Archive: Personal Commentary

Complete your Will & Power of Attorney in 15 minutes!

In 2016, a survey was conducted and determined that 56% of Canadians do NOT have a will (or power of attorney).  Below is an excerpt from RBC Insurance explaining the consequences of dying without a will:

“Many people incorrectly assume that if they were to die without a Will their estate would simply pass to their spouse. However, this would only happen for assets that were held jointly with right of survivorship with the spouse.

In Canada, if you die without a Will you are considered to have died “intestate.” Simply put, this means that your provincial government decides how your assets will be divided—and not you.

Each province has intestacy rules that define your estate’s beneficiaries and how much each is to receive. Usually, this means your legal spouse and biological and adopted children will likely end up with your estate’s assets. Intestacy rules, however, do not take into account any intentions you may have for distributing your assets. Even worse—intestacy can result in additional legal costs for your beneficiaries.

Most provincial intestacy rules do not recognize common-law spouse status, so he or she may be left out of the estate entirely. However, in most provinces, a common-law spouse may petition the courts for support as a dependent, leading the estate into litigation and further costs.

No matter what your family situation, intestacy does not take into consideration any intentions you may have for the distribution of your estate. For your peace of mind today and your family’s peace of mind tomorrow, making a Will is an easy, inexpensive solution.” (source: https://www.rbcinsurance.com/insuranceneeds/insurancewill/dying-without-will.html)

Over the past several months I’ve been working with the founder/owner of a company called “Willful”.  This company provides Canadian families the opportunity to get a will completed online for as little as $100 (mirror wills for spouses costs $250).  The online experience is so simple and takes no more than 15 minutes (below is a screen shot of the simple ‘point-and-click’ method).

An example of the very simple point-and-click process offered by Willful

To be clear, I recommend having an estate lawyer draft a personalized will and power of attorney (that’s what I did), but this service gives clients the ability to get a will completed quickly and effectively without the huge costs.

I have no ownership or financial interest in this company or product.  As a trusted advisor, my job is to help people arrange their affairs and this service provides a simple and cost effective solution.

Use my promo code “laundry” and you will receive a 10% discount.

 

*Important: Bill S-201 (Genetic Non-Discrimination Act.)

I know most of you rely on me to be more up-to-speed than you on insurance-based changes/issues. That said, there was much discussion about Bill S-201 that was largely overlooked because of the exempt test changes effective on January 1, 2017.

Here’s the scoop…..on May 4, 2017, the Federal Government passed the Genetic Non-Discrimination Act.

“This law makes it illegal to require someone to take a genetic test or disclose the results of a genetic test as a condition to obtain goods or services, or enter into a contract, such as insurance.”

So what exactly does that mean?  It means that individuals (you, me, clients) can have genetic testing completed and NOT DISCLOSE those results to the insurance company (it’s now illegal). If an insurance company uses/requests this information and it will be fined $1,000,000.

When I was in Ottawa at calu weeks ago, they are lobbying this issue to the supreme court, but as of today, this law is in effect.

The major unintended consequence of this new law is the creation of anti-selection for insurance purposes. What if a client had genetic tests that showed they were a carrier of the BCRA gene (ie. Angelina Jolie)? Currently, it is possible for a client to have a test showing they are a carrier of this gene, then immediately apply for critical illness insurance and not need to disclose this result.

This law will require the insurance insurance companies to (a) increase price heavily (up to 65%) and/or, (b) completely change the structure of critical illness insurance (or stop selling it entirely).

Since I knew that this change was happening, I literally just increased my own critical illness by $825,000 (I purchased a 20 year term with Manulife).  See my summary below:

Laundry CI

It’s important we talk more about critical illness insurance before products start to change. I also encourage each of you to consider adding some critical illness to your own insurance portfolio (if you haven’t already).

“Prescription Before Diagnosis, is Malpractice”

Back in 2012, I attended an education conference in Las Vegas.  Frankly, I was disappointed at how little product and tax education that was being provided.  Instead of education, it seemed that the entire conference was focused on sales strategies (ie. increase sales, increase production, etc. etc.).  Honestly, I was having a really hard time sticking around.

On the second day of the conference, there was a speaker who during his ‘sales-focused’ session, used the phrase, “Prescription before diagnosis, is malpractice.” For those who do not know, I spent the first 8 years of my career working directly with physicians, so I started thinking really hard about what that expression meant in the context of my business (insurance/planning).

This was my conclusion………..in my opinion, the reason so many people hate talking to insurance agents (investment advisors aren’t too far behind), is that traditionally, insurance agents “prescribed” insurance products to their clients.  No time or effort was used to diagnose what insurance (if any) a person/family needed (often, the only insurance discussed was mortgage insurance).  Worse still, professionals have never been required by their governing body for a needs analysis or plan before “prescribing” their insurance and/or investment product to make sure the client was well educated and informed (although things have been changing in recent years).

In the Financial Planning industry, “diagnosis” comes in the form of a financial plan and tax planning.  I rephrased the old expression to read, “Insurance and/or investment products that are sold, before a financial plan and tax planning, is non-compliant”.

My point is simple…..insurance should not be “prescribed” until a financial plan or needs analysis has been complete.  The case studies in this blog are examples of detailed “diagnosis”.

If you have never gone through the financial planning process, or have never had an insurance needs analysis completed, I strongly recommend reaching out to your financial advisor and book a meeting.

A Collaborative Conversation with an Old Friend

Last week an old friend and former colleague of mine (John Cruise) had one of those ‘random and unexpected’ great telephone conversations.  I was driving from a meeting and called John to shoot-the-breeze.  45 minutes, later, I arrived at the office and felt invigorated about our conversation and wanted to share.

By way of background, John is a CFA (Chartered Financial Analyst) and does the same type of advanced financial planning that I do (www.ckwealth.ca).  We were talking about client situations and John asked me the following question:

“When you look at a specific client situation and you had to rank the importance of the following 5 planning items, how would you rank them?  Those 5 items are: Tax Planning, Goal Setting, Investment Selection/Allocation, understanding the behaviour(s) of the client and developing a financial plan?”

There was only one difference between John’s answer and mine, but that’s what made this conversation so thought-provoking.  John told me that his list, ranked most important to least important was:

  1. Goal Setting
  2. Create a Financial Plan
  3. Understanding the Behaviour(s) of the client
  4. Tax Planning
  5. Investment Selection/Allocation

My ranking was as follows:

  1. Understanding the Behaviour(s) of the client
  2. Create a Financial Plan
  3. Goal Setting
  4. Tax Planning
  5. Investment Selection/Allocation

In just about every introductory financial planning meeting that I’ve had, when I ask the client about their financial goals, they always tend to be the same; “I want to have enough money to retire”, “pay off debt”, or “travel more” (in fact, most financial planning questionnaire’s include these as pre-populated answers).  These goals are not only predictable, but they are not specific enough for me to provide any expertise or clarity.  There is no emotion and absolutely no substance or rationale to help me develop a plan.

Instead, my goal for the first meeting is to learn the behaviour(s) of my client and try to understand the psychology of “why” have they amassed a certain level of wealth.  I try to figure out “why” they want to retire (I’ve learned that most don’t want to stop working, but rather work less).  I challenge business owners.  “Who’s going to buy your business?  How much is it worth?”

My goal is to ask a lot of pointed, personal, strange, engaging and otherwise ‘different’ questions to inspire discussion and get reactions (ie. Do they roll their eyes?  Do they get excited/angry?  Do they noticeably pause before answering specific questions?).

My point?  I use the information and emotions that I collected from the first meeting to develop the first draft of their financial plan.  When we have our next meeting, we have a new, more powerful and engaging conversation.  Better questions are asked, more clarity arises and “presto”, we start developing more specific goals based on the financial context to our conversation (ie. they see where their cash flow will come from.  I demonstrate what impact this has on the money left to their heirs, etc.).  The plan often needs to be revised/tweaked, but by then, the solution(s) start to become more obvious (ie. investment selection, tax planning, etc.).

Thoughts?  Please provide some comments.