Financial Regret: Helping Canadians Avoid It

Evelyn Jacks

Most people don’t wake up thinking “today is the day I am going to do my will or buy life insurance or explain to my adult children what my wishes are in case of my incapacity.” Or for many, as burdensome is this: “today I am going to talk to my heirs about transferring my substantial wealth to them, because they have no idea what’s coming.” Yet as tough as these topics may seem, doing nothing has a significant consequence few people consider: Financial Regret. That’s something tax and financial advisors can proactively assist with, and the Real Wealth Manager (RWM™) designation program, in particular, can provide the framework to make these conversations easier. Here’s what you need to know about Financial Regret:

Financial Regret comes from the things you didn’t do when you could plan for them and actually do them. Consider the consequences of not doing them:

• Big Missed Goals: Without a definitive plan, buying a home, starting a business, or funding children's education can and will slip out of reach.
• Working Longer Than Planned: Do you know of Baby Boomers who would like to retire to live their best lives, but who must still work, because they aren’t financially ready?  Perhaps they didn’t arrange their affairs for business succession? 
• Retiring Sooner than Planned: From a career point of view, perhaps there is an unforeseen job termination and loss of health insurance or pension plans?  
• Underestimated Health Care or Caregiving Responsibilities: Sometimes life events can get in the way of best laid plans: the sudden and unplanned caregiving for a spouse who has suffered a stroke, an adult child with a severe addiction who must have help or a grandchild whose parents have divorced.
• Unchecked Behaviors Leading to Financial Trauma: Gambling addictions and bad choices with money may have left you or a family member destitute – that happens more frequently for single males than females according to Statistics Canada. However, a significant 76% of the Canadian population, equivalent to 19.5 million adults aged 18 to 70 years old, have been classified as ‘Not Financially Resilient”, by the Vancouver-based Financial Resilience Institute with 22% of Canadians with a household income exceeding $150,000 clocking in at ‘Extremely Vulnerable’ or ‘Financially Vulnerable’ based on their June 2023 Index.
• Day Trading Leads to Losses: Study after study it is clear, over time, that going it alone isn’t profitable, according to a substantive summary by Enlightened Stock Trading. Further, an estimated 73-81% of retail crypto app users had likely lost money on their initial bitcoin investment by the end of 2022, according to BIS Working Paper 1049. And there can be substantial tax risk as well – activities that are considered “business activities” rather than passive investments that qualify for the capital gains treatment, are an example. 
• Leaving Estate Chaos Behind: Neglecting estate and inheritance planning can result in family conflict, legal hurdles, and most importantly, tax-diminished assets that do not reach the client’s intended goals.

There Is Urgency To By Proactive. At a time when Canada is undergoing the most significant wealth transfer in history, intergenerational planning is still very uncommon. A sweep of recent surveys provides a good picture of this gap:

• 48% of Canadians have no will in place (CIBC study)
• 54% of Canadians have no estate plan and no legal plan for cognitive decline (IG Wealth Survey)
• 6% of business owners have a formal written succession plan, according to the CFIB and those with a formal plan are far more confident in achieving a successful exit (86% versus 54% among those with no plan). Businesses acquired through a formal succession plan are also more likely to experience a smooth transition (81%).

Failing to prepare properly for wealth accumulation and transfer exposes both the individual, the family, the estate and its beneficiaries to steep tax erosion, potential legal delays, and in particular family conflict. Most people would rather their heirs, than CRA or lawyers, get the most of their lifetime legacy. Just the taxation alone, is poorly understood

• Deemed Disposition Taxes. Canada Revenue Agency (CRA) treats most assets—such as the second home or cottage, non-registered investments, and RRSPs/RRIFs—as being deemed disposed of at their fair market value upon death. A spousal rollover is possible to defer tax once, but there are opportunities to plan to reduce tax before the second spouse’s death, when the tax options for asset transfers are well managed before the death of the first. Without astute planning, though, a massive final tax bill can force heirs to sell important assets such as family cottages or businesses just to pay the CRA.
• Probate Delays and Fees. Without a valid will or proper beneficiary designations, assets must pass through provincial probate courts. Most provinces charge estate administration taxes (probate fees) based on the estate's total value, directly reducing the net inheritance.
• Family Fighting. Ambiguous wishes, unequal gifts, or blended family dynamics without clear legal documentation often spark costly legal battles among siblings and surviving spouses.
• Studies from the Williams Group show that 70% of wealth transfers fail by the second generation and 90% fail by the third generation, largely due to a lack of communication and financial preparation rather than poor investment returns.

And that’s where Real Wealth Management comes in. 

Founded and taught by Knowledge Bureau, Real Wealth Management™ is a comprehensive, multi-advisory approach to intergenerational planning that focuses on maximizing and maintaining the real, inflation-adjusted value of a client’s income and wealth over time to enable not just sustainability of resources and purchasing power when needed; but also Real Wealth – financial peace of mind.

Bottom Line. If you are a tax or financial advisor who can see the need for a formal, co-ordinated and professional approach to inter-generational wealth planning in your client base, enrol in the RWM™ Designation Program. It will make this task easier and help you lead proactively. 

Here’s how to register for the program