can consider using IRR, but if you are unsure, you can always consult a case consultant from your managing general agency or the insurance company directly. RICHARD PARKINSON, CPCA, is an independent insurance broker based in Vancouver. To receive a PDF of this article, email dgageforum@gmail.com.

A 1

Internal Rate of Return (IRR) for life insurance policy death benefit

Annual premium:

Guess:

IRR Formula:

$790 0.5

=IF(ISERROR(IRR(($E$8,D8),-D$3)),"N/A",IRR(($E$8,D8),-D$3))

Year

Age

Death benefit

Annual premium

IRR

Basic IRR formula

$38,697

-$790

4798.35%

IRR(($E$7:$E7,D7),-D$3))

$39,933

-$790

562.73%

IRR(($E$7:$E8,D8),-D$3))

$41,194

-$790

234.94%

IRR(($E$7:$E9,D9),-D$3))

$42,479

-$790

138.21%

IRR(($E$7:$E10,D10),-D$3))

$43,790

-$790

94.67%

IRR(($E$7:$E11,D11),-D$3))

ss Together Investments Passionate Business

nt Insurance? Investments? Life Wor

ss Maybe it’s time to choose. Cl us Compliance Complexities Lo Finding it a challenge growing your core insurance business while managing the increasing complexities and compliance requirements around your clients’ investment needs? We can help. At Polson Bourbonniere Derby, we’ve built a reputation as one of Canada’s premier investment planning advisory firms by staying focused on helping our clients achieve their investment goals and preserve their wealth. If you want to refocus your own practice on your clients’ insurance needs and work with a wealth management professional that recognizes, supports and respects your business, call or email us and discover the advantages of monetizing your investment book. Call 1-800-263-0120 or email info@pbfinancial.com to learn more. HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Insurance products provided through Hollis Insurance independently and separately from Industrial Alliance Securities Inc. Only the services offered through Industrial Alliance Securities Inc. are covered by the Canadian Investor Protection Fund.

TAX UPFRONT

BY JAMIE GOLOMBEK

Prescribed Rates How to best adopt an income splitting strategy for clients

26 FORUM DECEMBER 2020

rule if funds are loaned rather than gifted, provided the rate on the loan is set (as a minimum) at the prescribed rate in effect at the time the loan was originated and the interest on the loan is paid annually by January 30 of the following year. So, if the loan is made at the prescribed rate of 1%, the net effect will generally be to have any investment return generated above 1% taxed in the hands of the lowerincome family member. Note that even though the prescribed rate varies by quarter and may ultimately rise, one need only use the prescribed rate in effect at the time the loan was originally extended. In other words, if the loan is extended between now and the end of March 2021 (and possibly longer, if the prescribed rate remains unchanged, as is expected), the lower 1% rate would be locked in for the duration of the loan without being affected by any future rate increases.

REFINANCING A 2% LOAN AT 1%? The big question is: what if a client entered into a prescribed rate loan with a family member when the rate was 2% (or higher) and the family member invested the proceeds? To take advantage of the upcoming lower prescribed rate, you should encourage the family member to sell the invest-

ments (which could trigger capital gains tax, depending on the market value of the investments compared to their tax cost), and repay the loan. They can then enter into a completely new loan agreement using the new 1% prescribed rate. The CRA has stated that simply repaying a higher prescribed rate loan with a lower rate loan could trigger the attribution rules on the investment income. During the CRA roundtable discussion at the Canadian Tax Foundation’s virtual conference in October, the CRA was given the following scenario, submitted (humbly) by this author. An individual has a prescribed rate loan at 2% for $100,000 (“Loan 1”). The borrowed money was used to purchase securities for $100,000. The securities now have a value of $200,000. The individual wants to refinance the loan at 1%. The individual wishes to sell half the securities and use the proceeds to repay the loan. The individual would then borrow $100,000 at the prescribed rate of 1% (“Loan 2”). The proceeds of Loan 2 will be used to purchase new securities for $100,000. At the conference, the CRA confirmed that the attribution rules will not apply to the securities that are still owned and were purchased with Loan 1, and that the attribution rules will not apply to the investments purchased with Loan 2. JAMIE GOLOMBEK, CPA, CA, CFP, CLU, TEP, is the managing director, tax & estate planning with CIBC Private Wealth Management in Toronto. He can be reached at Jamie.Golombek@cibc.com.

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ince July 1, 2020, the Canada Revenue Agency’s (CRA) prescribed rate has been 1%, opening up a potentially lucrative opportunity for our clients to execute an income splitting strategy. Let’s briefly review this age-old strategy, and then focus on what to do with all those older prescribed rate loans that were done when the rate was 2% (or higher)! The prescribed rate is set by the CRA quarterly and is tied directly to the yield on Government of Canada three-month Treasury bills, albeit with a lag. The calculation is based on a formula in the Income Tax Regulations, which takes the simple average of three-month Treasury bills for the first month of the preceding quarter, rounded up to the next highest whole percentage point. As a result, the prescribed rate can never be zero, and 1% is the lowest possible prescribed rate. Given historically low recent T-Bill rates, the prescribed rate dropped to 1% on July 1, 2020 and will remain at 1% through at least March 31, 2021. The July decrease marks the first time that the prescribed rate has dropped since it increased to 2% back in April 2018. The drop in the prescribed rate may provide some clients with a significant opportunity to split income with a spouse or common-law partner, (grand)children, or other family members. Income splitting is the transferring of income from a highincome family member to a lower-income family member. Since our tax system has graduated tax brackets, by having the income taxed in the lower-income earner’s hands, the overall tax paid by the family may be reduced. The “attribution rules” in the Income Tax Act prevent some types of income splitting by generally attributing income or gains earned on money transferred or gifted to a family member back to the original transferor. There is an exception to this

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ESTATE DILEMMAS

BY KEVIN WARK

True Insurance Value

CRA challenges capital dividend amount arising from insurance proceeds

ost insurance advisors are familiar with the benefits of corporate-owned life insurance. To start, it may be “cheaper” to fund the premiums with after-tax corporate dollars rather than using personal funds. The tax-free receipt of the insurance proceeds can be used to pay down business debt and/or create needed liquidity. And most (if not all) of the death benefit can be paid as a tax-free capital dividend to the deceased’s estate to fund estate liabilities. The recent Tax Court of Canada (TCC) decision in Rogers Enterprises (2015) Inc. v. The Queen implicitly demonstrates the value of corporate-owned life insurance for even the wealthiest of families, with an additional tax twist that was decided in favour of the taxpayer. Ted Rogers built Rogers Communications into one of Canada’s largest public companies, a leader in wireless communications, cable television, telephone, and internet connectivity. Although he passed away in 2008, his family continues to have a significant shareholder interest in Rogers Communications. In recognition of the importance of Ted Rogers to the business enterprises and family wealth, 12 life insurance policies were taken out on his life. Family-owned private corporations primarily held these policies. Over the course of time, a number of transactions involved the policies, and upon Rogers’s death the taxpayer corporation received approximately $100 million in life insurance proceeds. The taxpayer credited the full amount of the insurance proceeds to its capital dividend account (CDA) — more on this later — and subsequently distributed dividends to other family corporations, electing the full amount of these dividends be treated as capital dividends. The CDA credit from life insurance proceeds will normally be reduced by the adjusted cost basis (ACB) of the related life insurance policies. In this case the policies had a cumulative ACB of approximately 28 FORUM DECEMBER 2020

$42 million, and thus it might have been expected that the taxpayer’s CDA credit would be reduced by this amount. But the Canada Revenue Agency (CRA) had previously confirmed in several technical interpretations that where the corporate beneficiary was not the owner of the insurance policies, the ACB of the policies would not reduce the CDA credit. However, the CRA also indicated that it did not feel this was the appropriate tax result, and might apply the general anti-avoidance rule (GAAR) to challenge situations where it appeared that the main purpose for arranging the ownership and beneficiary designation in this manner was to increase the CDA credit. The taxpayer therefore relied on its understanding of the law, as well as the CRA’s interpretations, to credit the full amount of the insurance death benefit to its CDA. The CRA responded by applying the GAAR to these arrangements and issuing a “notice of determination” to reduce the taxpayer’s CDA credit by $42 million. Not surprisingly, the taxpayer appealed this decision to the TCC. One more very relevant fact is that in 2016, the federal government amended the CDA definition (effective for deaths occurring after March 21, 2016) to ensure that the ACB of the insurance policy would reduce the CDA credit of a corporate beneficiary, even where that beneficiary was not the owner of the policy. Thus, if Ted Rogers had died after the 2016 changes, the taxpayer’s CDA would have been $42 million lower.

THE TCC DECISION One of the required elements for the GAAR to apply is that the impugned transactions must result in a “tax benefit” to the taxpayer. In this case the CRA alleged that the taxpayer received a “tax benefit” since the CDA credit was not reduced by the ACB of the policies. The Court disagreed, finding that an increase in a corporation’s CDA does not in and of itself fall within the definition of a “tax benefit.” The Court further held that

the distribution of the CDA arising from the insurance proceeds to other corporate shareholders also did not create any tax benefit, as those dividends would otherwise have been received as tax-free intercorporate dividends. In effect, there could be no tax benefit until capital dividends arising from the ACB portion of the insurance proceeds were paid to individual shareholders. Despite finding that the transactions did not result in a tax benefit to the taxpayer, the Court went on to consider whether the transactions were “abusive” such that the GAAR would apply if a tax benefit existed. The Court explored the “intent” of the legislation by reviewing the evolution of the CDA definition since the early 1970s. The Court concluded that it could not discern a clear legislative policy that required the CDA be reduced by the ACB of an insurance policy, where such a policy is owned by someone other than the corporate beneficiary. The Court also noted that the CDA definition was amended in 2013 to deal with certain abusive transactions involving life insurance, but the government took no action at that time to deal with this planning strategy. As a consequence, even had this court found there was a tax benefit to the taxpayer, the CRA would have failed in its GAAR challenge. We understand that the CRA has decided to not appeal this decision. Although the 2016 tax changes eliminated the advantages arising from the CDA planning undertaken in Rogers Enterprises, this case exemplifies the main benefits of life insurance in managing the financial needs of the Rogers family. The ability to pay out a significant portion of the insurance proceeds on a tax-free basis to the estate and/or surviving shareholders may be considered icing on the cake. KEVIN WARK is managing partner at Integrated Estate Solutions and a CALU tax advisor. He is the author of the bestselling consumer book The Essential Canadian Guide to Estate Planning (2nd Edition) available on Amazon.ca.

CORPORATE INSURANCE

BY GLENN STEPHENS

Beneficiary Challenge Ontario court decision’s potential impact on beneficiary designations

he 2020 decision of the Ontario Superior Court in Calmusky v. Calmusky has caused concerns in the financial and insurance planning communities regarding the viability of beneficiary designations on registered plans and life insurance policies. In one aspect, the decision correctly followed the landmark case of Pecore v. Pecore. In another aspect, however, the Court extended the reasoning of Pecore to apply to a beneficiary designation made under the deceased’s registered retirement income fund (RRIF). In doing so, the Court ignored certain provisions of the law relating to beneficiary designations and created doubt as to whether routine designations will now be subject to increased legal scrutiny and litigation.

OVERVIEW OF THE FACTS Henry Calmusky was a widower who died in 2016 leaving two adult sons, Gary and Randy. Included in his assets at the time of his death was a bank account held jointly with Gary. Gary was also named as the beneficiary of his RRIF. Following Henry’s death, Gary took the position that his father had intended for him to have complete ownership of the bank account by right of survivorship, and of the RRIF proceeds by virtue of the beneficiary designation. Randy challenged this, arguing that both accounts were held in trust for the estate.

THE BANK ACCOUNT In Pecore, the Supreme Court of Canada ruled that a gratuitous transfer of property from a parent to an adult child was subject to a presumption of resulting trust. This would include, for example, funds deposited

by the parent into a joint bank account with the child. Under the principles of the Pecore case, upon the death of the parent, that child would be presumed to hold the funds in trust for the estate, unless he or she was able to prove that the parent intended otherwise. This was essentially a reversal of the prior law, which stated that the presumption of advancement applied to gifts to any family member, i.e., prior to Pecore, absent evidence to the contrary, there was a presumption that the parent did intend a gift of the joint account to an adult child. In Calmusky, the Court applied the principles of Pecore and held that Gary had failed to provide sufficient evidence that his father intended to gift him the funds in the joint bank account. Gary was therefore found to hold the account in trust for Henry’s estate.

THE RRIF The Court in Calmusky applied the same principles to Henry’s RRIF as it had to the joint bank account. It found that the beneficiary designation form, together with the evidence of the bank employee who helped arrange the RRIF, were insufficient to prove that Henry had intended to gift the RRIF proceeds to Gary. As a result, the Court found that Gary also held these funds in trust for the estate.

IMPLICATIONS OF THE DECISION The Court’s conclusions involved the designation under a RRIF, but the same reasoning could equally apply to an insurance policy. This could result in an adult beneficiary (other than a spouse) having to prove that the deceased intended for

him or her to exclusively benefit from the proceeds. Absent evidence supporting the deceased’s wish that the adult beneficiary was to receive exclusive use of the proceeds, a Court might conclude that the funds were held in trust for the estate. It is an invitation to aggrieved family members to litigate. Even if they were unsuccessful, the financial and personal cost of the litigation could be substantial. The decision is particularly troublesome as the Court did not consider certain relevant provisions of the law that deal with beneficiary designations. The Succession Law Reform Act (SLRA) specifically allows an individual who has a plan, such as a RRIF or an RRSP, to designate a beneficiary. This is also permitted under similar legislation in the other provinces. It goes without saying that the Insurance Act, which is largely uniform across the Canadian common law provinces, also allows for beneficiary designations. In either case, the plan holder or policy owner has the option of naming his or her estate as beneficiary rather than naming a specific individual. While the designation of the estate has certain disadvantages (e.g., exposure to creditors, estate administration tax) it is nonetheless an option where the individual wishes to benefit the estate rather than a specific individual. The Calmusky decision is not being appealed and for now represents the law in Ontario. Courts in other provinces have also applied the presumption of resulting trust to beneficiary designations in favour of adults. Its full impact remains to be seen, but in the meantime insurance and other professionals should be as diligent as possible in documenting their clients’ wishes whenever beneficiary designations are being discussed. The better the documentation, the less likely it is that a successful legal challenge will ensue. GLENN STEPHENS, LLP, TEP, FEA, is the vice-president, planning services at PPI Advisory and can be reached at gstephens@ppi.ca.

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DECEMBER 2020 FORUM 29

THERE’S ONLY

ONE GOLD

GAMA INTERNATIONAL CANADA’S

2020 Management Awards recognize the achievements of leaders in the financial services industry

2020 GAMA INTERNATIONAL CANADA MANAGEMENT AWARDS The 2020 GAMA International Canada Management Awards recognize the highest leadership achievements in Canada’s financial services distribution industry.

National Builder Award (NBA) WINNERS The National Builder Award (NBA) recognizes outstanding achievement in agency-building, production and field development. ● NBA Gold Award Winners

Taha Al-Dabagh CFP, CLU, CHS, RRC ● Perry Badham CLU, CHS, RPR ● Jessica Buley Perminder Chohan ● Daniel Chuang ● John P. Cleminson CLU ● Stephane Cyr ● Sarah Decker Donald Der CFP, CLU, CHS, CH.F.C. Clarke O. Duncanson ● David E. Feldberg CFP, CLU ● Gerard Feliciano ●

Angela Fu CFP, CLU ● Adrian K. Fung CFP, CLU, CHS, CH.F.C. ● Peter B. Gillespie ● Ronald James Gilson Ted D. Girard CFP, CLU, CHS ● Stephen M. Kennedy CHS ● Brian R. Kilback CFP, CLU, CH.F.C. Karl J. Krokosinski ● Marco Levesque ● Mark J. Lewans CFP, CLU ● Sam Luong CHS ● Craig A. MacTavish CHS ●

Alvin Matthew ● Dennis Mavrin ● Minetta McDonald CFP ● Jason P. McMahon CFP, CHS ● Gemma Mendoza ● Katina Michelis CHS Steven Ollson CFP, CLU, CHS ● Ioannis (John) Panago CHS, CFP ● Norberto T. Pepito Jason D. Poulton CFP Jerome B. Pusung CLU, CHS ● Jarrett Robertson CHS Darren A. Rosenberger CFP ●

Sonny M. Sangemino CHS ● Wes J. Scott Rajesh Sharma ● Joshua M. W. Simpson CFP ● Shawn Smith ● Jennifer A. Tweddle CFP, CLU, CHS, TEP ● Bradley D. Unraw CFP, CHS ● Jesse Van Dalfsen Scott S. Woodman CFP, CLU ● Jing Wu ● Sonia Wu CHS ●

NATIONAL ACHIEVEMENT AWARD (NAA) WINNERS The National Achievement Award (NAA) represents the very pinnacle of management excellence among GAMA International Canada members. ● NAA Gold Award Winners Taha Al-Dabagh CFP, CLU, CHS, RRC ● Ziad Azzi CFP, CLU, RRC, EPC Perry Badham CLU, CHS, RPR ● Jessica Buley Darin D. Calderwood CFP ● Herman Chan CFP, CHS Perminder Chohan ● Daniel Chuang ● John P. Cleminson ● Stephane Cyr ● Sarah Decker ● Donald Der CFP, CLU, CHS, CH.F.C. David E. Feldberg CFP, CLU ● Gerard Feliciano ● Angela Fu CFP, CLU Adrian K. Fung CLU, CH.F.C.,CHS,CFP ● Brian N. Gebbie CFP ●

Peter B. Gillespie ● Ronald James Gilson ● Ted D. Girard CFP, CLU, CHS Nubia C. Gomez CLU, CHS ● Ernesto Gonzalvo ● Jordan Ingraham CHS ● Stephen M. Kennedy CHS ● Brian R. Kilback CFP, CLU, CH.F.C. ● Colin D. Kirby Karl J. Krokosinski ● Kris B. Kubin CHS ● Matthew J. Lane CFP ● Dean E. Lariviere CFP ● Nina Lau-Choy CHS, QAFP ● Xu Liu Craig A. MacTavish CHS ● Jayson Mallari QAFP ● Dennis Mavrin ● John B. McCallum CFP, CHS ●

Minetta McDonald CFP ● Jason P. McMahon CFP, CHS ● David E. McPhee CHS ● Gemma Mendoza ● Maria Cristina Mendoza CLU, CHS ● Katina Michelis CHS ● Izumi Miki McGruer CFP, CLU, CH.F.C., CHS ● Branden L. Mosher CFP ● Harjot Nijjar ● Steven Ollson CFP, CLU, CHS ● Ioannis (John) Panago CHS, CFP ● Murray J. Parks CFP, CLU, CH.F.C. ● Norberto T. Pepito ● James A. Phillips FIC Jason D. Poulton CFP ● Adam J. Powell CHS ● Jerome B. Pusung CLU, CHS ● Joseph Raine ●

Mark W. Roberts CFP Jarrett Robertson CHS ● Darren A. Rosenberger CFP ● Wes J. Scott ● Rajesh Sharma Joshua M. W. Simpson CFP ● Shawn Smith ● Greg N. Taylor CFP ● Eddy Tong CFP, CLU, CHS ● Bradley D. Unraw CFP, CHS ● Jesse Van Dalfsen Keith R. Vincent CHS ● Ling Wang Scott S. Woodman CFP, CLU ● Jing Wu ● Sonia Wu CHS ● Ray J. Zadrey CFP

NATIONAL MANAGEMENT AWARD (NMA) WINNERS The National Management Award (NMA) honours achievement in agency management, particularly increases in production. Taha Al-Dabagh CFP, CLU, CHS, RRC Perry Badham CLU, CHS, RPR Jessica Buley Herman Chan CFP, CHS Zhong Chen CLU, CHS Perminder Chohan Daniel Chuang John P. Cleminson Stephane Cyr Sarah Decker Donald Der CFP, CLU, CHS, CH.F.C. Gerard Feliciano David E. Feldberg CFP, CLU

Adrian K. Fung CLU, CH.F.C., CHS, CFP Peter B. Gillespie Ted D. Girard CFP, CLU, CHS Stephen M. Kennedy CHS Brian R. Kilback CFP, CLU, CH.F.C. Colin D. Kirby Karl J. Krokosinski Matthew J. Lane CFP Nina Lau-Choy CHS, QAFP Xu Liu Craig A. MacTavish CHS Jayson Mallari QAFP Dennis Mavrin

Minetta McDonald CFP Jason P. McMahon CFP, CHS Harjot Nijjar Steven Ollson CFP, CLU, CHS Ioannis (John) Panago CHS, CFP Murray J. Parks CFP, CLU, CH.F.C. Norberto T. Pepito James A. Phillips FIC Jason D. Poulton CFP Jerome B. Pusung CLU, CHS Jarrett Robertson CHS Wes J. Scott Rajesh Sharma Joshua M. W. Simpson CFP

Learn more at gamacanada.com

Shawn Smith Jesse Van Dalfsen Ling Wang Scott S. Woodman CFP, CLU Jing Wu Sonia Wu CHS Ray J. Zadrey CFP Meng Zhao CFA

LEADERSHIP & GROWTH

BY RANDY LITTLE

Intentions Versus Reality How to motivate new advisors to create referable businesses

hen new advisors join the industry, they have the intentions to do well by doing good for others. But their actions are often misaligned with those intentions. It takes a skilled coach to find the training and development that will help that advisor keep their activities aligned with their intentions. How can you efficiently bring new advisors to the point where they are self-accountable for their activities? As a team manager, you’ve worked with clients before. You’ve asked great questions, listened well, and helped prospects selfidentify their need and thereby created a great experience that is both memorable and referable. Let’s look at how the same skills that lead you to be successful with clients can contribute to solid training and development.

SELECTION PROCESS It starts with the pool of available candidates. Similar to target marketing or ideal client profile prospecting, how you find the best new advisors needs to be well defined and running on all cylinders. This way you’re more likely to have the right people in the seats. In the early interviews, you should be asking good questions about what the candidate wants to achieve. What are their income goals? What lifestyle goals do they have? Get them talking about these things early. It’ll help later when you’re linking activities back to what’s important to them. Write their answers down so you don’t forget.

BASELINE ASSESSMENT Understanding their personality contributes to the desired lifestyle conversations. They want a particular lifestyle but 32 FORUM DECEMBER 2020

are they likely to achieve it in our career, in our particular system? Some clients want an independently wealthy lifestyle, but based on where they’re starting it may be either easy, or a big hill to climb. Knowing your new advisors’ natural strengths and weaknesses should influence where you spend the most time in training.

FINANCIAL NEEDS ANALYSIS (FNA) PROCESS We conduct FNA with our clients and you need to take a similar approach when picking new advisors. Picture that light bulb moment that happens in your FNA process. You see that your prospective clients have self-identified their need, and because you’ve made the process so comfortable they “buy” you. The recommendation and ultimate solution becomes matter of fact. This results from skilled questioning and storytelling. The same goes for new recruits. Instead of telling them what to do, you can reason with them to a point where their actions become their own. Put another way, by connecting “the things they need to do” to what they said is “important to them in their career,” they become engaged and take ownership of their activities.

JOINT FIELDWORK None of this is new information, but sometimes we start to drift away from these concepts, spending less time asking and more time telling. Eventually this starts to be a painful, not enjoyable relationship with our advisors. Spending time in joint fieldwork keeps us fresh. I’ve never forgotten one interaction with a recruit. We had spent weeks in training. We had introduced the sales process, harped on the importance of a solid FNA, and lauded the value following this process. At some point you could see

the eye rolls as we repeated and reinforced the claims. Then we went on a joint meeting. I ran the meeting and followed the process. Afterwards, it became obvious that everything had clicked in his mind. All the questions had landed, the cues had happened. Everything we talked about in the training room went as claimed. The best part? It was all so simple. No product. No technical explanations. Just open and free conversation about what’s important to that family. The advisor knew he could do that. Spending time in the field is so vital to connecting all the dots, working on skill development, and building trust in your relationships. It’s also the most efficient way to inspect what you expect. Training and development can be most effective when the foundation is laid. You need to select good candidates, understand who they are by asking great questions and using science-based tools, link your training to what’s important to them, and inspect what you expect during joint meetings. Only then will you be in the best position to give your new advisors the greatest opportunity for success. RANDY LITTLE, CFP, is associate director at DFS Independent Network. GAMA International Canada, a conference of Advocis, provides professional development and networking opportunities for leaders in the financial services industry. For more information, visit www.gamacanada.com.

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GUEST COLUMN

BY MARK HALPERN

Doing Good and Doing Well Having the philanthropy conversation with clients

discussion of philanthropy usually follows comprehensive tax and estate planning. Advisors often find “never spend” money earmarked for future generations that will be heavily taxed along the way. Many great strategies are available, let’s examine a few of my favourites.

CPP PHILANTHROPY™ Many clients receiving monthly Canada Pension Plan (CPP) benefits also receive considerable income from other sources. They are already paying the highest marginal tax rate and don’t really need the CPP benefits. That “never spend” money only gets taxed, reinvested, and then taxed again. This strategy uses their CPP benefits (about $1,100 a month per person, or $26,400 per couple a year) to fund a permanent life insurance policy, creating a substantial windfall for their family and the causes they care about. The CPP benefits are used to pay the premiums on a joint-and-last-to-die policy. The charity, as beneficiary, will receive the payout on the death of the second spouse. That generates a $1.4-million charitable gift and the estate will receive a donation receipt for that amount, saving the estate about $700,000 in taxes. Alternatively, have the policy owned by the charity at the outset, in which case your CPP benefits will be considered charitable donations and will result in no tax on CPP while creating a $1.4-million future gift. Because an RRSP/RRIF will be fully taxed as income (at up to 54% in Ontario) on the death of the second spouse, consider using the CPP benefits to purchase a $1.4-million joint-and-last-to-die insurance policy, with the family/estate as the beneficiary. By donating the highly taxed RRSP/RRIF to charity in the will, the

client’s family will be 50% better off and you will have helped create a meaningful legacy.

GIFTMAXIMIZER™ The dividends from permanent cash-value life insurance are typically reinvested into the policy to buy additional paid up additions. If the policy is donated to a charity, instead of reinvesting those dividends, those annual cash dividends can be paid tax free to the charity so it receives cash flow from the policy while the donor is alive. Similarly, if a private foundation or donor-advised fund (DAF) owns the policy, annual dividends can be distributed with no tax consequence.

DONATE RRSP/RRIF A client can designate a charity as a beneficiary of an RRSP/RRIF and qualify the bequest as a charitable donation. Upon death, the assets are paid directly to the charity, bypassing probate. To qualify for the donation tax credit, it’s best to transfer funds from the RRSP/RRIF no later than 36 months after the individual’s death. While the value of the registered plan must be included in the income of the plan holder at death, the donation tax credit is used to offset the taxes payable on that amount.

DONATE APPRECIATED SECURITIES Recent clients owned a $10-million stock portfolio with significant capital gains. We created a DAF with a community foundation. They donated some of the portfolio with a market value of $4 million to their DAF, creating a charitable receipt for that full amount. They didn’t pay any capital gains taxes and were able to mitigate their entire annual income tax liability.

The $4-million DAF earned a 10% return, all of which is non-taxable. Using a portion of that interest income, we structured a new $10-million joint-and-last-to-die insurance policy, owned by the DAF, creating another, much larger charitable gift.

POLICYPRESERVER™ About $7 billion worth of term life insurance policies lapse every year in Canada, but that does not mean they’re worthless. Clients who no longer qualify to buy life insurance due to ill health can have the financial value of their unwanted policies evaluated by a professional actuary. The client can donate their policy to a registered Canadian charity and receive a charitable donation receipt for the value determined by the actuary — usually ranging from 10% to 70% of the policy face amount.

LEVERAGED PHILANTHROPY A middle-aged investor with a $30-million real estate portfolio with a cost base of $10 million wanted to pass it on to his children and grandchildren. He was a very astute investor but hadn’t done any tax, insurance, or estate planning, so his estate faced a tax bill of $5 million. We suggested life insurance as a great solution, but he was reluctant to spend any money on insurance premiums. We showed him how an immediate financing arrangement (IFA) would get him all the insurance he needed without tying up his money, and structured a $10-million policy using the IFA strategy. When he dies, the insurance policy death benefit, which will grow to $15 million, will repay the outstanding IFA borrowings, and the balance of the death benefit ($10 million) will go to charity to mitigate his entire estate tax. Learn about philanthropy, start having conversations with clients, or collaborate, but don’t ignore it. Our clients are counting on us and the opportunity is significant. MARK HALPERN, CFP, TEP, MFA-P™, is one of Canada’s top life insurance advisors, and CEO of WEALTHinsurance.com®. Mark’s corporate goal is to create $100 million of new charity each year working with clients, generous donors of non-profits, and by collaborating with allied professionals like lawyers, CPAs, investment and insurance advisors. He can be reached at mark@WEALTHinsurance.com. DECEMBER 2020 FORUM 33

AdvocisNews ASSOCIATION UPDATES AND EVENTS

Advocis Vancouver Island

020 was to be the year that Advocis Vancouver Island engaged not only with members and sponsors, but also our community. When the pandemic hit, our board discussed what we could do to support our neighbours during this uncertain time. We knew that people across British Columbia were being affected, and decided that giving to our local food banks would be a fantastic way to make an impact. In collaboration with Food Banks B.C., we created a donation tool that was placed on every chapter event invitation throughout the year — we also collaborated with all other chapters in B.C. to respectively open our chapter events to each other, encouraging attendance and maximizing the exposure of the donation opportunity. The tool allowed members to choose not only a donation amount to add on to their invitation response, but also to choose which food bank in B.C. they wanted to support.

WE’RE BREWING A FRESH POT. Ready to kickstart the new year with another cup? Stay tuned in January as COFFEE TALKS returns with more exciting topics, presenters and complimentary CE credit opportunities for members throughout 2021. advocis.ca/coffee-talks

Year to date, B.C. chapters have now raised $7,000 for food banks across the province — and we are striving to hit $10,000 by year end! This initiative was a true representation of what Advocis members adhere to: Non Solis Nobis — not for ourselves alone.

COFFEE TALKS

CHAPTER NEWS

Advocis Ottawa

dvocis Ottawa would like to heartily congratulate all advisors who have completed the inaugural Professional Financial Advisor (PFA) program! To offer special recognition for advisors from our own chapter, we invited each of our new PFAs to submit photos with their graduation kits to FORUM. This designation will enhance the knowledge our members have already acquired and will provide them with the opportunity to continue with further designations and educational opportunities in the future.

David McGruer, PFA

Jacques Duplain, PFA

Marc Perrier, PFA

Greg Porteous, PFA

Lori Ishii, PFA

Erin Meisner, PFA

Karen McNamara, PFA

Kristian Alary, PFA

Miguel Belisle, PFA

Is it time for you to sell your practice? There is no doubt that our business is evolving due to technological-driven competition, increased compliance demands and changing consumer expectations. And, the global pandemic has certainly made doing business even more challenging.

Is it time for you to sell? With over $30 million AUM with a robust family and small business clientele, I’ve been in this business for over 25 years; with the same financial centre for 13 years. Operating a compliant practice with two assistants, I’ll provide professional and courteous service to your clients for years to come.

™ The Desjardins brand is a trademark of the Fédération des caisses Desjardins du Québec and used under license. * Mutual funds distributed through Desjardins Financial Security Investments Inc.

Contact me and let’s explore a fair price for your practice.

John W. Saikaley, CHS Life and Health Insurance Advisor Mutual Fund Representative* 880 Lady Ellen Place, Suite 200 Ottawa, ON K1Z 5L9 Phone: 613-829-7874 ext. 224 Fax: 613-721-9781 john.saikaley@dfsin.ca dfsin.ca/johnsaikaley

AdvocisNews LRA NEWS

Advocis Supports Ontario’s Title Protection Initiative

n November 12, 2020, Advocis submitted our response to the Financial Services Regulatory Authority (FSRA) of Ontario’s Proposed Rule [2020-001], Financial Professionals Title Protection. Advocis strongly supports Ontario’s title protection initiative and FSRA’s leadership in its implementation. We believe that this initiative is fundamentally about consumer protection, and that the primary focus must remain on how the title protection initiative will benefit consumers. To that end, our comments urge FSRA to ensure that the minimum standards it establishes for both the financial advisor and financial planner titles represent a meaningful enhancement to the standards that consumers face today. Financial advisors and financial planners were once seen primarily as transactional conduits to purchasing product. Over time, their role has evolved, with the client relationship now taking centre stage. In our comments, we stress that a qualifying credential for either the financial advisor or financial planner title should offer rigorous education regarding both technical knowledge and client relationship management. FSRA should not recognize a credential or licence that is based primarily on product sales, as that is an antiquated view of consumer needs. Instead, we suggest that FSRA’s selection of credentials should be based primarily on whether they serve to enhance the quality of the client-advisor relationship.

ADVOCIS WINNIPEG

dvocis Winnipeg was pleased to partner with Advocis North Central Saskatchewan and Advocis South Saskatchewan to present “Little Zoom on the Prairie — A Professional Development Series!” throughout October. Thank you to our presenters Marielle Gauthier, Keely Shaw, Rod Burylo, Marnie McBean, and Joze Piranian for their talks on a wide range of topics both personal and professional, including retirement, career planning, technology, and building resilience.

Have you considered your next step? As financial advisors and planners face increasing pressure to provide competent advice for complex client issues, Advocis is pleased to offer members access to educational opportunities that support the need for refined specializations through its Partner Programs. When education providers work together, they can combine the best possible resources to enhance the educational experience, opening doors to many new possibilities.

Advocis is pleased to provide access to:

advocis.ca/partner-programs

WHAT’S NEW AT ADVOCIS Highlights of the past few months include:

• The return of Symposium, which was hosted virtually on Zoom on November 10 (see story on page 18). Both members and non-members of Advocis were able to experience this signature event across Canada from the comfort and safety of home. With panel discussions on title protection and the ongoing impact of COVID-19, the event closed with the hope that it will return to an in-person format for 2021. • A new Advocis CE course on Working with Senior Clients is now available, offering advisors the opportunity to differentiate themselves through greater professionalism and expertise in working effectively with this important group. • Advocis launched its annual campaign

for Financial Literacy Month in November with a theme of Back to Basics. New

content for this year included articles written by members, special editions of The Advocis Podcast, a weekly interview show with members on Instagram Live, and the inception of a fun (and fictitious!) new designation: The Junior Financial Advisor.

• In partnership with Knowledge Bureau, Advocis has now launched a new partner program to offer members the MFA-P™ Philanthropy Designation Program. This online program will provide advisors with the qualifications to discuss a strategic approach to philanthropy with their clients. • Another annual tradition continued on December 2 and 3 with the Update 2020 National Webinar, featuring four great interviews with group discussion activities in a facilitated, full-day session. • Are you a member of Advocis who is passionate about contributing toward

READY TO GO PRO? SELF STUDY NOW AVAILABLE advocis.ca/PFA

the future of your profession? Are you interested in helping to shape our advocacy strategy? Would you like to receive exclusive invitations to attend our famous Legislature Days? If so, Advocis has created the Advocis Advocacy Network just for you! Contact governmentrelations@advocis.ca to learn more.

IN MEMORIAM Barry McNamee, 1936–2020

dvocis was saddened to learn of the passing of Barry McNamee, CLU, on July 11, 2020. Barry joined Advocis in 1969 and remained a proud member of the Durham Region chapter for 51 years, as well as a member of the Million Dollar Round Table. He was also a Five-Star Master Builder, and was inducted into Manulife’s Hall of Fame at the time of his retirement. We send our condolences to his family and friends.

Professional Financial Advisor “This is an excellent program for all advisors - not only new entrants to the industry. Besides covering technical concepts, it includes information on interacting with clients that is very practical and useful.” – Stephen Macdonald, PFA, CHS

Advocis®, The Institute for Advanced Financial Education (The Institute™), CLU®, CHS™, CH.F.C.®, PFA™ and APA® are trademarks of The Financial Advisors Association of Canada (TFAAC). The PFA designation is conferred by The Institute for Advanced Financial Education.

FINAL WORD

Hindsight in 2020

BY GREG POLLOCK

s we approach the end of this extraordinary year, I find myself looking back on not only what Advocis has achieved in 2020, but also what those accomplishments communicate about the strength and ability to keep our membership at the heart of everything we do. Though March may now feel like it took place in another lifetime, this was when our national office transitioned from a bustling, two-floor operation in downtown Toronto to a fully remote company within days. Suddenly, we had to collaborate solely through phone calls, email, and the use of a little-known tool called Zoom. This presented unique challenges for each facet of our organization: everything from seamless continuity in administration, member services, finance, and IT, to the need for our teams in education, legal and regulatory affairs, public affairs, and chapter relations to begin a rapid pivot toward supporting our members as they began to work from home as well. Significant questions were also raised for our human resources staff concerning not only how we could return to the office safely in the future, but what we could provide to ensure that our collective needs for physical and mental health were met in the interim. And yet, within days, we were firmly on our feet. Within a week, we had already begun helping financial advisors across Canada carry on with what was undoubtedly an intensive time for concern and anxiety among their clients. We launched our COVID-19 Member Resource Centre, creating a nerve centre for the latest updates from governments and public health officials, and information on evolving economic policy. Our website also became a home base for Advocis Connect, a new program to connect small business owners across the country with volunteer members of Advocis offering financial advice free of charge during the pandemic. Other avenues of digital communication — emails and social media in particular — were also used to promote various discounts on new and existing continuing education opportunities and spread the word about Coffee Talks, our latest webinar series. With our initial response to the crisis established, we then proceeded to maintain and develop those resources while getting back to business as usual. For starters, our Professional Financial Advisor designation program continued, with the first PFA holders emerging throughout the spring and summer. We also held our first-ever virtual grad-

38 FORUM DECEMBER 2020

uation ceremony in October to celebrate them — one of many virtual events that took the place of formerly in-person ones, including the Taste of Advocis Schools and Symposium 2020. As all of this was happening within the national office, our chapter leaders and volunteers were simultaneously doing outstanding work in keeping the spirit of their communities alive through online solutions and remarkable chapter events of their own. Our Chapter Leadership Conference took place over Zoom in the summer, and our 2020 National Update Webinar is coming up this month. I continue to be impressed by the level of professionalism and camaraderie that has held together the chapter life that, for many of our members, is the core of their Advocis experience. These are only a few examples of the many highlights I could name throughout the year, and there are an equally significant number of teams and individuals behind them — people who have risen to the occasion of keeping Advocis attuned to the needs imposed upon us by the pandemic while also sustaining the momentum we held before it. Regardless of the creativity and planning involved in making everything we have done this year come together, I believe that credit must go first and foremost to our own determination. As the playwright Samuel Beckett famously wrote: “You must go on. I can’t go on. I’ll go on.” In other words, we find the strength to overcome difficult things as the importance of them comes into focus. For us, this dedication stems from the knowledge that the importance of financial advice in this moment cannot be overstated. I have personally witnessed this dedication in all the conversations that I have had throughout this past year, both within Advocis and throughout our industry — an industry that I could not be prouder to share. Thank you for your support of Advocis in 2020, as our strength is dependent on you. We continue to meet daily with partners, regulators, legislators, media, and others to advance the interests of Canadians, as we know that your priority is to build and advance their plans. When the pandemic has passed, I am confident that we will have even more to look back on with pride — with more good things to come. GREG POLLOCK, CFP, is the president and CEO of Advocis.

As the year ends with a season of giving, Advocis salutes the financial advisors across Canada who gave it their all. To keep your clients safe, you transitioned to a virtual world. To keep them confident, you managed difficult conversations and unprecedented circumstances. Through all of this, you faced the challenges of caring for your own health and family as well â&#x20AC;&#x201C; and you did so with the courage and professionalism that we need in these remarkable times. On behalf of your professional association, thank you for your extraordinary commitment in 2020.

advocis.ca

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FORUM Magazine - December 2020

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FORUM Magazine - December 2020