Fall Federal Budget: Will Spending Be Cut?

Canada has historically presented an annual budget since Confederation in 1867, even through periods like World Wars and the Great Depression, but we have recently experienced the longest period without a full federal budget in our history. By the time the next one is brought down, expected in October 2025, it will have been 18 months since the controversial April 2024 budget which introduced the doomed capital gains inclusion rate hikes. What can we expect?

Key message of Mick Kelly's speech on the deepening role for advisors in retirement income planning: "People don't change because they see the light, they change because they feel the fire.î Mick presented a dynamic interactive session with live polls and thought-provoking ideas, many of which were validated with interactive live polls with audience. 1. Demographicsówhat is the advisor's role in: a. Dealing with an aging population that is living longer b. Retirement years that are longer and therefore more expensive c. Canadians underestimate amount they need for retirement and need help with planning d. Market turmoil has jolted retirees sense of financial security, and so they are ready for help. 2. 5 Key Risks to Securing Retirement Income a. Longevity ñ must plan for longer retirement& Canadians underestimate amount needed for retirement b. Asset Allocation ñ long list of solutions; know what is available in market place c. Inflation ñ erodes purchasing power even if low; must be addressed d. Withdrawal rate ñ Don't run out of money before you run out of breath! Mick suggested the ideal rate is 4.2% e. Healthcare ñ biggest issue in next 10 ñ 20 years 3. Retirement income is a distinct discipline a. Advisors need a formal deliberate process ñ have a written plan b. Customization of plans goes up as affluence goes up

Gordon led us through the harsh realities of retirement in this ever changing global world and provided advice for solutions to these realities. His new book, by the same title outlined the following key points for advisors: 1. Incredible changes have taken place from 2005 to 2011 that affect retirement Surprising stats: more than 2/3rd Canadians plan to work after age 65: 38% due to not enough money 56% will retire debt free; 2 in 10 have a financial plan; 5% relying on lottery win to fund retirement 2. 8 Harsh Realities were outlined, including the following: demographics changing as boomers age; pension plans are dying; governments can't help; we aren't saving enough; we really don't know what we are doing to get out of the predicament; there is no safe place for our money; our tax system works against seniors; and, we have to make sacrifices to live a longer more financially stable retirement. 3. Financial Advisors need to offer the solutions ñ help retirees have a plan (only 21% of Canadians have a financial plan); pay off debt; know your pension plan; keep building the RRSP; tailor TFSA to goals; help clients help themselves to a better lifestyle; minimize taxes; be multi-dimensional in retirement planning.

Pat Foran delivered an inspiring message about the role of the advisor in helping families with young children become more financially literate; an integral part of the financial recovery. Highlights of Pat's speech included: 1. People need your help a. As Consumer advocate with CTV Pat receives hundreds of calls a week from Canadians who have made financial mistakes b. Advisor role needs to include educating clients and their children 2. Report on Task Force on Financial Literacy a. Financial Literacy means having the knowledge, skills and confidence to make responsible financial decisions. b. Some key recommendations coming from the task force: i. Financial literacy needs to be in public education curriculum ii. Website run by federal government with information and resources is a key hub for ongoing education iii. Ongoing public awareness campaign is necessary iv. Financial service providers should put a strong emphasis on delivering educational information and ensuring it is fully understood in "teachable momentsî. 3. The Smart, Savvy Young Consumer a. New book written by Pat just released this month, moving up the bestseller lists, published by Knowledge Bureau Newsbooks. b. Help for young people aged 14 ñ 34 c. Financial advisors need to pay attention to the young people and assist in their financial literacy education, and so should support this book as a valuable Christmas gift this year.

The morning sessions were led by Evelyn Jacks as opened the conference with outlining the road the world is on to financial recovery and the issues still facing us on a personal, national and global platform. Three key points emerged: 1. For the first time in history we are in a global financial crisis, hence an unprecedented challenge to find solutions to recovery. For individual investors it's what can be controlled that's important: a. Debt to disposable income ratios are at their highest levels ñ 150% to personal disposable income b. Financed Minister Jim Flaherty has warned, "Get your financial house in orderî in anticipation of higher interest rates in the future. 2. Recovery is going to come, but from the grass roots, rather than a macro level a. The growth of private business b. The careful and disciplined growth of wealth at a personal level 3. Wealth advisor needs to be positioned in primary role with clients to best help: a. Relationship model offering wealth management services is not enough b. Disciplined process and advice required c. Financial advisors role is as Educator, Advocate and Steward is paramount d. Knowledge Bureau's Real Wealth Management framework can help build sustainable wealth in the recovery; clients will identify highly skilled advisors with the DFA-Specialist and MFA Designations.

Delegates were treated to a fabulous morning of sunshine, good camaraderie and thought- provoking presentations as the Distinguished Advisor Conference (DAC) opened to a sold out crowd in Palm Springs. Master of Ceremonies David Christianson welcomed five speakers, who shared their views on the financial recovery in a slowing global economy. Reporting live on the sessions is Suzanne Wray, Business Relations Co-ordinator with Knowledge Bureau: Welcome to the Live Report of the 2011 Distinguished Advisor Conference from sunny Palm Springs, California! I will be reporting daily from the conference and sharing with you some of the key points expressed by our distinguished lineup of expert speakers. These reports will not be able to convey the wonderful atmosphere or networking opportunities being shared amongst the 160 attendees, however, they will provide you with a taste of the in-depth knowledge being shared and whet your appetite for the 2012 Distinguished Advisor Conference in beautiful Naples, Florida, November 11 to 14, 2012! The DAC began on Sunday, welcoming our students, sponsors, speakers, faculty and staff to this fabulous resort and sharing some of the first impressions. Our sponsors Advisor's Edge and City Press assisted with the distribution of materials, venue guides and name tags. The opening reception saw delegates gathered around on a terrace overlooking the gorgeous outdoor pool area and shared refreshments and lively conversation at a reception sponsored by our Lead Sponsor, Standard Life. All of our sponsors were recognized with a beautiful plaque and hearty rounds of applause. Yesterday's sessions start bright and early with Evelyn Jacks kicking things off with her take on Financial Recovery in a Fragile World. We are looking forward to stimulating presentations and interactive discussions. Tune in for all the highlights ñ you won't want to miss it!

Effective and equitable taxation requires a defined tax base. In Canada, income taxes are levied from a ësource'. The Income Tax Act (the Act) does not define ëincome' anywhere- it has always been based on the source concept. Segregating income by source was first conceived in the United Kingdom in a piece of legislation titled Addington's Act of 1803. This legislation allowed taxpayers to file separate returns for each source of income so that no single government official would know the total of each person's income. The distinction between capital (the source of income) and income itself was explained by Justice Pitney of the United States in Eisner v Macomber (1919): "The fundamental relation of ëcapital' to ëincome' has been much discussed by economists, the former being likened to the tree or the land, the latter to the fruit or the crop; the former depicted as a reservoir supplied from springs, the latter as the outlet stream, to be measured by its flow during a period of timeî. Capital gains or losses arise from the sale or disposition of the source itself. Section 3 of the Act is unavoidably tautological: "The income of a taxpayer for a taxation yearÖis the taxpayer's income for the yearî. Sources of income are listed (office, employment, business, property, and capital gains), but they are not exhaustive. Thus, Section 3 states that any other source is also taxable. Income from each source is determined by: a) Characterizing receipts as either income or capital; b) If income, classifying it by source; c) Deducting expenses applicable to each source to establish net income; and d) Aggregating the various sources of net income per Section 3. As a result of various government social policies and objectives the source doctrine is not completely followed in every circumstance though. For example, Section 12 lists specific inclusions and Section 81 specific exclusions. The source doctrine does not include gambling gains or gifts and inheritances in income. The reason for this is that these represent non-recurring amounts or the transfer of old wealth; according to the source doctrine, income involves the creation of new wealth, and these do not stem from a productive source. A residual category of exclusion, called ëwindfall gains' has proven problematic in Canadian tax jurisprudence. According to the ëSurrogatum Principle', another British legal doctrine adopted by Canada, amounts received in place of income from a source may be included in income. For example, amounts received as civil damages, or for breach of contract or tort can be classified as income (legal rights to income stemming from a source). Greer Jacks is updating jurisprudence in the EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients. His subject is a bitterly disputed, and expensive one and he reflects on his experiences in reading recent cases. Additional Educational Resources: Evergreen Explanatory Notes and DFA-Tax Services Specialist Designation  NEXT TIME: A PLEA FOR TAXING CONSISTENCY: Two examples will show the difficulty that Canadian courts have had in attempting to apply these principles of taxation.