Over the past couple of decades, the service offering for wealth management has evolved considerably.
The average client’s household wealth has increased significantly, as has the complexity of account options, investment choices, taxation factors, and regulation changes. Fortunately, wealth management teams are getting larger and can provide the comprehensive service offering required of higher net worth clients.
A primary role of a Portfolio Manager is portfolio management and the selection of investments that are consistent with your investment objectives, risk tolerance, time horizon, and unique situation. Below we have summarized the different types of accounts and the different categories of investments.
Types of Accounts
It is often confusing for individuals to know what type of accounts are right for them, how they should be funded, when should they be funded, and how to withdraw funds when cash flow is required. Below is a list of the most common types of accounts:
• Non-Registered account (CASH)
• Joint With Right of Survivorship (JTWROS)
• Informal In-Trust-For (ITF)
• Formal Trust Accounts (FTA)
• Corporate Accounts (CORP)
• Partnership Accounts (PART)
• Locked in Registered Retirement Savings Plans (LRSP)
• Registered Education Savings Plan (RESP)
• Life Income Fund (LIF)
• Spousal Registered Retirement Savings Plan (SRRSP)
• Registered Retirement Savings Plans (RRSP)
• Registered Retirement Income Fund (RRIF)
• Tax Free Savings Account (TFSA)
• First Home Savings Account (FHSA)
• Registered Disability Savings Account (RDSA)
• Individual Pension Plans (IPP)
Investment categories
In addition to knowing what type of non-registered and registered accounts to open, there are choices to be made on the underlying investments that are to be purchased within each account. As noted above, determining the appropriate investment for each client must factor in their investment objectives, risk tolerance, and time horizon.
Additionally, we must assess each client’s tax situation, income requirements, liquidity needs and other unique circumstances.
Below are the 10 most common broad categories of investment types:
• Investment Savings Accounts (ISA)
• Guaranteed Investment Certificates (GIC)
• Term Deposits and Notes
• Bonds and Debentures
• Preferred Shares
• Exchange Traded Funds (ETFs)
• Mutual Funds
• Common Shares
• Alternative Investments
• Structured Products
Within each of the above general categories there are hundreds or thousands of individual investment choices. The role of the Portfolio Manager is to assist in the selection of investments and determining the appropriate account type to put each investment in.
Information gathering
Wealth management today also involves the preparation of a comprehensive Total Wealth Plan. We gather additional information from our clients immediately when we begin working together. The preliminary information that we obtain includes the professional checklist, ÎÚÑ»´«Ã½ Revenue Agency’s (CRA) MyAccount, copies of previous financial plans and projections, summary of legal documents, and client discussions.
Professional checklist
On the introductory meeting with new clients, we provide them with a professional checklist to complete. Some of the information we request are the contact details for our clients’ accountant and lawyer, with the consent to reach out to them in the event we have any questions.
Additionally, we ask clients to provide a family tree with basic information on parents, siblings, spouse, previous marriages, and children. Over half the clients we work with have some form of a blended family component.
Non-financial discussions often centre around children from a previous relationship. Specialists have confirmed that an open discussion with all members of the family is an optimal and simple way to resolve any future conflicts and sets realistic expectations to all parties involved.
In addition, most of the households we assist have multiple individuals, some of whom may have been born in other countries; thus, tax treaties, citizenship, and other factors are all components that need to be factored into the discussions.
The benefit for asking new clients to complete the professional checklist is we will obtain a baseline of where they are currently at.
Furthermore, we can have far reaching results by obtaining details of any powers of attorney (banking, financial, or legal), named executor (including alternates), representative for health care directives, insurance agents, and other key individuals in their life. If a client does not have a particular document on the checklist, we can have a discussion whether they should or should not.
Our commitment to the client will always gravitate around transparency and effective solutions, and our practice is cemented on effective communication. Therefore, from our experience, having an enriching first meeting will set the foundations for sound and robust advice for our clients.
ÎÚÑ»´«Ã½ Revenue Agency My Account
Whenever we begin a new client relationship, one of the first steps we take is to obtain online ÎÚÑ»´«Ã½ Revenue Agency (CRA) access to view our clients’ tax information through CRA My Account. There is so much valuable information on My Account that we use to be proactive in our approach to investment and Total Wealth Planning.
Much of the historical information we need regarding our clients’ tax situation and federal programs is available in electronic form. For those clients who don’t already have CRA “My Account” and a “My Service ÎÚÑ»´«Ã½ Account” set up, we encourage them to do so. These services provide some valuable information that is useful for making informed short-term financial decisions and assisting with your long-term Total Wealth Planning.
Steps required to set up CRA My Account for Individuals
The first step to set up your CRA account is to provide your personal information. Once step one is complete, a CRA security code will be sent to you in the mail. When your CRA security code arrives, you will be able to complete the second and final step to finish setting up your online access. To do this, log in to CRA My Account using your CRA user ID and password. You will be prompted to enter your CRA Security Code, at which time you will then gain full access to your account.
Represent a client
One added benefit of a CRA My Account set up is the ability to quickly appoint individual(s) that you wish to have access to your account. This individual or business is referred to as a representative, and they must have a seven-digit code. You can enter the seven-digit code of the representative and then they would immediately have access to your account. If you do not wish to set up a CRA My Account, then a representative may request that you sign a certification form and will require a line amount from one of your previous tax returns.
Access level
Whether you appoint a representative through My Account or by completing the certification form, you will have to determine what level of access to grant the representative. These levels of access are referred to as either Level 1 or Level 2.
Accountants typically request Level 2 authorizations. Level 2 provides your representative the ability to obtain all the information listed in Level 1 (see below). In addition, a Level 2 authorized representative may ask for changes to your account, including: adjustments to income, deductions, non-refundable tax credits, and accounting transfers.
It is important to note that you can have more than one representative. Our clients will typically appoint us as a Level 1 representative and appoint their accountant (if they have one) as a Level 2 representative.
Level 1 Access
As a Portfolio Manager, we do not make adjustments to client accounts. Adjustments are done either by our clients or our clients’ accountant. When we access our clients’ accounts we do so through the “Represent a Client” section of the CRA website. The following is a list of the information we can access with Level 1 Authorization:
• Tax returns and notices of assessment and reassessment
• Tax information slips – T4, T4A, T4A(P), T4A(OAS), T4E, T4RSP, T4RIF, T5007, T3, T5, T5008, etc.
• Registered Retirement Savings Plan (RRSP), Contribution Receipts (historical), Deduction Limit, and Unused Contributions
• Tax-Free Savings Account (TFSA) Contribution Limit and historical transactions
• Instalment notices and balances
• Net-capital and non-capital carryover amounts
• CRA account balance and statement of account
• Proof of income statement
• Benefits and credits overview (including disability)
• Home Buyers’ Plan and Lifelong Learning Plan
• ÎÚÑ»´«Ã½ Child Benefit and related BC programs payments, account balance, and statement of account
Copies of previous plans
Studies have revealed that most individuals do not have a financial plan. When we first begin working with a new client, we ask them if they have ever had a financial plan. In the majority of cases the answer is no.
When the answer is yes, we will ask for a copy of the plan. In some cases, the previous plan cannot be located. The plans that we obtain are typically overly simplistic, out of date, or are not a financial plan at all.
Client discussion
Life events occur and we are always there to help our clients to assist them. Possibly they have gone through a separation/divorce, birth of a new family member, death in the family, buying or selling a business or a home, dealing with inheritances, or changes in residency.
Moreover, helping adult children purchase a home or dealing with larger wealth transitions (i.e., income splitting opportunities within immediate and extended family) are becoming common inquiries these days. Therefore, the more information we have will enable us to holistically map out the best option.
Today, every client wants to lower the level of tax they pay over their lifetime. When corporations, real estate, and other assets are involved, it takes planning and co-ordination with specialists to reduce the amount CRA will receive.
For these and other reasons, we encourage our clients to share all aspects of their financial life. As a result, we have helped numerous individuals and families that have communicated their concerns to us. The more information we have, combined with our depth of knowledge and experience, enables us to proactively provide the best solutions.
Team of specialists
We are regularly having discussions with clients covering their unique situation, regulations/tax complexities, life events, blended family components, helping adult children, types of accounts, selection of investments, etc.
In addition to our immediate team’s experience and depth of knowledge, we ensure that our clients are aware of our team of specialists. This team is comprised of experienced senior representatives of different business lines with specialized knowledge that help our clients even further.
Quite often, we remind our clients that our management fee is all inclusive and that they have full access to speak with our team of specialists to ask questions.
Being able to identify who they should speak with is usually the first stage. We can set up meetings with any specialist on our team either in person, on the phone, or on Microsoft Teams. Having direct access to our team of specialists enables our clients to ask questions directly. In fact, at times these questions are better answered by one of our team of specialists, including:
• Senior Financial & Small Business Advisor
• Senior Private Banker
• Senior Total Wealth Planner
• Business & Wealth Transition Specialist
• Insurance Senior Consultant
• Philanthropic Senior Advisor
• Senior Trust Advisor
• Estate and Trust Consultant
In many mays, the role of a Portfolio Manager is to determine who our clients should meet with after weighing all the discussions and information provided. Often at times this is done in conjunction with completing a Total Wealth Plan.
The Bank of Nova Scotia as a financial services institution encompasses different divisions. Understanding the role of each business line and how it impacts your situation may seem difficult to figure out. As a result, we have met with each of our team of specialists and have written a series of articles explaining each of their roles and divisions. For the next eight weeks we will have an article on a different specialist and how they specifically assist our clients.
Kevin Greenard CPA CA FMA CFP CIM is a Senior Wealth Advisor and Portfolio Manager, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250-389-2138, email [email protected], or visit .
