FORUM Magazine - December 2021 by Advocis

DECEMBER 2021 • $5.50

The Magazine of Influence for Financial Advisors

MAN WITHA VISION How one of Canada’s only visually impaired advisors builds his thriving practice Ryan Chin, CLU, CFP Proud Advocis Member Since 2016

INSURING A YOUNG FAMILY: TERM, WHOLE LIFE,OR UL? WHEN ARE LIFE INSURANCE PREMIUMS TAX DEDUCTIBLE?

COVERAGE FROM ADVOCIS SYMPOSIUM

2021

BOOK EXCERPT: 3 MYTHS OF DIGITAL ASSETS PLANNING

Publication Mail Agreement # 40069004

FORUM VOLUME 51, 4

DECEMBER 2021

ISSN 1493-826X

FEATURES Man with a Vision

Ryan Chin, CLU, CFP, is helping a growing number of clients reach their financial goals, and as he puts it, he’s doing it with his eyes closed. Kira Vermond explains how one of Canada’s only visually impaired advisors makes it happen

What Insurance Should I Get?

Term or whole life or UL? What you advise a young family depends on their specific needs, says Richard Parkinson

DEPARTMENTS

COLUMNS

28 TAX UPFRONT

How consumers’ changing consumption habits may affect advisors

OPENERS Long-term care is expensive and unsustainable; capturing new milestones; women more likely to work in non-profit jobs

34 ADVOCIS NEWS Association updates, events, and memorial tributes

38 THE FINAL WORD

It’s time for year-end tax planning BY JAMIE GOLOMBEK

New reforms to enhance the advisor-client relationship are finally coming. Susan Yellin reports from the virtual Advocis Symposium 2021

29 ESTATE DILEMMAS Discussing executor fees with clients drafting estate plans BY KEVIN WARK

32 CORPORATE INSURANCE When are life insurance premiums tax deductible? BY GLENN STEPHENS

33 LEADERSHIP & GROWTH

Connecting with the Future

How to move past DEI talk into action

BY ROB EBY

BY ABBIE MACMILLAN

Publication Mail Agreement # 40069004 Return Undeliverable Canadian Addresses to FORUM Magazine Circulation Department, 10 Lower Spadina Avenue, Suite 600, Toronto, Ontario M5V 2Z2

2 FORUM DECEMBER 2021

Three Myths of Digital Assets Planning

Sharon Hartung, TEP, explains how digital assets will change the face of estate planning

COVER PHOTO: ALEX SEARS, PHOTOSBYALEX.CA

EDITOR’S JOURNAL

Clients First

COST OF BIOLOGICS ADDING UP? To help combat the rising cost of biologic drugs, Janssen Inc. is offering the Biologics Savings Partnership™. TURN THE PAGE TO LEARN MORE.

BIOLOGICS SAVINGS STRATEGIES IN PRIVATE INSURANCE: EVALUATING “BIOSIMILAR FIRST” AND PLA STRATEGIES

Employing a “Biosimilar First” approach to manage the increasing spending on biologic* medicines is a strategy that may be employed by private insurance providers in Canada to manage the increasing spending on brand biologic medicines. An actuarial risk assessment, conducted by RSM Canada, however, found that the “Biosimilar First” approach may not be the most effective cost-saving strategy. A more recent approach, which combines the savings from biosimilar biologic drugs (also known as “biosimilars”) with negotiated prices on biologics that do not have biosimilar competition, has been found to generate significantly greater savings. An example of this approach is the Biologics Savings Partnership™ (BSP) concept introduced by Janssen Inc. in which its portfolio of biologic products is made available to insurers at biosimilar costs. Over the past decades, employer-sponsored drug benefit plans have witnessed an increase in prescription drugs spending from $1.5 billion in 1990 to $12.3 billion in 2018.1 In recent years, spending has primarily been driven up by the increasing utilization of specialty drugs like biologics, increasing by approximately 10.8 per cent, annually, from 2009 to 2018, thus prompting payers to turn to cost-saving strategies to address the rising costs.2 In their assessment, RSM evaluated three strategies involving biosimilars that insurers and employers may try to use to save on drug costs: 1) Biosimilar First – For new patients, only the biosimilar is reimbursed; 2) BSP + Biosimilar First – Combines cost savings from Biosimilar First strategy with negotiated rebates with biologic manufacturers to level the cost between biologics and biosimilars; and 3) BSP + PLA – Cost for new and existing patients is discounted, as per the BSP strategy. Janssen Inc. engaged RSM Canada to conduct an actuarial analysis of Janssen’s BSP offering versus a Biosimilar First strategy. RSM used IQVIA private insurance claims data provided by Janssen Inc., which consisted of product-level claims costs and modelled retention rates to estimate the cost of biologics and biosimilars. Dispensing fees and confidential rebates were not considered. Drugs included in the analysis were restricted to the following major indications for which the drug products are authorized in Canada: inflammatory bowel disease (Crohn’s disease and ulcerative colitis), rheumatoid and psoriatic arthritis, and plaque psoriasis. As part of the assessment, RSM conducted a risk-adjusted analysis based on a probabilistic model (Monte Carlo simulation) to calculate the cost savings that both Biosimilar First and BSP strategies can provide. This allows for a more direct consideration of the inherent uncertainties associated with the model. For the three years analyzed, the year over year total mean savings to private insurance plans under each scenario is shown in the graph on the next page.

YEAR 1 YEAR 1

$713 $713

$672 $672

$628 $628 $25 $25

$1,165 $1,165

$1,098 $1,098

$1,028 $1,028

$69 $69

$110 $110 YEAR 2 YEAR 2

Biosimilar First

BSP and Biosimilar First

BSP and PLA

Biosimilar First

BSP and Biosimilar First

BSP and PLA

YEAR 3 YEAR 3

Both strategies generate cost savings; however, the BSP strategy, in all scenarios and time horizons studied, provides significantly greater savings to private insurance plans. Over a three-year timehorizons horizon,studied, savings Both strategies generate costcost savings; however, the BSP strategy, in all scenarios and time are estimated at $1.864B for the BSP strategy vs. $184M for the Biosimilar First strategy. The savings provides significantly greater cost savings to private insurance plans. Over a three-year time horizon, savings associated withatthe BSP strategy are significantly more asfor it also allows for:First 1) Savings on The bothsavings biologics and are estimated $1.864B for the BSP strategy vs. $184M the Biosimilar strategy. biosimilars, and 2) Savings to be applied to both new and existing patients, whereas the savings of a Biosimilar associated with the BSP strategy are significantly more as it also allows for: 1) Savings on both biologics and First strategy are limited to new patients only. biosimilars, and 2) Savings to be applied to both new and existing patients, whereas the savings of a Biosimilar

First strategy are limited to new patients only. This analysis also evaluated a scenario where all biologic manufacturers and insurers negotiated a product listing agreement (PLA) illustratea the magnitude a PLA strategy provide. Savingsa in this scenario, This analysis alsoto evaluated scenario whereofallsavings biologicthat manufacturers andcould insurers negotiated product listing where all manufacturers negotiate biosimilar-level pricing, are estimated to be $3.048B over three years. agreement (PLA) to illustrate the magnitude of savings that a PLA strategy could provide. Savings in this scenario, where all manufacturers negotiate biosimilar-level pricing, are estimated to be $3.048B over three years. As the use of biologics continues to increase, employers need to carefully consider alternative savings strategies, such as a combined biologic PLA and biosimilar strategy, whichconsider may generate significantly As the use of biologics continues to increase, employers need to carefully alternative savings more savings while providing employees more options and flexibility in their treatment decisions. strategies, such as a combined biologic PLA and biosimilar strategy, which may generate significantly more savings while providing employees more options and flexibility in their treatment decisions.

FOR MORE INFORMATION, FOR MORE INFORMATION, PLEASE VISIT PLEASE VISIT BIOLOGICSAVINGSPARTNERSHIP.COM BIOLOGICSAVINGSPARTNERSHIP.COM * For the purposes of this article, the term biologics will only be used to refer to “innovative” biologics (being a drug that contains a medicinal ingredient not previously authorized in a drug by Health Canada) and “reference” biologics (being a biologic drug already authorized for sale in Canada, which is referenced by the biosimilar seeking an authorization for sale based on a demonstration to the biologic). * For the purposesof ofsimilarity this article, the reference term biologics will only be used to refer to “innovative” biologics (being a drug that contains a medicinal ingredient not previously authorized in a drug by Health Canada) and “reference” (being a biologic drugHealth already authorizedTrends, for sale1975 in Canada, referenced byG. the biosimilar an authorization for sale based on References: 1. Canadian Institute forbiologics Health Information. National Expenditure to 2019:which Data is tables – Series Available at: seeking https://www.cihi.ca/en/national-healtha demonstration of similarity to the reference biologic). expenditure-trends-1975-to-2019. Accessed August 7, 2020. 2. 2019 TELUS Health Drug Data Trends & National Benchmarks. References: 1. Canadian Institute for Health Information. National Health Expenditure Trends, 1975 to 2019: Data tables – Series G. Available at: https://www.cihi.ca/en/national-health© 2021 Janssen Inc. | All trademarks usedAccessed under license. expenditure-trends-1975-to-2019. August 7, 2020. 2. 2019 TELUS Health Drug Data Trends & National Benchmarks. All other third party trademarks are trademarks of their respective owners. RSM Canada © 2021 Janssen Inc. | All trademarks used under license. 11 King St. W.,party Suitetrademarks 700, Box 27, Ontario, Canada M5H 4C7 All other third areToronto, trademarks of their respective owners. W: www.rsmcanada.com RSM Canada 11 King St. W., Suite 700, Box 27, Toronto, Ontario, Canada M5H 4C7 W: www.rsmcanada.com

CP-173251E CP-173251E

BY DEANNE GAGE

Consuming Matter

’m reading a fascinating working paper from the Bank of Canada called The Covid 19 Consumption Game Changer: Evidence from a Large-Scale Multi Country Survey. It looks at consumption trends in five European countries once pandemic restrictions were lifted — and how these trends may shape structural changes going forward. According to the survey that took place in July 2020, a number of households consumed less than before — or not at all — especially in the hospitality, public transportation, and retail sectors. What’s particularly compelling is many households report not missing the consumption they did previously. In France, 23% don’t miss going to hairdressers and in Germany, 21% don’t miss restaurants. Of note, “these households are mainly middle-aged, high-income households and are the least likely to have had a personal COVID-19 infection experience,” the study says. This fact may “reinforce the magnitude of the change in consumption habits.” In Spain and Italy, for example, the study found that saving more money was a substantial motivator, while “savings” was the third reason for less consumption in Germany, France, and the Netherlands, after infection risk and preference shift. People tend to save more during times of unrest and uncertainty — even when the circumstances may not directly affect them. We only have to look at the Great Depression as an example. The generation born during that time — regardless of socioeconomic background — truly learned the importance of putting away for another day. Today, between the pandemic, horrific climate changes on the West Coast, and rising inflation nationwide, higher-income consumers are not only saving more but want to make sure their money is working for them. Solid professional advice can only win in this regard. Clients already know your value. But some investors, previously content with robo-advisors and other selfdirected pursuits, now desire a sounding 6 FORUM DECEMBER 2021

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

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

board. And they are willing to pay for the advice. This year, I’ve interviewed many advisors who report that business has increased significantly, and they are bringing on more clients than ever before. They attribute the success not just to the complexity of client needs but technology. They invested more in technology to prospect for clients and manage their client bases, but also greatly benefited from the industry’s relenting on the use of, say, electronic signatures. As Sun Life’s Susan Silma told delegates at the Advocis Symposium on November 16, there’s an “exciting opportunity to leverage technology to drive efficiencies and an improved client and advisor journey and at the same time, to make the role of advice and advisors even more clear and relevant.” For more of Silma’s comments and other Symposium speakers, check out Susan Yellin’s coverage starting on page 20. Have some downtime during the holidays? I believe MAID on Netflix is required viewing for every financial advisor. It gives an authentic depiction of the working poor’s plight and the obstacles of climbing to the next income level. Check out the running calculator showing income earned and then all the deductions, expenses, and liabilities. If you watch, let me know your thoughts.

***

Big congratulations to FORUM columnist Erin Bury on the birth of her daughter on November 3.

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

of Canada carrying on business as Advocis.

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

PHOTO: DANIEL EHRENWORTH

EDITOR’S JOURNAL

OPENERS Fodder For the Water Cooler LONG-TERM CARE EXPENSIVE AND UNSUSTAINABLE: REPORT

aving for the future has always been an ineffably difficult project, and COVID19 has made it all the more problematic for seniors who may have been thinking about moving to long-term care facilities, according to a pre-pandemic study by a number of experts. Bonnie-Jeanne MacDonald, an actuary and director of financial security research, National Institute on Ageing at Ryerson University in Toronto, told a late-September webinar that Canadians face a number of gaps to retirement financial security, both on the financial and caregiver sides. MacDonald, who is also a resident scholar at Eckler, says Canadians currently receive a total of about $20,000 a year in Old Age Security and Canada Pension Plan, providing

some inflation safety. However, about twothirds of Canadians don’t have a company pension plan to add to that total. The study, written by a panel of diverse experts, indicates that Canadians need to overcome these financial challenges by saving more. But saving more doesn’t actually provide secure lifelong income that will protect them, she says. “When it comes to long-term care in Canada, the status quo was unanimously seen as unacceptable, and really, all of the scenarios pointed to the fact that it is also an expensive and unsustainable one,” says MacDonald. Federal government programs for those who need financial help to get into nursing homes is limited and long-term care is not covered under the Canada Health Act. On top of that, family members are currently pitching in to provide care to aging

EMPLOYEE BENEFITS FIRMS GO ON HIRING SPREE

PHOTO: ISTOCKPHOTO

hile many smaller companies have had a dismal economic time during COVID-19, a number of employee benefits advisors are seeing many firms hiring more employees and spending more on benefits. Dave Patriarche, owner of Mainstay Insurance Brokerage Inc. and founder of Canadian Group Insurance Brokers (CGIB), says the majority of his clients are hiring staff as fast as they can. One marketing company he deals with had 72 employees a year ago; now that’s up to 130 and counting. “If we have more companies that are making more money, that are hiring more people, then everything from individual investments and everything else should be higher,” says Patriarche. “Money that had been set aside for a vacation they ended up not taking can be put into savings. If you are trying to

parents, a situation that may change in the future given a lower fertility rate in Canada, says MacDonald. That makes long-term care both complex and difficult to navigate. The future has more challenges, because it includes such variables as labour markets, disease control, climate change, immigration, and most of all, an aging population. “We are so far behind the eight ball on this one, but at least starting now is better than not starting at all.” A recent survey indicates that many seniors are reacting to serious issues taking place in long-term care facilities because of COVID-19, and the bulk now say they want to live independently. “Overwhelmingly, Canadians want to age in their homes. COVID has spurred most people to want to live independently,” MacDonald says. “[It’s] been a major wakeup call to the system.” — Susan Yellin

hire more employees then you can enhance your benefit plan.” One startup that hasn’t been in business for even a year asked Patriarche about adding group RRSPs to the company’s employee benefits package in order to keep the passionate workers it’s hiring and show them how important it is to have good benefits. He says he has seen this growth coming from a variety of companies, including those in pharmaceuticals, IT, printing, financial services, television and movie production, and construction. In the past 18 months, Patriarche notes he’s had only one company consider trimming benefits to mitigate an increase in claims. “Most everybody else has kept the same benefits. Maybe 10% to 12% have seen an increase in benefits, and that can be everything from increasing health spending accounts to adding mental health spending accounts or improving coverage. But for the most part, more people have been increasing benefits than decreasing benefits.” — S.Y.

DECEMBER 2021 FORUM 7

BRANDING & SOCIAL MEDIA BY ERIN BURY

CAPTURING NEW MILESTONES

ajor life changes are often the catalyst to overhaul finances, whether it’s marriage, divorce, or buying a home. Inevitably, one of the largest life changes that can lead to a renewed focus on finances is having a child — I should know, I’m expecting our first child next month. My husband and I run Willful together, and new parents are our key target audience. Our research shows that having a child is the number one catalyst to create or update a will, followed closely by buying a home and losing a loved one. This is typically a key target audience for advisors as well, knowing that many new parents are like me — dual-income homeowners in the wealth-building stage of their careers. To appeal to expecting or new parents, it’s key for advisors to focus on what they do best: providing guidance and clarity and cutting through the noise.

STEP ONE: EDUCATE A survey Willful commissioned with Angus Reid found that 73% of parents don’t have a set up Registered Education Savings Plan (RESP), 34% of parents don’t have life insurance, and 61% of parents don’t have an up-to-date will. As advisors, you can help to educate clients about the financial to-dos that come along with having a child — those include the obvious ones, like opening an RESP, getting or updating a will, and buying life insurance, but they also include things like applying for the Canada Child Benefit, applying for a SIN number (required in order to access the Canada Child Benefit), and updating beneficiaries on employer benefits plans. When I posted on social media about expecting our first child, one of our partners, Elke Rubach at Rubach Wealth, emailed to congratulate me and she attached their firm’s checklist for new parents. It’s a helpful PDF that lays out all the financial to-dos I needed to consider, and it was such a value-add at a time when I was unaware of many of those steps. By compiling similar resources, from video series to blog posts to checklists like Rubach Wealth’s, you can be a valuable resource for existing or potential clients as they go through this major life change. You can also discuss these top-

8 FORUM DECEMBER 2021

ics in webinars or one-on-one meetings with potential clients to help them map out their financial goals when baby arrives.

STEP TWO: FIND PARENTS WHERE THEY SPEND TIME After you create some baseline resources for new parents, it’s a matter of getting in front of them. As an expecting parent, I can tell you that my media consumption habits have changed quite a bit. I’m now a member of parenting groups on Facebook, I’m following child sleep consultants on Instagram, and I’m reading Today’s Parent magazine. To target parents when they’re expecting or recently had a child, map out where they are spending their time both online and offline, and reach them in those places. You can start by targeting parents in your local community — perhaps by sponsoring a local playgroup, or offering to deliver a seminar to local parenting groups. Kind Wealth founder David O’Leary often presents to local parenting groups, and it’s a great way to educate and add value. If you want to appeal to a broader audience outside your local community, consider running podcast ads on parenting podcasts like Cat & Nat’s #MomTruths podcast, or taking out digital or print advertising in parenting publications and websites. You can also reach out to offer the parenting media your tips for new parents so they can include them in editorial coverage, which helps to position you as a thought leader.

STEP THREE: ALLEVIATE STRESS DURING A STRESSFUL TIME As an expecting parent I’ve been overwhelmed with advice from friends and family, to-do lists for our nursery, and checking off a never-ending list of things to buy, all while preparing to take a maternity leave from our business. Add in financial to-dos to that and it all becomes a little overwhelming. The key when appealing to new parents is to help alleviate stress by outsourcing some of these financial decisions and helping to get them in place. If you can point them to resources to complete their will, or connect them with a great life insurance broker, or help them complete these processes with minimal involvement on their end, you’ll immediately become indispensable. To a new parent, time is money, and removing financial tasks from a new parent’s to-do list is worth its weight in gold. ERIN BURY Is the CEO at willful.co, an estate planning startup that provides an affordable, convenient, and easy way for Canadians to make a will online. Willful works with financial planners across Canada to help their clients get a solid estate plan in place.

PHOTO: ISTOCKPHOTO

OPENERS

DID YOU KNOW?

At every step up the corporate ladder, women of colour lose ground to white women and men of colour.

Women are more likely to work in the non-profit sector than men.

Representation by corporate role, by gender and race, 2021, % of employees

Type of organization, by gender

In my most recent role, I work(ed) in the following type of organization:

I identify myself as the following gender: Man

Woman

White women

29% 26%

Publicly traded corporation

43%

Privately held corporation

Women of colour

38% 13%

Non-profit (including associations, charities, educational institutions)

Men of colour

22% 3% 3%

Self-employed

White men

8% 7%

Public sector (e.g., government)

Other (please specify)

Entry level

3% 0%

10%

20%

30%

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

40%

Manager

Senior manager/ director

Vicepresident

Senior vicepresident

C-suite

Note: Figures may not sum to 100% because of rounding. Source: Women in the Workplace 2021, Leanln.Org and McKinsey, 2021

Professional Financial Advisor “The technical knowledge and soft skill set I acquired through the PFA program are useful tools for any advisor, and I believe the designation itself is extremely valuable for advisors both seasoned and new.” – Sherry Watty, PFA™, Abbotsford, British Columbia

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.

COVER STORY

10 FORUM DECEMBER 2021

Ryan Chin CLU, CFP, is helping a growing number of clients reach their financial goals, and as he puts it, he’s doing it with his eyes closed. Kira Vermond explains how one of Canada’s only visually impaired advisors makes it happen

Man witha

VISION

PHOTOGRAPHER: ALEX SEARS, PHOTOSBYALEX.CA

bout five years ago, Ryan Chin set off to meet a hiring manager at Sun Life Financial to talk about his future with the company. Chin was brand new to financial advising, but was interested in breaking into the industry in his hometown, Hamilton. He thought he might have what it takes to succeed: drive, determination, professionalism, and a commitment to his clients. A perfect combo. “He invited me in not knowing I had vision loss,” says Chin now of the recruiter, Camilo Chacon. “But as I came into the office with my white cane, oh, to be a fly on the wall to see his face!” At eight years old, Chin was diagnosed with Stargardt disease, which causes progressive vision loss that usually leads to blindness. Today he is considered legally blind. Yet despite the initial surprise that day, he says Chacon was all professionalism. They had a great conversation and the two hit it off. Soon, Chin was introduced to the higher ups. Rick Prior, district director, remembers the moments before he met Chin that day. Chacon popped into his office. “I think I found your guy,” he had told him. “He’s amazing and I think he’s going to kill it, but.…” “Well, what’s the but?” Prior had asked. “He’s blind.” “My immediate reaction was, ‘I don’t know how that will work, but let’s have a conversation and see where it goes.’ I never stopped to consider that we couldn’t help him be successful,” says Prior now.

He’s glad he made time for that conversation. Prior soon realized Chin certainly did have a lot going in his favour: years of professional, management, and fundraising experience with what’s now called the CNIB Foundation. Fundraising requires the ability to network and speak frankly about money with near strangers — an obvious requirement for financial planning. Chin also had an MBA from Athabasca University and relentless determination. Loads of it. Years before, Chin competed nationally and at the Olympic level in swimming, ultimately placing fifth in the world on the Paralympic stage in the Barcelona Games in 1992. “And he genuinely just wanted to find a way to help people,” says Prior.

MAKING OBSTACLES GO AWAY Still, there were very real concerns. Traditionally, the financial services industry is incredibly reliant on paper, where important documents are printed and signed. And, pre-pandemic, client and prospecting meetings were almost always face-to-face. How would Chin travel to them if he couldn’t drive? Then there was the matter of confirming client identity by examining identification like a driver’s licence. How would he do that if he couldn’t see? This was a compliance issue. “But Camilo and I felt our role was to make obstacles go away because that’s effectively what we do as planners anyway,” says Prior. “Here’s a problem. How do we get what we’re trying to achieve? What’s the solution?” In the end, the solution was to allow Chin to team up with DECEMBER 2021 FORUM 11

COVER STORY Chacon for 90 days and the two travelled all over southern and eastern Ontario so Chin could learn the ropes and navigate client meetings. Chin also had to commit to hiring a full-time assistant who could be his eyes when required. “Coming into the industry without a promise of income, I had to promise someone else that I would pay them a salary, which was pretty scary,” Chin remembers. “But I had to think, ‘OK, I’ve got the tenacity and the work ethic. Let’s just get it done.’” To alleviate some of the financial uncertainty, Sun Life provided him with a small client base to start. The gamble paid off. Chin completed and passed the Life License Qualification Program (LLQP) and his mutual fund license, and hit the ground running. Soon, Prior realized that Chin wasn’t only a natural with clients — he’s warm, engaging, listens, and can tell a good story — but that he was also extremely process-oriented. For instance, every marketing piece, data analysis booklet, or piece of paper is placed in the same order each time (coded with raised braille dots on page corners), so he knows what he is passing to clients. His phone and computer utilize a text-to-speech screen reader allowing him to stay on top of all correspondence. “Ryan could point to the middle of a page and talk about that section because he had memorized it. I swear, he must have a photographic memory because he knows where everything is,” Prior says. “Everything is a system and it makes him productive. It allows him to spend most of his time in front of people.” Although Chin has been able to show Sun Life and the industry what is possible for advisors with disabilities, there is still learning to be done. Prior says the company has been working harder on accessibility in previous years, not simply because the Accessibility for Ontarians with Disabilities Act demands it, but because people now have a better understanding of how accessibility accommodation has an impact on employees like Chin. Something as simple as ensuring that charts and graphs are laid out with a descriptor so Chin’s text-to-speech reading software can read it properly makes a difference. Adding descriptors to images and video is important, too.

IMPOSSIBLE IS NOTHING For Chin, systems and processes are simply a way of life. And he’s had years to find ways to hack the sighted world. Born in Guyana, Chin grew up in Barbados with his mother. On a vacation in Canada is when he was diagnosed with Stargardt disease, the juvenile form of macular degeneration. With few opportunities in the country for children living with vision loss, and with his father living in Canada at the time, his parents enrolled him at the W. Ross MacDonald School in Brantford, Ont., the province’s only school for blind and deafblind students. “I have absolutely nothing but great things to say about the staff and teachers at the school. They believe the impossible is only the untried,” he says. This is a motto Chin lives by every day. He started swimming at the school and went on to train at the provincial, national, and international level. Chin still remembers the cheers of hundreds of spectators in Barcelona as he perched on the starting block ready to begin his 50-metre freestyle event. Eventually, he went on to work in Toronto at the CNIB Foundation, and up at its Lake Joseph summer camp facility in the 12 FORUM DECEMBER 2021

After a strong 2020 and 2021, Chin employs three staff and focuses more on the financial planning side with his wealth block growing by leaps and bounds. His clients are committed to him, too, erasing the worry he once had in the beginning that people would not take him seriously as an advisor. heart of swishy Muskoka cottage country. Soon he wasn’t just running the facility, but networking with wealthy local cottagers and fundraising to help with a large redevelopment project. No easy thing when the area still only had dial-up Internet and faxes. After meeting a number of successful and driven professionals on Lake Joseph, he decided to sharpen his skills and get his executive MBA in 2.5 years while working full time. Chin admits the period was all a blur. But it turned out that MBA was a fortuitous decision. After years with his employer, he was restructured out of a job and needed to find a new opportunity. An idea hit him. “For almost 20 years of my life, I’ve done fundraising and asking for charitable dollars. Now that I have an MBA, why don’t I sit on

the other side of the desk on the philanthropic side?” he remembers thinking. Yet, despite reaching out to a number of financial institutions, the interviews didn’t pan out. He believes he got the initial job interviews because he was someone with vision loss asking for them, but ultimately, employers didn’t want to take on an employee with a disability. That discrimination is more their obstacle than his though, he says. “They were just not being totally aware of skill and were focusing on the disability, unfortunately,” Chin explains. Chin’s familiarity with navigating the world with vision loss — and still coming out on top — is one of the reasons Keya Osborne is glad she’s one of Chin’s clients. The two met about four years ago at an event where Chin was at the Sun Life booth. He also came highly recommended from other people she knew. “He has the best knowledge of both worlds. He understands the sight loss community and what our needs are, and he has the financial acumen to get us where we need to be,” she says. A program development team lead and program lead for youth empowerment at the CNIB Foundation in Toronto, Osborne also lives with vision loss. She feels a kinship with Chin because they are both traversing many similar challenges as Black Canadians in an able-bodied world. “When it comes to job stability or looking for work, we have to be extra cautious,” she says. “Being Black, a person with a disability, and being a woman, I have to work three times as hard,” she says. “I want to have financial security so if anything happens, I can still maintain my home and quality of life. Ryan understands all of that. He’s walking the same walk.” Chin, who now has his CLU and CFP accreditations, helped Osborne rein in her spending and broke down how much she needed to save to reach her retirement goals. He also listened to her concerns about risk and helped her create a portfolio that included some growth funds, but nothing too volatile. At 49, Osborne wants to retire in about 15 years. He checks in with her every six months or more often, if needed. That commitment to his clients helped him actually grow his business during a global pandemic. While many advisors were scrambling in the early days, Chin was already used to working from home. True, his calendar cleared as the world shut down, but instead of panicking, he simply turned to his clients and

picked up the phone. “The question became, do I turtle and let the current situation take me over or do I pivot and create a new way?” he says. “My life’s path has always pushed me forward so I leaned into it.” The calls weren’t sales calls, per se. He says he was concerned about many of the clients he worked with and people he knew. How were they feeling? What were their worries? How could he help? “Honestly, it was just a genuine reach-out,” he says. “I think in our industry we really have to understand that when you care — when you truly care about the people you work for and serve — it translates into them wanting to work with you even more.” After a strong 2020 and 2021, today he employs three staff and focuses more on the financial planning side with his wealth block growing by leaps and bounds. His clients are committed to him, too, erasing the worry he once had in the beginning that people would not take him seriously as an advisor. “I’ll tell you, not one person has ever said, ‘Yeah, I don’t want a blind advisor.’ Never ever. Everyone has always been, ‘I don’t care. As long as you’re able to tell me what I need to know, let’s move on,’” he says. “I think that’s so great. I love my clients for that.” Besides, sometimes vision loss has advantages. Unlike other advisors who might feel worried or stressed when they catch a client’s eyeroll or stressed expression, Chin doesn’t pick up on those visual cues. “I think that is truly one of the strongest tools in my arsenal,” he says only half joking. “Because I’m not afraid of what needs to be said. As advisors, we know what’s best for our clients and sometimes need to have the tough conversations. We want to make good, solid recommendations, but sometimes we get inhibited by our own fears.” Ultimately, vision loss has given him the ability to offer something special as an advisor, “with my eyes closed,” as he puts it. Hardship and challenges can have a way of burnishing empathy and the ability to form bonds with deep caring and compassion. For some, like Chin, a life changing event can also develop a need to turn the impossible into possible. “I tell people this all the time,” says Chin. “We all face hurdles in life. It’s how we adjust our stride to clear those hurdles that defines us.” KIRA VERMOND is a writer and editor based in Guelph, Ont.

MAKE YOUR COMMUNICATIONS ACCESSIBLE

ccessible written material gives every advisor the ability to do their job, serve clients, and have an impact on the industry. Wondering how to make your own firm’s communication and information usable by everyone? Here are some tips from the Accessibility for Ontarians with Disabilities Act (AODA). To start, make a list of all the documents that reach advisors and staff each

day. Accessible information can include: • Company newsletters • Health and safety information • Announcements of policy updates • Memos or word-of-mouth details about workplace social activities • Presentations or videos • Handouts or discussions at meetings

• Manuals, compliance materials, or guidelines Consult with workers to learn what formats or supports are most helpful. Don’t forget to find out if any grants are available to help the workplace purchase hardware, software, or services to get the job done. Provincial organizations and government legislation, such as the AODA, offer examples, as well as useful advice, about how to present printed, written, or visual material so everyone can access it. — K.V.

DECEMBER 2021 FORUM 13

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INSURANCE

What Insurance Should I Get? Term or whole life or UL? What you advise a young family depends on their specific needs, says Richard Parkinson

16 FORUM DECEMBER 2021

have decreasing term plans designed for mortgages, however most clients in their 30s don’t see the minimal savings vs. level as worth it. On the other hand, clients in their 60s will see a significant savings using decreasing term, especially if the coverage is to protect a mortgage. • Disability insurance for one or both adults, with the amount of coverage influenced by whether they have a group plan from their employer. “Benefits Integration,” my May 2020 FORUM article, can provide some insight when they have a group plan. If they have a decent group plan, it may be sufficient for the short term, realizing the risk of the plan only paying for two years is high. • Critical illness insurance for both adults, given that when one spouse has a critical illness it can have a devastating impact on the other spouse. When my wife was diagnosed with stage 4 cancer and needed to use a wheelchair, I appreciated how much time and energy she contributed to the family unit, which thankfully was just the two of us. If we had two young children, my life would have been a lot more difficult, and there would have been a severe impact to my work productivity and income. • Life and critical illness insurance for the children, which can take the form of an inexpensive child rider on the adult’s policy. I like 20-pay whole plans for young children, and many parents have the luxury of grandparents who will pick up the tab for the 20-pay plans. I bought 20-pay plans for my two grandsons when they were infants; they are now age 16. My daughters have mentioned more than once how they appreciated knowing that their children

PHOTO: ISTOCKPHOTO

have been asked to address a common question presented to all life insurance advisors, “Should I recommend term or permanent to a family age 40 or less with young children?” A good place to start is to ensure you complete a needs analysis for the family, which will hopefully identify all of the important elements for a plan. The needs analysis I use addresses three basic needs for every person or family. These include: • Elimination of all debts (mortgage, car loans, lines of credit, etc.) • Providing income replacement when a surviving significant other would suffer financially should they lose the deceased’s income contribution to the family. This can include university or trade school education costs for the children, care for a child with disabilities, etc. • Final expenses to cover burial expenses, legal, accounting fees, probate fees, final tax returns, etc. While there are exceptions, I rarely come across a couple with young children who have a budget sufficient enough to take care of those needs. What is the ideal insurance plan? Let’s assume it is a couple in their early 30s with two children ages five and three, all healthy and non-smokers. They should have: • Life insurance for the adults, with the amount of coverage determined by the needs analysis, which could be a different amount for one spouse versus the other. In terms of duration, given the age of the children, 20 years would be a reasonable duration for the initial coverage need, as I often find that new demands offset loan decreases. I know at least four companies that

Determine total cost for a combination of life, disability, and critical illness insurance Comparison of monthly term 10, 15, 20, 100, & 20 pay, plus DI & CI rates for: Valued client Input data:

Valued client

Date of birth:

June 15, 1989

Actual age:

Nearest age:

Days before age change:

Smoking status:

Combination of coverages Life insurance

(For rating purposes) most insurance companies base the premium on your nearest age.

Permanent 20 pay GWL

Permanent coverage amount:

Term duration 100 or 20 pay:

100

$0.00

$47.21

$524.56

$67.84

$753.78

$160.28

$1,780.89

Disability insurance

$2,000.00

Critical illness

$75,000.00

Critical illness 20, 75, or 100?

Term 20 monthly

Term 25 monthly

Term 30 monthly

Term to 100/MFUL

$50,000

$10.22

$12.38

$9.82

$12.96

$11.16

$34.38

$64.31

$100,000

$10.23

$12.06

$11.97

$14.58

$15.03

$62.73

$109.26

$200,000

$14.40

$16.83

$17.10

$21.42

$24.66

$121.32

$214.02

Total monthly for selected coverages

$250,000

$14.40

$18.23

$19.13

$25.20

$28.58

$135.71

$251.78

ROP = Return of premium

$300,000

$16.38

$20.52

$22.05

$28.89

$33.21

$161.25

$301.23

$400,000

$20.34

$25.11

$27.72

$36.27

$42.48

$212.33

$241.02

$500,000

$22.50

$27.90

$31.50

$41.85

$49.95

$255.92

$483.75

$750,000

$31.95

$39.15

$45.23

$60.08

$72.23

$379.88

$723.38

$1,000,000

$38.07

$47.97

$55.80

$75.60

$92.70

$503.40

$954.90

Critical illness Term 20

$502.56

Term duration (10, 15, or 20):

Term 15 monthly

Disability 90 day elimination to age 65, no optional riders – Manulife Venture

$45.23

$750,000

Term 10 monthly

GWL = Guaranteed Whole Life

Annual

Term coverage amount:

Coverage amount

MFUL = Minimum Funded Universal Life

Monthly

To the left are rates for life insurance, disability insurance, and critical illness insurance for amounts we discussed. To determine the total monthly cost of all three of these coverages in any combination, enter the desired values into the yellow shaded cells, based on the coverage amounts specified to the left, and for life insurance the term, i.e., 10, 15, 20, or 100 or 20 pay. For critical illness either term 20 term to age 75, or term to age 100. For disability, just the benefit amount.

Term to 75

Term to 100 Monthly premium

Monthly benefit

Monthly premium

$1,000

$25.86

$25,000

$11.27

$22.61

$26.46

$1,500

$36.54

$50,000

$22.55

$45.23

$52.92

$2,000

$47.21

$75,000

$33.82

$67.84

$79.38

$2,500

$57.89

$100,000

$35.64

$77.76

$91.44

$3,000

$68.57

$125,000

$44.55

$97.20

$114.30

$3,500

$79.25

$150,000

$53.46

$116.64

$137.16

$4,000

$89.93

$175,000

$62.37

$136.08

$160.02

$200,000

$71.28

$155.52

$182.88

Rates based on category 3A for office-type worker.

Lump sum payment

Canada Life - Life Advance - no options

have this lifetime coverage. A tip to keep in mind: I suggest to clients when the grandparent is the payor, that the grandparent be the owner, and name their child as a contingent owner. When the child is an adult, I suggest the grandparent retain ownership until the child has proven themselves to be responsible. I have had a few parents who have called me to switch ownership of a policy with cash values to the child. I recommend against it, as based on the three times this happened to me, the child will likely call me within a week to surrender the policy for the cash value. I advise the parent/grandparent that once they are no longer the owner, I cannot advise them that is happening or has happened. The main problem with this ideal solution is that most families do not have the budget to pay for all of the coverages ideally required, so invariably they will compromise on the number of coverages chosen, the coverage amount, or the duration. As part of my service, I provide my clients a spreadsheet that shows the rates for all of the relevant coverage amounts and durations for

all three coverages — i.e., life, critical illness, and disability — allowing them to try different combinations of coverages with the hope of finding a plan that best meets their needs, priorities, and their budget. Here is a sample of a rate table above, then the cost matrix where the client can choose any values in the table. By trying different values in the combination of coverage cells, the client can see the impact of adding coverage, changing coverage amounts, or choosing different durations. Note that most companies charge 18+% for paying monthly over annually, and when clients are apprised of this most choose annual payments if they have the cash flow. Now, most conversations with clients start with life insurance. The often-asked and most controversial question is, “Should the client purchase term insurance or permanent, and if permanent, should they choose whole life or universal life?” Term insurance has the advantage of providing the most coverage for the least cost compared to the permanent solutions. For DECEMBER 2021 FORUM 17

INSURANCE example, as per the table, the cost of a term 20 is $31.50 a month, versus $255.92 a month for the lowest-cost term-100 plan. At renewal time, the guaranteed cost is more than most people are prepared to pay, hence why it is important for the client to understand this, and choose the longest duration they are comfortable with. Permanent insurance comes in a few flavours: 1. Term 100/minimum funded universal life (UL) – This is characterized by paying for a lifetime or age 100, whatever comes first, and no cash value; plus, the monthly or annual premium never changes for the life of the policy. 2. Universal life (UL) overfunded – Given we have had the TaxFree Savings Account (TFSA) since 2009, typically, unless one has already maximized their RRSP and TFSA contributions and is looking for additional tax sheltering options, overfunding UL is not as common these days, unless RRSP and TFSA deposits are already maximized. 3. Whole life – non-participating – These plans are called nonparticipating because they do not participate on the par fund for whole life, for those insurance companies who offer whole life. Non-par whole is characterized by having a level premium for life, or in many cases, the payment period can be reduced to 20, 15, or 10 years, company dependent. Also, the death benefit is level as it never increases (with a couple of exceptions). The cash value is generally not available for a loan, with exceptions, and typically is not added to the death benefit on death. In other words, the cash value on death is lost, so with this type of policy, you either buy it for the death benefit, or the cash value if you plan to surrender the policy in the future, so it is either/or death benefit or cash value. After 17 to 20 years, some or all of the cash value could be taxable. 4. Whole life – participating – These plans are considered the best option for whole life, as there are quite a few options for the distribution of a dividend. Over time, the death benefit typically increases, and the cash value can be borrowed from or used as collateral at a bank for a loan. Larger policies with cash value in excess of $100,000 in your late 60s can be used for a collateralized loan, providing tax-free income in retirement. Most par policies have two configuration options, wealth or estate, with wealth focusing on maximizing cash value in the first 20 years, while estate focuses on the long-term death benefit.

The greatest hurdle with permanent insurance is its significantly higher cost compared to term for the same coverage amount. Then consider that while the need for the next 20 to 30 years might be $500,000 to $1 million or more, most don’t need that amount for their lifetime/final expenses need. So, for our young couple with two children, term insurance makes the most sense to me, given that few family clients have so much cash flow that they can consider permanent instead of term. Consider our 32-year-old male client who wants $500,000 for the next 20 years, but also would like $100,000 for lifetime coverage. Just $500,000 of term 20 will cost $31.50 a month, while $100,000 of term 100 plus $400,000 of term 20 is $91.45 a month ($63.73 + $27.72). So perhaps affordable, but term 100 may not be the most desirable permanent coverage compared to a 20-pay participating whole life plan. A feature of virtually all term plans is the ability to convert some or all of the term to a permanent plan without having to provide medical evidence in the future, so if money is tight initially, they can always consider converting some of their term to permanent in later years. Depending on their initial age at start, the penalty of waiting is not that great when they are young, certainly in the first five years for this hypothetical client. The table below shows the monthly premiums for this client as they age, so it’s worthwhile informing them of this so that they understand the implications of waiting to convert, and perhaps the best time to do so. Also be aware that companies have different rules for term conversions when you convert less than the full term amount. What happens to the remaining term? • you may lose the term (not common); • the remaining term continues until it renews or expires; and • the remaining term is rewritten for the same term coverage amount and duration at attained age, without medical evidence. Minimum coverage, how much of the term you can convert, and age restrictions apply, so it’s important to understand the rules for the insurance company you choose. Ultimately, I hope I have made the case that for the average couple aged 25–34 with children and an average annual family income of $87,380, term insurance just makes more sense. A better time to consider permanent coverage is when their income is higher so they can afford it. RICHARD PARKINSON, CPCA, is an independent insurance broker based in Vancouver. Have a different viewpoint on this? Email dgageforum@gmail.com.

Term 100/minimum funded UL

Term 100/min. funded UL – $100,000 $300

$100,000

$500,000

$62.73

$255.92

$77.00

$322.58

$93.75

$407.32

$114.83

$512.76

$142.00

$636.30

$178.26

$838.86

$230.60

$1,103.32

Age

18 FORUM DECEMBER 2021

$200

$100

AGE

As a brighter future comes into view, Advocis salutes the financial advisors across Canada who led the way. While 2021 presented a continuation of the challenges we faced in 2020, it also brought with it a remarkable amount of hope: the emergence of effective vaccinations against COVID-19, the reopening of businesses in our communities, and the start of a transition back to the company of friends, families and colleagues alike – a new beginning that we believe has only just begun. On behalf of your professional association, thank you for your extraordinary commitment in 2021.

advocis.ca

SYMPOSIUM

Clients First

weeping regulation under client-focused reforms (CFRs) is coming to a dealer near you very soon following a long consultation period that now has many people on the same page, said speakers at the Advocis Symposium 2021. The CFRs are designed to put clients’ interests first and include enhanced suitability standards that advisors with high principles are already using, said Grant Vingoe, chair and chief executive officer and commissioner at the Ontario Securities Commission (OSC). “It’s a wonderful development for advisors who actually have the opportunity … to further professionalize and augment the financial planning services that are provided to their clients to pro20 FORUM DECEMBER 2021

duce the satisfaction of helping Canadians achieve their objectives … with any conflicts of interest mitigated,” he told virtual delegates. The Canadian Securities Administrators (CSA) published the client-focused reforms in October 2019. The CSA, the Investment Industry Regulatory Organization of Canada, and the Mutual Fund Dealers Association put together an implementation committee to delve into any challenges members of the industry had and how to respond to them. Reforms to enhance the client-registrant relationship will come into effect at the end of this year with the goal of assuring clients that the investments recommended to them coincide with their risk profile and investment objectives. These include know your client, know your product, suitability, and other reforms.

PHOTO: ISTOCKPHOTO

New reforms to enhance the advisor-client relationship are finally coming. Susan Yellin reports from the virtual Advocis Symposium 2021

Kelly Gustafson

Susan Silma

Kelley Oke

Karen Cutler

Conflict of interest requirements came into effect on June 30, 2021. When the news first broke about the CFRs, a number of the big banks stopped selling third-party funds, using only their own proprietary products, a situation Vingoe said was a conflict of interest. The OSC said the goal of the CFRs was to give investors access to products that best served their needs, not to have firms drop third-party funds in favour of their own products. “There’s a vast difference between a small firm engaged in that activity or a small advisor having a relatively limited shelf because of resource limitations and doing comparisons,” Vingoe told the Symposium. “It’s another thing for the principal distribution channels in this country to be eliminating choice from their offerings in at least one channel. We are equally worried that that phenomenon can spread.” The percentage of proprietary sales from the banks is high and has grown over the years, said Vingoe, noting that more independent fund companies need to be represented on the shelves. “There’s a will that if we don’t see positive change in this area, we will have to use other tools to bring it about.” Vingoe said the OSC is watching carefully to ensure the CSA’s goals are attained. But Clay Gillespie, managing director of inde-

pendent firm RGF Integrated Wealth Management in Vancouver, said that while the rules make sense, recording all the necessary data and technology costs is a concern to smaller firms. He said RGF does not want to restrict product shelves for advisors, adding that all in all, the CFRs are a good change for the industry. Another step in the right direction for the industry is protecting vulnerable investors, making sure that advisors aren’t picking products haphazardly but are instead creating appropriate financial planning strategies for older clients, said Gillespie. Regulators have told advisors to ensure that a vulnerable client has a trusted contact with whom they can discuss products and issues relating to the client. Currently, holds can be deemed appropriate, while some have called for a safe harbour that would protect advisors from regulatory and legal action when acting in good faith. An important step forward, said Vingoe, is that regulators are ensuring that privacy laws are co-ordinated with protections given to firms when holds are put into effect. “It’s a work in progress from our standpoint,” he said. Ken Kivenko from Kenmar Associates, an Ontario-based organization focused on investor education, said protecting vulnerable

“I feel we have a very exciting opportunity to leverage technology to drive efficiencies and an improved client and advisor journey.”

DECEMBER 2021 FORUM 21

SYMPOSIUM

Greg Pollock

Grant Vingoe

Ken Kivenko

Clay Gillespie

clients is an important step forward and will require training to help advisors determine whether a person has diminished capacity and if they can handle different kinds of risk. Kivenko said his group sees risk as including three different characteristics: risk tolerance, risk capacity, and risk need. Risk is critical because if a client has money, he or she won’t necessarily

“There’s a vast difference between a small firm engaged in that activity or a small advisor having a relatively limited shelf because of resource limitations and doing comparisons. It’s another thing for the principal distribution channels in this country to be eliminating choice from their offerings in at least one channel. We are equally worried that that phenomenon can spread.” 22 FORUM DECEMBER 2021

have to invest in risky products — or even invest at all — as they get older. However, on the other side, clients may have totally unrealistic views on how much money they should be saving, particularly for retirement. “This will require real professional counselling,” he said. As Canadians age and retire, some are taking risks even if they don’t need the money, said Gillespie. He suggested advisors create appropriate modelling to ensure clients know how much money they can spend when in retirement. He said in his firm, some clients in their mid-to-late 70s are advised to buy life annuities to provide or supplement their retirement income so they don’t have to worry about taking any risks at all. The best advisors are building a holistic way to have difficult conversations with clients about risk and whether they should defer their retirement or cut expenses if they feel they are running out of funds. Clients have to be able to sleep at night, said Vingoe, so advisors have to resist the tendency to introduce more risk into the client’s account. There are times when clients have outside holdings unknown to their advisor but are tight-lipped about such situations. In that case, he said, advisors have to decide whether that’s the kind of service they want to provide. Vingoe said the OSC is keeping a close eye on ensuring that clients achieve their objectives. Many advisors, he said, are already using these high CFR standards. But Gillespie noted that most clients have no clue as to how

much they are paying for the total cost “So, when do we say when and when do of a financial product, they only know we go [with a tool] or do you wait for what the advisor gets paid. Competition, the next big thing?” he said, is the best way to reduce those Silma said Sun Life’s focus lately has been to make the tools scalable and be costs, rather than relying on the advisor able to connect them together, making to produce the information. Vingoe noted it easier for both clients and advisors. that the OSC has a study under way on The best bet is to get all individual total costs. tools to fit together, agreed Oke. Canada Most advisors are also taking advanLife has made “significant” investments tage of one of the greatest spurts in techin how it enables advisors and clients to nology, another step to serving clients better. In fact, a number of speakers at use tools digitally. Last year, the insurer the Symposium credited the pandemic launched Advisor Workspace, which with taking the insurance industry forgives advisors a 360-degree look at their books of business and is continuing to ward in a pace of change they called invest in this tool. It’s also working on a intense. new goals-based planning tool for clients “I feel we have a very exciting opporwho want more personalization. “We tunity to leverage technology to drive think this tool will be foundational to efficiencies and an improved client and maintaining a distinct value proposition,” she said. advisor journey, and at the same time, to make the role of advice Other insurers have also been encouraged to create their own and the advisor even more clear and relevant,” said Susan Silma, head of risk and regulatory business practices at Sun Life. tools. Manulife has Advisor Portal for advisors to access and manSilma emphasized the goal is not to replace advisors, but to allow age their business information. Sun Life has introduced “Ella,” a them to focus more accurately on the needs of their clients. digital coach to nudge clients and give them tips on ways to meet Consumers have been exposed to fast and easy technology outtheir health, wealth, and protection needs as well as make the most side the insurance industry and now want the same in insurance of their benefits and savings. as members of the industry create new tools and commit themselves to ongoing upgrades. SUSAN YELLIN is a writer who specializes in financial services issues. “The launching of a new tool is never one and done in today’s world,” said Kelley Oke, vice-president of digital product strategy at Canada Life. Oke said insurers like Canada Life are having ongoing talks with clients and advisors insurancecouncilofbc.com so they can help play a role in shaping business tools. She said a challenge for many comThe Insurance Council of BC is panies is how to deal with multiple legacy pleased to announce the election systems that came about as the result of consolidation in the industry in the of its chair for 2021–2022, 1990s and early 2000s, a situation that Mr. Karl Krokosinski. also increased costs and caused complexities. Mr. Krokosinski is CEO of Not only has the industry itself Customplan Financial Advisors Inc. ramped up its technology and tools, With over 47 years’ experience in the foregoing wet signatures with electronic financial services industry, he is a member of the Financial Advisors signing, but so have many companies Association of Canada, GAMA International and the Canadian outside insurance, providing needed competition. For example, DocuSign Association of Independent Life Brokerage Agencies. offers eSignature, while Adobe Sign is a Mr. Krokosinski is a member of the Million Dollar Round Table for over cloud-based e-signature service that lets the user send, sign, track, and manage 35 years, 24 of which were Top of the Table. His past experience also signature processes. include President and Chairman of the PCA Savings Credit Union and And just when you think you have sessional instructor at Mount Royal College (now University). gone as far as you can with a new tool, there’s some other company that develThe Insurance Council of BC regulates the licensing and professional conduct of ops a product that is even better, said 45,000 insurance agents, salespersons and adjusters doing business in BC. Karen Cutler, head of underwriting and claims and chief underwriter at Manulife.

The best advisors are building a holistic way to have difficult conversations with clients about risk and whether they should defer their retirement or cut expenses if they feel they are running out of funds.

DECEMBER 2021 FORUM 23

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Three Myths of Digital Assets Planning Sharon Hartung, TEP, explains how digital assets will change the face of estate planning

24 FORUM DECEMBER 2021

PHOTOS: ISTOCKPHOTO

lanning for digital assets is not a new topic. Estate planners have been discussing this topic for the past 10 years, and yet during this time of rapid global technology adoption, the topic of digital assets remains one of the least understood aspects of estate planning and estate administration. From a technology management perspective, I’ve seen no less than three myths circulating on how to handle this new asset class in estate planning. There is the misunderstanding that all digital assets are the same, password managers and hard-copy password lists are the answer, and that the appointment of a digital asset fiduciary solves the problem.

MYTH #1:

ALL DIGITAL ASSETS ARE THE SAME.

n 2017, the value of bitcoin rose, increasing public awareness of unregulated cryptocurrencies and leading to revisiting the conversation on the financial implications of owning cryptoassets. Are these digital assets handled the same way as an email account? Would you handle a client’s fine art collection the same way as their real-estate holdings? While the volume of digital assets in estate administration grows, until corporate fiduciaries and trust companies start raising alarm bells, unfortunately, we may continue to see these myths perpetuate. Digital assets have been described as unique assets and have been grouped in the same asset class along with art collections, rare sculptures, or other historically significant artifacts. The definition of a digital asset I shared earlier, as simply an electronic record, can make it seem innocuous and uniform. Compare digital assets with physical objects that are mostly made up of water: each physical object is so characteristically different that we may not even know it contains water. Digital assets are likewise vastly different. Digital assets may have financial or sentimental value. This definition is a useful conversation starter with clients because it draws in all the other more familiar process steps in estate planning. Consider listing digital assets along with other assets and client wishes, providing equal weight and importance. The conversation should also consider any tax liabilities associated with these assets. Digital assets are not all the same and estate advisors should treat each one as having unique value to that particular client. Some digital assets, such as online access to financial institutions, are governed by rules set by the financial institution. So much so that fiduciaries should not be accessing these digital assets and should be dealing directly with the institution to establish their own access, if required, supported by the legal documentation the individual holds. Even within types of digital assets, such as email or loyalty points, what is allowed upon death will differ within each provider’s terms of service. To address the myth that all digital assets are the same, I recommend estate advisors ask their clients to identify their top three digital assets. Then I suggest asking the individual how devastated they would be if the assets were not transferred. Those assets could be email correspondence, loyalty points, their wishes for online memorialization, or the handling of unregulated cryptocurrencies. Review the distinguishing features of each asset, considering the terms of service or technical management characteristics of each. Most importantly, develop an estate plan addressing the unique aspects of each digital asset, so they can be effectively managed upon incapacity and transferred upon death. A client’s email account is as significant in estate administration as it is in today’s home office. Clients should be urged to create an estate inventory or list of all their significant assets — physical and digital — as a fiduciary can no longer rely on a paper trail. It’s unwise to rely solely on the fiduciary’s ability to gain access to a client’s email account, because there is a high degree of risk the fiduciary will be unable to do so.

MYTH #2:

PASSWORD MANAGERS AND HARD-COPY LISTS ARE THE ANSWER.

haring passwords might seem like a convenient answer to the problem of transferring digital assets, but it is a superficial solution for a variety of legal, technical, and practical reasons. The biggest barrier is the terms of service (TOS) imposed by service providers, which may prevent the account owner from sharing the password(s). A fiduciary could be exposed to legal liability by attempting to access an account after death, even if the individual they are acting on behalf of has given them their passwords. From a technical perspective, all the barriers imposed to protect users from cybercrime will be the same barriers the fiduciary is confronted with. It may not be technically possible to use someone’s password even if you were allowed to do so legally. Passwords change over time, passwords get written down incorrectly, and users are often required to perform a two-step verification through text message. What if the cell phone was cut off because the credit card was frozen, and there was no longer a secondary method available? Relying on passwords to transfer valuable digital assets is ineffective and precarious. Password managers are for the living. With the proliferating number of online accounts the average person has, password managers can be useful for storing unique and complex passwords as we strive for cybersecurity; however, other pre-planning options are required for the estate planning of digital assets. According to the study Beyond the Clouds from the Cloud Legal Project at Queen Mary University of London, more than DECEMBER 2021 FORUM 25

85% of cloud providers do not have terms that address incapacity and/or death of the account owners. This means your fiduciary might get frustrated dealing with customer support trying to get access to your account, even with the correct documentation. There are certainly emerging tech entrepreneurs offering digital vaults to manage our tech, as well as solutions to document directives on dealing with providers. There is really no such thing as joint ownership of an online account, but maybe there should be. It is unlikely that a variety of options will appear in the near term, as it will take time for consumers to become aware of the issue and demand more choice from providers. For now, all we can do is encourage clients to use the pre-planning options that are available and seek legal advice. For significant digital assets, encourage clients to explore using business accounts instead of personal accounts, as business accounts often provide multiple-user access.

MYTH #3:

APPOINTING A DIGITAL EXECUTOR SOLVES THE PROBLEM.

ing on the asset, such as an art appraiser for art, or a real estate agent for property, in the digital age, the fiduciary may need specialized advice in dealing with the client’s digital life. Providing the fiduciary with powers in a client’s will and other estate planning instruments to deal with their digital assets and digital estate is a good starting point. Identifying additional guidance or technical support that the fiduciary may need is another worthy measure. Consider these findings from the Cloud Legal Project survey on TOS contracts: • Users are generally not permitted to assign their rights under cloud contracts. • The TOS of most cloud services do not address what happens when a user dies. • The TOS of all cloud services surveyed prohibited user password sharing. • The TOS of around one-third of cloud service providers surveyed stipulated that user accounts would be terminated upon inactivity. • Cloud providers can typically change their TOS after notifying users of any material changes, either by email or through the service. Given how dependent we are on technology, and the power of the digital custodians, I expect once consumers have heightened awareness, they will demand better options for estate planning from service providers. The unfortunate reality is that digital assets are difficult to access after death. This notion of a digital estate has emerged only in the past 30 years as a result of our reliance on the Internet. It’s critical we raise our clients’ awareness of their digital assets and the impact they have on their estate plans.

igital executor is a made-up term. It sounds convenient, but this myth is likely based on an oversimplification of the digital asset class conversation and a lack of recognizing how intertwined our digital lives are with our physical lives. Unfortunately, there are a myriad of other titles emerging to describe this person who is separate from the fiduciary. When your client has a subscription to an online newspaper, magazine, or streaming service and engages with that platform through their browser, who is supposed to deal with this digital asset — the executor or the digital executor? Now consider the flipside. Suppose your client has an unregulated cryptocurrency and specialized technical help may be required to deal with this asset. But what about the taxes? Does the digital executor or the fiduciary deal with the tax liability? From a project management perspective, what is happening is that today’s fiduciary has to deal with not only traditional estate matters, but also the deceased’s digital estate. Additionally, there are jurisdiction-specific laws that govern what a fiduciary, or anyone for that matter, can and can’t do in handling a client’s digital life, digital assets, and online accounts. Sharon Hartung, TEP Just as fiduciaries engage specialists depend26 FORUM DECEMBER 2021

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TAX UPFRONT

BY JAMIE GOLOMBEK

Last Call It’s time for year-end tax planning

s year-end approaches, now is the perfect time to reach out to your clients and suggest that they may want to take advantage of some common, and perhaps lesserknown, tax planning opportunities that may be available before December 31.

INVESTORS While 2021 has been a great year for most markets, your client may be holding the odd stock that may be down in value. Tax-loss selling involves selling investments with accrued losses to offset capital gains realized elsewhere in the portfolio. For 2021, the trade date must be no later than December 29 to complete settlement by December 31. If your client purchased securities in a foreign currency, the gain or loss may be larger or smaller than anticipated once the foreign exchange component is taken into account. Of course, we need to be mindful of the “superficial loss” rules if the client plans to repurchase a security sold at a loss. The superficial loss rules apply if property is repurchased within 30 days and is still held on the 30th day by the individual or an “affiliated person,” which includes a spouse, partner, controlled corporation, and even a Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund, and Tax-Free Savings Account (TFSA). If the superficial loss rule applies, the capital loss will be added to the adjusted cost base of the repurchased security and any benefit of the capital loss can only be obtained when the repurchased security is ultimately sold.

FAMILIES WITH STUDENTS One of the benefits of setting up a Registered Education Savings Plan (RESP) is the ability to collect Canada Education Savings Grants (CESGs) equal to 20% of the first $2,500 of annual contributions per child or $500 annually, with a $7,200 lifetime limit. If your client’s (grand)child 28 FORUM DECEMBER 2021

turned 15 this year and has never been a beneficiary of an RESP, no CESG can be obtained in future years unless at least $2,000 is contributed to an RESP by the end of the year. You may wish to remind your clients of the importance of making a contribution by December 31. When it comes to RESP withdrawals, if an RESP beneficiary attended post-secondary school in 2021, you may wish to consider having Educational Assistance Payments (EAPs) made from the RESPs before the end of the year to take advantage of the student’s basic personal amount and tuition credits. Note, however, that if the student finished school in 2021, EAPs can only be paid out for up to six months after the student has left the school.

CHARITABLE GIVING For donations up to $200 in a year, the federal donation credit is 15% of the donation amount. For total donations exceeding $200 in a year, the federal donation credit jumps to 29% (33% to the extent taxable income exceeds $216,511 in 2021) of the donation amount. Provincial donation credits are also available and the total credit may be up to 54% for total annual donations that exceed the $200 in a calendar year. December 31 is the last day to make a donation for 2021. With soaring stock markets in 2021, gifting publicly-traded securities with accrued capital gains “in-kind” to a registered charity or a foundation (perhaps via a donor advised fund) may be the way to go this year. Doing so not only entitles the donor to a tax receipt for the fair market value of the security being donated, it eliminates capital gains tax, too.

POTENTIAL CHANGES TO TAX RATES Some tax measures were proposed during the 2021 federal election that, if implemented, may increase future taxes. For example, the Liberals’ proposal to tax

residential properties held for less than one year could result in tax payable on a principal residence if a home is sold within the first year. It’s also possible that the NDP might persuade the minority Liberal government to implement some of the NDP election promises, such as increasing the top marginal tax rate by 2% to 35% (from 33%) or increasing the inclusion rate for capital gains to 75% from 50%. Clients who fear an increase in taxes in 2022 may wish to consider realizing income in 2021, where practicable, before any new measures that could increase taxes may come into effect.

INCORPORATED BUSINESS OWNERS Finally, if you have clients that have an operating company or professional corporation with a December 31 year end, consideration should be giving to the optimal compensation mix for 2021. A corporation may distribute its income to the owner/manager (as a shareholder and employee of the corporation) either as salary or dividends. As a general rule of thumb, if the business owner needs funds from the corporation, perhaps to pay personal living expenses, consideration should be given to distributing salary (or bonus) to create RRSP contribution room for next year. Receiving salary of up to $162,278 in 2021 would create RRSP contribution room in 2022 of up to $29,210 (the 2022 maximum). Business owners who do not need funds from the corporation to live on may still wish to withdraw sufficient funds to maximize contributions to RRSPs and TFSAs, which may yield more after-tax investment income than leaving the funds in the corporation for investing. JAMIE GOLOMBEK, CPA, CA, CFP, CLU, TEP, is the managing director, tax & estate planning with CIBC Private Wealth in Toronto. He can be reached at Jamie.Golombek@cibc.com.

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ESTATE DILEMMAS

BY KEVIN WARK

Reasonable Compensation Discussing executor fees with clients drafting estate plans

otivating a client to make a will, or update an existing one, can be a difficult and frustrating exercise. Clients may be reluctant to contemplate their own demise, and the process of making or changing a will can raise a number of thorny issues. For example, who will be the executors/alternate executors of the estate? Who would be a suitable choice as guardians of minor children? Should gifts go into trusts for young adult beneficiaries? But there is one more tricky question your clients should address in drafting their wills. That is, what fees should the executors be entitled to receive for their services? In the absence of having clear directions in the will, the executor will look to provincial guidelines as to what is an acceptable and reasonable fee. For example, in Ontario the general rule of thumb is that executors are entitled to fees based on 2.5% of (capital received + capital disbursed), and 2.5% of (revenue receipts + revenue disbursed). Thus, on a $2-million estate, an executor could charge a capital fee in the range of $100,000. Depending on the circumstances, the executor may also be able to charge an annual fee for managing estate investments. However, before collecting this fee, an executor must “pass their accounts.” This typically involves the executor providing an itemized accounting of all activities and expenses, and obtaining approval for payment by the beneficiaries. If the beneficiaries object to the amount of fees/ expenses they are entitled to go to court and ask that they be reviewed. The court has the ultimate power to approve executor compensation, which, in many cases, will not be determined solely by a strict formula. This process not only causes delays and more legal fees but can also

result in discord between family members. So, it’s in everyone’s best interest for the testator to give careful thought to executor fees and set out guidelines in the will for calculating this fee. The first question to ask is whether it is appropriate for the executor to be paid for administering the estate. One might assume the answer will always be yes, as the role can be both timeconsuming and demanding. But where the executor is the deceased’s spouse, and he or she is receiving all or most of the estate, the payment of fees is somewhat counterproductive, as gifts under the estate are tax free, whereas executor fees are taxable. To ensure that estate distributions are not challenged as executor fees, the will could specify that a spousal executor is not entitled to fees. What if one of the children is acting as co-executor with the spouse? In this case there is a good argument that the child should receive an additional amount from the estate as an executor fee. Once again, establishing guidelines for calculating the amount of the executor fee under the will and/or having family discussions on this issue should reduce the potential of these payments creating dissent with other family members. In other situations, the testator may want to appoint a trusted advisor (a lawyer, accountant, or financial advisor) as an executor or co-executor. An important step is to consult with that advisor to confirm they are able to act (provincial regulation or firm/employment guidelines may prevent such persons from acting as a client’s executor) and are willing to accept this role. Once this is settled, there should be a discussion on their compensation. If the advisor/executor is expected to provide advice to the estate (legal, accounting, tax, investment related) that executor might be

compensated on an hourly basis. The will should also provide clear guidance on whether such fees are in addition to regular executor fees or not. Rather than naming a trusted professional as an executor, the testator can specifically identify one or more advisors in the will and request that they be consulted on behalf of the estate as needed. This is not binding on the executors but would allow them to utilize these trusted professionals for their specific expertise without having to pay additional executor compensation. The testator may also want to appoint a professional trustee to administer the estate or act as co-trustee. Professional trustees are often selected when no other person is available or suitable for managing the estate. In most cases, a professional trustee such as a trust company will not agree to act unless a compensation agreement is signed at the time the will is executed. Ultimately, it may be up to the court to decide the fee to which an executor is entitled. In doing so, it will consider a number of factors, including the size of the estate and type of assets, the complexity of the estate (minor beneficiaries, foreign assets, business assets), the time required to finalize and distribute the estate, the relevant skills and expertise of the executors, and the overall success of the administration. KEVIN WARK, LLB, CLU, TEP, is the managing partner of Integrated Estate Solutions and tax advisor to CALU. He is the author of the bestselling consumer book, The Essential Canadian Guide to Estate Planning (2nd Edition).

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DECEMBER 2021 FORUM 29

THERE’S ONLY

ONE GOLD

GAMA INTERNATIONAL CANADA’S 2021 Management Awards

2021 GAMA INTERNATIONAL CANADA MANAGEMENT AWARDS The 2021 GAMA International Canada Management Awards recognize the highest leadership achievements in Canada’s financial services industry. National Builder Award (NBA) WINNERS

This award recognizes outstanding achievement in agency-building, production and field development. ● NBA Gold Award Winners Adrian K. Fung, CFP, CLU, CH.F.C ● Alain Marleau Alvin Matthew ● Amrita Paul, MBA, CLU, QAFP ● Angela Fu, CLU ● Annadette Clarke-Moore, CHS ● Blanche Tse, CFP, CLU, CHS, EPC Brian R. Kilback, CFP, CLU, CH.F.C ● Camilo Chacon Sandoval, CFP® ● Clarke Duncanson ● Colin James-Anil Whitehead ● Craig A. MacTavish, CHS ● Daniel Chuang ● Darin Calderwood, CFP Darren Rosenberger, CFP ● David Feldberg, CFP, CLU ● Dawn Ewing Dennis Mavrin ● Djebran C. Mehdawi, CLU, CHS ●

Donald Der, CFP, CLU ,CHS, CH.F.C. Earnie B. Gonzalco Esther Po Yin Chu, B.Comm Gemma Mendoza ● Geoffrey Keleher, B.A., CFP Gerard Feliciano Harjott (Jimmy) Nijjar ● Ioannis (John) Panago, CHS, CFP ● James Phillips ● Jamie Benn, CFP, CLU, CHS ● Jamie Gilson, B.A. Jarrett Robertson, CHS ● Jason D. Poulton, CFP Jason McMahon, CFP, CHS ● Jennifer A. Tweddle, CFP, CLU, CHS, TEP ● Jerome Pusung, CLU, CHS ● Jessica Buley Jing Wu ●

John Cleminson ● Jordan Ingraham, CHS ● Joseph Raine ● Joshua Simpson, CFP ● Karl Krokosinski ● Kevin D. Jessup ● Marco Levesque ● Maria Cristina Mendoza, CLU, CHS Mark Dickson ● Mark Foster, CFP, CLU, BA, BBA ● Mark Lewans, CFP, CLU ● Michael Y.C. Liu ● Minetta McDonald, CFP ● Nila Mohibi ● Norberto T. Pepito ● Nubia C. Gomez, CLU, CHS ● Perminder Chohan ● Perry Badham, CLU, CHS, RPR ● Peter Gillespie ●

Rajesh Sharma ● Ray Zadrey ● Sam Luong, CHS, CLU ● Sarah Cumpson Sarah Decker ● Scott A.Grant ● Scott McDonald, CFP ● Scott S. Woodman, CFP, CLU ● Shawn M. Smith ● Sonia Wu, CHS ● Sonny Sangemino, CHS ● Stephane Cyr ● Steven Ollson, CFP, CLU, CHS ● Taha Al-Dabagh, CFP, CLU, CHS, RRC ● Ted D. Girard, CFP, CLU, CHS ● Wayne Kiryk, RHU, EPC Wes J. Scott Xu (Leo) Liu, MBA

NATIONAL MULTI-LINE EXCLUSIVE AGENCY MANAGEMENT AWARD (NMLEA) WINNERS

This award recognizes the growth of a Multi-Line Advisory team with a focus on exceeding various performance levels of the Agency Managers team in the areas of new Life Insurance, new wealth and new Property and Casualty sales. ● NMLEA Gold Award Winners ● NMLEA Bronze Award Winners

Daniel Chuang ● Darin Calderwood, CFP ● Dennis Mavrin ●

Jesse Van Dalfsen ● Joshua Simpson, CFP ● Nubia C. Gomez, CLU, CHS ●

Perminder Chohan ● Rajesh Sharma ● Sonia Wu, CHS ●

Wes J. Scott ●

NATIONAL ACHIEVEMENT AWARD (NAA) WINNERS

This award represents the very pinnacle of management excellence among GAMA International Canada members. ● NAA Gold Award Winners Adam Proudfoot, BBA, CFP, CLU ● Adam Powell, CHS ● Andreas Zacharakis ● Angela Fu, CLU ● Annadette Clarke-Moore, CHS ● Blanche Tse, CFP, CLU, CHS, EPC Brad D. Unraw, CFP, CHS, RIS ● Branden Mosher, CFP ● Brian N. Gebbie, CFP ● Brian R. Kilback, CFP, CLU, CH.F.C ● Colin D. Kirby Craig A. MacTavish, CHS ● Daniel Chuang ● Darin Calderwood, CFP ● Darren Rosenberger, CFP ● David E. McPhee, CHS ● David Feldberg, CFP, CLU ● Dean E. Lariviere, CFP ● Dennis Mavrin ●

Djebran C. Mehdawi, CLU, CHS ● Donald Der, CFP, CLU, CHS, CH.F.C. ● Eddy Tong, CFP, CLU, CHS ● Gemma Mendoza ● Gerard Feliciano ● Greg Taylor, CFP ● Herman Chan, CFP, CHS ● Ioannis (John) Panago, CHS, CFP ● Izuni Miki McGruer, CFP, CLU, CHS, CH.F.C ● James Phillips Jamie Benn, CFP, CLU, CHS ● Jarrett Robertson, CHS ● Jason D. Poulton, CFP ● Jason McMahon, CFP, CHS ● Jayson Mallari, QAFP ● Jerome Pusung, CLU, CHS ● Jing Wu ●

John B. McCallum, CFP, CHS ● John Cleminson ● Joseph Raine Joshua Simpson, CFP ● Karl Krokosinski ● Katina Michelis, CHS ● Keith R. Vincent, CHS ● Kevin D. Jessup ● Kevin Wong, CFP ● Kris B. Kubin, CHS ● Ling Wang Maria Cristina Mendoza, CLU, CHS ● Mark Dickson ● Matthew Lane, CFP ● Michael Y.C. Liu ● Minetta McDonald, CFP ● Nina Lau-Choy, CHS, QAFP ● Norberto T. Pepito ● Nubia C. Gomez, CLU, CHS ●

Perminder Chohan ● Perry Badham, CLU, CHS, RPR ● Peter Gillespie ● Peter H. Royster, CHS Rajesh Sharma Ray Zadrey Sarah Decker ● Scott A.Grant ● Scott McDonald, CFP Scott S. Woodman, CFP, CLU ● Shawn M. Smith ● Sonia Wu, CHS ● Stephane Cyr ● Steven Kennedy, CHS ● Steven Ollson, CFP, CLU, CHS ● Taha Al-Dabagh, CFP, CLU, CHS, RRC ● Ted D. Girard, CFP, CLU, CHS, ● Wes J. Scott ●

NATIONAL MANAGEMENT AWARD (NMA) WINNERS

This award honours achievement in agency management, particularly increases in production. Colin D. Kirby Craig A. MacTavish, CHS Daniel Chuang Darin Calderwood, CFP Darren Rosenberger, CFP David Feldberg, CFP, CLU Djebran C. Mehdawi, CLU, CHS Donald Der, CFP, CLU, CHS, CH.F.C. Gemma Mendoza Gerard Feliciano Greg Taylor, CFP Herman Chan, CFP, CHS Ioannis (John) Panago, CHS, CFP James Phillips Jamie Benn, CFP, CLU, CHS Jarrett Robertson, CHS

Jason D. Poulton, CFP Jason McMahon, CFP, CHS Jayson Mallari, QAFP Jerome Pusung, CLU, CHS Jesse Van Dalfsen Jing Wu John Cleminson Joseph Raine Joshua Simpson, CFP Karl Krokosinski Katina Michelis, CHS Kevin D. Jessup Kevin Wong, CFP Ling Wang Matthew Lane, CFP Meng Zhao, CFA

Michael Y.C. Liu Minetta McDonald, CFP Murray Parks, CFP, CLU, CH.F.C. Nina Lau-Choy, CHS, QAFP Norberto T. Pepito Nubia C. Gomez, CLU, CHS Perminder Chohan Perry Badham, CLU, CHS, RPR Peter Gillespie Rajesh Sharma Ray Zadrey Sarah Decker Scott A.Grant Scott McDonald, CFP Scott S. Woodman, CFP, CLU Shawn M. Smith

Learn more at gamacanada.com

Sonia Wu, CHS Stephane Cyr Steven Kennedy, CHS Steven Ollson, CFP, CLU, CHS Taha Al-Dabagh, CFP, CLU, CHS, RRC Ted D. Girard, CFP, CLU, CHS, Wes J. Scott Zhong Chen, CLU, CHS

CORPORATE INSURANCE

BY GLENN STEPHENS

Collateral Insurance When are life insurance premiums tax deductible?

ife insurance premiums are, for the most part, not deductible for income tax purposes. This is understandable given that insurance proceeds are tax free. One exception to the general rule is where insurance is used as collateral for a loan from a financial institution. In most cases, the insurance is issued on the life of a key shareholder.

BASIC REQUIREMENTS The rules governing collateral insurance may be summarized as follows: The policy must be assigned to a “restricted financial institution” (such as a bank, trust company, or life insurance company) in the course of borrowing from that institution. Interest on the loan must be deductible to the borrower, i.e., the funds must be used for a business or investment purpose. No deduction is available if the insurance secures a loan that is used for personal purposes, such as a home mortgage, or if it secures an unused line of credit. The collateral assignment of the life insurance policy must be required by the lender as a condition of the loan, and should be clearly reflected in the loan documentation. If a purported requirement is in reality a mere accommodation to the borrower by the lender, no deduction is permitted. In order for the deduction to be available, the borrower must also be the owner of the life insurance policy. For example, no deduction is available where a corporate-owned life insurance policy is used to secure a personal loan to the shareholder. If these conditions are not satisfied, no deduction is available.

DEDUCTIBLE AMOUNT Where the above conditions are met, the borrower may deduct the lesser of the premiums payable by the borrower in the year and the net cost of pure insurance (NCPI) under the policy, provided that the 32 FORUM DECEMBER 2021

deductible amount must be adjusted so that it relates to the amount owing from time to time during the year. For example, if the face amount of the policy exceeds the loan amount in the year, the deduction must be prorated accordingly. This provides deductibility for any type of policy (term or permanent) that meets the above requirements. Canada Revenue Agency’s (CRA’s) position is that premiums paid from the internal policy values of participating whole life policies are considered premiums for this purpose, as they are contractually stipulated and thus “payable” in accordance with the legislation. On the other hand, amounts paid from the cash value of universal life policies do not qualify, as such policies do not have a stipulated premium. A policy’s NCPI reflects an annual mortality charge provided in a table prescribed in the Income Tax Regulations. This table was updated for policies issued after 2016 as part of the new exempt test rules introduced at that time. The new table reflects the fact that people are living longer, which means that in most cases the NCPI will be lower for post-2016 policies. The NCPI for any given policy will be available from the insurer.

CAPITAL DIVIDEND ACCOUNT CREDIT Where the borrower/policyholder is a private corporation, the corporation will, in most cases, be named as beneficiary of the policy. On death, the insurer will typically issue a cheque jointly to the beneficiary and the lending institution, at which point the parties are free to determine and divide their respective entitlement to the proceeds. In that case, despite the collateral assignment, the full amount of the proceeds less the adjusted cost basis of the policy will be credited to the corporation’s capital dividend account (CDA). This credit is available even though all or a portion of the proceeds were used to repay out-

standing indebtedness. The legal basis for this is that the proceeds were ‘‘constructively received’’ by the beneficiary, then used to repay the indebtedness.

CREDITOR INSURANCE Banks and other lending institutions typically use creditor insurance as a means of protecting business and other loans. In most cases, the financial institution itself will be named beneficiary of the policy and will apply the proceeds against outstanding debt. At one time, the CRA had taken the position that in these circumstances no CDA credit was available, as the borrowing corporation was not the beneficiary of the policy. However, that position changed after the CRA was unsuccessful in several tax court cases, particularly the 2010 case of The Queen v. Innovative Installations. The Tax Court of Canada ruled that proceeds paid to the lending institution were constructively received by the borrower and therefore eligible for a CDA credit. The Federal Court denied the CRA’s appeal and it appears that the CRA has accepted this result. While the tax treatment of creditor insurance and conventional insurance for corporate borrowers may be aligned as a result of this decision, significant differences exist between the two in terms of policy features. In particular, creditor insurance is typically much less flexible and cost effective than a conventional insurance policy. Compare the two types of coverages before making any decisions. GLENN STEPHENS, LLB, TEP, FEA, is the vice-president, planning services at PPI Advisory and can be reached at gstephens@ppi.ca

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LEADERSHIP & GROWTH

BY ABBIE MACMILLAN

Diverse Nature How to move past DEI talk into action

PHOTO: ISTOCKPHOTO

iversity, equity, and inclusion (DEI) initiatives are on everyone’s agenda these days. As a woman who has spent nearly three decades working in a male-dominated environment, I welcome this focus and acknowledge it’s long overdue for our industry. My personal experience over the years has been both wonderful and challenging. Wonderful because I have had meaningful roles and the opportunity to work with some amazing people. Challenging because over the years I was often an “only” — the only woman in a role, in a room, on a team. Inevitably that would lead to what I now know to call microaggressions — being talked over, being interrupted, sharing an idea to only have it confirmed once a male colleague repeated that same idea. Microaggressions continue to be the experience of not just women but also people of colour, Indigenous peoples, and other underrepresented groups. The point is not to place blame on any one individual or group of individuals but to acknowledge these truths and to find a way to make things better. I am encouraged by the conversations that are now happening in our workplaces. As a leader, I am also aware that it will take our own personal self-reflection, collective engagement, and action! As leaders, it’s important for us to actively engage in supporting DEI as if it were any other business imperative. We all know that diverse workplaces bring a wide range of skills, experiences, and perspectives that can lead to more productivity, creativity and innovation. Inclusivity will help us unlock the potential that diversity presents in our business and our community. The question is, are we actively engaged in the change required to realize the benefits? Start by asking yourself if you believe that it’s important to be inclusive and to support diversity in your workplace, or are you viewing it as a box to tick? Does your diverse workforce represent different races,

Start by asking yourself if you believe that it’s important to be inclusive and to support diversity in your workplace, or are you viewing it as a box to tick? ethnicities, genders, gender identities, sexual orientations, ages, and socioeconomic classes, for instance? Are you listening to these diverse voices on your team and acting on what they say? Have you paid enough attention to the issues that stand in the way of creating a truly inclusive environment? One of the issues that stands in the way is our own unconscious bias. Unconscious bias is often defined as prejudice or unsupported judgments in favour of or against one thing, person, or group as compared to another in a way that is usually considered unfair. Some examples might be that older people are bad at technology or men who take paternity leave aren’t as committed to their careers. The important point is that EVERYONE has unconscious biases based on their background and their lived experiences. Acknowledging that we all have unconscious bias takes away some of the judgment and creates an opportunity for conversation. As leaders who want to

have a positive impact, we need to acknowledge that we have unconscious bias and then become aware of it. How do we do that? In The Inclusion Dividend, authors Mason Donovan and Mark Kaplan devote an entire chapter to unconscious and unintentional bias. Below are a few of the steps they recommend to reduce unconscious bias: • Accept that you carry biases, that you are probably not aware of many of them, and that your good intentions are not enough to make them go away. • Rewire your brain by regularly interacting with people who are different from you, both inside and outside of work. Read the work of authors who are different from you. Do this repeatedly and over time. • Develop peer coaching and feedback relationships that will enable you to get feedback from people who are different from you. Work hard to build sufficient trust that will enable honest feedback. As leaders, it is up to us to prioritize action around DEI as a business imperative. The real risk is that all the talk of DEI is just that — talk. What is the first step you will take toward action? ABBIE MACMILLAN is vice-president, advisor practice development & talent at Canada Life. GAMA International Canada provides professional development and networking opportunities for leaders in the financial services industry. GAMA is launching a new initiative focused on women in leadership. For more information, visit www.gamacanada.com DECEMBER 2021 FORUM 33

AdvocisNews ASSOCIATION UPDATES AND EVENTS

CHAPTER NEWS TOUR DE CURE

embers from all four British Columbia chapters of Advocis came together in August to participate in the Tour de Cure — B.C.’s biggest cycling fundraiser — in support of the BC Cancer Foundation. They had an amazing time, and raised more than $45,000.

VANCOUVER ISLAND – “WORKING WITH INDIGENOUS PEOPLE” EVENT

n the lead-up to the National Day for Truth and Reconciliation, Advocis Vancouver Island hosted a timely webinar on Working with Indigenous People. The virtual event featured a panel discussion among professionals currently working with Indigenous clients. There was also a discussion on acknowledgments and a presentation from Indigenous Advocis member Mike Carlson on his experiences as a financial advisor.

Advocis British Columbia chapter participates in Tour de Cure fundraiser

CHAPTERS CONNECT, GOLF, AND GIVE BACK!

everal chapters in late summer hosted golf tournaments that provided opportunities to bring members together to reconnect in a fun, outdoor activity, while also supporting community organizations. Charities supported on the links included: • Advocis North Central Saskatchewan renewed their relationship with READ Saskatoon in support of the RESP Matched Savings Program. • Advocis South Saskatchewan revived its annual 65 Roses Tournament for Cystic Fibrosis, raising more than $16,000. • Advocis Edmonton partnered with Desjardins to host a golf tournament benefiting SportCentral, which provides equipment for children living in low-income households. • Advocis Peel Halton renewed its support of Community Living Mississauga. 34 FORUM DECEMBER 2021

Mike Reilly

LEGAL AND REGULATORY AFFAIRS UPDATE UPDATE ON THE NEW SELF-REGULATORY ORGANIZATION FRAMEWORK

n October 4, 2021, Advocis submitted our comments to the Canadian Securities Administrators (CSA) on its proposal to establish a single national self-regulatory organization (New SRO). The consolidation of Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association, along with their investor protection funds, can increase efficiency and harmonization within the industry. While this merger can alleviate a number of regulatory issues present in the current framework, it is not without its own challenges. In the proposal, the CSA laid out several solutions to address concerns raised by stakeholders in previous consultations. To name a few, the CSA proposed that the fees in the New SRO be proportionate to the regis-

trant’s activities and that independent members who have expertise in investor protection form a majority on the board of the New SRO. In our submission, we supported the CSA’s efforts on reducing regulatory duplication for dual platform dealers, reducing consumer confusion, and enhancing proficiency standards and clarity to titles and designations. We emphasized that the CSA should promote a diversity of stakeholders in the marketplace and a level playing field for independent advisors and dealers. We also encouraged the CSA to ensure that advisors have meaningful representation in the governance of the New SRO that is reflective of the modern clientcentric approach to financial advice. Worth noting is that the CSA has not reached a decision on the treatment of directed commission arrangements and incorporation under the New SRO. Instead, the CSA will be setting up a working group to study this issue and we expect to be fully engaged in promoting an expansive approach that would bring directed commissions to investment dealer activities. Merging of the SROs is an evolving process, and Advocis, on behalf of its members, will continue engaging with the CSA on this initiative in the coming future.

IN MEMORIAM Cynthia Duncan 1961–2021

dvocis was saddened to learn of the sudden and unexpected passing of Cynthia Duncan, MBA, CFP®, CLU, FCSI, CIWM, TEP, CFP, on October 6. Cynthia joined Advocis in 2001 and remained a proud member of the Winnipeg chapter for 17 years. A winner of the Leslie Dunstall Award in 2006, Cynthia also served as co-chair of the Manitoba Financial Literacy Council and chair of the research committee for the FP Canada Research Foundation. “Cynthia’s contribution to Advocis, leadership in the industry, and passion for financial literacy was admired by all who knew her,” said Greg Pollock, president and CEO of Advocis. “Her untimely passing has come as a shock to all of us, and our thoughts are with her clients, family, and friends.”

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AdvocisNews

IN MEMORIAM Hugh Haney 1934–2021

dvocis sends its condolences to the family, colleagues, and friends of Hugh Haney, who passed away on August 7. Hugh was a pioneer of the independent distribution system in the Canadian life insurance industry, and had a profound effect on the business and the careers of many current-day leaders. He is remembered by the CEOs of two of Canada’s leading MGAs, Terri Botosan, of Hub Financial, and Paul Brown, of IDC WIN. Terri: I was hired at Financial Life in 1986 as a file clerk. On my first day, a friendly gentleman sat down on the corner of my desk, welcomed me to the company, and asked me how things were going. Later that day I pointed him out to my new colleague by saying, “That man is really nice, he checked in on me this morning.” She replied with, “That man is the president of the company.” Over the next 12 years, I held many roles at Financial Life, departing as vice-president, marketing. In every role Hugh taught me to be humble, to compete from our strengths, not our competitors’ weaknesses, to be reliable, to deliver excellence, and, likely the most important of all, that “you get what you inspect, not what you expect.” Paul: I first met Hugh at a Christmas party hosted by a Calgary-based general agent in 1986. I was director of marketing at another smaller life company and Financial Life had just literally photocopied our market leading term rates. Although we joked about it over a cup of Christmas cheer, I didn’t think it was that funny. Over the next few months, I came to realize why we were losing market share. Financial Life was actually issuing policies in a timely manner and getting brokers paid quickly and efficiently. Our underwriting was backed up and our systems were antiquated. Brokers, as always, gravitated to the best in class. We stayed in touch, and in September of 1987 I joined Financial Life as assistant vice-president of sales, with the task of recruiting general agents and supporting that distribution system. The culture of Financial Life was one that I had never really experienced before. Everyone from the C-Suite to the mailroom was focused on the task at hand: deliver consumer-oriented products, issued in a timely manner with a focus on serving independent general agents who in turn served life insurance agents. Terri: Hugh was a pioneer in brokerage distribution, and believed that Canadians deserved to be able to choose from a variety of products and find the one that met their needs,

36 FORUM DECEMBER 2021

regardless of the insurance carrier that offered that product. Hugh believed that companies should earn the right to an agent’s business, and that customer service and ease of doing business were important parts of a solid value proposition. He didn’t just believe that, he delivered it. Paul: “Disruptor” is a topical phrase in our industry today. Hugh was a disruptor long before it was a known concept. He built a business that competed head on with the large mainstream insurers. Hugh ran a great business but I think his legacy was really secured by what Terri referenced, his vision of the industry as whole. He did not expect or even want his distribution partners to give 100% of their business to him. In those days this was not a view held by most insurance companies. He believed that brokerage general agents had to expand their markets and overall offering to earn the business of the emerging crop of independent agents. Terri: Over the course of my career, I have often been asked about the “glass ceiling” and how I broke through. That ceiling didn’t exist at Financial Life. Effort, focus, and results were rewarded, and many of the executive positions were held by women. Hugh created a culture like no other. He embraced diversity, equity, and inclusion long before the industry was talking about it. We worked hard, played hard, and were proud of what we were accomplishing. Paul: I’m not sure there will ever be another “Hugh Haney” in our business. He had a unique ability to operate and motivate without being extroverted or exhibiting an ounce of arrogance. He was focused and confident that by looking after the customer that his business would succeed. As Terri said, he was supportive of women in executive roles long before it was a social issue. He just always did the right thing. Terri: The greatest accomplishment of all is to have lived a life that mattered and to have lived a life that impacted others in a positive way. That can certainly be said about Hugh Haney.

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FINAL WORD

Connecting with the Future BY ROB EBY

s this year wraps up, we undoubtedly will reflect on many things. After beginning the year in our home offices, many of us are now returning to the workplaces we left behind in 2020 with new realities and changes within them. The industry continues to shift as well, with CRM and Know Your Product just around the corner. If anything has been constant, it has been that the pandemic has forced us to be creative about the way we connect with people. Many who adapted and implemented new technologies throughout the past year are now in the early stages of seeing the benefits. Like many of you, I have had to expand my team and my practice while thinking carefully on how to reposition and take advantage of a new normal that is quickly solidifying. Our year began with hiring and training a new associate virtually — without ever being able to meet in person or have them visit our offices — and I realized that we had succeeded in doing something we might have never even considered attempting. At the same time, the technologies that are enabling all of these changes are also providing us with the opportunity to rethink and elevate the narrative of the client planning experience. For starters, our practices have now evolved to use technology on a more dynamic basis. I feel far more engaged and am having more frequent and efficient meetings and conversations with clients. From my experience, clients of all ages have become much more comfortable as meetings move fluidly between being online or in our offices depending on their needs. I now feel I’m able to provide more consistent and repeatable advice within the meeting regardless of where I am, and the technology I use to support them is equally convenient. I haven’t picked up a pen to fill out a form in almost two years, it’s all online! Though the basics of advice have not materially changed, the way in which we engage and deliver that advice to clients has changed rapidly. This is not a one-size-fits-all approach, and not all clients and advisors will be the same in how they adjust their practice. In the fee-based

38 FORUM DECEMBER 2021

world, for example, we are seeing planning offered on a monthly subscription basis that is enabled largely by collaborative online planning technologies. These technologies are allowing us to offer a much more interactive planning experience both online and in person. Clients are now able to experience the process via customized dashboards, modifying and exploring various scenarios for their financial futures on their own time before reconnecting with us again. The advice hasn’t changed, but rather the opportunity of how we can deliver that advice has. This is a tremendous opportunity for advisors. Clients have now had more time to think about their future and re-evaluate what is truly important to them. Clients now realize that they may have had a portfolio, but not a plan. Technology is also giving us greater insight into our practices, as well as quicker processing and turnaround. This has allowed us to have more conversations with clients about their goals and needs, improving our focus on how we can plan for their future. As a tail-end Baby Boomer, I wish I was 10 years younger — the newest generation of advisors increasingly have an unprecedented chance to truly focus on the core value we can offer to clients, which is our professional advice. Finally, are you ready for client-focused reforms? Much of today’s regulation is very focused at a transaction level, but I believe that successful advisors are focused on clients already. Driven by empathy, coaching, and a greater understanding of client needs, successful advisors understand that these are the factors that ultimately produce better outcomes and greater client satisfaction. For advisors who are still coming around on this perspective, the good news is that as an Advocis member you already have the cornerstone of a client-first culture: our motto of Non Solis Nobis — not for ourselves alone. Happy holidays and best wishes for next year. Go forth and inspire client confidence! ROB EBY, RRC, CFP, is chair of Advocis. He can be reached at rob.eby@igpwm.ca.

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FORUM Magazine - December 2021

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