Finance Monthly - May 2022

Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s What are the current trends shaping wealth management in the high-net-worth space? One trend we’re seeing is the push-pull relationship whereby clients have cash on hand and want to deploy it but they have a mental block that is preventing them from deploying large lump sums of their capital. There is a reservation that real estate is potentially overvalued. There is also a reservation about geopolitical issues that affect the stock market or may affect the market in the future. We also see a lot of fortune-telling syndrome happening. 51% of Canadians still don’t have a will and money is starting to move from one generation to the other. I’ve spent 17 years in the business and now more than ever, money is intentionally being given to adult children. “Do something responsible with this X dollars” say the parents. We work with people who are about to sell their company or are thinking about doing it and yet they have no idea what they spend each month. The second part of this situation is a spouse who has not worked for many years, who really has never been part of the finances so getting them to look at how much is being spent can be a challenge. We walk clients through an exercise called BAM. BAM stands for Bare Ass Minimum, referring to monthly expenses that exist regardless of your lifestyle spending. The baseline bills. This is the starting point for someone who is considering retiring and it is useful for clients to accumulate and wonder how much they need to build up before selling. They can accumulate a mix of cash, stocks, real estate and business equity to make a total pot, and then use the BAM to figure out how long the money will last spending X per month with 0 return. That is a starting point. Over the near two decades in the business, I have used permanent insurance where appropriate and some years have not implemented a single policy. In other years I have encountered many clients who have effectively used the permanent insurance solution. Currently in the market with the continuous tax reforms in Canada in the government and limitations being implemented, permanent insurance seems to be more of interest to some clients now. From an estate planning tax standpoint one of the last standing advantages is the Capital Dividend Account. Life insurance death benefit is one of a few items that create a capital dividend account (CDA) which can flow money out of a company tax-free. With the recent real estate values growing at a fast pace and the continuous business sale activity many clients are utilising reorganisations of the corporate structure. For wealthy families, they likely know they will never run out of money or assets, but if they can organise their companies in a certain fashion and it enhances their tax efficiency or enables a more seamless estate transition while they are alive or dead, this 37

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