Money In Motion.... Be the advisor of choice when retirement knocks. Daryl Diamond CLU CHFC CFP Diamond Retirement Planning Ltd.

Transcription

1 Money In Motion... Be the advisor of choice when retirement knocks Daryl Diamond CLU CHFC CFP Diamond Retirement Planning Ltd.

2 Before We Get Started... What would you like to get out of this session? What are the biggest challenges you face in this market?

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5 Retirees Have to Make a Choice... They recognize that specialized help is needed They also know they need to consolidate their income-producing assets For almost all of our clients, we have not been involved in their accumulation years Every client previously had a relationship with an advisor or institution We are competing with a familiar relationship but

6 The Ways To Differentiate Come Down to One of Two Issues Things that we know are important in this market Things that current advisors or institutions don t realize as being important in this market and /or don t provide Our role is to look for and then lever this difference and break the relationship

7 ADVISORS WRONGLY DEFINING HOW CLIENTS MEASURE THEIR VALUE

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9 ADVISORS THINKING THAT THE RELATIONSHIP WILL RETAIN THE CLIENT

10 M.I.A. = Missing Inaction What are some reasons people have come to you, from other advisors / institutions?

11 M.I.A. = Missing Inaction Quotes Just wants to talk about the investments Keeps putting off the planning side of things Have done a good job until now... But... I seem to know more about this than they do I think that all they are interested in is what they offer in terms of product They don t have a clue about most of this I don t think they can actually put a plan together This is the way that the software is programmed

12 Differences Between Accumulation & Income The change from saving to spending Clients will build their assets at any number of places. They need to consolidate to use them most efficiently Planning and process driven not product driven Many of the investment rules that apply when saving, don t apply in the withdrawal years

13 Different Planning Considerations In the accumulation years, clients know how to define what they want We don't know or receive the same planning parameters from them during the income years Additional unknowns are longevity and health issues There is little room for investment error

14 The Challenge for Advisors Dealing with the differences Acumen Processes Structure / team TIME

15 DON T HAVE A PROCESS FOR THE RETIREMENT INCOME MARKET

16 The Retirement Income Process 1 Competent planning 2 Aligning Investments 3 Efficient Execution

17 CAN T OR DON T CREATE A TAILORED, WRITTEN INCOME PLAN (BLUEPRINT)

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19 Video to go here

20 Retirement Income Planning One time where people need specific advice Not prescriptive advice This is complicated stuff Needs to be addressed in a comprehensive way Still many misconceptions The One General Rule

21 Step-By-Step Income Plan 1. Assessing current lifestage 2. Determine lifestyle and time objectives 3. Financial goals and priorities? 4. Create income needed through layering 5. Aligning Investments with the Blueprint 6. Assess impact on net worth 7. Health Risk Management 8. Wealth Transfer Spouse / Estate / Intergenerational.

22 NOT HELPING CLIENTS MERGE THEIR TIME WITH THEIR MONEY

23 Video to go here

24 With permission of RBC Financial - Your Future By Design

25 ASSUMING RETIREES NEED INFLATION-ADJUSTED INCOME THROUGHOUT RETIREMENT

26 Income Trends Over the Retirement Years Income needs, showing a reduction at younger spouse's age 75 to reflect slowing spending patterns as clients age.

27 LACKING KNOWLEDGE IN OTHER INCOME SOURCES

28 For example At what age can payments from an RCA qualify for pension splitting? 2. What is the difference between pension splitting and splitting CPP retirement income? 3. Should people start or defer CPP retirement income? 4. Should they start CPP pension while still working? 5. Should people integrate their pension with government benefits? 6. Should people commute their pension? 7. Should they buy-back years of service 8. Should they continue to make RRSP contributions after they retire?

29 NOT LAYERING INCOME IN A TAX-EFFICIENT MANNER

30 Step 4 Layering Income 1. Using the least flexible income sources as they are available 2. Using least tax-efficient income sources in lower tax brackets 3. Working efficiently within the tax brackets 4. Putting the least amount of strain on an asset to deliver the next dollar to spend 5. Looking for income-splitting opportunities 6. Determining which assets are best to use and which are best to defer

31 Withdrawal for $1.00 After Tax Manitoba 2013 Fully Eligible Capital Bracket Rate Taxable Dividends Gains TFSA 11, % $1.35 $1.00 $1.15 $ , % $1.39 $1.07 $1.16 $ , % $1.54 $1.19 $1.21 $ , % $1.65 $1.29 $1.24 $ , % $1.76 $1.39 $1.28 $ , % $1.86 $1.47 $1.30 $1.00

32 Tax Credits 2013 Personal Exemption 11,038 The Age Amount 6,854 = 17,892 The Spousal Amount 11,038 Pension Credit 2,000 Clawback Zone Personal Exemption N / A The Age Amount 34,562 80,225 The Spousal Amount 11,038 net income Old Age Security (OAS) 70, ,620

33 NOT MANAGING THE ASSETS THAT PRODUCE THE INCOME

34 Topping Up To Bracket - Manitoba RRSP Exit Strategy Assume taxable income of $36,000 per person Never in a lower bracket Same marginal rate (28%) if $36,000 or $43,561 (35%) between $43,562 and $67,000 Pay tax now and defer / split RRSP conversion before age 65

35 Topping Up to The First Federal Bracket- Manitoba Fully Eligible Capital Bracket Rate Taxable Dividends Gains TFSA 31,000 43, % $1.39 $1.07 $1.16 $ % $1.54 $1.19 $1.21 $1.00

36 Convert and Defer Non-registered Dollars Creates more tax-effective income in the future Can serve to keep "net income" figure low Helps preserve gov't benefits and tax credits Provides more control for client (no min w/d) May enhance future income splitting opportunities Care per diems may be lower More tax-efficient for survivor beneficiary More estate-friendly Fund TFSA s Use for insurance premiums

37 Step 6 Assessing The Impact on Net Worth

38 Minimum Withdrawal Registered $ Age % Age % Age %

39 Recommended Course of Action (Formal income plan from a bank)

40 Intelligent Disassembly Variables Amounts of registered vs non-registered assets Age at which retirement commences Health of the individuals Amount of after tax cash flow needed, measured against the sum of income producing assets Other income streams that will form part of their retirement income Tools to be used to defer non-registered assets Length of time over which we have two tax-payers

41 NOT BEING TRANSPARENT ON FEES

42 The 4 Investor Considerations Certainty Probability Taxes Inflation Fees Flexibility Perpetuity

43 So How Did We Get Here? Very weak equity returns over the last 5 10 years Lack of transparency Introduction of lower fee alternatives Media emphasis Media bias

44 Fee Based Accounts Broker Managed Accounts 1.25% 1.50% Private Investment Counsel 1.00% 1.50% Self-managed Accounts.50%

45 Three Fee Components 1. Money Management 2. Advisory Portion 3. Admin / taxes

46 The level of fees is a valid measure for making a decision if you are comparing the same end result

47 The level of fees is NOT a valid measure for making a decision if you are comparing a different end result

48 You also need to compare The after-fee investment returns

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50 $221,743 $147,914 $86,625

51 You also need to compare The after-fee investment returns The tools and strategies being employed The cash flow (yield) that can be created from the income-producing assets The quality of retirement income planning advice and the resulting benefits

52 Efficient direction and counsel from a retirement income specialist can benefit you through Assisting you to execute the plan Savings on income and estate taxes Preserving government benefits and entitlements Intelligent disassembly / conversion of assets Employing advanced deferral strategies Survivor income and estate planning Employing unique tools and strategies specific to taking income Realizing the many benefits of competent advice

53 In Your Current Arrangement What is your current cost for investment management? What is your rate of return on your investment(s)? What is your return after fees? What is your tax-adjusted return? What is your cash flow (yield)? What is your cash flow, after tax? What are you getting in return for the advisory portion of the fee that you are paying?

54 The Retirement Income Process 1 Competent planning 2 Aligning Investments 3 Efficient Execution

55 The Accumulation Phase 1 Competent Planning 2 Investments Investment management 3 Efficient Execution

56 The Retirement Income Process 1 Competent Planning 2 Aligning Investments Tailoring to client Tax-efficiency Proven strategies Course of action 1. Investment management 2. Layering income 3. Asset management 3 Efficient Execution Service / Processes Applying acumen Experience and insight Making it all work

57 NOT ALIGNING INVESTMENTS WITH THE BLUEPRINT TO CREATE INCOME

58 Step-By-Step Income Plan 1. Assessing current lifestage 2. Determine lifestyle and time objectives 3. Financial goals and priorities? 4. Create income needed through layering 5. Aligning Investments with the Blueprint 6. Assess impact on net worth 7. Health Risk Management 8. Wealth Transfer Spouse / Estate / Intergenerational.

59 Step 5. Aligning Investments for Income This is a different time from accumulation a game change Current investments were set up for accumulation Investments need to be aligned with the Blueprint, not the other way around There are different tools and strategies, UNIQUE to efficiently creating income

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61 So what strategy do you employ for taking income when the markets are down?

62 Video to go here

63 The Many Ways... Advisors assuming existing relationship will prevail Do not have a retirement income process Do not provide written plans for this market Not helping clients merge their money with their time Assuming the need for fully indexing income

64 The Many Ways... Lacking knowledge in other income sources Not layering income in a tax-effective manner Not managing the income-producing assets Not being transparent on fees Not aligning investments with the Blueprint

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66 Disclaimer and Copyright While every attempt has been made to assure the accuracy of content, the author assumes no liability for any errors or omissions. The author also assumes no liability for subsequent use of this information by advisors or consumers. The contents and information contained is copyright as indicated below and may not be reproduced in any manner without written consent from the author. Charts and illustrations have been provided by third parties and are believed to be accurate, though no warranty is provided and may be subject to separate copyright. Content and opinions are those of the author and may or may not reflect advice, recommendations, explanations or practices in any particular situation. Content provided by and copyright of: Daryl Diamond Diamond Retirement Planning Ltd.

67 Money In Motion... Be the advisor of choice when retirement knocks Daryl Diamond CLU CHFC CFP Diamond Retirement Planning Ltd.