FDONE ORUM MAY 2021 • $5.50
The Magazine of Influence for Financial Advisors
HOW TO USE TIKTOK TO FIND NEW CLIENTS
DEAL What it’s like buying and selling a book of business during a pandemic
INSURING THE UNINSURABLE
LESSONS FROM MY BRAIN TUMOUR DIAGNOSIS By Ted Polci, CLU, TEP
REVIEWING THE
TAX
CONSEQUENCES OF YOUR AGREEMENT
Publication Mail Agreement # 40069004
FORUM VOLUME 51, 2
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MAY 2021
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ISSN 1493-826X
FEATURES
10
Moving Up and Moving On
Buying or selling a book of business during a pandemic is not for the faint of heart. Alison MacAlpine shares some advisor-tested steps and processes
17
Knowing the Fine Print
Many tax implications affect the purchase and sale of a financial planning practice. Jamie Golombek and Debbie Pearl-Weinberg provide the details
DEPARTMENTS
COLUMNS
4
29 TAX UPFRONT
EDITOR’S JOURNAL How are you doing? And, remembering David Wm. Brown
5
OPENERS Virtual care is the new norm; how to use TikTok as a marketing strategy; working moms juggling child care, finances, and career one year into the pandemic
Association updates, events, and memorial tributes
38 THE FINAL WORD
BY JAMIE GOLOMBEK
30 ESTATE DILEMMAS Insurance ownership considerations for business owners BY KEVIN WARK
31 CORPORATE INSURANCE Dos and don’ts of disability buy-sell arrangements
34 LEADERSHIP & GROWTH How to best assist clients caring for palliative loved ones BY CATHY HISCOTT
A season of renewal
COVER: ISTOCKPHOTO
BY GREG POLLOCK
Patricia Giesbrecht explains how implementing client input can have a profound impact on your advisory business
New policy changes to discuss with your clients
BY GLENN STEPHENS
36 ADVOCIS NEWS
20
Using Feedback Effectively
35 GUEST COLUMN Advocating for fair treatment for family businesses BY GUY LEGAULT AND KEVIN WARK
Publication Mail Agreement # 40069004 Return Undeliverable Canadian Addresses to FORUM Magazine Circulation Department, 10 Lower Spadina Avenue, Suite 600, Toronto, Ontario M5V 2Z2
24
Plan B
27
Life Curveball
How do you advise clients who may not qualify for life insurance? Richard Parkinson explains the alternatives for the uninsurable
Ted Polci had a life-changing experience he wouldn’t wish on anyone. Here’s what he learned from it MAY 2021 FORUM 3
EDITOR’S JOURNAL
BY DEANNE GAGE
Checking In W
*** Advocis and the team at FORUM send their deepest condolences to the family of David Wm Brown, CLU, CHS, TEP, who passed away in February. David was a highly respected insurance advisor and partner at Toronto-based Al G. Brown & Associates, a firm his father founded. He served his clients for 43 years. On a personal note, I met David back in 1999, the year I first started writing about 4 FORUM MAY 2021
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
this industry. Soon after I wrote an article on insurance, David mailed me a two-page letter introducing himself and offering kudos on the piece. The letter mentioned some advanced insurance strategies I might be interested in covering and he invited me to his offices to meet the team. I accepted, and over the years, attended many lunch meetings in his company boardroom. We had many delightful conversations about insurance and the industry, and I learned so much thanks to him donating his time to educate me and other reporters. His Jewish faith, close-knit family, and giving back to the community were passions near and dear to his heart. Over the years, he served on several professional associations, charities, school committees, and other community groups. In case you missed it, I encourage you to go back to our May 2019 issue and read “Have a Little Faith” on page 16. You’ll get a true sense of David’s essence from that article. David knew how to break the ice during serious moments. Once around 2003 during a roundtable, I had asked a group of advisors to write down their biggest day-to-day challenges. Among the usual industry topics was David’s written response: “My daughter’s phone bill.” Thinking about that moment always makes me laugh. Zikhrono livrakha (may his memory be a blessing).
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
e’re now past the one-year mark of the pandemic. How is everyone doing? We’ve written about how you’ve helped your clients navigate new financial obstacles and, of course, adapted to the new virtual world — no easy feat for businesses that always thrived on face-toface communication. I recently hosted a Zoom call with FORUM’s editorial advisory board, and rather than strictly reviewing past content appearing in FORUM we discussed how the pandemic has affected us personally and professionally. The advisors were thrilled at the chance to actually talk shop with each other, something they hadn’t really engaged in since before the pandemic. Take virtual events. They are likely here to stay as they are more accessible to people across the country and save travel time. But the coffee breaks and lunches where you mix and mingle with other advisors — who are not your colleagues — are sorely missed. Virtual networking just doesn’t translate in the same way, especially when you are trying to get to know new people. And advisors miss seeing their clients in person. Hugging them. Consoling them in a way that’s hard to do on the phone or online. Being able to say goodbye to clients who pass away. I’m inviting you to share a few paragraphs with FORUM about what the pandemic has taught you about being an advisor, what you miss, and what you are looking forward to in the future. We will publish some of your responses in an upcoming issue. Please email your stories to dgageforum@gmail.com.
FORUM
OPENERS Fodder For the Water Cooler
VIRTUAL CARE IS THE NEW NORM
A
dd another way that COVID-19 has changed our lives permanently: Virtual care is spreading across the country and will be successful if those in charge set reasonable goals. It’s provided by TELUS Health and offers online physician consultations to Alberta, British Columbia, and Ontario residents through their public healthcare systems. Virtual care started out as “telemedicine” in the 1990s, enabling people to get online support from either their family doctor or a nurse to deal with patient medical questions. Since then, it has expanded and can start, for example, with a virtual care provider who can then triage the patient, potentially sending that person to a specialist, all online. “Today, almost anything and everything is included in virtual care,” says Joey Raheb, senior vice-president for Health Solutions at Aon, which recently released
a report on virtual care in Canada. “But I think the future is an integrated platform where private and public means are aligned, and that we see providers rallying around the kinds of services and capabilities that are needed for employees to be able to do that.” The key to a successful virtual care plan is for employers to examine costs and trends in their benefits offer, look at employee demographics and issues like productivity, and then target strategies and goals that are constantly re-evaluated. By creating this connection, employers will be
WHY WOMEN NEED MORE FINANCIAL PLANNING
PHOTO: ISTOCKPHOTO
F
inancial advisors should plan to take on an even greater educational role, particularly for their female clients in light of the “she-cession” brought on by COVID-19. “This is where we need to step up and be more than [advisors] doing spreadsheets,” says Zena Amundsen, a certified financial planner at ASTRA Financial Services in Regina. “We’re here to be the leaders, connectors, educators, and champions of our clients, and take on more of a supportive role, whether for women or men.” Women in particular need to be told that they will (generally) live longer and need to have solid plans in place to shore up their retirement years, notes Amundsen. “We need to keep this top of mind.” Cuts in pay during the pandemic mean women can’t make the same kind of contributions to their RRSPs as they had
able to measure the success of their virtual care programs, says the Aon report. Mental health is one of the areas that has benefited greatly from virtual care, since confidentiality is key. Raheb gives the example of a person living in a small community driving to a particular doctor’s office. Everyone can tell immediately that the person is going to the town psychiatrist, a topic the person may rather keep confidential. But now, virtual care over a secure Internet line is considered a mental health best practice by such organizations as the Centre for Addiction and Mental Health (CAMH). CAMH uses secure videoconferencing in its virtual psychiatric care program, which has been taken as being as effective as in-person interactions. Professionals are also able to connect remote care settings with experts in major health centres, maintain confidentiality, and bridge geographical disparities. — Susan Yellin
previously, and loss of earnings will also mean less for their Canada Pension Plan when it comes time for retirement — something they may need to be told, says Jeanette Brox, a certified financial planner and a senior financial consultant at IG Wealth Management in Toronto. “The other thing I think about for women is that we look after everybody else, but when it comes our time, who will be there to look after us?” Brox suggests women seriously consider getting long-term care insurance for themselves and sock away as much savings as possible for whatever unplanned events occur. When it comes to investing, some sectors have done extremely well, so even a 5% exposure to one of these areas during the past few months would have been fruitful to the more knowledgeable investor, she says. Amundsen also notes Ottawa may come forward in terms of child care reform, which might keep more women on the job. “This is kind of exciting. The silver lining in the cloud is going to be some positive change.” — S.Y.
MAY 2021 FORUM 5
BRANDING & SOCIAL MEDIA BY ERIN BURY
Using TikTok to Engage, Educate, and Fund New Clients
W
hen I mention TikTok, you probably think of teens lip-synching to The Weeknd — not a marketing opportunity for your business. But in the past year, that’s exactly what TikTok has come to represent to professionals across many industries, and it’s become more than just entertainment — it’s an opportunity for financial planners to build an audience. Like many other professionals, I initially dismissed TikTok as an app for teens. But then COVID-19 hit, and Canadians started spending a lot more time on our phones. Comscore reported that in April 2020 the share of 25- to 34-year-olds on TikTok grew to 27.4% from 22.4% of the user base, while the share of users aged 35 to 44 grew to 17.1% from 13.9% — so almost half of TikTok’s users were 25+ as of last spring, and those numbers have been climbing as Millennials and Gen Xers continue to download the app. I downloaded TikTok in the spring of 2020, and came to love the app because it’s not based on popularity, nor on who you follow — your TikTok homepage is a collection of random videos from creators that the algorithm shows to you based on your interests. As you use it more, it starts to understand your tastes and becomes more relevant to your interests. I also love it because the videos are so creative and often educational. There are chefs posting recipes, personal trainers giving workout tips, and yes, personal finance experts telling you how to pay down debt or negotiate with your cable provider. Creators like @humphreytalks (1.6 million followers), @girlstalkstocks (337,000 likes), and @jimchuong (2.3 million likes) have built a strong presence on the app, sharing accessible educational videos about credit cards, mortgages, investing, cryptocurrency, and saving. Last summer I decided to run an experiment for my company Willful: Could I produce estate planning content that would find an audience on TikTok? There are thousands of people on the app who are having kids, buying houses, and getting married, and they might need a will — and more importantly, they might need some education on how to go about it, and what the laws are in Canada. In over three months I hadn’t seen one video focused on estate planning, so I thought it was a niche I could own. The only challenge is that estate planning isn’t exactly the most fun subject
6 FORUM MAY 2021
matter for an app dominated by comedic videos — but the beauty of TikTok is that you can communicate serious information in a lighthearted, creative way, and it may actually be more effective and easier to consume than a lengthy educational article. I put myself out there, filming a variety of videos that centred on TikTok memes, overlaid with education about wills. Because the “For You” page presents strangers’ content to you, your content also shows up in other people’s feeds — and this resulted in more than 200,000 views and thousands of likes on my videos within the first several weeks. I also started receiving questions and comments from Canadians who were interested in estate planning and had questions, and this allowed me to answer dozens of questions about wills, and to engage with potential customers (some of whom mentioned TikTok as the reason they visited our website). It’s been a great way to increase awareness of our brand and connect with a new audience on a platform that I’m sure our competitors aren’t using. Financial advisors have a similar opportunity to build awareness and build your client list through TikTok. You may be inclined to dismiss TikTok as irrelevant, but the app has an audience of millions of Canadians, many of whom are in your target demographic. The key to getting started with TikTok is to go in with an open mind. I challenge you to download the app and use it for a few weeks. Start to see how the algorithm adjusts content to your interests. At the very least, you’ll be entertained. At best, you’ll see what I saw: an opportunity to connect with your audience and to creatively get your message across. A few tips to get started: 1. You may have limitations on which social platforms you’re allowed to use, and you may want to speak with your compliance department about how to ensure you’re abiding by any marketing protocols. 2. Maybe you’re not the right person to build a TikTok presence, so throw the challenge out to your marketing team, or to any summer students you’re bringing on board who are likely already familiar with the app’s nuances. 3. If you’re not ready to become a creator, consider running ads on TikTok to test the waters. Many financial advisors are using the platform already in Canada to educate, inform, and engage. And in an age where we’re all on our phones more than ever, you don’t want to pass up an opportunity to be an early adopter of a powerful new marketing tool. 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.
PHOTO: ISTOCKPHOTO
OPENERS
DID YOU KNOW? Canadians with mental health issues not seeking help • 60% of Canadians are currently experiencing mental health issues • About 54% of those with mental health issues have not received medical support • Affordability (25%) and embarrassment (23%) are the top two barriers Canadians say have prevented them from seeking help SOURCE: SUN LIFE, MARCH 2021
Canadians feel vulnerable to financial fraud • 56% of Canadian respondents feel vulnerable to being a target for financial fraud • A strong majority (84%) believe social isolation contributes to fraud vulnerability • More than three-quarters (78%) report they have been targeted by fraudsters in the last year
Women juggling childcare, career, and finances as pandemic reaches one year Canadian women take care of key household responsibilities: • • • •
65% supervise learning/schoolwork for children 60% manage child care 67% are in charge of meal preparation 66% handle household cleaning
Yet, their financial futures are suffering: 38% do not have an investment portfolio Women also share financial responsibilities: • 61% oversee household bills • 56% are the main contact for their financial advisor • 49% plan long-term savings goals for their families Only 17% have a clear plan for retirement SOURCE: CIBC POLL, FEB.2021
SOURCE: TD BANK, MARCH 2021
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. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates. Insurance products provided through Hollis Insurance independently and separately from iA Private Wealth Inc. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investor Protection Fund.
MAY 2021 FORUM 7
L O N G - S TA N D I N G C L U D E S I G N AT I O N H O L D E R S
The Institute for Advanced Financial Education honours longstanding CLU® holders – those who have held their designation for 25 years or more—demonstrating a longtime commitment to excellence in financial advice. We are honouring CLU designation holders who are celebrating 25, 30, 40, 50, 60 & 65 year increment milestones in 2021.
Ted Faibish, CFP, CLU, CH.F.C., CHS Anthony H. Sverdrup, Paul D. Farrell, CFP, CLU, CH.F.C, CHS CFP, CLU, CH.F.C., CHS David A Fedder, CLU, CH.F.C. Timothy M. Tahara, CFP, CLU, CH.F.C. Ross W. Hagen, CLU, CH.F.C. Donald R. Taylor, CLU, CH.F.C. Gerold Haukenfrers, CFP, CLU, CH.F.C. John D Temple, CFP, CLU, CH.F.C., CHS Michael H. Hildebrandt, CLU, CH.F.C. Glenn M. Thorarinson, CFP, CLU, CH.F.C. David A. Holm, CFP, CLU, CH.F.C. Sandra J. Valks, CLU Mark Kempf, CFP, CLU, CH.F.C. Mr. Miklos Valsamas, CLU, CH.F.C., CHS Jeffrey J. Kraemer, CFP, CLU, CH.F.C. Paul J. Virgin, CLU Wade C. Lawrence, Jaymes C. Winch, CLU, CHS CFP, CLU, CH.F.C., CHS James C. Wingrove, CLU, CH.F.C. John K. Leith, CFP, CLU, CH.F.C. Peter Leung, CFP, CLU, CH.F.C. Gordon K. Maikawa, CFP, CLU, CH.F.C. Mark A. Mazurek, CLU, CH.F.C., CHS 30-YEAR Reid A. McGruer, CFP, CLU, CH.F.C., CHS CLU DESIGNATION HOLDERS Kenneth McNaughton, CFP, CH.F.C., CLU, CHS Atiya Ahsan, CLU, CH.F.C. Bonnie D. McPhail, CFP, CLU, CH.F.C. Bahadur F. Alarakhia, CFP, CLU, CH.F.C. Michael A. McTague, CFP, CLU, CH.F.C. Jose L. Angeles, CFP, CLU, CH.F.C. Jerome A. Meckelborg, Dale R. Berg, CFP, CLU, CH.F.C. CFP, CLU, CH.F.C. Casey G. Brandreth, CFP, CLU, CH.F.C. Mr. Mark R Meilleur, Tammy J. Buss, CFP, CLU, CH.F.C. CFP, CLU, CH.F.C, CHS Judy M. Byle-Jones, CFP, CLU, CH.F.C. Mary F. Moran, CLU, CH.F.C. Brian D. Clewes, CFP, CLU, CH.F.C. Keith J. Muchan, CLU David A. Collard, CFP, CLU, CH.F.C., CHS 25-YEAR Tuan C. T. Nguyen-Cao, CLU, CH.F.C. Corrigan Collins, CLU, CH.F.C., CHS CLU DESIGNATION HOLDERS Timothy R. Paziuk, CFP, CLU, CH.F.C. Rodney L Cousineau, CFP, CLU, CH.F.C. Trevor A. Pienaar, CLU, CH.F.C. John G. Davidson, CLU John G. Brick, CFP, CLU, CH.F.C. Domenic M. Pizzimenti, CLU, CH.F.C. Chris C. Douglas, CFP, CLU, CH.F.C. G. Scott Calcutt, Michael J. Saron, CLU Rui B Fernandes, CFP, CLU, CH.F.C. CFP, CLU, CH.F.C., CPCA Mark A. Schneider, Ivan D. Gidluck, CFP, CLU, CH.F.C. D. Ross Campbell, CLU, CH.F.C., CFP CFP, CLU, CH.F.C., CFSB Allan V. Hacking, CFP, CLU, CH.F.C. Richard E. Coye, CLU, CH.F.C. Paul K. Scott, CFP, CLU, CH.F.C. Howard J. Haskings, Mario A. DeLisi, CLU, CFP With more than 5,000 CLU® and CHS designation holders in good standing. The institute for advanced financial education is the leading designation body in canada for Perry J. and Sellars, CH.F.C. CLU, CH.F.C.,ofCHS Jack DiNardo, CLU, CH.F.C. financial services CFP, practitioners in the specialty areas of advance estate wealthCLU, transfer, and living benefits. The instituteCFP, provides a platform standards and advanced L. Siemens, CLU,speak CH.F.C., FLMIof a practice Robert A. Izatt, CFP, CLU, knowledge through designation programs and accreditation Bonnie services. Institute destinations powerfully that is built on knowledge and aCH.F.C. belief in the Allan M. Dorfman, continuous refiCH.F.C., nement ofCHS that knowledge. Kyle R Silverberg, CLU, CH.F.C. Abraham O Jakarsezian, CFP, CLU, CH.F.C. CFP, CLU, Jane Simpson, CLU David R. Johnson, CFP, CLU, CH.F.C. Len A. Drouillard, CLU Jonathan R. Sinnatamby, CLU, CHS Karen S. Kelndorfer, CFP, CLU, CH.F.C. Peter J. Drum, CFP, CLU, CHS Duane R. Snow, CLU, CH.F.C. Douglas M. Kennedy, CFP, CLU, CH.F.C. Michael J. Duckworth, CLU, CH.F.C. Brian C. Stuebing, CLU, CH.F.C. Gary I. Laakso, CFP, CLU, CH.F.C., CHS Diane M. Dupuis, CFP, CLU, CH.F.C., CHS
The Institute for Advanced Financial Education (The Institute™) is the leading designation body in Canada for financial services practitioners in the specialty areas of Advanced Estate and Weatlh Transfer, and Living Benefits. The Institute provides a platform of standards and advanced knowledge through designation programs and accreditation services.
Holding a CLU designation is proof of commitment to higher standards. Even under the most difficult economic circumstances, longstanding CLU designation holders have continued to help Canadians build and preserve their wealth.
Peter G. Lamb, CLU, TEP, EPC, CSA Avis M. Lapham, CFP, CLU, CH.F.C. Meiz M. Majdoub, CLU, CH.F.C. James A. Matson, CLU, CH.F.C., CHS Kevin B. Mckelvie, CFP, CLU, CH.F.C. Robert C. McNary, CFP, CLU, CH.F.C., CHS Alban B. Moran, CLU, CHS Joe Moretto, CLU David Neale, CFP, CLU, CH.F.C. Harry J. Norman, CFP, CLU, CH.F.C. John F. OLeary, CFP, CLU, CH.F.C. William OLeary, CFP, CLU, CH.F.C. Dave Otto, CFP, CLU, CH.F.C., EPC Gus K. Pappas, CFP, CLU, CHS, CH.F.C. Robert A. Park, CFP, CLU, CH.F.C. Cheryl L. Rasko Ferris, CLU, TEP, EPC Sterling Rempel, CFP, CLU, CH.F.C. Derek Rideout, CFP, CLU, CH.F.C. Robert N. Smithyman, CLU Patrick M. Souliere, CFP, CLU, CH.F.C. William D. Stewart, CLU, CH.F.C. Donald R. Stone, CFP, CLU, CH.F.C. Larry Swartz, CFP, CLU, CH.F.C. Clinton B. Thierman, CLU, CH.F.C. Russell P. Thompson, CLU, RHU Abe E. Toews, CFP, CLU, CH.F.C., CHS Richard L. Tomalty, CFP, CLU, CH.F.C., CHS Paul S. Tuccitto, CFP, CLU, CH.F.C. Vincent P. Uhryniuk, CLU, CFP Debra L. Wiegers, CFP, CLU, CH.F.C., GBA Michele Wilson, CFP, CLU, CH.F.C. Donna J. Winstone, CLU, CH.F.C.
40-YEAR CLU DESIGNATION HOLDERS Gerry P. Belec, CFP, CLU, CH.F.C. Gerald M. Bray, CFP, CLU, R.F.P., TEP
Layden A. Brown, CLU, CH.F.C. Dennis L. Brumley, CFP, CLU, CH.F.C. Richard H. Clark, CFP, CLU, CH.F.C. Edmund J. Dawson, CFP, CLU Sonia M Field, CLU Bruce Field, CLU, CH.F.C. Russell Gillman, CFP, CLU, CH.F.C. Fred S. Gordon, CLU, CH.F.C., CFP Banny L. Hu, CFP, CLU, CH.F.C. Edward A. Jacob, CFP, CLU, CH.F.C., CHS Rodger E. Johnson, CLU W. James Kennedy, CFP, CLU, CH.F.C. W. James Maclean, CFP, CLU, CH.F.C. Harold B. Mcadam, CLU, CH.F.C. Frank E. McKitterick, CFP, CLU, CH.F.C. Roger McMillan, BA, CLU, CH.F.C. Gerry H. Myers, CLU, CH.F.C. Kirby J. Payette, CFP, CLU, CHS Ian M. Robinson, CLU, CH.F.C. Pietro Sostegno, CFP, CLU, CH.F.C. Deborah G. Sutter, CFP, CLU, CH.F.C., CHS J Lewis Warke, CFP, CLU, CH.F.C. Richard J. Wolfson, CFP, CLU, CH.F.C.
60-YEAR CLU DESIGNATION HOLDERS William H Gleed, CLU Mr. Frederick W Grant, CLU
65-YEAR CLU DESIGNATION HOLDERS D I. Mcclellan, CLU
For more information on the CLU designation, please visit www.iafe.ca/clu
50-YEAR CLU DESIGNATION HOLDERS Gerald R. Butler, CFP, CLU, CH.F.C., CSA John E. J. Courneya, CFP, CLU, CH.F.C. Bruce W Etherington, CFP, CLU, CH.F.C. Joseph H. Ewanika, CFP, CLU, CH.F.C. Robert L. Gulyas, CLU Barry A. Hanson, CLU James E. Rogers, CFP, CLU, CH.F.C. Ramon L. Sattaur, CFP, CLU, CH.F.C., RHU Ronald C. Sparkes, CFP, CLU, CH.F.C. Gordon F. Stovel, CLU, R.F.P., CFP William E. Wall, CFP, CLU, CH.F.C.
The Institute for Advanced Financial Education™ (The Institute™), CLU® and CH.F.C.® are trademarks of The Financial Advisors Association of Canada (TFAAC). The Institute is a wholly owned subsidiary of Advocis®. Copyright © 2018 TFAAC. All rights reserved. Unauthorized reproduction of any images or content without permission is prohibited. Financial Planning Standards Council is the marks licensing authority for the CFP® marks in Canada, through agreement with Financial Planning Standards Board Ltd. CAIB® is a registered trademark of the Insurance Broker Association of Canada. F.Pl. is a registered trademark of the Institut québécois de planification financière. FEA® is a registered trademark of the Family Enterprise Xchange.
COVER STORY
Moving Up and Moving On Buying or selling a book of business during a pandemic is not for the faint of heart. Alison MacAlpine shares some advisor-tested steps and processes
10 FORUM MAY 2021
ILLUSTRATION: ISTOCKPHOTO
M
ike Berton didn’t plan to retire during a I paid a bit too much and would definitely do things differently pandemic. Four years ago, long before next time,” he acknowledges. “For me, it was getting the assets up COVID-19 upended our lives, the senior to build the revenue, and now, after these purchases plus organic financial planner at Assante Financial growth, I am in a position to be picky with any further acquisitions.” Management Ltd. in Vancouver announced For Dunn, the most important focus as the pandemic extinhis November 30, 2021 retirement date to guished in-person meetings was maintaining contact with his new his team and set the transition in motion. and existing clients. Beyond regular calls to check in with them, he started a quarterly webcast to share insights about the markets Because of the long lead time, by March 2020, he had his successors with his clients and launched a YouTube channel to educate an in place and had started meeting jointly with them and his clients. Then, overnight, public health restrictions were imposed and ineven broader audience about financial topics. person meetings came to a sudden stop. Dunn thinks the pandemic will affect book of business valu“Moving to Zoom meetings was a challenge, because a lot of ations — after all, as he points out, “generally speaking, except people last March had never used Zoom before. I had, but only real estate, every kind of asset is getting a reality check.” In particular, he believes businesses that have successfully integrated occasionally. I think we all had a rapid learning curve, and same technology into their practices will attract more buyers because with clients,” Berton says. He recalls many meetings in which the they run more efficiently. first five minutes were devoted exclusively to microphone problems and feedback loops — but then people adapted. “Most people “When you are a young advisor, every speck of revenue is seem pretty comfortable with it nowadays and, in some cases, important so you end up sacrificing your time way more than you people prefer it.” should,” he observes. “Implementing technology allows you to free What has been more of a challenge, he says, is that his team up more time to service clients, build your business, and have a life. I always wanted to be more virtual but sometimes it’s hard to hasn’t been able to work in one physical space. “With COVID, make such a change unless you are forced.” everything now takes way longer to do because people are further Gillian Stovel Rivers established a partnership with advisors apart, they’re not right beside you,” he explains. Rather than chatting casually about a client situation immediately after a call, planAdil Mohammed and Andrew Hawryluk on March 2, 2020, shortly ners exchange emails — and, as a result, the volume of emails has before pandemic restrictions came into force. But the new partners risen “exponentially” and is hard to keep up with. didn’t let COVID-19 affect their plans for growth. Nevertheless, Berton feels that because he started the transition “I cut my teeth as a business owner during the financial crisis; I had just bought the business from my father,” says Stovel Rivers, years in advance, the pandemic didn’t have a big impact on his plans. senior wealth advisor and partner at Surround Wealth Advisors On November 30, 2021, on schedule, an associate in his branch will complete the transition of 45 client relationships with assets under (Assante Financial Management Ltd.) based in Burlington, Ont. management (AUM) of about $7.5 million, for a sale price of 1.75% “So I have it in my background that any time we’re presented with of AUM adjusted for retention as of December 31, 2021. Two other a crisis, we use it as an opportunity to grow rather than use it as a groups of clients will be assigned without a sale to two associate reason to be afraid. The same has really held true with the way that we approached buying a business. We didn’t let [the pandemic] planners in his practice in a joint code with Cathie Hurlburt, the phase us at all.” practice’s co-owner and senior financial planner (and Berton’s wife). Another small group of high-net-worth clients with complex needs Throughout 2020, Stovel Rivers, Mohammed, and Hawryluk will transfer directly to Hurlburt. And one distant client relationship continued to have discussions with advisors who were considering has been sold to an advisor in that client’s home town. retiring or transitioning out of the business — and they found a “Start a good five years early, thinking out a timeline,” is his advice to other advisors crafting their exit strategy. “In year four, you should be beginning to introduce the new advisor, which means in years one and two, you should be putting the person in place and training them. … We think it takes two, three, maybe four years to get a person up to speed to be a financial planner properly and to get to know the client base and how we practise. It’s the soft facts that take all the time.” Mike Dunn, a wealth advisor with IPC Securities Corporation in Cobourg, Ont., had recently acquired a book of business when COVID-19 crept into Canada. About 80 new households added around $15 million in AUM to the $30 million in AUM he was already managing, for a Mike Berton, CFP, CLU, R.F.P., CHS, FMA Mike Dunn, CFP purchase price based on three times revenue. “This is roughly the going rate [but] I think MAY 2021 FORUM 11
COVER STORY
Gillian Stovel Rivers, CFP, CEA, Adil Mohammed, CIM, FCSI, QAFP, and Andrew Hawryluk
match with an advisor who is leaving financial planning to pursue other interests. By March 2021, they were starting the transition for 120 clients with $60 million in AUM. The undisclosed price for the book was set after negotiations that were made more complex because the transaction was from an IIROC seller to an MFDA buyer. Stovel Rivers doesn’t think the pandemic affected the purchase price, but it definitely affected the process. From negotiations to meetings with transitioning clients, she says, “everything has been done on Zoom … and it doesn’t actually feel weird. It occasionally occurs to [the other advisor] that she would so much rather that the introduction to clients be in person, but we had to just block that out because that’s not happening; we can’t do that. So now it’s about how do we take the best of what Zoom can be and do and how do we leverage its efficiency and also how do we learn to perform for Zoom?” Stovel Rivers acquired a lot of experience presenting virtually through the pandemic. Starting a year ago, she began to send out weekly video emails to clients, learning how to craft a script, build in visuals, and deliver a message within a specific number of seconds. Then she added longer monthly video emails focused on various educational topics, sometimes including a panel with her two partners. “We’ve tried to practise what I would say is very well-considered off-the-cuff delivery,” she explains. The process of introducing clients to their new advisory team has been carefully worked out within the context of a virtual world. The seller will call 12 to 15 clients each week to let them know what is happening. Immediately after that call, those clients will receive an email with a link to a group Zoom call at which they will watch their old and new advisors present with no pressure to interact if they don’t want to. Right after the seller’s call, they will also get a call from one of the Surround Wealth advisors to schedule an individual Zoom meeting in April, May, or June at which 12 FORUM MAY 2021
“As much as we want to go back to seeing people in person, there is a beautiful efficiency that saves carbon footprint, and time and energy and risk, by meeting this way,” Stovel Rivers says they can speak with their new team one on one and complete the transition paperwork. Before that meeting, one of the advisors will arrange a virtual briefing session with the seller so they have a good sense of the client’s history. “As much as we want to go back to seeing people in person, there is a beautiful efficiency that saves carbon footprint, and time and energy and risk, by meeting this way,” Stovel Rivers says, noting that “there are a number of clients where we’re going to have to get creative” because they are not as comfortable with technology. “When we hit those barriers, that’s when we will find some other way to communicate with them,” she adds, noting that phone calls, conference calls, and snail mail are all still available. COVID notwithstanding, Stovel Rivers advises those considering buying a book of business during the remaining months of the pandemic to favour practices with digitized record keeping, stellar compliance records, thorough meeting notes, and a Continued on page 16
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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
ST. JOHN’S, NEWFOUNDLAND
Jeremiah Renner, EPC, FIC, QAFP™ Two Pillars Financial Solutions Inc.
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.
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.
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.
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 !
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COVER STORY Continued from page 12 compatible perspective on investing. “Whether [the pandemic] goes on forever or it ends next week, you’ve got to make sure that the clients you’re acquiring are a fit with the clients you already take care of or the business you aspire to own,” she says. “There’s so much basic due diligence that I think is good to do, pandemic or no pandemic. Do they value what it is that we do, does that advisor practise the same values and principles as we do — and if they do, then we have a high likelihood of a successful transition
HOW HAS COVID-19 CHANGED THE BUYING AND SELLING LANDSCAPE?
where the client is served well and they’re happy, and the advisor who is selling gets the full value of their business.” That’s a feeling Berton has — that he’s reaping fair rewards from a long and successful career. Next up for him is more time jamming with other musicians on the bassoon (virtually for now), relaxing at his cottage on Ontario’s Georgian Bay in the summer, and speeding down ski slopes in Whistler in the winter. He’s spent many years helping clients achieve their vision of retirement. Now, it’s his turn. ALISON MACALPINE is a Toronto-based writer. To receive a PDF of this article, email dgageforum@gmail.com.
On the upside, Plaskett thinks that the recent upheaval has shone a spotlight on practices that haven’t made the move from “technician” to “business owner” to create the “sticky, reliable, repeatable revenue” buyers want. He hopes one lesson advisors will take from the pandemic is that they need a documented hile COVID-19 hasn’t changed the financial planning process that makes them, in fundamentals of buying and selling a effect, dispensable so the business can continue book of business, Afsar Shah, a business and to thrive after they are out of the picture. regulatory coach at The Personal Coach in Like Shah, Christine Timms, a retired adviAfsar Shah Waterloo, Ont., says it has made some elesor based in Toronto who has written three ments of the process much more challenging. practice-building handbooks for financial adviEstablishing solid relationships with new sors, hasn’t seen a run for the exits during the pandemic. She thinks most advisors want to clients is harder, and the pandemic has also see their clients through to the other side of a curtailed opportunities to get to know the crisis. Still, she adds, “any crisis makes people advisor on the other side of a transaction. “It’s made it much more difficult for buythink about whether or not they want to be still ers and sellers to assess the cultural fit, the working as an advisor when the next one comes strategic fit of their prospective target or partaround the corner.” So COVID-19 may have ner. It’s much more challenging to do that in planted the seed of an idea for some people. an environment where you can’t spend lots As they contemplate the future, she says it’s of time together in person talking about busivery important for both buyers and sellers to Christine Timms articulate everything they do for clients (she ness philosophies, client service models, value has created a business model checklist, available in her propositions, investment philosophy, and so on,” he says. Transitioning Clients and the Retirement Exit Decision handShah believes that rather than driving more advisors out of the business, the pandemic has accelerated timelines for book downloadable from https://christinetimms.com). A advisors who were already looking to sell. Instead of making fully articulated business model can enable sellers to get a the necessary changes to their business model, they may be price that fully reflects their practice’s value and help both more eager to exit, especially while markets remain strong. buyers and sellers find a good match. And if the pandemic has revealed flaws in sellers’ businesses, as Plaskett suggests, Shah’s warning: don’t skip or rush the necessary steps. it has done the same for buyers’ businesses, which can help “It’s a real risk if you try and speed through any one of sellers evaluate potential successors. the individual stages that comprise the acquisition process,” he says. “The sellers who’ve built a strong client base with “COVID is not going to change what you need in a sucwell-run operations, strong teams, and solid service processcessor,” Timms says. “What it does is give you some opporing are attracting much more interest and solid valuations.” tunities to see how the successor does in times of adversity. Scott Plaskett, senior financial planner and CEO at IRONWere they there for their clients? How did they adapt to the new technology needs? Were they able to instill confidence SHIELD Financial Planning in Toronto, agrees that the panand calm the clients and help them realize that this didn’t demic has made it harder for buyers to win over sellers’ clients. “When we go through an event like this, it’s much more difblow up their financial plan? You need to be able to see that, ficult to keep that retention in place, and retention is one of and I think that you can get a better feeling of that [in a crithe key components to acquiring a business,” he says. sis].” — A.M.
W
16 FORUM MAY 2021
COVER STORY
Knowing
the Fine Print
Many tax implications affect the purchase and sale of a financial planning practice. Jamie Golombek and Debbie Pearl-Weinberg provide the details
I
f you’re an advisor buying or selling a practice, it is important to recognize that the structure of the arrangement may have tax consequences for you. In addition, as goodwill is now treated as depreciable property, this can also affect the tax results. The starting point to determine the appropriate tax treatment to be applied to the purchase or sale of an advisory practice is to ascertain whether the purchase or sale occurs in your capacity as an employee, or if you are self-employed and either running your practice as a sole proprietorship or you have incorporated your practice.1 Secondly, consider whether the proceeds you are paying or receiving for the “book” are payable/ receivable up front, or paid out over a multi-year period.
EMPLOYEE OR SELF-EMPLOYED?
ILLUSTRATION: ISTOCKPHOTO
Employees In 2004, the Supreme Court of Canada (SCC) ruled in a case involving the purchase of a client list by an employee. In this case,2 the taxpayer was a financial advisor employed by a brokerage firm who decided to purchase the client list of a departing financial advisor. The SCC held that both the payment to buy a “client list”
and the interest paid on money borrowed to finance the purchase of the client list were not tax deductible. This decision has had a significant impact on advisors who are considered employees, the result being that any amounts paid to purchase a client list are simply not deductible. Instead, what often happens is that the sale is conducted via the brokerage firm, whereby the departing advisor continues to be paid by the employer off of the revenue stream generated from the book of business “sold” to the purchasing advisor. The purchasing advisor receives a reduction in their ongoing compensation from the brokerage firm, essentially making the payments tax deductible to the purchaser and taxable to the vendor. If the vendor is an employee, what is actually being sold? Some insight may be gleaned from the analysis in the Gifford case. According to the SCC’s decision, what was being sold was a combination of goodwill, developed over years of the departing advisor’s dealing with his clients, and an agreement not to compete with the purchaser. In fact, in Gifford, the purchase and sale agreement required the vendor to provide written endorsements of Mr. Gifford to select clients and not to compete for them for 30 months. Assuming that the facts in Gifford do not significantly differ
1 Note that the ability for non-insurance commissions (i.e., mutual fund and securities commissions) to be paid or earned by a corporation (which is not itself registered as a dealer) is questionable and beyond the scope of this article. For more information, see CRA Technical Interpretations 2006-0176531I7 and 2017-0693761E5 and two decisions of the Tax Court of Canada: Boutilier v. The Queen, 2007 TCC 96 and Wallsten et al v. The Queen, 2001 DTC 215. 2 See Gifford v. The Queen (2004 SCC 15).
MAY 2021 FORUM 17
COVER STORY from a typical sale by an employee, the proceeds received by the vendor who is an employee would likely be fully taxable, either as employment income or as payment received in respect of an agreement not to compete, which will effectively be treated as employment income. Note that this need not be a separate, stand-alone agreement but rather could take the form of a provision or covenant in the sale agreement.
Self-employed proprietorship or carrying on business through a corporation If the advisor is self-employed, including carrying on the advisory business through a corporation, the tax treatment will depend on whether the advisor is selling the business of an unincorporated practice, selling shares of the corporation that carries on the business, or is selling the business assets of the corporation.
Sale of an unincorporated practice
Purchaser The purchase of the goodwill will be treated for tax purposes as the purchase of depreciable capital property. CCA or tax depreciation may be claimed annually at a 5% declining balance rate on the goodwill. Just as with other depreciable capital property,
3 The vendor will likely also provide a covenant not to compete with the purchaser. In most cases, no proceeds are allocated to this covenant. A discussion of non-compete agreements is beyond the scope of this article. 4 Transitional rules apply if the goodwill sold was former eligible capital property (ECP). A discussion of these transitional rules is beyond the scope of this article. 5 Supra. note 1 6 The lifetime capital gains exemption (the “LCGE”) is available for gains realized on the disposition of shares that are qualified small business corporation (“QSBC”) shares. The LCGE is $892,218 for 2021 and is indexed annually for inflation. 7 Similar to the case with the sale of an unincorporated practice, there will likely be a covenant not to compete. In most cases, no proceeds are allocated to this covenant. 8 Ibid. 9 See CRA archived Interpretation Bulletin IT-462 - Payments Based on Production or Use, which sets out the CRA’s position on the tax treatment of any amount received that is dependent on the production from or use of property. 10 Technical Interpretation 2004-0098121E5. 11 289018 Ontario Limited v. M.N.R (87 DTC 38). 12 The Estate of Jean-Paul Rouleau v. M.N.R. (91 DTC 120). 13 CRA Technical Interpretation 9522420 and paragraph 12(1)(g) of the Act. 14 Smith v. The Queen, 2011 TCC 461. 15 If the full reverse earn out is not collected, a capital loss may arise in the hands of the vendor. The purchaser could also be subject to tax consequences under the debt forgiveness rules.
18 FORUM MAY 2021
in the year the goodwill is purchased from an arm’s length person, only one half of the CCA otherwise available may be claimed.
Sale of shares Setting aside the much larger issue of whether or not an advisor is permitted to incorporate a non-insurance (i.e., securities) financial advisory practice,5 the sale of shares should result in a capital gain. One half of the capital gain will be included in income, and will potentially be eligible for tax-free treatment if the gain can be sheltered by any remaining lifetime capital gains exemption on the sale of qualified small business corporation shares 6 (assuming the shares qualify for such treatment).7
Sale of business assets by corporate entity Similar to the sale of an unincorporated practice, where a practice is sold by a corporation, the purchase price must be allocated between the goodwill, and any other assets that form part of the sale.8 The sale of the goodwill will result in a capital gain to the extent that the proceeds exceeds the original cost of such property, 50% of which will be treated as investment income within the corporation and taxed at a combined federal/provincial rate exceeding 50% (in most provinces) assuming the corporation is a Canadiancontrolled private corporation. Note that although some of this tax will be refunded when the after-tax investment income is paid out to a shareholder as a taxable dividend, it is initially a high rate of tax that is originally paid by the corporation on the taxable portion of the capital gain. The 50% non-taxable portion of the capital gain will be added to the corporation’s capital dividend account (CDA). When there is a positive balance in the CDA account, it can be generally be paid out as a tax-free capital dividend to Canadian resident shareholders.
ILLUSTRATION: ISTOCKPHOTO
Vendor The unincorporated advisor who is selling his or her financial planning practice must allocate the proceeds received between the sale of goodwill and any other assets that form part of the sale.3 The disposition of intangible assets related to the business, such as goodwill, is treated as the disposition of a depreciable capital property. If the goodwill was not previously purchased from another party, then it will result in a capital gain, 50% of which will be taxable. If the goodwill was previously purchased from another party, and capital cost allowance (CCA) has been claimed, then there may also be recapture of previously claimed depreciation. Recapture is fully included in income for the year of sale.4
When the taxable portion of the capital gain is eventually paid out as a dividend to an individual shareholder, it will be taxable in the hands of the shareholder as a non-eligible dividend. At that time, the corporation should receive a refund of some of the refundable tax paid at the time the corporation realized the capital gain.
PROCEEDS PAYABLE OVER SEVERAL YEARS In some transactions, the purchase price for goodwill is paid out over a number of years. The mechanics of the sale determine its tax treatment.
Reserves When the amount allocated to goodwill or any capital property is determined in advance but is payable over a number of years, the entire amount must be included in proceeds of disposition in the year of the sale. The question then arises whether a reserve can then be claimed for the proceeds not yet received. The Income Tax Act (the Act) provides a reserve in certain situations where property is sold in the course of business. Since goodwill is now treated as a capital property, a capital gains reserve should be available. This capital gains reserve was typically claimed when a capital property (e.g., shares of a corporation) was sold. The Act permits a capital gain to be included in income over a period of up to five years if a portion of the proceeds are payable to the taxpayer after the end of the year where no less than 20% of the capital gain is to be included in income each year.
Earnout If the payments for the goodwill associated with the sale of a practice are all or are in part based on future commissions, the outcome may be different. This is where the details of the actual agreement are key. The CRA’s position is that if the payments for the goodwill associated with the sale of a practice are all based on future commissions, all amounts received by the vendor will be taxable in the year received as ordinary income. 9 This applies even if an amount is “an instalment of the sale price of property.” If, on the other hand, the agreement of sale provides for a fixed lump sum payment plus a percentage of future commissions, the lump sum payment is proceeds of disposition of the property sold (e.g., goodwill), giving rise to capital gains treatment as discussed above, and the future commissions are fully taxable as ordinary income when received. The CRA’s view is that if the consideration received for the disposition of goodwill is dependent upon the use or production from that property, and no amount can be quantified at the time of sale, such consideration is not proceeds of disposition of goodwill and is instead taxable as income when received.10 As support for this seemingly harsh result, the CRA referred to a Tax Court decision11 in which the court held that the profit from the sale of a business, which included goodwill and knowhow, where the payment was received as a percentage of sales, was taxable as ordinary income as it fell within the terms of the abovenoted tax provision. The taxpayer had unsuccessfully argued that since what was being sold was simply “know-how,” the proceeds should be taxable as a disposition of ECP. Curiously, the CRA seemed to have ignored another tax case
a few years later with the opposite result. In that case,12 the judge found that payments on the sale by an accountant of his goodwill, paid over five years based on gross billings, were not subject to the payments-based-on-production rule and were, in fact, to be treated as proceeds of disposition of ECP. The CRA acknowledged that this different treatment could occur, as in their view the case law does not impact their administrative position.13 A more recent case involved the sale of a client list, where the total purchase price was set, but the payments were to be adjusted each year based on actual commission revenue for the prior year.14 This case involved the 2002 sale of a client list by a Quebec insurance broker. The agreement specified that the purchase price, subject to adjustment, would be paid 40% in 2002 ($143,000) with 20% ($69,500) payable in each of 2003, 2004, and 2005. The payments due beyond 2002 were subject to interest. If the annual commission revenue at any payment date was greater or less than the amount originally contemplated, the annual payments contemplated above would be adjusted upwards or downwards accordingly. The taxpayer included in his income for the 2002 to 2005 taxation years the total consideration received for the sale of the clientele — including the interest — as the disposition of ECP, and thus claimed the capital gains–type treatment. The CRA reassessed the taxpayer, including the subsequent adjusted payments received in 2003, 2004, and 2005 as income from the sale of a business whose payments were based on production and thus 100% taxable. The CRA also taxed the interest received annually in full. The judge agreed with the CRA, upholding the reassessment. As he wrote, “it cannot be said that the purchase price was fixed and determined in advance since the annual payments to the appellant were calculated each year based on commissions received for the previous year. The initial price of $351,000 was only an estimate and the purchase price was not fixed… [It] could fluctuate depending upon the annualized commissions received on any anniversary payment date.”
Reverse earn-out A reverse earn-out occurs when the purchase price of property is set as a maximum amount at the outset, but may be adjusted downwards in the future if certain projections regarding future performance do not materialize. Where this occurs, the Act will not require an ordinary income inclusion to the original sale of the goodwill. Rather, a capital gain will have been realized, with a capital gains reserve possibly claimed.15 Based on the above analysis, careful tax planning is needed to ensure optimal tax treatment. Expert valuation advice may also be needed to determine the appropriate allocation of proceeds received to any non-compete agreement. Finally, consideration should be given to whether the purchase price should be fixed in advance and payable at once. If the purchaser cannot pay all at once, perhaps the price could be fixed in advance to ensure capital gains treatment, along with a possible capital gains reserve. 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. DEBBIE PEARL-WEINBERG, LLB, is the executive director, tax & estate planning with CIBC Private Wealth Management in Toronto. She can be reached at Debbie.Pearl-Weinberg@cibc.com. MAY 2021 FORUM 19
PRACTICE MANAGEMENT
Using
Effectively
How do you approach client feedback? You’re likely so focused on meeting your clients’ needs and getting them timely information that you overlook your need for information. Client feedback includes the significant insights, issues, and recommendations your clients share with you. It is significant because nothing else will tell you more about the job you are doing for your clients. The feedback runs deep throughout every facet of your business. But first, you need to develop a strategy to ask for it and then devise a plan to apply it. When used effectively, client feedback will ultimately impact your bottom line, and here is why: 20 FORUM MAY 2021
PHOTO: ISTOCKPHOTOS
Feedback
Patricia Giesbrecht explains how implementing client input can have a profound impact on your advisory business
1. Clients will know they are your priority. You’re telling your clients that you care. If the main priority of your advisory practice is to help your clients, then what better way to accomplish that than by asking how they feel about the client experience? Show them that their opinion and feedback matters. 2. Enhanced loyalty. Your clients will share which services are satisfying them and which require improvement. If adjustments are required and you make them, your clients will be gratified. 3. Uncover important commonalities. You will notice similarities and general themes that emerge from these discussions, and discern what your clients appreciate most about your business, not what you think they appreciate most. It’s not always the same. 4. Enabling you to communicate your value. A more refined understanding of what clients appreciate most about your business will enable you to focus on those points in prospect meetings and in your brand identity and marketing communications. 5. Ideal client profile will become clear. If you want to focus on profiling your ideal client, client feedback is vital. Generally, your ideal client is probably the one whose feedback you’re most interested in, but it’s important to formally gather their information to enable you to learn what they appreciate and what they would like to see modified. 6. Boosting cross-selling. Acquiring feedback from clients about all aspects of your service naturally reveals cross-selling opportunities. You then have comprehensive data to fulfill your clients’ specific needs. 7. Increased referrals. We have witnessed this with many of our advisor clients. There is a direct correlation between clients who have been asked for feedback and the number of subsequent introductions/referrals. It helps create more meaningful client/ advisor relationships.
ASKING FOR FEEDBACK We suggest you start by holding a virtual value meeting with your top clients. It’s important that all parties in the relationship attend. For example, if your clients are a couple, both spouses, and if you are speaking with a group benefits client, all business owners/HR consultants, should be included. This is the most personalized method of getting feedback and it yields the most helpful responses. For example, you might state that you genuinely wish to identify their unique needs and fulfill them. Thank them for attending and tell them you appreciate their business and loyalty. Share your goal as their advisor. Ask them how you are doing as their advisor and tell them you would like to know what they value, what you are doing well, and what you can do to improve your service. Work with your team to develop a list of specific questions you think will be most effective. Be sure the questions focus on eliciting details or examples, that they encourage communicating any “pain points,” and that responses to these questions would enhance the client experience. You want to avoid asking questions that are likely to produce one-word short answers. They won’t provide much insight.
If the opportunity arises, state that you would like to ensure you are referrable; that you would like to add a few more quality clients to your portfolio, others you can help, just like them. One of your goals is to learn whether you have earned the right to those introductions and to become more referable. If the client expresses an interest in referring but they don’t know how, here is an opportunity to provide them with a script to make referring easier. You can encourage your client to try an introduction via text or email in their own writing style. For example: “I’d like to introduce you to my financial advisor. If this is of interest to you, let me know. He/she has been great and I’d like to share the experience with people I care about.” Of course, this wording needs to be personalized so the client feels comfortable. You can offer two to three options, and they can decide which they prefer. It can be challenging to ask for referrals. Setting up the virtual value meeting and determining that the client has seen the value in your services provides the perfect moment for asking. At the conclusion of your meeting, ask the client if they would be comfortable with you using any of the statements from the meeting in your marketing communications as a testimonial. You can also make them aware of your Google My Business page or Facebook page (if you have these accounts), and welcome them to write an online review. If people find you online, they are likely to read through a few reviews before calling you. These reviews also help to increase your online visibility.
APPLYING THEIR FEEDBACK Many companies ask for feedback and it never translates into meaningful outcomes for their business. Take the virtual value meeting and implement significant client experience improvements based on what you learn. It will help you retain the client and increase referrals. Thoroughly review the responses. What words were used the most to describe you and your business? What do people value the most? What are their concerns? Identify the basic commonalities and prepare an action plan to incorporate these revelations. Select the most influential words in your clients’ comments that will describe your services in an attractive way. For example: If people stated that you are “nice,” “trustworthy,” or “efficient,” the latter two words are much more persuasive. If you haven’t already done so, finalize your ideal client profile so you can create a more focused marketing strategy. One of the outcomes may be that you discover you have smaller niches in specific professions or industries. The more you discover, the better! And circle back to clients who may be seeking services that you currently don’t offer and consider amending your business accordingly. The most rewarding opportunities might be addressing the evolving needs of existing clients. And if you can’t accommodate their newly identified needs, refer them to someone who can. Finally, keep all of this information top of mind when contemplating any new strategies or business initiatives. Your clients know best. So always consider their feedback to maintain the most productive direction. PATRICIA GIESBRECHT, FLMI, ACS, AIAA, is a business coach with the Personal Coach, providing customized coaching to financial advisors and their teams. To receive a PDF of this article, email dgageforum@gmail.com. MAY 2021 FORUM 21
AN N UA L
J.G. TAYLOR AWARD RECIPIENTS presented by
Terry McBride CFP, CLU, MTI, DFA
J.G. TAYLOR AWARD RECIPIENT
Terry is a past President of Advocis North Central
After an early career in advertising sales, Terry transitioned
Saskatchewan, as well as a past President of the Saskatoon
to the industry through work as a financial consultant
Estate Planning Council. He is a Certified Financial Planner
for Principal Group, followed by Sun Life – where he
(CFP), a Chartered Life Underwriter (CLU), a Member
also became active in LUAC, contributing to the chapter
of the Trust Institute (MTI), a Certified Executor Advisor
executive. He went on to become a Charter member of
(CEA) and a Distinguished Financial Advisor – Tax Services
the Canadian Association of Financial Planners (CAFP) in
Specialist (DFA).
1983 and was highly active in the organization for decades following, also progressing in his career through roles with
Born in 1951, Terry was raised in Saskatoon. His interest
Co-operative Trust Company, Matrix Financial and more –
in estate planning emerged when he realized how life
including his current position with Raymond James Ltd.
insurance could have helped his mother cope financially after his father died of a heart attack at age 41, leaving her
Terry and his wife have been married 45 years, and have three
to raise seven children on her own. Terry bought his own
daughters and five grandchildren. To stay fit, Terry has been
first life insurance policy at the age of 18.
commuting to work by bicycle year-round for over 25 years.
With more than 5,000 CLU® and CHS designation holders in good standing. The institute for advanced financial education is the leading designation body in canada for financial services practitioners in the specialty areas of advance estate and wealth transfer, and living benefits. The institute provides a platform of standards and advanced knowledge through designation programs and accreditation services. Institute destinations speak powerfully of a practice that is built on knowledge and a belief in the continuous refinement of that knowledge.
Award recipients have demonstrated excellence among their peers. they have made an impact on the profession and the public they serve; exemplified the Institute’s code of professional conduct; positively affected their communities; participated in the industry, with either the Institute or Advocis; and/or within other financial services professions.
Lawrence Ian Geller CLU, TEP
J.G. TAYLOR AWARD RECIPIENT
Lawrence has been a member of Advocis Toronto for more
In addition to Advocis, Lawrence is also a member of the
than four decades, contributing to multiple committees
Conference on Advanced Life Underwriters (CALU), The
within the Association including the Public Affairs
Independent Financial Brokers of Canada (IFB) and The
Committee, Nominating Committee, Ontario PAC, and the
Society of Trust and Estate Practitioners (STEP). He is a
Legal Regulatory Policy Committee. He also served on the
founder of the International Disability Insurance Society (IDIS).
Board of the Advocis Protective Association. As a consultant and expert, Lawrence has also worked with As the President of L.I. Geller Insurance Agencies Lt.
agency association groups on issues relating to legal and
in Belleville, ON, Lawrence has also made numerous
accounting practices. He has served as an expert witness
contributions to the industry through articles in the Globe
for The Superintendent of The Province of Ontario and an
& Mail Report on Business, Insurance Executive, Health
investigator for The Superintendent of Insurance of The
Insurance Underwriter Magazine, Professional Administrator,
Yukon Territory.
The Toronto Life Underwriter, and more. He has been frequently engaged as an expert speaker on topics such as disability income, fiduciary duty, regulatory issues, and marketing for advisors.
The Institute for Advanced Financial Education (The Institute), CLU® are trademarks of The Financial Advisors Association of Canada (TFAAC). The Institute is a wholly owned Subsidiary of Advocis® Copyright © 2019 TFAA. All rights reserved. Unauthorized reproduction of any images of content without permission is prohibited.
INSURANCE
PLAN B How do you advise clients who may not qualify for life insurance? Richard Parkinson explains the alternatives for the uninsurable
A
s I’ve mentioned in a previous article, there are three forks in the road for life insurance applications: Medically underwritten — for people in good health with no serious medical or lifestyle issues. Simplified issue/non-medical — for people with more serious medical issues (e.g., diabetes, past heart attack or cancer but more than two years ago, or some obscure illness not mentioned on an insurance application). Guaranteed issue — these plans don’t ask any questions at all, so to protect themselves
BMO Insurance Canada Protection Plan (CPP) Edge Benefits Empire Life Foresters Industrial Alliance Manulife RBC Specialty Life Insurance SSQ Financial (Beneva) Sun Life TD Insurance
PLAN NAME
MINIMUM – MAXIMUM AGE
MAX. COVERAGE
Guaranteed-Life Plus
40–75
$50,000
Guaranteed Acceptance Life
18–75
$50,000
Guaranteed Issue Life
18–69 (expires at age 75)
$50,000
Guaranteed Life ProtectTM
40–75
$50,000 (25K at 51)
Guaranteed Issue Whole Life
50–80
$25,000
Guaranteed Access
18–80
$50,000 (18–50)
Guaranteed Issue Life
40–75
$25,000
Insurance Guaranteed Acceptance Life
40–75
$40,000
Guaranteed Acceptance Life
18–74
$25,000
18–80
$50,000 ($25k at 71)
Guaranteed Life
30 –74
$25,000
Guaranteed Acceptance Life
50 –75
$25,000
Guaranteed Issue Whole Life
Plans available through a licensed life insurance broker Available online only, not through an independent broker
24 FORUM MAY 2021
PHOTO: ISTOCKPHOTO
GUARANTEED ISSUE (no questions asked) COMPANY
somewhat, they have a deferral period of two years. If the insured dies within the first two years of the policy in-force from something other than an accident, they will return the premiums paid, some with a 3% rate of return, and after two years they will pay the benefit. I surveyed the market in March 2021 for guaranteed issue policies and created this list of companies who offer “no questions asked” plans. My apologies if I have missed any company. The appeal of these plans is that anyone can qualify, and although the maximum coverage is just $50,000, I have had the odd young client apply for multiple policies. The following table shows the rates for these companies, which presents a wide range of pricing, with green shading the lowest cost and red the highest. Note that all of these plans are lifetime plans, aside from Edge Benefits, which expires at age 75. Edge Benefits explains that many people who only qualify for these plans will not likely see age 100, so they chose a plan that is more price competitive than their previous final expenses plan in the age range that is competitive. The appeal of these plans for brokers is that the policy will be issued. However, it’s obviously important to explain to the client about the two-year deferral period except for a demise caused by an accident, and return of premium. The return of premium if death occurs within the deferral period means the client is not really risking anything, and after two years, the internal
rate of return is huge in the first three to five years depending on the age of the annuitant at issue date. There’s another main consideration for guaranteed issue plans: At what point is a guaranteed issue questionable value? In the top graphic on the next page, it shows the rate for a female age 75, coverage $25,000 at $5,467.48 annually, so I created an Excel sheet to compare the life insurance option with a TFSA. In part, the reason is the family on the annuitant’s demise receives the $25,000 benefit, but not the $5,457 annual premium to get it. When that is taken into account, the break-even (i.e., when the TFSA balance at 3% return is equal to the life insurance minus premiums paid) is 28 months. Given the deferral period, unless this person dies between months 25 and 28, the TFSA is the better solution. Also, there are not many retirees in their 70s who could budget a huge life insurance premium. Finally, given the flexibility of the TFSA, (e.g., they can stop or start deposits at any time), whatever money they put in is retained, and this money can be used for any emergency purpose.
SIMPLIFIED ISSUE/ NON-MEDICAL These plans ask a few questions, with most requiring answers to a specific set of questions to all be “no.” As soon as there is a “yes” answer, that plan, or a version of that plan, is not available. A good example of this
is Canada Protection Plan (CPP) whose application is divided into six sections, A to F, with sections A, B, and C considered the simplified issue sections. If “no” is the answer to all questions in sections A, B, and C, your client will qualify for their Simplified Elite plans, term, or life. On average, the rates for Simplified Elite are 1.5 to two times the cost of a medically underwritten plan, but if you know your client will be, or has been rated, these plans are a good choice. At the bottom of the next page are the providers I know of offering simplified issue/nonmedical plans. Here’s a suggestion: Create a summary like this in Excel, save it as a PDF, then add the PDF medical questions to the summary sheet. Then when you have a prospect, you have all of the companies’ questions in one convenient file, which you may decide to send to a prospect for them to review, and perhaps find a company that will cover them given their issue, as each company words their questions differently. You need to have an important understanding of interpreting questions. Recently I had a prospect with polycystic kidney disease and sent some preliminary opinions to medically underwritten plan companies. I got the answer I was expecting, he would be declined. So, I continued searching. I started with CPP, and hit a snag early on. Their question A9 asks: “Have you ever had, been treated for, or been diagnosed prior to age 40, with: chronic kidney disease, stroke (CVA), transient ischemic attack (TIA), aneurysm, coronary artery disease, heart bypass $25,000 of coverage for non-smoking male
COMPANY
BMO Insurance Canada Protection Plan (CPP) Edge Benefits Empire Life Foresters Industrial Alliance
PLAN NAME
APPLICATION AGE RANGE
AGE 50
AGE 70
COVERAGE AT AGE 70
Guaranteed-Life Plus
40–75
$90.00
$120.00
$11,500
Guaranteed Acceptance Life
18–75
$96.51
$326.68
$25,000
Guaranteed Issue Life
18–69 (expires at age 75)
$42.48
Max. age 69
N/A
Guaranteed Life ProtectTM
40–75
$96.30
$332.57
$25,000
Guaranteed Issue Whole Life
50–80
$170.64
$255.42
$25,000
Guaranteed Access
18–80
$99.09
$338.47
$25,000
Guaranteed Issue Life
40–75
$72.35
$255.29
$25,000
Insurance Guaranteed Acceptance Life
40–75
$72.32
$283.48
$25,000
Specialty Life Insurance
Guaranteed Acceptance Life
18–74
$53.40
$324.40
$25,000
SSQ Financial (Beneva)
Guaranteed Issue Whole Life
18–80
$99.41
$286.63
$25,000
Guaranteed Life
30 –74
$65.11
$229.77
$25,000
Guaranteed Acceptance Life
50 –75
$88.54
$256.25
$25,000
Manulife RBC
Sun Life TD Insurance
Plans available through a licensed life insurance broker Available online only, not through an independent broker
MAY 2021 FORUM 25
INSURANCE surgery, angioplasty, stent insertion, angina or heart attack?” His answer is “yes,” so CPP can only offer him Guaranteed Acceptance Life, a maximum of $50,000 of coverage. Assumption Life in their LIA software has a Fetch application that allows you to answer some questions, and it will determine which of their plans the applicant qualifies for. A few other companies have a similar app. Fetch suggested their nonmedical – immediate plan, which asked this question differently: In the past three years: (b) Have you been diagnosed with or hospitalized for chronic kidney disease or undergone dialysis? My prospect was diagnosed more than 10 years ago, and his answers were no to the hospitalization and dialysis part, so I believed he would be able to answer “no” to this question, which turned out to be the case, on verifying with Assumption Life. This allowed him to qualify for a term 20 with $150,000 of coverage with immediate payment. There would be no deferral period and premiums would be $38.39 a month or $426.50 a year. Tip: Be aware that plans with a modal factor of .09 actually have an annual percentage rate of more than 18%. Since I have been advising clients of this, 80% of my sales are annual premium. By doing some research, understanding the questions, and asking the insurer for clarification if you are unsure, you can often find the ideal solution for your client. I am often approached by clients who want a second opinion on why they have been declined for a medically underwritten plan. They don’t know why they were declined and their advisor did not ask the company COMPANY
to send a letter to the client’s doctor explaining why they were declined. More than once when I have done this, it turns out there was a misunderstanding and I’ve turned a decline into a standard or rated policy. Lesson: If your client is declined, make sure you draft a letter on your client’s behalf for the insurer asking them to advise the doctor of the reasons for the decline or rating. I’ve also found many advisors don’t suggest alternatives to these clients, such as simplified issue or guaranteed issue
plans. While some don’t have access to these plans, that is no excuse. Find a local insurance agent who does have access to these plans and refer your client to them, so at least the client is properly served. Yes, finding the right plan takes some time and research, but if you get organized, it doesn’t take a lot of time, and the reward is a happy client. RICHARD PARKINSON, CPCA, is an independent insurance broker based in Vancouver. To receive a PDF of this article, email dgageforum@gmail.com.
Client age: Life insurance coverage: Monthly life insurance premium (Empire Life Guaranteed Life Protect): Annual life insurance premium: Monthly deposit into TFSA: Estimated rate of return for TFSA investment:
75 $25,000.00 $454.79 $5,457.48 $454.79 3.00%
Female Non-smoker
4.17 $25,000 $24,745 $255 2.33 years/age 77 89
Years
AFTER-TAX VALUE OF LIFE INSURANCE VS. TFSA Year when TFSA balance equals life insurance death benefit: Net after-tax value of life insurance: Net after-tax value of TFSA: Life insurance value over TFSA: Year/age when life insurance minus premium paid equal to TFSA balance: Life expectancy based on current age of 75:
Stats Canada provides a table to show life expectancy given you have reached a certain age. The age shown above is based on you current age. The older you are, this age becomes greater than the traditional statistic for the population in general. Based on 2016–2018 stats.
$11,741.58 $8,172.77
SIMPLIFIED ISSUE (some questions asked) MINIMUM – MAXIMUM AGE
MAX. COVERAGE
Assumption Life
Total Protection
18–80
$30,000–$50,000
3–6
Assumption Life
No medical term and permanent
20–70
$150,000–$250,000
7–16
Assumption Life
Golden Protection & GP deferred
18–85
$100,000–$50,000 (Def.)
16–8 (Deferred)
BMO Insurance
EasyOne Life
50–80
$50,000
3
Canada Protection Plan (CPP)
Deferred or Simplified - Term and Permanent
18–80
$75,000–$500,000
23–39
PLAN NAME
NUMBER OF QUESTIONS
Foresters
Simplified Non-Par whole life
18–70
$10,000–$100,000
10
Humania
Insurance without medical exam
18–70
$300,000
6–18
Industrial Alliance
Acess Life - Term & Permanent
18–70
$25,000–$500,000
Def (5)-Def+(9)-Imm+(13)
Specialty Life Insurance
Standard Protetion
18–70
$300,000
13
Speciality Life Insurance
Preferred Protection
18–70
$300,000
23
SSQ Financial (Beneva)
None - have what they call Simplified life, but with 51 questions it is more medically underwritten than simplified issue
Sun Life
Sun Life Go - Term 10 only ( immediate issue, no deferral)
18–69
$100,000
3
Wawanesa
Instant Issue
45–75
$50,000
5
Plans available through a licensed life insurance broker Available online only, not through an independent broker
26 FORUM MAY 2021
COMMENTARY
Life
Curveball Ted Polci had a lifechanging experience he wouldn’t wish on anyone. Here’s what he learned from it
L
ife can change in an instant. Imagine leaving your house in one moment and in the next, blacking out and waking up in an ambulance. This is my story. On Tuesday January 15, 2019 at 5:30 a.m., I headed to my club for a workout. I felt a little tired but thought some fresh cold air would wake me up and I would be fine. I remember driving down the street toward the Bayview Avenue Extension in the dark. The next thing I remember is waking up in an ambulance. I apparently had a seizure and lost consciousness, crashing my car into a guardrail. It was totalled. A police officer asked me my name and address and what day it was. I couldn’t remember anything at all, I couldn’t concentrate; I was totally dazed. As they drove me to the hospital, I began to come around. Later that morning, after some tests, I was diagnosed with a meningioma, grade 2, atypical benign tumour. Benign means the tumour was not malignant but it doesn’t mean it was not a problem. Because the seizure had been caused by the tumour, it could have cost me my life. Typically, grade 2 meningiomas grow back faster, especially if they are not completely removed. I was taken for surgery that day and they removed most of it (5 cm x 2 cm), but there was still some residual tumour that they couldn’t get without risking injury to my brain. I stayed in the hospital for a few days before being released. The day I left, I found out that I had developed a blood clot in my leg from the surgery, not uncommon, apparently, and was required to self-inject a blood thinner each day into my stomach area for the next three months. That was not fun.
Above: Getting proton radiation therapy. The author with his wife, Carolyn Polci.
Normally, for a grade 2 meningioma, radiation is recommended to minimize the risk of a recurrence. Without radiation, there is an increased probability of recurrence and negative outcome. I was advised that radiation wasn’t a choice, but a necessity. What I didn’t know is there are two basic types of radiation: photon, available here in Canada, and proton, available in parts of the U.S. and other G7 countries for more than 20 years. No one at the hospital had informed me about proton radiation so I was just going along with the recommendation to have photon. Proton beam radiation therapy is a very precise treatment that was developed back in the 1940s. It was developed by spinning the atom at a very high speed to separate out the heavy part of the atom — the proton — which can then be controlled more accurately as it is directed into the body to kill cancer and tumour cells. Proton has a significant advantage over photon in that it can be very finely targeted at the tumour and start and stop wherever it is required, thereby minimizing or eliminating the damage to healthy cells. For example, it can stop at the outer edge of the residual tumour, which will result in little or no damage to delicate healthy brain cells, which can dramatically reduce the possibility of serious side effects. Those side effects can include loss of shortterm memory (possibly permanent), a decline in neuro-cognitive capabilities, and other major cognitive issues. Patients need to be informed of these options to make an educated treatment decision; currently in Canada, that is not happening. While waiting to book my preparatory appointment at the hospital, I received a call from a good friend who asked if I knew MAY 2021 FORUM 27
COMMENTARY about proton therapy. He had had personal/family experience with proton beam radiation in Boston at Massachusetts General Hospital and felt that I should consider it. He said if the tumour was close to some sensitive areas of my brain, I could suffer some unnecessary, significant, and irreversible side effects from the photon radiation. I got off the phone and started my research. Over the next couple of days, I read a couple dozen articles and research papers. While it was somewhat controversial, it was quite clear that proton was the best treatment option for me. If I lost some of my memory or other capabilities (math, deductive, logic, etc.), I would have to consider retirement. That would not be my first choice as I was planning on working for at least another 10 to 12 years. As an insurance advisor and estate planning specialist, these are my best years. All of my experience and, in particular, my influence with my clients is valuable at this point in my career. It would be a huge financial loss, not to mention the devastating impact on my personal life and the enjoyment of my family. Ultimately, I made the decision to go to Boston to Massachusetts General Hospital and have the proton treatment there. Dr. Jay Loeffler, (head of the hospital’s radiation oncology department and a noted neurosurgeon and professor at Harvard Medical School) my treating physician, confirmed it was the correct treatment for me and my circumstances, and designed a program of 30 fractions (treatments) over a period of six and a half weeks. As required by the hospital, I wrote a hefty personal cheque in advance of commencing the treatment. Two weeks prior to the first fraction, I went to Massachusetts General for a few days and had a mask made (it is custom-moulded to each patient’s head from heated plastic and is designed to keep the head perfectly still during the treatment). My wife, Carolyn, and I moved to Boston from early May to the end of June and stayed in an apartment six short blocks from the hospital. Each day we got up, walked to the proton centre at the hospital for the treatment, and after approximately 30 minutes or so there, were done for the day. There was only a slight whirring sound but no sensation — no pain, vibration, burning, etc. — from the treatment. When I returned to Toronto, I was able to connect with Dr. Gelareh Zadeh, a top neurosurgeon at Toronto Western Hospital and Dr. Normand Laperriere, a senior oncologist at Princess Margaret Cancer Centre. Both of these esteemed professionals confirmed I had done the right thing in going to Massachusetts General for treatment; the follow-up MRIs (four to the current date) confirmed the residual tumour had shrunk, as it should have. What I found most interesting was the complete lack of support or information at the hospital where I had my surgery. In fact, when I said I was looking into it, I received a negative reaction, suggesting there wasn’t enough science to support the reduced side effects indicated in my research. The neurosurgeon there even suggested it would not be a great experience being a “customer” in the U.S. versus a “patient” in Canada. On the other hand, the doctors with whom I spoke at Toronto Western and Princess Margaret when I returned were only too pleased to spend the time discussing my situation and offering guidance on proton; they were very well informed and in favour of it and were actively seeking support from the Ontario government to have it brought to Toronto in collaboration with the Hospital for Sick Children. 28 FORUM MAY 2021
As I learned at that time, we send dozens of kids every year to various proton treatment facilities in the U.S., at a cost of $200,000 or more per child, because it is critically important to protect their cognitive capabilities at such young ages. My personal experience left me with three takeaways: 1. Circumstances can change quickly. One minute I was heading to my workout and the next I was being wheeled into the operating room for brain surgery. I lost most of the year in treatment and recovery. I was fortunate to be financially well-established. What would my fate have been if our four sons were still in university or if we had a big mortgage? Have a look at your finances and make sure you are prepared for anything. I know that doesn’t happen in one review, but start to think about what you would do if this or something similar happened to you. There are insurance plans available that will cover some of your expenses should you ever have to go to the U.S. for treatment. Make sure you have adequate office overhead and personal disability insurance. And of course, life insurance. Keep paying down debt. Just practise good financial management. 2. We need more funding. How can we possibly say that our coun-
try has a “great medical system” when some of our hospitals are ill-informed about current technologies, and, worse, it takes so long to get government funding to put those advancements in place? What are the long-term costs to our economy and our health-care system for people not well enough — or financially able — to travel to proton centres in the U.S.? Children could end up with permanent neurocognitive losses, and adults may have to deal with the disabilities caused by damage to healthy brain cells. Is this an acceptable result? Contact your MPP and MP to discuss the importance of governments funding proton radiation for adults and children here in Canada. 3. Ultimately, we are all responsible for our own health care. We are justifiably proud of our health-care system in Canada. It is the envy of so many countries around the world. But it is not perfect. It is funded by tax dollars and is therefore stretched to meet the needs of all of us who require care. That situation is going to get worse before it gets better. So, each of us has to take the lead when it comes to researching and understanding our diagnosis, getting second opinions on treatment options, speaking to others who have had the same or similar health challenges, joining online groups that discuss specifics of our diagnosed condition, getting referrals to expert professionals and additional tests, and being prepared to spend our own money (probably deductible) and perhaps even travel if necessary. There is no rule that says the best health care is being offered in your city or mine and that it is free. I am fully recovered now, although I will continue to get MRIs every six months to watch for any new growth. Should that happen, we will address it promptly with one or two quick treatments and I should be good to go. This was an experience I wouldn’t wish on anyone but it certainly helped to put things in perspective for me and my family. Look after yourself. TED POLCI, CLU, TEP, is a partner at First York in Toronto and is a past chair of Advocis. He can be reached at tedp@fyork.com. To receive a PDF of this article, email dgageforum@gmail.com.
TAX UPFRONT
BY JAMIE GOLOMBEK
Budget 2021 Highlights New policy changes to discuss with your clients
L
ast month, Canadians saw the first federal budget in more than two years. Here are some of the highlights that may be worth discussing with your clients.
Increasing OAS for Canadians aged 75+ Last month’s budget proposed a one-time payment of $500 in August 2021 to Old Age Security (OAS) pensioners who will be 75 or over as of June 2022. It also proposed to increase regular OAS payments for pensioners 75 and over by 10% on an ongoing basis as of July 2022. This would increase the benefits for approximately 3.3 million seniors, providing additional benefits of $766 to full pensioners in the first year, and will be indexed to inflation going forward. More RRSP room for postdoctoral students Under the tax rules, postdoctoral fellows are generally not considered to be students; therefore, postdoctoral fellowship income generally does not qualify for the scholarship exemption from income tax and is taxable. Yet, under the current rules, this income is not considered to be “earned income” for the purpose of determining an individual’s contribution limit for a Registered Retirement Savings Plan (RRSP). The 2021 budget proposed to expand the definition of “earned income” to include postdoctoral fellowship income received in the 2021 and subsequent taxation years. This measure would also apply retroactively to postdoctoral fellowship income received in the 2011 to 2020 taxation years, if the taxpayer submits a request in writing to the CRA to have their RRSP room adjusted for the relevant years. Improving access to the Disability Tax Credit The Disability Tax Credit (DTC) is a nonrefundable tax credit that is intended to
recognize the impact of various non-itemizable disability related costs. For 2021, the value of the federal credit is $1,299. Provincial and territorial credits are also available. To be eligible for the DTC, an individual must have a certificate confirming that they have a severe and prolonged impairment in physical or mental functions. Individuals who are eligible for the DTC may also access various other credits, deductions, and other programs, including the Registered Disability Savings Plan. In early April 2021, the CRA’s Disability Advisory Committee released its second report, which contained a variety of recommendations toward improving the eligibility criteria for the DTC in such areas as mental functions and life-sustaining therapy. The budget proposed to update the list of mental functions of everyday life that is used for assessment for the DTC. Under current rules, mental functions necessary for everyday life include: memory, problem-solving, goal-setting and judgment (taken together), and adaptive functioning. The budget proposed to expand this list to include attention, concentration, memory, judgment, perception of reality, problem-solving, goal-setting, regulation of behaviour and emotions, verbal and non-verbal comprehension, and adaptive functioning. In addition, the budget proposed to recognize more activities in determining time spent on life-sustaining therapy, and to reduce the minimum required frequency of therapy to qualify for the DTC. New luxury tax on planes, boats, and automobiles Finally, in perhaps the most attentiongrabbing piece in the 2021 budget, the government announced that it would be introducing a new “luxury tax” on sales of luxury cars and personal aircraft with a retail sales price higher than $100,000, and boats with a price higher than $250,000 pur-
chased as of January 1, 2022. The tax will be calculated at the lesser of 20% of the value above the threshold ($100,000 for cars and planes, $250,000 for boats) or 10% of the full value of the luxury car, boat, or personal aircraft. The luxury tax will apply to new passenger vehicles typically suitable for personal use, including: coupes, sedans, station wagons, sports cars, passenger vans and minivans equipped to accommodate less than 10 passengers, SUVs, and passenger pickup trucks. The tax will not apply to motorcycles and certain offroad vehicles, such as all-terrain vehicles and snowmobiles, racing cars, and motor homes (for example, recreational vehicles or RVs), construction vehicles, or farm vehicles. The tax will apply to new boats such as yachts, recreational motorboats, and sailboats, typically suitable for personal use. Smaller personal watercraft (for example, water scooters) would be excluded from the base. Floating homes, commercial fishing vessels, ferries, and cruise ships would all fall outside the scope of the tax. The luxury tax would apply to new aircraft typically suitable for personal use, including airplanes, helicopters, and gliders. Large aircraft typically used in commercial activities as well as smaller aircraft used in certain commercial and public sector activities would also be excluded. Upon purchase or lease of the car, boat, or plane, the seller or lessor would be responsible for remitting the full amount of the federal tax owing, regardless of whether the good was purchased outright, financed, or leased over a period of time. The GST/HST would apply to the final sale price, inclusive of the proposed tax. 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. MAY 2021 FORUM 29
ESTATE DILEMMAS
BY KEVIN WARK
Fact-finding Mission Insurance ownership considerations for business owners
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inancial advisors often spend a great deal of time and effort assisting a client with the purchase of a life insurance policy. There is the initial fact finding to determine the client’s family and business situation, analyzing liquidity requirements on death, determining whether the coverage should be term or permanent, and selecting the product that is most suitable to the client’s needs. However, there is one part of the process that may not always receive the same level of attention. That is, deciding who will be the owner and beneficiary of the policy, and whether successor owners and contingent beneficiaries should be appointed. This can be a particularly important decision for your business clients, and may require input from the clients’ tax, accounting, and legal advisors. Consider the “simple” example of Ms. A, who is 40 years of age and owns shares in an incorporated landscaping business (Opco). She is married to Mr. A, who has the role of caring for their two young children. Ms. A has decided to purchase $2 million of permanent life insurance to provide income to her family and cover tax liabilities arising on death. As Opco becomes more profitable there will be additional funds available to take advantage of the tax-deferred growth within the policy. The main outstanding issues relate to who will be the owner and beneficiaries of the policy. The two most common options would either have Ms. A as owner of the policy with Mr. A designated as the beneficiary, or Opco as owner and beneficiary of the policy. A key benefit of Ms. A owning the policy is that the death benefit will be received by Mr. A on a tax-free basis and will be outside Ms. A’s estate for probate purposes. In addition, having Mr. A as the beneficiary provides creditor protection for the policy during Ms. A’s lifetime, and the proceeds themselves will also be protected from her creditors on payment to Mr. A.
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Alternatively, with Opco as owner the premiums can be paid with “cheaper” after-tax corporate dollars (assuming Opco qualifies for the small business deduction) and the insurance is similarly received tax-free by the corporation. However, depending on the adjusted cost basis of the policy at the time of her death, some of the insurance proceeds may be taxable when distributed by Opco. As well, the insurance policy is exposed to Opco’s creditors. There is another concern if Ms. A decides to sell Opco in the future. Assuming she wishes to retain the policy for estate planning purposes, she will likely want to transfer the policy out of Opco. However, the transfer of the policy could result in a taxable gain to Opco as well as a shareholder benefit to Ms. A.
It might also make sense for Ms. A to consider using an inter vivos trust to be the owner and beneficiary of the insurance policy. These concerns might be addressed by forming a holding company (Holdco) to own her shares in Opco. Holdco could be set up as the policy owner, and Opco could pay tax-free dividends to Holdco to fund the premiums. If Opco is sold in the future, Ms. A would still retain control of the policy through her ownership of Holdco. The main downside of this arrangement is the cost associated with setting up and maintaining a separate company, but for successful, longer-term businesses the costs of a holding company can often be easily justified. However, discussion of ownership options should not necessarily stop at this point. There are several other options that advisors may wish to recommend depending on the circumstances. The first would be to provide Mr. A with a source of income
or capital such that he could be set up as the owner of the policy. For example, Mr. A could be appointed as a director of Opco and receive director fees, which would be taxable at his lower marginal tax rate. Ms. A could also make prescribed rate loans to Mr. A to assist him with funding deposits. The current prescribed interest rate of 1% makes this an attractive option. Future cash growth in the policy might then be utilized by Mr. A for investment or retirement purposes. The tax rules permit the transfer of the policy from Mr. A to Ms. A on a rollover basis if ownership needs to be restructured in the future or if Mr. A predeceases Ms. A. For this reason, Ms. A should also be appointed as successor owner under the policy. It might also make sense for Ms. A to consider using an inter vivos trust to be the owner and beneficiary of the insurance policy. This might be the case where Mr. and Ms. A are in a second marriage and she wants to ensure the insurance proceeds are used for the benefit of her own children. The trust arrangement could also administer the death benefit if the children are still minors. It is also important to note that an insurance policy is not subject to the 21-year deemed disposition rule that normally applies to capital property owned in an inter vivos trust, and that it is possible for the trust to transfer the insurance policy to a capital beneficiary (which could also include Ms. A) on a rollover basis. As is evident from this discussion, there are some less “traditional” ways to structure insurance ownership arrangements for business owners that not only address some of the concerns that can arise with corporate ownership but may also create additional planning opportunities. KEVIN WARK, LLB, CLU, TEP, is the author of The Essential Canadian Guide to Estate Planning, 2nd Edition. For a limited time, Advocis members can get a signed version of his book for a special price of $20 plus HST including delivery. Please contact kwark@integratedestate.ca for ordering details.
CORPORATE INSURANCE
BY GLENN STEPHENS
Special Provisions Dos and don’ts of disability buy-sell arrangements
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ore often than not, a shareholder agreement will contain buy-sell provisions that apply on a shareholder’s disability. In many cases, however, there are drafting or structural issues that prevent the purchase and sale from happening on an efficient or tax-effective basis. Consider the following clause: In the event that a shareholder becomes physically disabled, the shareholder must sell and the corporation must purchase the shares held by the disabled party. The purchase price shall be payable in full on closing, which shall take place within 60 days from the date of disability. The above clause is not taken from any single agreement, but is instead a compilation of provisions from different agreements that illustrate the following problems often seen in many disability buy-sell arrangements: It is restricted to physical disability. As
readers will know, a significant number of disability claims relate to stress and other mental conditions that would be appropriate triggers for the purchase and sale of shares. In any case, the agreement might require a doctor’s certificate or other independent verification to substantiate the shareholder’s disability. Another alternative is to use the definition contained in a disability buyout policy, even if no such policy is actually acquired. It does not address whether the disability affects the shareholder’s employment responsibilities. To use an extreme
example, if Jane breaks her leg skiing, she may be physically disabled, but the nature of the disability is not normally one that would affect her ability to work in a business long term nor prompt the sale of her shares. However, the above clause could easily be interpreted to oblige the corporation to purchase Jane’s shares. This would
not be an appropriate or reasonable result in most cases. The clause does not provide a waiting period. Rather, there’s an implication that
a buy-sell agreement would take place immediately upon a person becoming disabled. Ideally, a waiting period of at least a year should be provided so an assessment can be made as to whether the disability is permanent and whether on a long-term basis it will prevent the disabled party from performing their customary duties in the business. The clause provides for a mandatory purchase and sale. It states that the pur-
chase price must be paid on closing. Unless disability buyout insurance is available, this could create significant financial pressure on the corporation. For these reasons, it is often preferable that a disability buyout be optional on the part of the prospective purchasers (i.e., before committing to a purchase they should have the opportunity to determine whether or not the purchase is affordable). Payment of the purchase price over a three- to fiveyear period is often recommended as a way of making the purchase more manageable. A purchase by the corporation, as provided in this clause, would result in a deemed dividend to the disabled shareholder/vendor. On the other hand,
a sale to the other shareholder would result in a capital gain, which is currently taxed at a lower rate than a dividend, even more so if the capital gains exemption is available. Not only that, unlike a purchase by the corporation, a purchase by the other shareholder(s) would result in an increase in the adjusted cost base of their shares. In other words, a purchase by the other shareholder(s) often results in a better tax result for all parties. As suggested above, disability buyouts will normally be limited to active share-
holders. A buyout may also be unnecessary in a family business where an older, active parent becomes disabled. In that case, the buyout would typically be restricted to active members of the younger generation who become disabled. Disability buyout insurance is available in the marketplace, although it’s sometimes difficult to underwrite. Policy limits are often lower than might be ideal for larger corporations ($2 million or less), but the insurance option should nonetheless be explored whenever possible. Disability buyout proceeds are received tax free but do not provide a capital dividend account credit to a beneficiary corporation. An agreement may also provide for a purchase and sale of shares upon the occurrence of a critical illness, although there is a question as to whether critical illness is an appropriate ‘‘triggering event.’’ For example, a shareholder may have a mild heart attack, or incur a treatable form of cancer, and have a full recovery. In such a case, critical illness benefits may be paid, but it may not be appropriate to require a sale of his or her shares at that time since the individual may be able to continue to return to work on a full-time basis. The situation is therefore not as clear as in the case of death or permanent disability, where a purchase and sale of shares is generally appropriate. 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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CLU DESIGNATES
John A. Tory
AWARD 2020 THE INSTITUTE CONGRATULATES 2020 JOHN A. TORY AWARD WINNER
LAURA A. MONEY, CFP, CLU, CHS FOR ATTAINING THE TOP MARK IN CANADA.
Lorenzo Mercado, CFP, CLU, CHS Louis Monjo, CLU Matthew Ramadan, CFP, CLU Jeremy Samuels, CFP, CLU Kim Schlosser, CFP, CLU Alexei Schwartzman, CLU Jeffrey Smith, CFP, CLU, CPA, CA Aaron Vissia, CFP, CLU, CEBS Sarah Wong, QAFP™, CLU, CIM Bradley Woods, CLU, CHS Xiaojing Yu, CFP, CLU, CPA, CGA Jarrett Zavitz, CFP, CLU, PFA Tianyou (David) Zhang, CFP, CLU, PFP Sylvia Zheng, CFP, CLU, CHS MANITOBA Sara Halstead, CLU Melissa MacQuarrie, CLU Andrew Omura, CLU, CHS, QAFP™ Curt Rawluk, CFP, CLU, PFP(ICB) Rhonda Walker, CFP, CLU Denise Weretyk, CFP, CLU
ALBERTA Susan Armitstead, CFP, CLU Navdeep Brar, CLU, CPA, TEP Virginia Greey, CFP, CLU Khushaal Kalra, CLU Elijah Kirchmaier, CFP, CLU Valerie Kumagai, CFP®, CLU Michael Lawton, CFP, CLU Marie Majeau, CFP, CLU Amanda McCloy, CFP, CLU Munish Mehan, CLU Collin Noble, CFP, CLU Joe Sanford, CFP, CLU Stephanie Stewart, CFP, CLU, CHS Jordan Tarasoff, CFP, CLU Diane Thang, QAFP, CLU Audrey Thorhauer, CFP, CLU
NEW BRUNSWICK Devansh Bavishi, CFP, CLU Robert Manning, QAFP™, CLU Joshua Martin, CFP, CLU, CIM Shannon Tatlock, CFP, CLU, BA BEd NEWFOUNDLAND Grant Maddigan, CFP, CLU Tracey West, QAFP™, CLU
BRITISH COLUMBIA Brittany Adamson, CFP, CLU Robert An, CFP, CLU Darlene Barker, CFP, CLU Robert Bauml, CFP, CLU Lisa Carter, CFP, CLU, CIM Raman Chopra, CFP, CLU Toban De Rooy, CFP, CLU Eryn Denroche, CFP, CLU Damilola Gittens, CFP, CLU Jeffrey Graham, CFP, CLU Jeffrey Hayes, CFP, CLU Darryl Ho, CLU, QAFP, BASC Willa Hong, CFP, CLU Daniel Ping- Hsiao Hsu, CFP®,CLU,CHS,CIM Jacqueline Knoblauch, CFP, CLU Beata Krajcovic, CFP, CLU Felicia Lee, CLU Hung Kwan Tony Lee, CFP, CLU Richard Lee Wah, CLU Ka Yan (Kris) Leung, CLU David Loncaric, CFP, CLU Cody McGowan, CFP, CLU, CHS Mark McGrath, CFP, CLU Rodrigo Mendez Ramos, CFP, CLU, CIM
NOVA SCOTIA Jennifer Bonnevie, CFP, CLU Jonathan Davies, CLU Jason Kassouf, CLU Scott Lutz, CFP, CLU ONTARIO Alexander Anastasopulos, CLU, CHS Pelinus Antony, CLU, CHS Amar Bains, CLU Ekta Balani, CLU John Baldassarra, CLU, CHS Lei Bao, CLU Nancy Bell, CLU, CHS Michael Bellamy, CFP, CLU Sandra Best-Reeves, CLU, CHS Ashma Bharose, CLU Muhammad Rehaaz Khan Boodhoo, CFA, CFP, CLU Scott Bouwmeester, CFP, CLU Carol Boyce, CLU Mark Bull, CFP, CLU, CHS Taryn Bumstead King, CFP, CLU Emmanuel Burguete, CLU, QAFP™
Kyle Causyn, CLU Jun Chen, CFP, CLU Jiayi Chen, CFP, CLU Benny Cheung, CLU Mary Chow Ivanovic, CLU, CGA, CPA Tanvir Chowdhry, CFP, CLU Allan Colavecchia, CLU, CHS Jeffrey Conron, CFP, CLU Andrew Cremasco, CFP, CLU David Cremasco, CLU, CHS Susan Cross, CLU Brandon Davies, CFP, CLU Christopher de Ruiter, CLU, CHS Maria Antonietta Del Mundo, CLU, CHS, FLMI Parul Desai, CLU, CHS Lino Diasonama, CLU Nathan Dietz, QAFP™, CLU Cherie Dolstra, CFP, CLU Justin Donati, CLU Chadric Dreise, CLU Kyra Droog, CLU Jennifer Fernandez, CLU, CHS Delia Folino, QAFP, CLU Albert Frias, CLU, CHS Raquel Gallardo, CLU, CHS Murugiah Gandhiram, CLU Nadia Ganesh, CFP, CLU Marc Gervais, CLU Micah Gervasi, CLU Nickolas Giovannetti, CLU, CHS Rahul Goel, CLU, CHS Adam Gordon, CFP, CLU, RHU Reema Habash, CLU, CHS Ryan Hammar, CLU, CHS Michael Harrington, CLU Shaun Heslegrave, CFP, CLU Chan Hsiung, CLU, CHS Muhammad Hussain, CLU, CHS Annie Huynh, CLU Nazia Iqbal, CLU, CHS Athavan Iyathurai Iyer, CLU Janet James-Webb, CLU Kalaivany Jeganmohan, CLU, CHS Steven Johnson, CFP, CLU Mathew Keating, CFP, CLU, CHS Michael Kemp, CFP, CLU Michael Khan, CLU, CHS Laura Klaehn, CFP, CLU, CHS Natalie Lacroix, CFP, CLU, CHS John Laurendi, CLU Jeannette Lee, CFP, CLU Timothy Lew, CFP®, CLU, CHS Kenneth Li, CFP, CLU Derrick Lindsay, CLU, CHS Yanjun Liu, CLU Kenneth Livy, CLU, CHS Sam Luong, CLU, CHS Grant MacAulay, CLU Shelley MacIntyre, CLU, CHS Nazim Makhani, CLU, CHS Wendy Man, CFP, CLU, CFA
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Vasanthakumaran Markandu, CLU, CHS Peter Martin, CFP, CLU Dan Matwey, CFP, CLU Cindy McNeill, CLU Romeo Miano, CLU Paul Moffatt, CFP, CLU Laura Money, CFP, CLU, CHS James Morton, CFP®, CLU Junqing Mu, CFA, CLU Ruth Murle, CLU Bryce Nabrotzky, CLU Jayakumar Nadarajah, CLU Saad Nadeem, CLU Sujit Nair, CLU, CHS Jason Nelligan, CLU Mike Newell, CLU Lam Nguyen, CLU, CHS Amanda Noonan, CLU Chibueze Okparanta, CLU Rauf Ozdincer, CLU, CFA Boopathy Padmanaban, CLU Miyoung Park, CLU, CHS Samuel Pasternak, CLU Rameshbhai Patel, CLU, CHS Daniel Perras, CLU Pietro Perri, CLU Andy Pham, CLU Douglas Price, CFP, CLU, FMA Tristen Qaderi, CLU, CHS Goldis Radjabalipour, CLU Nalini Rajendram, CLU, CHS
Zanecia Ramjohn, CLU Michael Reckley, CLU, CHS Judy Ruttle, CFP, CLU Natalie Sachs, CLU Hanna Sahar, CLU Cooper Schnurr, CLU, CHS Emily Seunarine, CLU Kyle Shaen, CFP, CLU Varsha Shah, CLU Arif Shaikh, CLU, CHS Abiramie Shanmuganathan, CLU, CHS Mitchell Shields, CFP, CLU Manjinder Singh, CLU, CHS Manmohan Singh, CLU, CHS Danny Siu, CLU, CHS Lucas Snider, CLU Edward Song, CLU Antonio Sousa, CLU Stephanie Sparks, CLU Prasoon Srivastava, CLU, CHS Joseph St Lewis, CFP, CLU Melanie Stapleton, CLU Stephen Ste. Croix, CLU, CHS Brent Swatuk, CLU, CHS Taivi Tayler, CFP, CLU Shokre Thibeh, CLU Adela Thomas, CLU, CHS Raffaela Trentadue, CFP, CLU, CDFA Anna Tsepelis, CLU, CHS Salini Uthirakumaran, CLU Michael Vancea, CFP, CLU Lakshmi Varanasi-Rudrabhatla, CFP, CLU
Leslie W. Dunstall
AWARD 2020 THE INSTITUTE SPECIALLY RECOGNIZES THE 2020 DUNSTALL PRIZE WINNERS FOR ATTAINING TOP MARKS IN THEIR RESPECTIVE PROVINCES: ALBERTA Michael A. Lawton, CFP, CLU Navdeep Brar, CLU, CPA, TEP
Ellahe Vaziri, CLU, CHS Rakesh Verma, CLU, CHS Nidhi Vyas, CLU Sean Walden, CLU Ivan Pak Wing Wan, CLU, CHS Yiqi Wang, CLU Rohan Wharton, CLU Junho Yang, CLU Yuling Yin, CLU, CHS Zheng Yu, CLU Wanda Zayachkowski, CLU Leighton Zhang, CLU Yongbin Zhao, CLU Yong Qiang Zuo, CLU QUEBEC Qiong Hui Luo, CFP, CLU, CGA Keith Skeete, CLU, Pl.fin SASKATCHEWAN Jennie Aldworth, CFP, CLU Paul Bourgeault, CFP, CLU TerryBrownell, CFP, CLU Aaron Cadrin, CLU, CHS Janea Dieno, CFP, CLU Marni Harvey, CFP, CLU Michael Isbister, CFP, CLU, CIM Christopher Moore, CFP, CLU, CHS, EPC Tanis Robertson, CFP, CLU Alex Topolnitsky, CFP, CLU
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LEADERSHIP & GROWTH
BY CATHY HISCOTT
Be a Helper How to best assist clients caring for palliative loved ones
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with clients in the sandwich generation, there is help for caregivers of seniors. Providing information about what is available, not only in Ontario but in most other provinces, can set you apart, and more importantly, provide valuable information for people who wouldn’t know where to begin. As a licensed insurance professional, we learn very early on the importance of urging our clients to have an up-to-date will, POAs, and beneficiary designations on insurance policies and investments. I’ve come to realize we really should learn about the resources and services available to people who are chronically/terminally ill and their caregivers. Jennifer Moir, owner of Age Well Solutions in Ottawa, spoke at a meeting I attended last year, which was a catalyst for me to start asking questions of my moms’ caregivers. I’d urge anyone who is working with aging clients to look her up at www.agewellsolutions.ca. If you want to be helpful to clients with aging parents, take some time to go through
the links below and provide your clients with these resources as part of an annual review. During your discovery meetings, if you’re aware that they are caring for an elderly person, be their trusted advisor, and provide them with these useful links: • www.centrallhin.on.ca • www.centrallhin.on.ca/en/goalsandachievements/palliativecare.aspx • www.canada.ca/en/health-canada/ topics/end-life-care.html • www.canada.ca/en/health-canada/ services/palliative-care.html We are living in unique times. Many people are not able to see or be with their aging family/friends as they transition to the afterlife. Knowing what I know now provided my brothers and me the ability to be with our mom, in her own home, until her final days — COVID-19 or not. CATHY HISCOTT, CFP, CHS, is senior vice-president, innovation & strategy, at PPI and a board member of GAMA Canada. Reach Cathy at CHiscott@ppi.ca. For more information on GAMA visit www.gamacanada.com.
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palliative care doctor once told me if I wanted to be a trusted advisor, I had to get to know Edith. When I asked who Edith was, she said, “Has your mom completed all the paperwork to be able to receive care at home?” Over the past year, my mom’s health had deteriorated, and she decided she would not go to any more emergency rooms or specialists’ appointments. “Enough is enough,” said my 85-year-old Irish mom. For those of you with Irish moms, you get it. This led us to have the difficult conversation with her family doctor about endof-life options. The family doctor personally introduced us to the LHIN in-home palliative care doctor, who in turn set up our care team. A couple of things I learned in December, among many others. First, when a person has a terminal illness, and is likely to pass away at home, there is a lot of red tape that can be avoided when the proper paperwork is completed should they in fact pass at home. This includes having a visible DNR (Do Not Resuscitate) at the home. If the ambulance is called, they must do their best to resuscitate even if there is one on record at the hospital. Second, and perhaps most importantly is the value of a family doctor who is current, compassionate, and connected within their own circle of influence who can put things into action quickly. Let’s go back to my question, who is Edith? Turns out Edith is not a who but a what. It stands for “expected death in the home,” and is a simple form completed by the palliative care team, along with the patient. It clearly outlines which funeral home to call, and that the person is expected to die in their home due to a chronic/terminal illness. This eliminates the red tape if a person passes at home. In other words, it makes a very difficult time less difficult. Advisors often struggle with being unique, looking for something that can set them apart from others. If you’re dealing
GUEST COLUMN
BY GUY LEGAULT AND KEVIN WARK
Strategic Partnership Advocating for fair treatment for family businesses
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pirits were lifted in the tax advisory and small business communities this March when progress was made to address current inequities in the tax treatment of family business transfers. The Conference for Advanced Life Underwriting (CALU) has been actively advocating on this issue on behalf of members of CALU and Advocis starting in 2016 with its 2017 pre-budget submission to the House of Commons’ Standing Committee on Finance (FINA). CALU’s efforts reflect the strategic partnership that exists between CALU and Advocis. CALU represents the needs of Advocis members in the areas of advanced tax and estate planning. Under the partnership, Advocis is primarily responsible for advocacy on provincial regulatory issues and CALU takes the lead on federal taxation and advanced planning issues, allowing it to speak on behalf of more than 13,000 financial advisors when making representations and submissions to government officials. The partnership gave added weight to CALU’s support for changes to section 84.1 of the Income Tax Act. This tax provision can create significant issues for small business owners who are contemplating the transfer of their shares in a private business to children. Take the example of Mr. and Mrs. Smith, who own all the shares in an incorporated landscaping business. They have a daughter, Joanne, who wishes to take over the business. They agree on a price of $500,000, which will be payable over five years. The Smiths plan to use their capital gains exemption to shelter the capital gain that will arise on the sale, resulting in no taxes being payable. In turn, Joanne will incorporate a new company that will buy her parents’ shares and be responsible for repaying the purchase loan. All looks good until Mr. and Mrs. Smith meet with their accountant to discuss the terms of the sale. The accountant delivers the unexpected news that the proposed sale
We are now closer than ever to seeing muchneeded legislative changes that will facilitate the successful transfer of businesses to the next generation of family owners. to Joanne’s corporation will trigger section 84.1, converting what would otherwise be a tax-free capital gain into a $500,000 taxable dividend. The resulting tax bill of about $180,000 would have a very negative impact on their retirement plans. The accountant further advises the Smiths that they should consider selling the business to an arm’s length purchaser, as this would allow them access to their capital gains exemption. This puts the parents in the untenable position of having to choose between a tax-free sale to a stranger or a taxable sale to Joanne. CALU has long recognized the unfairness of this result to business owners and their families, and over the last five years has made representations to both the Department of Finance and FINA recommending changes that would facilitate intergenerational transfers of private cor-
porations. CALU has also reached out to Members of Parliament and other government officials to educate them on the urgent need for modifications to section 84.1 More recently, Conservative MP Larry McGuire introduced a private members’ bill (Bill C-208) that will make the desired changes to section 84.1. This bill has the support of the Conservative, NDP, and Bloc Québécois parties, and despite government opposition, recently passed second reading in the House of Commons and was referred to FINA. CALU was invited by FINA to speak on the bill and CALU chair Cindy David took this opportunity to urge the Committee to approve the bill and return it to the House of Commons for passage. We were very pleased when FINA supported our position and approved Bill C-208 without modification. The bill has since been reported back to the House of Commons for the third-reading debate. The ultimate enactment of Bill C-208 is still uncertain due to ongoing opposition by the government. However, it is clear is that CALU’s strong and reasoned voice on this issue has had a positive impact on the government debate. We are now closer than ever to seeing much-needed legislative changes that will facilitate the successful transfer of businesses to the next generation of family owners. GUY LEGAULT, MBA, FCPA, FCGA, CAE is CALU’s president and CEO, and may be reached at glegault@calu.com. KEVIN WARK, LLB, CLU, TEP is a CALU tax advisor and may be reached at kwark@calu.com.
HOW TO REACH US ON TWITTER: @advocis @deannegage ON FACEBOOK: facebook.com/advocis ON LINKEDIN: linkedin.com/company/advocis
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AdvocisNews ASSOCIATION UPDATES AND EVENTS
REGULATORY AFFAIRS
CHAPTER NEWS
Advocis Comments on FSRA Rule Re: UDAP, Rebating
IWD Event Inspires Pushing Boundaries
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T
n March 18, 2021, Advocis submitted our comments to the Financial Services Regulatory Authority of Ontario (FSRA) regarding a Proposed Rule concerning Unfair or Deceptive Acts or Practices (UDAP). The Proposed Rule would replace the existing prohibition against incentives with a more permissive provision that would allow insurers (but not insurance agents) to offer rebates and incentives to consumers in certain circumstances. In our submission, we raised significant concerns with the plan to permit rebating in the life and health insurance sector. We are concerned that the proposed restrictions would not adequately address consumer protection concerns and would create an unlevel playing field for independent advisors. Life insurance is typically purchased as part of a long-term wealth and risk management strategy with the assistance of a qualified advisor, and is designed to create a stable, long-term plan for the insured’s beneficiaries. Any rebate could incent consumers away from products that are better aligned with their overall interests. This is possible regardless of the reason that the rebate is being offered or how transparently it is communicated. Our submission also highlighted concerns in the group benefits space, including the risk that rebates could imbalance the payout ratio in year one of a plan, building in a large increase in premiums in year two. This could drive employers to seek the next illusory “lower price” from a competitor. This is not a sustainable way to promote competition and choice. Since submitting our comments, Advocis has met with FSRA and other stakeholders to discuss our concerns and further explore the risks involved in the proposed approach to rebating.
MILESTONES Happy Retirement!
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dvocis and GAMA Canada are pleased to congratulate James (Jim) Wingrove, CLU, CH.F.C., on his upcoming retirement from a successful 35-year career with The Co-operators, as well as his retirement from the Board (2016–2021) of GAMA Canada. Advocis and GAMA Canada would like to thank Jim — also a 35-year member of Advocis’s Golden Triangle chapter — for his many contributions to both organizations.
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he Advocis Winnipeg Chapter hosted an event on March 10 in honour of International Women’s Day. It was an inspiring morning that included guest speaker Michelle Hoskin who has more than 20 years’ experience working alongside some of the world’s most successful financial services organizations. She is an internationally recognized author, speaker, coach, and leading expert in the design and implementation of international framework-based best practice standards. Michelle’s presentation, entitled The Future You, discussed the financial advice profession, focusing on how every waking moment is focused on taking care of the needs of others, our families, friends, and of course, our clients. In turn, this often means we often forget to take care of the most important person of all — ourselves. The presentation pushed boundaries and encouraged us to create the best possible future version of ourselves. She broke it down to 10 key areas of our lives and challenged us to think about a future where we have total freedom of choice, no restrictions, and no worries — a future in which we are totally free to be who and what we want.
The Power of Partnership
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n a time where virtual resources are invaluable and in-person gatherings remain challenging, Advocis chapters across Canada are cooperating to offer mutual access to their respective events, and sharing expertise and best practices on planning for the year ahead. “In British Columbia, chapters this year have come together to collaborate on programming,” says Christie Coltman, CLU, CFP, and president of Advocis Vancouver Island. “This includes each chapter’s regular programs, as well as working together to offer U5A5 and CLU case studies. As a result, we have better diversity of speakers and topics, more regular sessions, and increased value for our members.” Coltman also noted that this combined approach has also led to more advisors attending sessions, which in turn enhances the value delivered to sponsor partners. Additionally, this collaborative culture and sharing of programs means that members across Canada can now register to attend any Update 2021 virtual session that matches their availability. Members should check the Advocis events calendar at myadvocis.ca on a regular basis for ongoing additions of great speakers and topics being offered — with member pricing, as always!
What’s New at Advocis
WHAT’S NEW AT ADVOCIS • Begin your path toward the PFA™
As the new year begins, excitement wepossibilities celebrate spring Advocis, forAsthe ofat2021 is we’d like to highlight some fresh opportunities kicking off at Advocis as well! available to Advocis members: A few highlights include: • Four new accredited online courses.
Learn more about Mental Health andon • Three new courses in our series
theManagement Financial Advice Risk areRelationship; now available the Essentials of Family, and for online enrolment —Trust, and may Charitable Transfers; the Essentials of be coming to your chapter soon as Shareholder, Corporate Partnership a hosted event! Learn more about Transfers; and Ethics and Social Media.
Building a Protected Practice, • Update 2021 is now available through Selecting the Right E&O Insurance, your local Chapter. Earn six CE credits and the Challenge of Documenting (includes one ethics credit) for Nothing an opportunity to earn full-dayfor participation, plus additional CEcredits creditsare and qualify for a 5% earned upon successful discount on of E&O insuranceLearning through completion the Advanced Modules. Advocis Broker Services.
• Todesignation assist us in our to becomonjourney your own terms and ingat a more for Selfyour equitable own paceorganization with the PFA ourStudy members and future members, Program, now available alongAdvocis has partnered with Strasity side the existing Semester Program. Inc. to address diversity and Make 2021 your year for pursuing the inclusion in a more fundamental way. credentials and designations that will We encourage members to visit make you more effective than our Diversity, Inclusion, Belonging, ever for the benefit & Equity (DIBE) of Infoyour Hub clients. for more information.
• Interested in personal • As an Advocis member don’t and forgetprofesto take advantage of being reading, listed on and sional development, Find anpart Advisor tool located ourtaking in search a community of likeon minded the Advocis website. Email advisors across Canada? communicatons@advocis.ca to Join the Advocis Book Club, a new request a sign-up form to get started.
benefit exclusively for members. • Haven’t joined the Advocis Book of Habit: Our first book, The Power Club yet? Don’t worry you still Why We Do What We Dohave in Life and • Register for the June 6 National time; new books are being introduced Webinar Protecting Your Client Data, by Charles Duhigg, is • The launch of DigiCat by our Tech andBusiness read every two months. This is with Jack Check Mazakian, already being actively discussed in Task Force. outvice-president best-in-class an exclusive benefit for Advocis of Advocis Broker Inc., as an our forums. Join us. options for all yourServices digital needs members. and Geoff Le Quelenec, IT director advisor, including CRM, calendarizaat Advocis. • Advocis Coffee Talks brews brand-new tion, and financial planning software. • The fresh pot has now been brewed! espresso-sized webinars throughout • DigiCat launched. Look for it Learn more2.0byhas visiting Advocis.ca/ttf, Advocis Coffee Talks members, continues 2021. Exclusive to Advocis on the Tech Task Force webpage on where you can also view the latest on these throughout 2021, with brand new 30-minute webinars provide the Advocis website. what the Tech Task Force is looking CE espresso-sized accreditation. webinars exclusive forward to throughout the year ahead. to members with CE accreditation.
NOTICE OF ANNUAL GENERAL IN MEMORIAM MEETING OF MEMBERS Alexander Rutherford
The Annual General Meeting (“AGM”) of Members of 1938–2020 The Financial Advisors Association of Canada dvocis was saddened to learncarrying of the on business as Advocis (“the Association”) will be held passing of Alexander Rutherford CFP, exclusively online this year due to the COVID-19 pandemic. CLU, CHFC, TEP, on December 30, 2020. Online voting for the 2021 AGM will be available from no Alexander joined Advocis in 1982 and was later than May 31, 2021.
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a member of the Durham Region chapter
Items forfor approval by the include: 38 years. Hemembership was the proud owner of • Minutes of 2020 Annual General Meeting Rutherford Financial Services. We send • Appointment of the Auditortoforhis thefamily next fiscal our condolences andperiod friends. • Election of directors • Receive the audited financial statements for the financial Steven Lowe year ended December 31, 2020 and the Auditor’s report 1956–2020 • Any other business
A
dvocis was saddened to learn of the
passingofofThe Steven (Steve) THE AGM of Members Institute will beLowe held on exclusively online this25, year2020. due toSteve the COVID-19 December joined pandemic. Advocis Online voting for theand 2021was AGM will be available in 1990, a member of thefrom no later than May 31, 2021. Region chapter for 30 years, Durham where he also served as a board member.
Items for approval by Institute Designation Holders include:Steve was a long-time financial advisor with London proud Kinsmen • Minutes of 2020 AnnualLife, General Meeting member, and supporter of the Canadian • Appointment of the Auditor for the next fiscal period • Receive the audited financial statements forsend the financial Cystic Fibrosis Foundation. We our year ended Decemberto31,his 2020 and the Auditor’s report condolences family and friends. • Any other business
FINAL WORD
A Season of Renewal BY GREG POLLOCK
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t Advocis, I am pleased to say that spring finally seems to be in the air! A long and difficult winter of social distancing and cold weather has passed, COVID-19 vaccines are starting to be distributed across the country, and hopefully these circumstances may soon be in our rear view. I have recently had the opportunity to welcome a new granddaughter into the world, and I am both looking forward to seeing her and reflecting on what else this season of renewal may have to offer. Within the association, we have been taking this time to examine how we want to approach many of the strategic goals we had before the pandemic with a revitalized focus — as well as consider how we can adapt them to the “new normal” to ensure we are successful in reaching them. First and foremost, we have been thrilled to watch the first steps of our Diversity, Inclusion, Belonging, and Equity (DIBE) strategy alongside the assistance and partnership of our associates at Strasity Inc. By the time you are reading this, our internal staff kickoff and training sessions will have already taken place, and the program will likely have now begun to work out toward our board, CLC, and chapter leadership groups as well. As the largest and oldest professional association of financial advisors in Canada, Advocis has a responsibility to take an exemplary position on these important issues. Both our association and our industry must be held accountable for the systemic inequity, oppression, and unequal opportunity faced by marginalized groups, and we know that we are at our best when we recognize, encourage, and celebrate our diverse and unique experiences. Speaking of unique experiences: Our increased adaptation and reliance on technology has certainly brought a whirlwind of changes to how we live and work — and things at Advocis are no exception! One of our highest priorities for the year is to undertake considerable upgrades to all digital aspects of our member experience. Many of these changes are occurring behind the scenes as we perform major upgrades to our IT systems, but these improvements are ultimately about expanding our capacity to make membership a more convenient, beneficial, and virtual experience — the best parts of which will endure
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even as we begin working toward the prospect of in-person events once again. It may be some time before what we are doing becomes an everyday part of how you interact with Advocis online, but this is one of the few ways in which the pandemic has been an inspiration. We now have a clearer picture than ever of what you, our members, are expecting from us. Of course, we are also continuing to offer the online experiences and improvements that we have perfected throughout the past year — our Coffee Talks, online CE, webinars, and other virtual initiatives continue to provide outstanding content and educational opportunities. Chapters across Canada are also now starting to combine their efforts, creating regional passes that are allowing members to take advantage of online events from other chapters in their area. Finally, the conclusion of the pandemic also has us looking forward to continuing our efforts with regulators on the issues that are most vital to financial advisors. As governments look to the end of this time and these efforts toward economic recovery, we will continue to engage with them closely to ensure that the financial advice that is certain to accompany it can work equitably in protecting both the public and the interests of our members. These have been remarkable times. And, while they are not yet completely at an end, there is an optimism and an energy around us that would have been unimaginable at this same time last year — a time in which we were only at the beginning of this strange and unprecedented ordeal. I hope we will also look back at how far our understanding, compassion, and support for each other has taken us. The miraculous science of modern medicine and manufacturing may be what is chiefly remembered when we think about the end of this period, but financial advisors played a crucial role as well. Consider how much more we might have had to rebuild if we had not given our all to press forward with the work of seeing our communities through this pandemic with tenacity, professionalism, and grace. Your clients will never forget it — and neither will we. GREG POLLOCK, CFP, is the president and CEO of Advocis.
N AT I O N A L Q U A L I T Y AWA R D W I N N E R S
Barbara Ann Buryn, 6 years
Brian A. Burlacoff, 24 years
Michael K. Spicer, 6 years
Gordon D. Clark, 24 years
Vimaladevi Manuel, 7 years
Raymond A. Monnier, 25 years
Nicolas Manuel, 8 years
Isabella Lo, 25 years
Justin McCarron, 9 years
Jeffrey F. Willms, 26 years
Thien Ly, 10 years
Michel Butler, 27 years
Jason J. Trudeau, 11 years
Brian L. McEvoy, 29 years
Robert G. MacKinnon, 12 years
Edgar L. De Souza, 30 years
John Katie-Jean Haslett, 1 year
Gerry C. Cabunoc, 15 years
Kevin R. Williams, 31 years
Andrew J.T White, 1 year
Louis A. Maestre, 15 years
Clarke E. Ingebertson, 34 years
Jimmy Minh Nguyen, 1 year
Brian J. Grundner, 15 years
Audrey Y. S. Chiang, 38 years
Tina C. Getz, 1 year
Tammy M. Truman, 16 years
Howard James Fergusson, 42 years
Randy Butt, 1 year
Bilhar Bachra, 16 years
Matthew Brayden Young, 1 year
Victoria L. White, 16 years
Elaine M. Erhart, 1 year
Craig Ash, 17 years
Scott Adams, 1 year
Douglas J. Stewart, 18 years
Jennifer M. Proznik, 2 years
Wayne C. Henrikson, 19 years
IN RECOGNITION OF QUALITY BUSINESS EXCELLENCE IN LIFE INSURANCE SALES AND SERVICE TO CANADIAN CONSUMERS
2020 AWARD WINNERS
For more information on the NQA award, please visit: www.advocis.ca/nqa
® Ron Sutherland, 3 years Mark B. and Coutts, yearsand living benefits. The institute provides a platform of standards and advanced financial services practitioners in the specialty areas of advance estate wealth20 transfer, With more than 5,000 CLU and CHS designation holders in good standing. The institute for advanced financial education is the leading designation body in canada for
knowledge through designation programs and accreditation services. Institute destinations speak powerfully of a practice that is built on knowledge and a belief in the
continuous refinement of that knowledge. John P. Darch, 4 years
Geoff S. Douglas, 20 years
Douglas D. Stroud , 5 years
Shirley S. H. Ma, 21 years
Darren Patrick Ryan, 6 years
Isabella P. C. Choy, 23 years
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.
The Certified Executor Advisor (CEA) Designation More than ever before, Canadians want to talk about their estates. Learn to engage in powerful conversations about the great wealth transfer underway to ramp up AUM, life insurance and seg fund sales.
Advocis members save $200 Learn more about the CEA designation at MyAdvocis.ca under Partner Programs
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