Tuesday, May 5th14.8°C
David Allard

The rules are changing

In recent years, a number of countries, including England, Australia and the United States, have changed the regulatory framework that governs their financial institutions. Included have been changes to formalize client communications and create greater transparency in fees.

While industry is constantly striving to improve compliance standards and suitability requirements, there is nothing like a market meltdown combined with a financial crisis, to accelerate the improvement agenda to warp speed. 2008-2009 was no exception. The carelessness and blatant disregard for the rules by some of the World's major investment banks, global ratings agencies, and government regulators were all catalysts in the almost complete meltdown of the global financial system. This had far reaching consequences for stock exchanges, regulators, sovereign treasuries and banks the world over; whether they were complicit or not. Even though Canadian institutions faired relatively well, Industry is implementing similar reforms here at home. Many changes have already been made with the remainder being phased in over the next 18 months.

Building upon the existing requirements that help to ensure fair and honest dealing with clients, the Investment Industry Regulatory Organization of Canada (IIROC) has introduced the Client Relationship Model (CRM). At its core are three key principles designed to enhance investor protection and strengthen the client-advisor relationship:

  • Transparency regarding the relationship between the client, service providers and firms (e.g. information on account types, services provided, transactions and account fees);
  • Transparency surrounding performance of the account;
  • Disclosure of any conflicts of interest.


What will this mean for you?

Because the fundamental principles of CRM are a core part of the way Industry has always tried to serve clients, many of the changes may not be perceived. While in other cases the changes may be apparent, but will not fundamentally change the advisor and client relationship. How this affects you will depend upon your situation, your account types and the securities that you hold.

Significant changes have already occurred in the areas of understanding your risk profile and investment suitability. In some cases, paper work and documentation requirements have increased, but in general the challenges in implementing the new regulations are operational in nature that are borne by the institution.

The two most visible changes are slated between now and July 2016. They will include the reporting of all fees a client pays (trailing commissions, management fees, transactional commissions, and deferred sales charges) on an annual statement and the calculation and reporting of account performances on an annual basis.

While the body and timing of these changes is still considered proposed, the expectation is that they will ultimately be enacted as written.

If you have questions regarding these changes, please feel free to connect with Jeff at [email protected] or link directly to IIROC’s site at www.iiroc.ca


What's your score?

There was a time when we would sit down with nothing more than a sheet of paper and a sharp pencil to do the math. Totalling our expenses and subtracting our revenue, the amount left over was the answer to the question, “Can I retire now?”

While the basic calculations haven’t changed, the number of options, our life expectancy and the vibrancy of retirement health have conspired to give us more to think about. Over and above the financial realities, we now consider lifestyle, purpose, our social networks and the legacy we want to leave behind. Healthcare and accommodation needs are two major areas we must plan for. As we live longer, each of these areas becomes more critical to the quality of our retirement years. The better we prepare for the future, the greater the probability of it becoming our reality. Two of the core components of planning well, are to measure your progress and to monitor regularly how well you're doing.

We use a tool in our advisory business called the Retireability Score. It was conceived and developed by my partner, Dave Allard, as a way to create a snapshot of our client’s retirement preparedness. It covers eight of the core considerations in retirement ranging from hard issues to soft. The key components of retirement that the Retireabilty Score measures are:

  1. Vision
  2. Health Care
  3. Interests
  4. Social connections
  5. Accommodation needs
  6. Lifestyle
  7. Financial
  8. Legacy

The online questionnaire takes 10-15 minutes to complete. At the end, you will receive a score out of 100. This score will reflect your preparedness across the retirement spectrum. If you would like to receive a summary of the report that shows how you scored in the individual areas you can request it via email when you’re finished. The complete report is available at a cost, your score and summary page are both free of charge. If you would like to know your Retireability score click the link and complete the questionnaire. The Retireability Score is a great snapshot of where things stand for you right now and it’s also an excellent way to begin thinking about the key issues in retirement.

Questions or comments? Navigation Wealth Management

Living with Plan B

“It does not do to leave a live dragon out of your calculations, if you live near him.”
J.R.R. Tolkien, The Hobbit

Human beings are optimists by nature. Whether we are talking about our ability to drive, the state of our physical health or our outlook for the future, our default is generally to the positive. In part, that is why we have risen to the top of the food chain - at the same time it can leave us vulnerable and exposed when things don’t go our way. It’s why it’s so important to consider alternative outcomes when planning for retirement.

Too often we build our plans based on best case scenarios: how long will it take us to get to work in rush hour; how much will it cost to build our dream house; how long will we be healthy and active as we age? For some people the answers to those questions are often: looks like we’re going to be late, we’re over budget by how much, and what do you mean I need to replace the other hip now?

Contingency plans are the key to a successful retirement. With a well thought out retirement plan we should consider the potential for things to shift, and map out the steps to take if they don’t. For most of us, those back-up plans tend to be financial in nature but the broader emotional and personal impact need to be considered as well.

Ward and June worked hard to raise a family and build a successful business. They saved and parlayed those funds into an early retirement. For twenty years now they’ve made an annual pilgrimage South to enjoy the sunshine, the golf, and the friends who mean so much to them. In fact many of the friends they spend time with down there are friendships that began long before they retired and a few even date back to when their children were in school together. Three years ago, Ward had a series of health emergencies down South. He had to spend several weeks in a US hospital eventually being medevaced to a hospital in Canada, where he had to convalesce for six long months at home.

As Ward’s health returned, and a winter at home passed, he and June began to make plans to head South for the winter. The first roadblock was the cost of health insurance. With a pre-existing medical condition, costs skyrocketed and even finding a company that was willing to underwrite a policy was difficult. Ultimately restrictions within the policy required them to leave the US, return to Canada and then fly back to the US in order to have coverage for the length of time they wanted. To add to this, the fall in oil prices saw the US dollar appreciate substantially against the Canadian dollar making everything 20-25% more expensive than the last time they had been down.

These were the financial considerations, but there were also personal concerns that couldn’t be quantified. The possibility of another winter in Canada would mean being apart from the people and friendships that have become such an important part of their lives. The depth and colour that these connections brought to their life would be hard to replace; yes they had family at home, but the kids were busy with their own lives and those of their children. 

Fortunately, the story has a happy ending; Ward’s health continued to improve and as a result of careful planning in earlier years, they were in a position to weather the financial difficulties. They went South and enjoyed the heat of an Arizona winter. 

This isn’t the case for all people though; often these kind of curves can be devastating to retirement plans. Aging parents with dementia or major health problems, boomerang kids going through job lay-offs or marital issues can all put a strain on the best laid plans. The unexpected could mean holding off on downsizing the family home—with the empty nest full again. Scarce resources which were earmarked for retirement may suddenly be needed to cover unexpected healthcare costs or “getting-back-on-the-feet” expenses. That isn’t to say that we shouldn’t be willing or happy to help family in need; it just means that we always need to consider the other side of things and have a Plan B in place- especially in retirement.

Do I have to file tax return?

Personal Tax Return Filings

Many people assume that they don’t have to file a personal tax return because they don’t have a balance owing. This isn’t the best rule of thumb to follow. Filing is mandatory in the following situations:

  1. There are self-employment earnings that were subject to contributions for the Canada Pension Plan(CPP) or Employment Insurance Premiums (EI);
  2. Capital property was sold in the year;
  3. Spouses elect to split pension income; or
  4. CRA sends you a request to file a return.


Sometimes filing a tax return is technically not required, particularly when there is no income to report. However, there are situations when it makes sense to file a return regardless of having no income such as claiming:

  • A refund of tax withheld at source;
  • Tax credits such as GST/HST; and
  • Tax benefits and supplements such as: Canada Child Tax Benefit (CCTB); working income supplement, etc.


Filing a tax return is essential to receive benefits such as Guaranteed Income Supplements. It is also the easiest way to establish your contribution room for a Tax-Free Savings Account (TFSA).

Students are also able to carry forward or transfer unused tuition, education, or textbook amounts. Reporting earned income also creates RRSP contribution room.

In addition, when applying for a loan or mortgage, the bank may request a copy of a Notice of Assessment for income verification purposes.


Commonly Overlooked Tax Breaks

Some people pay more tax than needed simply because they tend to overlook some of the savings available to them. Common omissions are as follows:

1.  Capital Losses

Losses from buying or selling shares in an unregistered account can be carried back to offset capital gains realized in any of the three preceding years or carried forward indefinitely.

2.  Pension Income Splitting

Individuals who are 65 years of age or older can allocate up to 50% of eligible pension income to a spouse. This can result in significant savings when one spouse is in a lower tax bracket than the other.

Read more Navigating Retirement articles


About the Author

Jeff Stathopulos, CIM, CFP, Portfolio Manager

After two decades in the financial services industry, Jeff's experience as an advisor and branch manager define his approach to providing customized financial planning, estate planning, and managed income solutions. Key to this approach is a thorough understanding of the unique challenges and goals that exist in every client's life. He is a partner in Navigation Wealth Management.

Jeff holds the Certified Financial Planning and Chartered Investment Manager designations. He lives in Kelowna with his wife Tanya, and their two (almost adult) enterprising children.


You can contact Jeff by email at [email protected]

Website:  www.yourlifeyourplan.ca


The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.

These articles are for information purposes only. It is recommended that individuals consult with a financial advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

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