We advocate for any one we encounter to seriously consider creating a financial plan. We all need a road map in our lives to coordinate our life’s goals and objectives. Where people do not have these identified, then that is the starting point. A financial planner can assist you with this process, which is daunting to some.
Further, we have always advocated for the use of financial life planning, as opposed to financial planning alone, in our planning services. The difference? The inclusion of life goals and objectives in plan development, as mentioned above, and not just a focus on financial goals and objectives.
Nature of our lives
The fundamental problem in financial planning platforms may stem from the deeply subjective and personal nature of client’s lives. Take the example of a Registered Disability Savings Plan (RDSP). It’s a registered account that only a small portion of the population will ever need. But for those who do need them, parents of children with disabilities, a financial plan that can’t integrate an RDSP is an incomplete plan and a plan that has effectively zero value.
Whatever the client’s circumstances are, be they lifestyle or financial, you have to model them properly. We achieve completeness in the planning. Our planning tools result is using technology that offers life planning rather than just financial planning elements.
Things change over time
There are some things in life that decidedly change over time. Things like taking vacations, at a certain age you’re not taking them anymore. Or vehicles, at a certain point you go from a two vehicle family to a one vehicle family, then quit driving altogether. In a lot of financial planning software, many of the entries are assumed to continue over time. In financial life planning, you build in more itemization with the notion that things will change over time.
We build each client’s plans using visual queues that spark different mental pathways and prompt clients to offer other important pieces of information that might not come up in a normal conversation with us. Use the vehicle example again, noting that if an advisor just asks their client what they drive, they’ll hear back something like a sedan and an SUV but when the client is asked various questions including every kind of vehicle, they might be prompted to say we’re planning to get a motor home in retirement. Our process offers advisors different ways to stimulate planning conversations so we can input enough data to achieve a more complete picture of a client’s vision of the life they want.
Wealth strategies
That complete financial life plan can then inform strategies around both accumulation and decumulation that clients are in need of. It can help house-rich cash-poor high earning clients rein in spending and save better. It can help give some spending confidence to retirees who may be needlessly conservative about spending out of fear they’ll outlive their savings. By addressing each input and including a complete set of the variables involved in a client’s life, our process can help clients gain a clear picture of what they can and can’t do to achieve their goals.
Maintaining that level of dynamic data and completeness isn’t easy. The recently announced plan in the 2024 budget to raise the capital gains inclusion rate to 67 per cent for gains over $250,000, and for all capital gains in corporations or trusts, will reset many clients’ plans. We have already integrated these new inclusion rates into our planning software, ensuring they are applied to each relevant category. Given that this new inclusion rate is set to come into effect on June 25th, we’ve ensured we can account for capital gains before the application of the rule as well as future capital gains. This allows us to create unlimited what if scenarios, with clients, applying different policy rates and different decisions around the timing of asset sales to their life plans.
Communication with clients
Integrating these new policy changes into our planning process assists us communicate with our clients. Given the level of anxiety and uncertainty the new inclusion rate has introduced, we can quickly apply the new rate to our client’s unique financial situation and show them in hard numbers whether it will meaningfully apply to them or not. Our process serves as a form of triage, allowing us to organize our clients from most to least impacted and budget their time and efforts accordingly.
The bottomline
It’s that ability to facilitate and open conversations with clients that is the greatest value of our process. As technology makes it easier, and easier for clients, to manage the their financial lives, our value will come from integrating those wider life considerations into their financial life picture.
We’re on the major shift where the value add for clients is no longer going to be the best mathematical answer. The real value add is sitting down with people and getting them more emotionally involved in the life planning process while Keeping Life Current.
