Why is this segment so important? According to the 2021 Investor Economics Household Balance Sheet, $3.7 trillion (two-thirds of Canadians’ financial wealth) is controlled by retirees or near-retirees. This is forecast to reach $6.4 trillion by 2030.
Therefore, this is an opportune time for advisors to reinforce their value and help their clients live a purposeful retirement by identifying retirement income possibilities and delivering innovative outcome-oriented solutions. Those advisors who can help their clients shift from a plan that has been primarily focused on growth to one that also prioritizes income and stability while guiding them in the pivot from saving to a tax-efficient drawdown will have an edge over those who don’t.
Below are some strategies advisors should consider as they seek to maximize their value and help their clients reconstruct their retirements with holistic and comprehensive plans that balance personal goals with the financial capacity to achieve them.
Reframe the retirement conversation. According to a study by Mackenzie Investments conducted in 2021, 71% of Canadians said they don’t know what to expect when they retire. To ease this uncertainty, advisors can help their clients by talking about more than just investment portfolios and help them understand what will give them purpose and meaning as they transition to the next phase of their lives. This sets the stage for a discussion and evaluation of matching needs and wants with financial capacity.
Re-evaluate the retirement income stream. The same research showed that 66% of Canadians are not confident in their retirement income sources. They want to know if they are going to be OK. How much money will they need to save, how long will it last and how much can they earn? By analyzing various income drawdown strategies, such as government and employer-sponsored pensions, registered/non-registered investments and corporate assets, advisors can demonstrate the value of advice through the optimization of after-tax income and/or maximizing net estate value.
Rethink retirement tax planning. Taxes may be the single largest expense during retirement. However, our research showed that the majority of Canadians are not confident about managing taxes when retired. There are numerous options available to retirees to help manage their tax bill. These range from income splitting, spousal loans and the use of family trusts. The order of asset withdrawal in the decumulation phase can also have significant tax implications. Depending on individual circumstances, it may be advantageous to draw from registered assets first and defer drawing from government programs such as CPP, QPP and OAS.
Re-examine retirement estate and legacy planning. Canadians approaching or entering retirement need to have a plan in place for their estates. Advisors can use this as an opportunity to help them with tax-efficient legacy planning and charitable giving, as well as succession planning for small-business owners and professional corporations. Establishing trusts, for example, can be a powerful tool in achieving many tax and estate objectives, such as the control and protection of minors, income splitting, confidentiality, probate tax minimization, charitable giving and more.
For business owners, an estate plan could also include transferring a private company’s ownership and leaving certain assets to charities for more flexibility in claiming donation tax credits to offset owed taxes.
Reconstruct the retirement income portfolio. New retirement realities mean Canadians need to reconstruct their portfolios; yet, over two-thirds of Canadians are focused primarily on the preservation of capital. Capital preservation is important, but a retiree’s portfolio must also provide growth and income as well as stability. Key risks that retirees face in their portfolios include the sequence of returns, longevity and inflation. A well-structured portfolio that is diversified by asset class, region and investment style can go a long way to mitigating these risks.
The retirement phase is not just a life stage for Canadians to explore new interests and pursuits; it’s also an ideal opportunity for advisors to expand their businesses through demonstrating the value of advice and offering both pre-retirees and retirees comprehensive retirement plans that consider all aspects of this exciting period.
At the end of the day, Canadians want to retire from work, not life.
Ron Hanson is senior vice-president, investment strategy and portfolio solutions, with Mackenzie Investments.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
