A budget full of challenges for todayís advisors and their clients

The federal government's budget, Economic Action Plan 2012, may be ground-breaking both for its changes to the eligibility age for Old Age Security (OAS) and the disappearance of the penny. But for a government that wants to get its fiscal house in order yet build long-term prosperity, it is a balancing act. And that will require some balancing, too, on the part of professional financial advisors as they work with their clients to build their long-term prosperity.

"It is clear that wealth advisors and tax and retirement planners must pay much more attention to the combined effect of taxes and inflation on returns, after fees, given the numbers in the budget,î says Evelyn Jacks, president of Knowledge Bureau, which teaches Real Wealth Management strategies in its designation programs.

"With personal tax increases of 6.5%, GDP inflation rates of 2.4% and three-month Treasury bills returning only 0.9%, careful investment choices will be required,î she adds, "especially given today's changes to the OAS.î In her story below, Jacks looks at how pre-retirement income planning has changed.

"Its not what you earn that counts,î concludes Jacks, "it's what you keep and what that's worth in the future that matters.î

Knowledge Bureau Faculty Member Alan Rowell, DFA-Tax Services Specialist, and contributor to this Budget 2012 Special Report agrees: "This is the point at which financial advisors need to look across the board and do what needs to be done, not with regards to return on investment alone, but with in-the-pocket net cash when you need it.î

Rowell tackles the changes Budget 2012 has made to the corporate tax regime in his story below.

Advisor Douglas Nelson, MFA and author of Master Your Retirement: How to fulfill your dreams with peace of mind, puts it this way: "In the study of Real Wealth Management, we learn that how well an inter-advisory team of financial professionals coordinates all aspects of a family's financial affairs into one strategic plan is often the greatest contributor to the financial success achieved by that family.

"When the ripple effect of every financial change is weighed, the financial outcome is often much more positive and highly predictable,î he adds. "When changes in a federal budget affect tax rates, inflation rates, government benefits and rates of return, the importance of the Real Wealth Management approach is underscored. This is about how well the advisory team and the client respond to these changes.î

In this Special Report, Nelson assesses the changes Budget 2012 have made to the retirement system in Canada.