The Greatest Recovery on Earth

Terri Williams

Evelyn Jacks, President and Founder of Knowledge Bureau opened the Virtual Distinguished Advisor Conference this week with a key insight: a global economic crisis and recovery of this magnitude will require a new approach to tax and financial advisory practices. Citing the many threats investors face - and the pandemic is not the only trigger – Evelyn set the stage for the Greatest Recovery on Earth and its implications over the long term for Canadian taxpayers and investors, as well as the many ways advisors can help their clients through the recovery. 

One of the biggest threats to the Great Recovery is “financial euphoria”.  In any bubble, like the one we are experiencing now, people fail to see that something is not quite right.  “They can then suffer the steep, deep and quite devastating consequences of the end of a bubble,” Evelyn said, citing research by Minsky and Galbraith.  She pointed out, however, that household balance sheets have improved over the past 20 months, as people spent less while income was buoyed by government programs. And, even before the pandemic, Canadians were getting debt under control. 

Meanwhile, though federal and economic projections have been optimistic in the short term, the fourth wave of the pandemic will significantly deter the euphoric reopening previously anticipated in federal economic statements and budgets.   Growth projections have actually been cut.  In fact, experts say stabilizing our federal debt is going to take 75 years – or two generations. And, because of the income replacement programs, governments will need to consider tax policies that will drive income and productivity, as emerging demographics pose an even more significant fiscal threat to future stability of government income.

This is a very significant threat.  A large part of labour force is retiring.  Nearly half (46%) of Canadians will be seniors 65+ by 2095 – during the very 75-year period in which Canada hopes to recover financially and pay down federal debt.  Tax hikes on the rich may not have the desired results.  In fact, raising taxes for our high-net-worth citizens could potentially trigger another exodus out of Canada to better taxed regimes.

Financial professionals have an important role in tempering that euphoria and helping their clients navigate through their new realities – including changing taxation and increased audits. 

Many people have taken on new health costs and they need to be educated about the various credits available to help them offset new expenses.

For small businesses, new tax audit scope and depth can be trouble. Advisors can help clients follow good practices that will make any future audits easier.  The burden of proof is on the taxpayer and good record keeping is critical.  As well, advisors should be speaking to their clients about estate planning – and not from their deathbeds. 

Evelyn concluded by saying the greatest recovery on earth boils down to three key areas where advisors can make a difference:

• Client care:wealthy older multigenerational families need collaborative advisors
• Portfolio care:make sure clients don’t hit that euphoria wall
• Practice care: everything is different now; there is no going back.The ability to pivot, adapt, change and win is needed and will continue to dominate the direction practices evolve into.

Evelyn predicted that focusing on these three responses will lead to the “greatest recovery on earth” and today’s leaders in the tax and financial services have shown that they are up to the challenge of moving their firms from fragility to stability.

Join us next year LIVE in Niagara Falls October 16-18 for DAC Acuity 2022 when the educational extravaganza will continue in-person! Take advantage of early-bird tuition rates and reserve your spot!

Want to learn from this year’s thought leadership? The online certificate course from DAC 2021 is available and includes the recorded presentations of this year’s speakers. Enrol in the Integrated Solutions in Practice Management course by October 31 and save $200 on tuition with code: NEWCOURSE.