Helping new Canadians find their bearings in financial planning

For clients from the East, getting a handle on Canada’s wealth ecosystem is difficult without a guiding hand

Helping new Canadians find their bearings in financial planning

Anyone who’s set foot on foreign soil for the first time should expect some level of culture shock. Those that come from English-speaking countries are lucky; they at least have some chance of finding someone who understands them and can answer questions. But for those that don’t, the sense of otherness is more acute — which has implications when it comes to their wealth planning.

Speaking to Wealth Professional Canada, Wilkie Kam, vice president and senior investment advisor of the Wilkie Kam Investment Advisory Team at BMO Nesbitt Burns, explained some common hurdles he’s encountered among new Canadians. Over his decades of experience, he has had the opportunity to assist clients from Asia, mainly Hong Kong, Taiwan, and China, whose financial attitudes and preferences have been shaped by the norms in their home country.

“I think the biggest difference would be the tax situation in Canada versus the homeland,” Kam said. “For example, residents in Hong Kong don’t pay any interest on dividends, capital gains, and interest. But in Canada, all these returns are taxed, and at different rates. So I’ve found that clients don’t really appreciate how they can gain the maximum tax return by looking at the different tax rates on these returns. We may explain that Canadian company dividends could come with a tax credit versus interest, and they’ll say that it’s a very foreign idea to them.”

Another difference that Kam has found is in terms of the returns they expect from various asset classes. He explained that the Chinese stock market has remained basically flat over the last 12 years; because of that, clients from the homeland tend to shake their heads at recommendations to invest in mutual funds.

Read more: Are mutual funds good for beginners?

“Stock investment in China is not as transparent as what you’d see in developed countries,” he said. “A lot of money is being made on getting information before everyone else, or trading based on rumours. Contrast that with North America, particularly Canada, where investment decisions are more grounded in company fundamentals, earnings, and analysts’ recommendations.”

Because of their formative experience in their own financial markets, Kam’s new Canadian clients tend to favour real-estate investment, which is where many have made their fortunes in the past two decades. That inclination leads to wealth portfolios that may lack proper diversification, leaving many disproportionately exposed to housing market risks.

Social benefits are another stumbling block. Compared to many other countries, Canada’s social programs are more generous, providing citizens with assistance through health coverage, tax deductions, and exemptions. Immigrants used to other systems may not realize the what they’re eligible for, causing them to leave a lot of money on the table.

Cultural tendencies may also hold immigrant clients back. In Kam’s experience, such individuals tend to be very reticent when it comes to details about their wealth. “When I talk to mainstream clients who were born and raised in Canada, they’re very open to give information on what they own, their expenses, their income, and their plans. Those are basically the fundamentals that we need to know to determine how clients can and do progress moving forward.

“But new Canadians often won’t tell you,” Kam said. “They’ll tell you maybe 30% of the total big picture of their investments; we’ve suspected some clients of not declaring some portion of their wealth left in the home country, and that will create a big problem down the road. And they may tell you their income, but they won’t share a lot of family situations and plans for the future. New Canadians keep more to themselves, I’ve found, especially Asians.”

Problems also arise from the perception of death as taboo. End-of-life planning is a crucial piece of wealth management. Wealth transfers can succeed or fail based on proper knowledge of probate taxes, joint accounts, rights of survivorship, beneficiary designations, and life insurance. But new Canadians’ deep-seated need to avoid the subject makes opening the door to such discussions difficult.

It seems clear that immigrants face many financial challenges compared to mainstream clients. Kam encourages them to reach out to financial professionals, especially those with access to expert knowledge and networks. That can help them get properly oriented — a challenge that’s close to Kam’s heart.

“I was a new Canadian around 30 years ago, and there’s a steep learning curve,” he said. “Especially with my capacity, I love to help all the new Canadians to come after me. I take a lot of pleasure in helping them localize, blend into society, and have a happier integration.”


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