Advisors face a TFSA dilemma

Advisors face a TFSA dilemma

Advisors face a TFSA dilemma Canadians desperately need education on TFSA, but a new study suggests they may increasingly be unable to win financial advice.

"There is so much discussion surrounding TFSAs but when it comes to understanding them, Canadians are still bewildered," said Carol Bezaire, Vice President Tax and Estate and Strategic Philanthropy for Mackenzie Investments. "In five years Canadians still have misunderstandings about the basics of the program."

Mackenzie’s survey of 1,558 Canadians aged 18 and older asked five questions about the retirement savings vehicle which saw its maximum annual contribution increased to $10,000 in April when the feds announced their annual budget.

The survey’s findings provide advisors with an opportunity to educate their clients which can help cement the advisor relationship.

“We know our clients. We know their financial situations. We recommend that they contribute as much as possible to the TFSA,” says Tony Battista, a dual-licensed advisor in Montreal. “[However}, we have to educate them. At the beginning [2009] I had two or three people that paid penalties.”

Bautista says that a common occurrence for advisors is when clients say they haven’t done anything TFSA-wise at the bank and then it turns out that they have. That’s exactly what happened with the two or three clients mentioned previously.

At the end of the day no amount of education, in Battista’s opinion, is going to change the fact that higher net worth clients benefit most from the TFSA. It’s also a better savings alternative to the RSP for those earning less than $35,000-$40,000.

“It is a good way for the people who have money but I do find, honestly, while I’m happy with $10,000 because it’s more money for us,” says Battista, “that it’s not fair to the middle-income earner. They cannot put aside $10,000 net outside their RSPs. About $5,500 would have been very appropriate.”