The cost of living is pushing more Canadians to consider a move south of the border, how can their advisors help them?
Shiraz Ahmed sees a steady stream of Canadian clients who want to move south of the border. While each of them come with a unique reason, the Senior Financial Advisor & Senior Portfolio Manager of the Sartorial Wealth Team at Raymond James sees a few major themes emerging. Chief among them is the cost of living and high rate of taxation in Canada. High earning younger professionals in the GTA and Vancouver are finding that they can’t afford to build a life in their cities. At the same time, the US offers lower taxes and typically higher earnings for these professionals.
Ahmed is a cross-border specialist, and works with these Canadian clients to navigate the challenges of moving across the border. He emphasizes that, for many, a move south is often an emotional decision, tied as much to political beliefs or a sense of frustration than it is a rational cost-benefit calculation. He explains that as advisors work with their clients around a cross-border move, they need to do their best to remove the emotion from the decision and help their clients plan appropriately for what a move to the USA entails.
“I find when it comes to moving over the border, people often make decisions that are rooted in emotions. They may even say that they want all their money to be in the same country I live in. The consequences of doing that includes collapsing retirement accounts, which can have major tax implications,” Ahmed says. “Often, folks get caught up in the idea that their money needs to be exactly where they live. When they feel that way, I explain to them what the consequences are to make that happen…Nobody wants to go out there and poke holes or invalidate someone’s personal belief set, but I find if folks can see the bigger picture then cooler heads can prevail.”
Those periods of heightened emotion sometimes come around tax season, but Ahmed notes that the greatest uptick in these emotional decisions was during the COVID-19 pandemic. When Ontario was among the most locked-down jurisdictions in the world, he saw Canadian clients so fed up that their decision to move was heavily tinged with emotion. He sees similar upticks when taxes are raised or new measures are implemented that make people feel like they get ahead in this country anymore.
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Ahmed’s job is to ensure that any decision to move across the border is implemented with appropriate consideration of tax and investment implications. He cautions against an emotional decision because that can often mean an individual moves south before theyadequately arranged their affairs. Moving before making those decisions, Ahmed says, is among the biggest mistakes a client can make. Once you’ve moved it is much more difficult to plan retroactively and restructure accounts to avoid potential negative outcomes from a tax perspective.
If the client hasn’t already moved across the border, Ahmed’s process begins with the hiring of cross-border tax counsel. Those professionals can reconcile the differences between the US and Canadian tax systems, laying the groundwork for financial decisions that need to be made. It’s on those financial decisions where Ahmed and his team can offer the greatest value.
Key to Ahmed’s work is the identification of potential pitfalls. He educates clients to seek out appropriate cross border tax counsel especially surrounding tax returns in the year of departure He also encourages to speak with CPAs regarding tax implications of any Canadian income sources they may still have after a move to the US — such as a rental property. He outlines how established investments in retirement accounts may work based on their new residence status and the possible savings plans offered by their employer.
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Ahmed thinks it’s key for advisors to consider what is and what isn’t inside their personal scope when they work with clients on a cross-border move. Financial planning, tax-efficient strategies, and investment management are all key to this process, but certain areas require lawyers or accountants. The desire to give advice and help out, even in areas where you are not expert, can cause significant headaches down the road for advisors and their clients.
“Know your limitations. As an advisor you don’t want to be outside your comfort zone. When I’m outside my area of expertise I’ll call in a specialist. I will be the first to admit that I know enough about tax to be dangerous, but I’m not a CPA and I won’t give tax advice,” Ahmed says. “If people are asking questions about that, they really need to be talking to a CPA. Don’t overstep and, when in doubt, get counsel.”
