Advisors are divided on a proposal that would create a tax break for clients – but only those using the fee-based model.
Advisors are now pointing to 429-page report in calling for a tax break for clients opting for the fee-based model and not the embedded one.
One of the key recommendations made by the PIAC in crafting the comprehensive report was the creation of a tax credit for clients using a fee-only financial planner [as opposed to embedded compensation] -- ostensibly to encourage more in-depth financial planning.
Toronto-area fee-only planner Jason Heath wrote an op-ed for the Financial Post last week on this very subject as a part of a broader discussion about the four-person expert committee that’s been created by Ontario’s Ministry of Finance.
“There is clearly a problem with the financial planning industry if the Ontario government is using valuable resources to contemplate changes. Given the progress in the U.S. and farther abroad, it seems it is just a matter of time before we see similar changes here,” wrote Heath. “The pace of change will hopefully be accelerated by the Expert Committee, especially if they focus primarily on the position of consumers, for whom “suitability” may be a less suitable standard for advisers than a true fiduciary responsibility.”
WP discussed the idea of a tax credit for fee-only clients as proposed by PIAC with Dundas, Ontario, advisor Mike Travers, who is not a fee-only advisor but rather uses a blended model of embedded compensation and a percentage of assets under management depending on the size of account.
“Although I love tax credits, I don't see why fee-only accounts should be the only ones to enjoy this benefit,” said Travers.
Interestingly, although there’s no question that Heath is pro-fee-only, he also believes any tax credit made available by the government should be for all clients and not just those who can pay by cheque for his financial planning services.
“Some sort of tax credit, tax solution [for all clients] would be beneficial otherwise the government is endorsing a certain type of financial advice,” Health told WP. “Fee-only financial planning is still kind of vague. It’s hard to define. It would be difficult to figure out how to define eligibility but certainly some sort of tax-incentivized solution is a great way to motivate people.”
One of the key recommendations made by the PIAC in crafting the comprehensive report was the creation of a tax credit for clients using a fee-only financial planner [as opposed to embedded compensation] -- ostensibly to encourage more in-depth financial planning.
Toronto-area fee-only planner Jason Heath wrote an op-ed for the Financial Post last week on this very subject as a part of a broader discussion about the four-person expert committee that’s been created by Ontario’s Ministry of Finance.
“There is clearly a problem with the financial planning industry if the Ontario government is using valuable resources to contemplate changes. Given the progress in the U.S. and farther abroad, it seems it is just a matter of time before we see similar changes here,” wrote Heath. “The pace of change will hopefully be accelerated by the Expert Committee, especially if they focus primarily on the position of consumers, for whom “suitability” may be a less suitable standard for advisers than a true fiduciary responsibility.”
WP discussed the idea of a tax credit for fee-only clients as proposed by PIAC with Dundas, Ontario, advisor Mike Travers, who is not a fee-only advisor but rather uses a blended model of embedded compensation and a percentage of assets under management depending on the size of account.
“Although I love tax credits, I don't see why fee-only accounts should be the only ones to enjoy this benefit,” said Travers.
Interestingly, although there’s no question that Heath is pro-fee-only, he also believes any tax credit made available by the government should be for all clients and not just those who can pay by cheque for his financial planning services.
“Some sort of tax credit, tax solution [for all clients] would be beneficial otherwise the government is endorsing a certain type of financial advice,” Health told WP. “Fee-only financial planning is still kind of vague. It’s hard to define. It would be difficult to figure out how to define eligibility but certainly some sort of tax-incentivized solution is a great way to motivate people.”
