Evelyn Jacks on Taxing Trends: Embracing the Millennial Millionaire

Evelyn Jacks, president of Knowledge Bureau, welcomed close to 200 attendees at the 2015 Distinguished Advisor Conference (DAC) on a high note. Her opening session at the 12th annual conference in beautiful Puerto Vallarta, Mexico, was packed with information and opportunities for advisors to seize, particularly in light of the new Liberal government in Ottawa and the significant tax reforms their rise to power will usher in.

Evelyn identified four major opportunities for advisors in a changing marketplace:

1. Boomers: This aging cohort represents extreme wealth and advisors can play a critical role in helping them pass assets to the next generations through estate and succession planning to secure the future of these families.  However, they must manage risks to their savings due to depopulation, taxes, inflation and fees by monitoring capital encroachment with precision.
2. Millennials: The future is here — a powerful emerging demographic has come of age. Millennials are now the largest cohort in the workplace; they want value-based and goal-based investment advice, but often feel their needs are not being met. This generation stands to inherit enormous wealth and advisors need to adapt to serve these clients effectively.  They want to participate in a values-based and goals-based investment strategy.
3. Tax Reform: The Liberals under Trudeau made a number of promises during the recent election campaign that they hope to make good on soon. There is significant tax reform on the horizon for families, tax increases for high-earning executives and professionals, and for single taxpayers whose income levels, whether at work or at death, exceed $200,000. There is an immediate opportunity for advisors to revisit conversations with these clients.
4. Beyond the Numbers: Striving to be a trusted advisor who functions as part of a collaborative wealth management team will give you the chance to educate your clients about technical changes and evolving trends, advocate for your clients’ needs, and be a steward of their family wealth.  It’s through that three-part role that advisors can enhance their value propositions and beat the threat posed by the Internet and Robo tax and financial advice.

Just a few of the other highlights from Evelyn’s presentation:

• Every Canadian should maximize their Tax Free Savings Account (TFSA) savings opportunities and advisors should be doing everything they can to encourage clients to participate in this tax-exempt investment, even in the face of the impending Liberal roll-back from a $10,000 annual contribution limit to $5,500.

• Canada is a business tax haven — the best in the G7 in fact. The new government has not indicated they will make any changes in this area, so businesses will continue to be attracted to Canada and create jobs. Advisors should see this as an opportunity to help with the business with innovative financing options, as well as financial, retirement and succession planning for the business itself.

• Corporate tax rates are being reduced from 11% to 9% by 2019, but dividends will be taxed at a correspondingly higher rate. The additional 2% tax on dividends will affect retiring business owners and their planning for exiting the business and requires year-end tax planning.

• The aging of our population has a ripple effect on family finances, with 20% of Canadians over 45 years old currently caring for aging family members. That number will only increase in the future.

• The proposed Liberal tax increase on the wealthiest Canadians (over $200,000 in annual income) will affect not only those with the highest salaries, but also seniors across the country. Those who have non-pension sources of income, such as RRIFs, and are the last surviving spouse will be subject to the highest marginal tax rates. Advisors can help them minimize the tax impact by maximizing TFSAs and averaging income in retirement.

The bottom line is that advisors can add real value by taking a long-term, collaborative approach to wealth management with these different types of clients and their families — across generations — to minimize the eroders of wealth and to maximize their wealth potential.

The Distinguished Advisor Conference 2016 will be held November 6-9, 2016 in beautiful San Diego, CA.  The theme is SOAR HIGHER: Plan for Your Greater Potential and registrations and sponsorships for this extraordinary think tank and professional development opportunity are now being accepted at Knowledge Bureau.