15 minute read
Family Friction
COVID-19 has caused financial stresses for parents and their adult kids. Rosalind Stefanac explains how advisors can help them get back on track
O T O H P K C S T O I : O T O H P T ina Tehranchian ’ s long-time clients were excited about their first year of retirement together. Both in their early 60s, the couple had budgeted to spend 2020 renovating their home and finally ticking off some travel destinations. But then COVID-19 hit, all four of their adult children lost jobs, and the parents felt compelled to step in. “They never imagined they ’d be dishing out tens of thousands of dollars in their first year of retirement to help their kids, ” says Tehranchian, a senior wealth advisor at Assante Capital Management Ltd. in Toronto. While the parents were more than willing to divert their budget so they could support their children, she helped them see just how much financial assistance was realistic without permanently damaging their own retirement plans.
Tehranchian points to another client in her 70s who gave her son $50,000 at the onset of COVID-19 to put toward a new home purchase. “She could afford to do this, but when he called back two months later asking for another $50,000, I told her this would really impact her own planning, ” she says. “She needed to be reminded to put her own needs in front of her motherly love, and it was a real ‘ aha ’ moment for her. ”
Scenarios like these have become all the more common as Canadians approach another year of pandemic living. With uncertainly around COVID-19 still looming large, Boomers and Gen X parents are paying the price in financial setbacks to support struggling family members, while their dependants push future life goals back indefinitely.
According to research by FP Canada, only 57% of Canadians surveyed in September 2020 said they were confident they would achieve their financial life goals, compared to 67% who felt that way in 2018. Three in 10 were concerned they ’d never recover financially post-pandemic. It’ s not surprising then that a Consumer Financial Hardship Study, conducted by TransUnion in November 2020, showed that 30% of respondents were saving less for retirement, while Gen Z and Millennials (the hardest hit with COVID-19-related job losses) reported the greatest negative impact to household income due to the pandemic.
“I know of parents whose children were studying aeronautics and had offers to be plucked out of school for jobs only to graduate with no prospects and major student debt, ” says Julia Chung,aVancouver-based partner and certified financial planner at Spring Financial Planning. “One of them has moved back home with his parents and is working in a cheese-making store. ”
In these uncertain times, what has become crystal clear to Canadians across generations is the need to have a financial plan. “We saw this during the housing crisis of 2009 with people rushing to find interest-bearing investments and get life insurance, and now it’ s happening again, ” Chung says. In speaking with the younger set in particular, she notes that they ’ re “desperately interested in what they should know ” because they ’ re aware of the instability of today ’ s world and the fact there won ’t necessarily be the pension to rely on that their Boomer parents had. “Millennials in their 30s say they ’ ve been reading the Globe and Mail, and that level of self-taught knowledge is pretty impressive compared to older generations who are used to getting this information at the bank, ” she says.
Chung and her team are offering free webinars and articles about cash-flow planning to try and target those who haven ’t reached out for help yet. “Often people come
Tina Tehranchian, CFP, CLU, CHFC
to us for cash-flow management and money coaching when their debt is out of control, and those client requests have dropped off to zero some months, ” she says. “That makes me think people are struggling, so we ’ re giving them tools even if they don ’t think they can afford to contact us directly. ”
After weathering four major financial crashes throughout her career already, Chung says COVID-19 is yet another example of how “the sun is not always going to shine, ” and why financial planning is essential to being better prepared for disaster. “It’ s like they now finally see the reason behind that emergency fund I’ ve always been talking about. ”
Emergency Funds Gaining Favour
Stephanie Douglas, a partner and portfolio manager at Harris Douglas Asset Management in Toronto, says she ’ s had more questions about emergency funds in 2020 than in her seven years in financial planning. “We suggest three to six months for living expenses, plus a line of credit just in case, even if you never use it, ” she says. “I’ ve seen people who want to keep even more cash for peace of mind, especially if they ’ re more insecure about their jobs these days. ”
While much of her client base has been proactive about saving even prior to the pandemic, she expects this latest crisis will encourage many more to do so. “I’ m optimistic that people are paying more attention to their finances, and this will be a learning experience for many younger Canadians in starting to think about setting up these funds, ” she says. “Lots of people are still employed and spending less money, so it’ s a good time to get started. ”
Alim Dhanji, a senior financial planner at Assante Financial Management in Vancouver, has several clients in the hospitality and healthcare sectors who have taken a substantial financial hit during the past year. “Having a three- or six-month emergency fund gave them the ability to make the right decisions instead of making decisions under pressure, ” he says.
When the pandemic started, a big part of his job was to help his clients (ranging from 40 to 60 years of age) realize what government supports were available to them, including disability tax credits and housing subsidies along with emergency response benefits. “Now it’ s more about making sure they have a [financial] plan that will give them structure, hope, and direction, ” he notes. “This is a good time to check off the boxes of what they ’ ve wanted to do and haven ’t, like get their wills done, look at insurance and cash flow, and build an emergency fund. ”
When it comes to investments, Dhanji says this could also be the time for younger investors to have more equity exposure in their portfolios so they can stay ahead of inflation and taxes. On the other hand, older and even middle-aged investors may have to take on more risk to achieve their retirement goals. “But if their financial plans say they ’ re on target, they may not need to, ”he adds.
For Tehranchian, whose clients are primarily affluent Boomers, investment portfolios haven ’t had to change much at all. “We have been very lucky that all the world markets have recuperated faster than expected, and as long as those who are retired have a good cash cushion in their portfolios, they ’ ve been fine, ” she says, noting that she always recommends clients have three years of cash reserves or very low risk funds to draw from to give markets time to recover. She says those who did panic and got out of the market entirely — or needed income but had no reserve padding — felt the impacts of the last year in a major way. “That’ s why now is an ideal time to reassess the risk tolerance of all clients to make sure portfolios are in line with their comfort level going forward. ”
Tehranchian also notes that the pandemic has incited more interest in estate planning. “It’ s easy to procrastinate on estate planning, and most people need a trigger to start thinking about mortality, ” she says. “In normal times, it would be the death of a family member that gets you thinking about this, but in a pandemic you hear about [death] happening every day. ”
Alim Dhanji, CFP
Helping Out at What Cost?
As Tehranchian ’ s own client experiences have shown her, COVID19 times have also emphasized the importance of helping parents recognize when they can ’t jeopardize their own financial plans to Zena Amundsen, CFP, CDF bail out their children. “The key role of a financial advisor is to be there to provide the right perspective, ” she says, which includes outlining the tax implications of withdrawing funds for others. says, along with introducing them to your financial planner to “We owe it to our clients to make sure they are well informed help them have the coaching and discussions that will keep them about making decisions before they make them. ” on track.
Once clients determine they can afford to help, the next step Amundsen recalls one client who retired in September amidst is to create limits and expectations for their children, says Zena the pandemic and was worried about having to say no to her chilAmundsen, a certified financial planner at Astra Financial Services dren because she had been helping them in the past when she in Regina. Perhaps that means drafting a formal loan agreement could better afford it. “We ’ ve been practising her response, and it to help build a sense of responsibility among adult children, she Continued on page 14
REACHING OUT AND CONNECTING
Social distancing and stay-at-home orders are straining our personal connections. But during this pandemic, we need each others’ support more than ever.
Here’s how two independent Advisors affiliated with PPI are reaching out to people in their communities…
EDMONTON, ALBERTA
Jeremiah Renner, EPC, FIC, QAFP™ Two Pillars Financial Solutions Inc.
ST. JOHN’S, NEWFOUNDLAND
Kevin Dunphy, CLU, CFP Dunphy Molloy & Associates Limited
For Edmonton Advisor Jeremiah Renner, good nutrition and community engagement go hand-in-hand. For years, Jeremiah, his team, and his clients have initiated, organized and rolled up their sleeves to feed those at risk within their South Edmonton communities. From bagging sandwiches and juice boxes for school lunch programs to cooking over 700 annual holiday dinners for the less fortunate (yes, turkey with all the trimmings!), Jeremiah encourages a spirit of community and facilitates connections that endure and have a long-term impact. During COVID, when the need has been even greater, Jeremiah and his team have continued to work with local food programs to provide funds, groceries and meals for those in need. Yes, those charitable events and activities have been limited, but he has found a way to give back, and connect with people in his community for positive change. Follow Jeremiah’s inspiring community outreach on social media via #buildingcommunity. Strength. Endurance. Willpower. Courage in the face of adversity. It takes all of these things and more to become a Special Olympics athlete. Perhaps it is all of these things, which made St. John’s Advisor Kevin Dunphy a lifetime advocate and supporter of this initiative and the many exceptional athletes who participate. For many years (until 2019 when Kevin retired from the board), he garnered funds, inspired volunteers, hired coaches and recruited new athletes, becoming a force within the organization and his community. For Kevin, the goal has simply been to ensure that these exceptional athletes live the best life they possibly can. Although the current pandemic has put a pause on all athletic events, these incredible athletes have found a way to persevere by engaging online, eating healthy and remaining active. Today, Newfoundland and Labrador boasts over 600 Special Olympics athletes – a feat to be proud of!
STARTING NEW CONVERSATIONS
Reach new prospects and re-connect with existing clients when you share articles and videos from The Link Between.
Now more than ever, you want to stay visible online and help take care of what matters most for your clients. With your own custom URL, a branded site with your logo, and your contact info on every page, The Link Between inspires the conversations that energize your business.
• Free, customizable online tool to promote your brand • A growing inventory of thought-provoking articles and videos, ready-to-send • Simple, fast and easy-to-share via Facebook, LinkedIn, Twitter or email • Focused on financial concepts – not products – to help clients make sound decisions • Clients can subscribe to receive new articles from you, automatically
Sign up in under 5 minutes and create your own branded site instantly. Start sending articles right away – all at no cost to you. If your MGA isn’t offering you this kind of support, contact us today.
There are up to 17 client visits to a Link Between site for each article shared.*
With over 30 articles published in 2020, including Protecting Your Estate, The Travel Bug – When Travel is Too Risky, and The ABCs of Spousal RRSPs, The Link Between is growing every week.
*Estimate based on ratio of articles shared to total number of site visits, 2020.
Unparalleled Resources. At Your Command.
Continued from page 11 definitely puts the blame on me as the financial planner, ” says Amundsen. “I don ’t mind using myself as the so-called bad guy that says she shouldn ’t help. It is my job to protect her first. ”
As a mother of two adult children still in school, Amundsen is prepared to practise what she preaches. When her kids wanted to move out, she drew up a spreadsheet showing them how much more they could save without renting, but they decided to leave anyway. So far, they have jobs and some cash savings that give them some breathing room, but if they ’ re laid off Amundsen expects they ’ll be boomeranging back home looking for support. “This is a little bit of tough love because my husband and I have agreed we will not pay their rent or give them money to move out again, ” she explains. “We pay for their education because that is our own personal values system, but the rest is on their own. ”
Opportunities in the Chaos
As Canadians wait to see how 2021 will unfold, many advisors are optimistic that there ’ s already a silver lining to the turmoil of the past year, particularly in changing bad habits and pushing younger generations to be more savvy about saving for the future.
“Before the pandemic, disposable income versus debt load was just getting higher and higher, and sometimes we need a wake-up call to shake the complacency, ” says Wendy Brookhouse, founder and chief strategist at Black Star Wealth in Halifax. “This gives our clients an opportunity to make lasting changes and be more deliberate in how they spend their money. ”
In those first few months she says she wasn ’t hearing from new clients at all, whereas now she is regularly working with many who realize they have work to do for what’ s ahead. “As we move into phase two [of COVID], they ’ re looking much more at contingency plans, like how they could survive another big financial shock, ” she says. “Together we ’ re trying to figure out where the gaps are and how we will address them so they can reach retirement. ”
Nicole Putz, whose clients are mostly Millennial women, points to one 32-year-old flight attendant now living on government benefits that are half as much as she was making while working. “She told me it really opened her eyes to the fact she was living beyond her means and needed to focus on finances, ” says Putz, a certified financial planner at Wolfond Financial in Regina. “So much of what we do as advisors is scenario-based and now that we ’ ve gone through something so major, it’ s put a real-life perspective to it. ”
These tumultuous times have also been a reminder to older clients that their children are going survive — and maybe thrive — even if parents don ’t provide the solution. “I think the vast majority of Millennials are hard-working, but they ’ re used to getting what they want, and in the most important and fundamental ways, life has been easier than their parents ’ and grandparents ’ , ” says David Christianson, a senior financial advisor at Christianson Wealth Advisors in Winnipeg. “Plus, parents don ’t have 20 or 30 years to recover like their kids do, so they have to take care of themselves first. ”
As an advisor with plenty of second- and third-generation clients, he says those facing unemployment or putting their aspirations on hold should be looking for the opportunities that inevitably emerge in disruptions like these. “If you ’ ve lost your job in hospitality or in the airlines, there are other industries that are booming — and now hiring, ” he says. “Hopes and dreams may feel like they ’ re shattered, but they ’ ve only been delayed. ”
The opportunities abounding extend to financial advisors too, he adds. “This is a chance to forge those lifelong bonds with clients by helping them through the crisis and providing the advice and resources they need to get through this, ” says Christianson.
David Christianson, CFP, R.F.P., TEP, CIM
Stand out.
In today’s wealth planning world, being like everyone else won’t cut it anymore. You need a superior line of attack – one that helps you deliver deeper knowledge to diagnose and overcome complex challenges. Be smarter. Instinctual. More agile. Find your fierce with a CLU ® .
