The temptation to show off their investment prowess at the expense of elderly clients may have just arrived courtesy of changes to RRIF withdrawal requirements.
“I would hope that the advisor’s risk assessment of their client would not change,” says Tim Laceby, a CPA and tax expert with Kreston GTA LLP.
Laceby was responding to the suggestion that advisors could further expose seniors to risk associated with RRIF accounts knowing that the investable assets available to them under the new rules will be available for a longer period of time. The minimum withdrawal rate in 2015 and beyond has been reduced from 7.38 per cent to 5.28 per cent with the 20 per cent cap being extended one year to age 95.
Ottawa estimates a 90-year-old will have 50% more capital as a result of this change ensuring they don’t outlive their money.
Unfortunately, with the future value of RRIF accounts increasing in size due to the deceleration of withdrawal rates, it’s possible that some advisors will be tempted to further emphasize equities and other asset classes at the expense of fixed-income investments, the foundation of many retirement portfolios.
However, CPA Laceby believes advisors won’t do much tinkering when it comes to RRIF clients and their financial planning.
“If the client needed to withdraw the funds to support their lifestyle based on the old withdrawal rate, then not much will change as the client will likely keep taking out the money they need for day-to-day living,” says Laceby.
Whether five per cent or seven per cent, this expert doesn’t see advisors altering their asset allocation decisions, no matter how tempting.