An advisor's worst nightmare come true

An advisor's worst nightmare come true

An advisor

According to Bhalla, investors can be taxed upwards of 30 per cent on withdrawals. “It’s a huge hit for retirement,” he says.

In the very first meeting, Bhalla tells his clients to consider this tactic a last resort. If the option comes up later, he explores every other avenue for his clients to tackle their debt.

Focussing on financial education, Yih has considered how to solve this problem. His suggestions include educating investors (explaining in detail why taking money out is a bad idea and the consequences of doing so), monitoring withdrawals more closely, or having employers ban withdrawals on plans completely.

“A lot of companies don’t even know the withdrawals are as high as they are,” Yih says. “The question is how do we fix things? Is it temporary or is it an ongoing trend?”

Are you experiencing a similar trend in your firm? Tell WP your story in the comments section below.



read more > 1 2

  • Daniel Hanzelka 2013-10-25 8:48:01 AM
    I do agree with Jim. It is a problem when people start taking money out of their RRSP's to pay things off. But I believe that the problem is more than just financial literacy, the issue is that people don't understand the reason why they find themselves in the financial situation they are in. I believe people are smart and educated and they know that taking money out of an RRSP will have financial consequences. In order to change this trend we need to tackle a much deeper issue. People need to understand that they have a money story and a money personality. I cover this in my book "Financial Reset". Advisors need to help their clients understand that they have a money behaviour and this money behaviour is costing them their retirement. This same money behaviour is the reason why 85% of people that win the lottery are broke after 5 years. The same happens with professional athletes or celebrities.
    Post a reply
  • Daniel Hanzelka 2013-10-25 9:10:19 AM
    I agree with Jim. It is a problem with people cashing out their RSP's. I believe they know that there are consequences in doing so, but in reality that is not the real problem. What I have found in researching for my book Financial Reset, is that people need to know the money scripts and money personalities they have which are leading the decisions they are making. It is the unseen factors in peoples lives that make them make the financial decisions that they are making and until they see these they will continue to do what they are doing such as cashing in their RSP's.
    Post a reply
  • Ryan 2013-10-25 4:08:35 PM
    When you have people that think it is a good idea to use a card at "The Brick" that they do not have to pay for a year then get hammered with 25% accrued interest on the balance (to purchase something that they cannot really afford), then maybe they do not deserve to have registered savings.

    Serious clients that have put away hard earned RRSP money for retirement will rarely pull the funds out if they understand the negative tax consequences of doing so. I believe as a financial advisor it is your job to help a client to make informed decisions that better their finances, but not to babysit someone that can't control their own compulsions against sound advice. the only time I really ever see clients that withdraw from an RRSP is in the situation of a job loss or family emergency.

    I am actually surprised to see that there is a trend of people using RRSP funds to pay off debt, all the more reason for people to start early with a competent planner that can financially educate them from an early age.
    Post a reply