Help your clients build a sustainable tax strategy

Help your clients build a sustainable tax strategy

Help your clients build a sustainable tax strategy Although 2017’s filing deadline may have passed, advisors should not be pushing tax issues to the back of their minds. Many Canadians have complex tax situations and an advisor who has a proactive approach to clients’ tax affairs will be well-positioned to differentiate themselves from the crowd and start receiving some of those lucrative referrals.

“It’s important for advisors to have access to the answers that are meaningful to the portfolio that’s being managed and relative to the needs of the client who wants to have that tax conversation,” says Chris Poole, an advisor at Sun Life Financial. “As well as that, the advisor needs to have the ability to provide the guidance that will help clients find the solutions that will be of most benefit.”

Poole warns advisors against taking a passive approach to any client’s tax situation. Taking the time to build that relationship and getting to know the client’s family needs and lifestyle is a crucial first step when devising a long-term strategy. “In terms of strategy, using non-registered funds can prove valuable,” Poole says. “Although we pay the tax in the short-term, if we use T class or corporate class solutions, under the current regime it’s going to help to shelter some taxes or at least control the tax burden on the withdrawal. Being able to time when tax is being paid can prove very valuable.”

For clients who own corporations, Poole sees immense value in using permanent life insurance with cash value to start sheltering money, although treading cautiously is advised. “You need to be careful about not letting the cash value grow too high as you could offset the small business deductions,” Poole says. “If you start growing the cash values too much too quickly, there can be some challenges there. It’s always important to work with an accountant or tax attorney when dealing with more complex tax strategies, but otherwise a good advisor should be able to walk the client through the whole scenario.”

Tax rules are changing constantly and Poole is quick to point out that any strategy should be devised based on the most up to date tax rules. In the most recent budget, released on March 22nd, the government announced plans to clamp down on wealthy Canadians and specifically the way tax savings are created within corporations. “The government is evaluating corporations that are using capital gains as income where, in fact, dividends may be more appropriate,” Poole says. “In terms of strategies, it’s all about ensuring budgetary considerations on a going forward basis because these rules can change at any given time and you need to be ready to adapt with them.”


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