For many new international students in Canada, finding a grocery store or a place to live is daunting enough without trying to decipher why they should invest in a TFSA.
Jennifer Muench, regional president, British Columbia, BMO Private Wealth, told WP that an important part of an advisors job is not just to help on the financial side but also to offer a warm “Welcome to Canada”.
Clients that have landed in the country to study, whether that’s with family or by themselves, face an overwhelming period of adaption. Muench added that an advisor can play a significant role in helping them get established and used to Canadian culture.
She said: “It can be things as simple as [telling them] where there are grocery stores that they will know - it’s a case of guiding them to those places so they become comfortable in Canada right away. That can be looking for a house, whether it’s buying or renting, or guiding them through the education system and how you might go about applying.
“Also, where does it make sense to live? Sometimes that’s matters depending on the school. That’s how you are really going to help. When you do that loan, that helps a client, but what you're actually doing is giving them a place to stay and a place that feels like home.
“To the extent that you can do that and make them comfortable, you’ll build up that trust more quickly and you'll find out way more about that client and be able to help them quicker. It’s really a win-win for the client as well as the advisor.”
Financially, there is a raft of things to get used to, from tuition costs and commuting to the various savings vehicles. The likes of RRSPs, RESPs and TFSAs may not exist in the country the client has come from and so educating and planning early around these is of great value. Muench added: “If you’re coming from the US, it’s not as dramatically different than if you are coming from Asia, where we see a lot of the international students.”
A key difference is whether the parents and family come with the student or whether they stay behind in another country. Either way, Muench stressed, it starts with a plan: begin early with RESP contributions and the government will contribute and set up a TSFA, which will allow your income to grow tax-free.
Parents may also want to create a trust, which can be set up offshore, although there may be tax implications depending on the residency of the child.
She explained: “If you're an international student that isn't resident in Canada, and the family's income is not resident in Canada, then we really do say immediately that we should set you up with somebody on our new Canadian market team who will offer specialist advice to assist non-tax resident families.
“Often, that happens with families that come from Asia. We can connect people with an appropriate external advisor or an appropriate expert external tax planner that will get families thinking about what makes the most sense.”
She added: “When the student is in Canada, it’s really about starting those savings vehicles and making sure you set up a budget in which you understand tuition costs and the sort of income you will be able to draw upon, whether that’s gifting from grandparents or it comes from yourself. Then, what are those fixed expenses? It really just starts with a plan.”
If parents are living paycheck to paycheck to get their kids through education, insurance is also something that could be considered. Whether that’s life insurance, disability insurance or critical illness, these give the client access to funds when you need them the most and have dried up on a tax-free basis.
Muench said that more contact the advisor can have with the advisor, the better. “They’ll know [the client’s] goal, what expenses they're going to have and whether there are any red flags that require a rethink.”
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