March 31, 2022
I also cover this in a YouTube video. Click here to watch!
Now here’s a question you may have never thought of needing to ask yourself: are you really working with a Financial Planner or just somebody who calls themselves a Financial Planner? Well, by the end of this article I’ll have supplied you with all the necessary information needed to determine if your current Financial Planner really knows what they’re talking about – and if the recommendations they’re making to you and your family are correct.
Right now, in so many provinces across Canada, anybody can call themselves a Financial Planner and get away with it.
As an industry, we are asking for reforms and regulations to protect the public from rogue people who pretend to be Financial Planners – the ones whose sole pursuit is selling products, moving onto the next opportunity and leaving many mistakes behind.
When I am in need of a doctor – a specialist – I want to find a doctor that has a number of degrees and designations after their name. I am seeking out someone who has gone to school for a number of years, someone who is a real expert in their field. Ultimately, I’m looking for someone who knows what they are actually talking about.
This same practice should be used when seeking out a Financial Planner to work with. We have similar acronyms after our names that you should be looking for to ensure the person that you are sitting down with is actually a Financial Planner.
So – you want to make sure the person has a business or a math background; additionally, they should have at least their Certified Financial Planners designation (CFP), which is the gold standard when it comes to Financial Planning. The second designation you should be looking for is the Chartered Life Underwriter (CLU) designation. The CLU designation really focuses in on working with business owners and complex estate planning. Those two designations – either the CFP or the CLU – are what’s really required in order to call yourself a Financial Planner.
Starting this year, if you want to enroll in the CFP program, you must already have a university degree – just like lawyers and accountants need to have a university degree, so will Financial Planners. This is just one step of many that the industry needs to take in order to protect the public.
Currently, I am working on a number of client files and you can see during the information gathering process that many business clients have no clue if they are maximizing the effectiveness of their corporation, and whether or not they are paying way too much in taxes to Revenue Canada.
Just to give you an example…
One client I dealt with had a Critical Illness Policy that they owned, but when I reviewed the documents, I noticed that the brother was listed as the beneficiary of the policy. Now, if this was a Life Insurance Policy, that might be correct, but this was a CI policy. So, I explained to the client that they were making the premium payments, but if they contracted a critical illness, the payout would be going to the brother. Boy, were they displeased when I showed them their own documents. Needless to say, they fired their previous Financial Planner since they clearly didn’t know what they were doing.
Life insurance is a no-brainer to have inside a corporation. Time and time again I see business owners owning life insurance policies personally instead of corporately and that is just not being wise.
Why would you take money out of the corporation – paying 30% or 40% in personal taxes in order to pay for the life insurance premiums – when that policy could be inside the corporation?
Plus, depending on which province you are in, you’re using 11-12% corporate dollars to pay those life insurance premiums. And, if you did pass away unexpectedly, the death benefit would be paid into the corporation, at which point your accountant would prepare paperwork to declare a “Capital Dividend” and the life insurance proceeds would come out of the corporation tax-free. What I’m trying to say is: there is no downside to owning the Life Insurance Policy inside the corporation.
So, again, I ask the question: why are business owners still owning Life Insurance Policies personally? Part of the answer is that the person who “sold” them the product didn’t know what they were doing.
Cash flow management is key to running a successful business. However, during my analysis of many client files, I find out that their current Financial Planner has never taken the client through a Cash Flow Management exercise. Never!
In a more recent client engagement, once we took them through a Cash Flow Management exercise, we were able to save the client $33,000 a year in personal cash flow – which meant we reduced their personal taxes by at least $10,000-$15,000 each year. If we hadn’t come into their lives, they would have continued to make Revenue Canada rich.
If you’d like to learn more about working with an actual Financial Planner, and not somebody who is just trying to sell you products, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
1 416 840 8544