With the RRSP deadline approaching, retirement planning is top of mind for Canadians, many of whom invest with the sole purpose of securing a healthy retirement income. For advisors, having the ability to help clients develop robust retirement investment strategies is a fundamental key to success. With a whole host of products and investment vehicles on the market, it’s the advisor’s role to work out the best path for each individual client to take.
“In the modern day, a large income is required in retirement and people of all ages need to get an understanding of what their retirement is going to look like, whether they’re 18 or 45,” says Melanie Johannink, an advisor at Sun Life Financial
. “There is often a natural progression towards RRSPs because they provide that deferred income ready for a client’s retirement, but there are other good options available, too.”
With each client, Johannink examines defined contributions, defined benefits, non-registered investments, TFSAs and individual RRSPs. “For me, it’s a combination of an art and science with clients: it’s not just about RRSPs, you have to look at a retirement plan from a holistic perspective,” she says. “Every client is different and you can’t have a cookie cutter for everyone. If your RRSP buckets are full you might want to use TFSAs for some good sheltering for after tax income. With an RRSP, you have to tell clients to consider why they’re deferring this income for later; is it something that they really need to save for retirement? Everybody is different in that respect.”
A truly holistic approach must encompass a diversified investment strategy that avoids placing a client’s nest egg in one basket. Those clients who aren’t encouraged to explore all of the different avenues needed to create and protect income run the risk of not being able to live the retirement they had in mind.
“Each individual has a different level of risk: the risk is different for a 30 year old than it is for a 60 year old. That older client is getting ready to retire and might have some defined benefit from a previous company, some defined contribution from their existing job and possibly a lot of equity in their house,” Johannink says.
“If a client is 24 and just starting their career they may be prepared to take on a higher level of risk. If they’re only earning around $40,000, an RRSP or a TFSA is a good option. The RRSP has amazing advantages from a savings perspective for younger people because they’re able take advantage of the Home Buyers' Plan
When it comes to managing risk, Johannink believes that getting a good sense of the client’s personality and unique needs is key. “We do a risk questionnaire which helps us match the products to the client, not the other way around,” she says. “You need to get a really good sense of who your client is and what holistic planning is going to be the most suitable for them. “
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