We begin every meeting with our clients by reviewing a summary sheet of key macro items we believe are important for the client to either understand or communicate to us.
We provide new clients with a financial checklist to take home, fill out and return to us either by email, mail or at our next meeting. In many ways, it is similar to if you were visiting a medical professional for the first time. In order for the medical professional to best help you, they would need to know both your and your family’s health histories.
The purpose of this article is to outline some of the reasons why we ask for this information.
Accounting information
Do you prepare your own tax return or do you have someone prepare your taxes on your behalf? If you have an accountant, then at a minimum we obtain the name of the individual(s) you work with, the firm name, mailing address, phone number, fax number and email. We also like to know when the relationship began. If you do not have an accountant, then how is your return prepared (software package, paper version, family member)? We have all new clients complete a Canada Revenue Agency (CRA) representative form as a starting point. With your consent, this enables us to get some background information and all carry-forward limits. We obtain alerts from CRA when our clients get new mail (Notices of Assessments, reassessments, review letters). Often we are able to review this before our clients receive it. If we are not able to assist the client directly, then we can point them in the correct direction.
For our corporate clients and incorporated medical professionals, it is important for us to speak at least annually, if not more frequently, with their accountants. We can provide the accounting firm with the information they require to expedite the preparation of corporate and trust returns. It also enables us to document the structure, shareholdings, and overall strategy with respect to tax sheltering, dividend payments and wages. This information needs to be consistent with all financial planning documents we prepare.
Legal information
One of the sections on our professional checklist requests details regarding the lawyer and notaries you work with. For our corporate and trust clients, they may have a different lawyer to help with the structure, records office and minute filings. All clients should have a notary or lawyer that helps prepare their personal legal documents. This is perhaps the area where we have to nudge clients along a bit as the natural tendency is often procrastination.
The benefit of us asking new clients to fill out the professional checklist, and asking existing clients to update or provide this information, is that it encourages people to dedicate time to get it done. The most basic of questions we ask is whether our clients have a will. We believe it is important to know when it was last updated, where the original(s) are kept and who the executor and alternate executors are? We also advise clients that we do not prepare wills and don’t require copies of our clients’ wills unless they have questions and concerns. When we have estate planning meetings, I will always want to know how our clients ultimately want their estate distributed. If the will does reflect their most current wishes, then I will work with their lawyer to ensure it is updated.
We also obtain details regarding power of attorney, including legal, bank, and financial information. Unlike wills, there is no registry for powers of attorney. We ensure that we document details that clients provide, and request that they confirm no changes at every meeting. In cases where clients are aging we will encourage them to bring the representatives that they trust in to meet with us prior to a situation where the client's capacity can be questioned.
Often the legal section of our checklist is returned without the requested information or incomplete. In some cases, it may be because the client didn't understand the question or that it is not applicable. Many people want to know about the different types of power of attorney and health care directives (i.e. representation agreement) available, but have never really talked to anyone about it.
Perhaps the most important part of this exercise is that it enables our clients to open up about personal situations that have been bothering them. After working with clients for a couple of decades, there are very few situations that we have not found solutions for if clients want to talk about it.
Banking information
When clients first open up accounts, they must provide a copy of a void cheque to ensure we have the correct details. In some cases, we have clients who have multiple bank accounts at different institutions. Many couples have joint accounts. Some clients choose to have individual accounts. Our elderly clients have, at times, had questions about setting children up as power of attorney on bank accounts and investment accounts or setting them up as joint owners. We try to both simplify our clients banking needs while at the same time ensuring they understand the pros and cons of each decision that they make.
Every investment account is linked to a bank account. It is possible to have different bank accounts linked to different investment accounts. That can get a bit confusing, especially as our clients are aging. We generally encourage closing unnecessary accounts and consolidating them into one Canadian chequing account. In this one account you can have all your deposits transferred in including CPP, OAS, RPP pensions, and withdrawals from your financial institution. Establishing a good relationship with one banking institution makes sense to have one point of contact. It makes cash-flow planning and taxation administration easier. Whenever our clients change their banking information they must let us know so we can update the applicable link to the investment account(s).
Insurance information
When clients come to the insurance section of the checklist, people often don’t have a clear understanding of what insurance coverage they have. Some may have had insurance they purchased years ago, but are fuzzy on all the details. Sometimes clients bring in policies that have lapsed, have been replaced, or converted. In other cases, they are fully in force. For existing in-force policies, we document all details, including why the insurance was initially put in place. We also obtain details of the cost of insurance and any periodic cash-flow needs to fund. In some cases, the insurance is fully paid up. In other situations, premiums are set to be paid monthly or annually normally. When we see monthly premium payments, we normally talk to the client about converting to annual as the cost of insurance is typically slightly lower. With annual payments we are also able to coordinate payments from a non-registered account to insurance companies on our client’s behalf. We ensure that cash flow is available to fund and we can make the payment direction, similarly to us making installment payments to CRA.
In some cases, our clients have no insurance and they do not need insurance. In other cases, our clients have young families, or have significant debt loads, partnership agreements, compliance with separation agreement clauses, etc. When there is an obvious need we will outline how risks can be managed in the scope of an overall financial plan.
Asking questions about insurance and obtaining details of all in force policies enables us to understand the full picture. One of the side benefits of gathering all insurance details is that it is required information to complete a comprehensive financial plan. Within a financial plan, a section covers insurance. Insurance can often help provide solutions to concerns, protection, taxation benefits, and estate maximization and ensuring asset transfers after taxes have been paid.
Family information
For every client, we request that they provide us some background of their family dynamic, usually via a family tree, starting with details on their parents. If their parents are deceased, then we request that they provide their age at the point of their death. This type of information is useful from a genetic footprint standpoint. In situations where parents are still living it opens up many discussions. Are your parents currently dependent on you or will they need assistance as they age? In some cases, we will encourage our clients to bring their parents in and we can assist them with any questions. When parents are living, there will likely either be some form of future cost (i.e. extended care, funeral costs) or future inheritance. This information is useful when mapping out future cash flow needs and financial plans.
Obtaining details about siblings is also important, as they, too, can provide information from a genetic standpoint. We have many situations where we can set up siblings and our clients on joint family accounts if the situation is right. When siblings open up accounts, it provides more options for estate planning with parents, such as in-kind distributions. Siblings can also be an option with respect to executor and powers of attorney depending on proximity, age and knowledge level.
Information on children and grandchildren is also important to know. For younger children and grandchildren, the discussion can initially focus on setting up Registered Education Savings Plans. We will often discuss with our clients what type of assistance, if any, they want to provide to any minor children once they become adults. In some cases we have clients that feel they have no obligation to assist their children after they leave them. Some feel they feel an obligation to fund education costs only. Others want to extend the assistance to helping their children purchase their first home. Every client is different and we try to get an initial understanding of where they are within this wide spectrum.
When family members combine accounts at one institution, it is referred to as “house-holding.” As overall asset levels rise and reach certain thresholds, then fees as a percentage can decline for all family members.
We also want to obtain details outside of a family tree if non-family beneficiaries are listed on life-insurance policies and registered accounts. At times, we have had beneficiaries that live overseas and have been challenging to reach. Making sure we have up-to-date addresses and phone numbers of key individuals that are part of your estate plan.
Finally, many of our clients have pets that are an integral part of their family and have concerns about what will happen to them as part of their estate. We can provide solutions that give pet owners options and peace of mind.
Other information
With extended families and complicated family situations we ask our clients to provide marriage contracts, prenuptial agreements or any information that gives us a complete understanding. We also ask clients to provide any additional details that they feel we should know. Stated another way, are there any specific concerns that are bothering them?
Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director of wealth management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the Times Colonist. Call 250-389-2138. greenardgroup.com
