Wealth professionals treated unfairly

Accountants can. Lawyers can. Even dieticians can incorporate in order to make sure that their business can run in an effective and tax efficient manner. But many, many Wealth professionals can’t – what’s going on?

Personal corporations are an effective and legitimate way to run a business and to allow some of Canada’s hardest working professionals the ability to make sure that they follow their own advice and mitigate taxes and costs. But a number of wealth professionals, for example, IIROC advisors can’t.  And now discretionary portfolio members have also been told they can’t.WP is highlighting what one advisor calls the uneven playing field for wealth professionals looking to use personal corporations.

“They [our regulator] recently advised us that no payments can be made to a holding company or personal corporation,” a leading discretionary portfolio manager based in Hamilton, Ont., told WealthProfessional.ca speaking on condition of anonymity. “So, if you have commission or fee income it has to be paid to you directly personally so there’s no opportunity to take advantage of the personal corporation.”

The provincial securities regulator could not be reached for comment.

That kind of prohibition puts the discretionary portfolio manager in the same boat as the IIROC broker – a decidedly different one from the MFDA and life insurance players, ostensibly allowed the use personal corporations.

“So two are allowed and two are not allowed,” said the discretionary portfolio manager.
The apparent discrepancy means a big chunk of the financial advisors in Canada are unable to use the same tax planning tools they likely recommend to other business-for-self clients.

With CRM2 regulations focused on fee disclosure and performance reporting, it could be sometime before regulators turn their attention to leveling the playing field on this issue, argued another industry veteran. “Insurance agents can incorporate. The MFDA-licensed advisor can. The IIROC guy can’t,” Kevin Whelly, national sales director, private client group, at Raymond James told WP recently. “This doesn’t seem fair to many.”