DAC 2013 – Day 2: Make Better Collaborative Decisions While Deepening Client Relationships

Collaborative decision-making was the name of the game for Day 2 of DAC 2013 in Ojai, California.

The day kicked off with Stig Nybo, president, pension sales and distribution for Transamerica Retirement Solutions. While getting clients to save more for their retirement is a challenge, Nybo said advisors have a role to play in inspiring clients to change their behavior. “If you make it easy for people to act, they will act,” Nybo told attendees, giving a powerful, entertaining and insightful speech on how to do just that. 

Unfortunately, creating portfolios that produce consistent retirement income is hardly a straight line. You can do the right things and still fall short because of two unknown variables: longevity (we don’t know how long we will live) and investment performance (we can estimate rate of return but ebbs and flows of the markets make it hard to predict). The key is to cover the bases and minimize the risks, says Scott Mackenzie, president and CEO of Morningstar Canada, who took the audience on a journey into managing for Gamma.

Most clients simply hope not to outlive their money and leave a little something behind for their loved ones. But do these expectations meet reality? Many affluent families worry about their kids squandering their inheritance or not having a sense of purpose for their life. A panel about “affluenza” addressed these underlying issues. Affluenza means not knowing how to handle a huge amount of money, noted panelist and financial writer Deanne Gage. The panel advised the audience to set up family meetings with the younger generation to understand each family member’s financial point of view. “If the advisor relationship is only with the parents, the kids will find another advisor, taking the inherited assets with them,” notes panelist Kevin Gebert, a financial advisor with Greenrock Financial and newly published author of Financial Fotographs.

Panelist Jordan Kerbel, filling in for Gordon Pape, emphasized the importance of involving kids early in financial discussions. When children start to earn income, they should begin filing tax returns to build RRSP contribution room, and open a tax-free savings account when they turn 18.

Panelist Deborah Kerbel, co-author of Money Savvy Kids, noted how her advisor had never asked about her kids despite knowing she had two young ones — the most important focus in most parents’ lives. The advisor had never even discussed financial options for post-secondary education. She recommends offering advice and tips to help parents raise money-savvy kids. It may not be financially rewarding right away but the gesture will help to create a loyal client base that includes other family members; a most important part of collaborative wealth management.

In Day 1, DAC 2013 attendees learned most of the country’s growth would most likely come from small business owners and entrepreneurs. Larry Frostiak spoke about the benefits of incorporation, namely a largely reduced tax rate that allows the owners to put more money back in their business or invest in other people and preserve wealth. “The corporate environment is ideal for wealth preservation in that it is not eroded as quickly as it is by personal taxes, and at the same time, not as readily accessible to be personally spent,” he says.

That said, at some point, entrepreneurs still have to prepare for someone else taking over their business or winding up the business entirely, says Dan Kelly, president and CEO of the Canadian Federation of Independent Business. “Over half of entrepreneurs plan to exit their business over the next five years,” he says. “Only nine per cent have a formal, written succession plan.”

Instead they are busy running their businesses and often dealing with a difficult marketplace. Now too they must wonder how a mandatory increase to the Canada Pension Plan premiums would impact them. To fund the change, Kelly says businesses would likely freeze salaries and/or decrease investments to the actual businesses. “If we are not careful, there will be a lot fewer businesses providing jobs to Canadians,” says Kelly, whose members do not believe such changes would be positive to the business growth environment Canada is hoping will pull it out of its current tepid growth pattern.

Advisors are entrepreneurs too, and Patrick Kennedy has a strategy for how they can position themselves for future growth.

“It’s not about what [clients] aren’t doing today but what they ARE doing in your book today,” says Kennedy, PriceMetrix’s co-founder and vice-president of product and client management. In other words, consider the quality of your relationships and how they fit with your proposition rather than the quantity, and keep a close eye on pricing metrics in the process.