How Advisors can build a one-page financial plan report and model the proposed changes to capital gains inclusion rates.

May 15, 2024

Learn to confidently discuss corporate planning opportunities with your clients.

May 14th’s corporate planning webinar had over 500 Advisors register to attend. Attendees got to see two new and exciting planning capabilities during the Case Study — how to create a one-page financial plan report and how to model the impact of the proposed changes to capital gains inclusion rates. The session was CE-accredited, but live attendance was required to gain the Credit. 

Canadian Financial Advisors, Planners, and Investment Managers are eligible to start a 14-day Free Trial of Snap Projections financial planning software.

 

 

This session was fully inspired by requests from our March financial planning webinar, Learn how to efficiently provide highly personalized planning for 3 different client goal types. A big thank you to everyone who took the time to provide your feedback and suggestions!

Corporate planning received the most votes by a landslide so the focus will be on how you, as the Advisor, can provide your incorporated clients with more value.

If you are not currently offering corporate planning, our goals for you are:

  • to learn language and discussion points around corporate planning
  • to gain the confidence to have high-level corporate planning discussions with your clients
  • to learn how corporate planning can be layered onto personal planning in practice
  • and finally, to see how Advisors are presenting this information to their clients in a way they can understand

 

For those of you already providing corporate planning, our goals for you today are to:

  • to uncover new corporate planning ideas and opportunities to explore with your clients
  • to learn what Corporate functionalities exist in Snap and how to best leverage them
  • to learn how to model the impact of corporately-owned life insurance
  • and to get an update on our most recent reporting improvements

 

 

I’d like to introduce you to today’s case study client, Olivia Garcia

Olivia celebrated her 50th birthday in January, and is hoping to retire in just ten years.

Olivia is a a small business owner paying herself a salary from active business income and accumulating retained earnings within a holding company.

  • How can we combine corporate distributions with personal resources to ensure her spending goals in retirement are achievable?
  • How could corporately-held life insurance be leveraged, and what other items should we consider for an optimal outcome?
  • How can we share this information with Olivia in a way that makes sense to her?

 

The plan for the hour:

Our first projection models a small business owner paying themselves a salary from active business income and accumulating retained earnings within a holding company. It demonstrates how corporate distributions can be combined with personal resources (e.g., government benefits, RRIF withdrawals) in retirement to achieve the client’s personal spending goals.

Our second projection illustrates the potential benefits of corporate life insurance in situations where the client has surplus cash in the corporation that will not be required for personal spending needs.

Our third projection shows how corporate distributions can be optimized with consideration for notional account balances, personal tax rates, and personal resources. It displays how Snap’s automated withdrawal algorithm can be customized and overridden to achieve your desired drawdown.

Once we’ve completed our recommended projection, we’ll discuss the pages available in the Client Report to help explain the assumptions and results of the projection to the client. We’ll show how to customize, summarize and present a PDF that is tailored to the projection and the client’s needs.

 

Canadian Financial Advisors can now create a one-page financial plan summary report with Snap Projections financial planning software.

 

Initial case data:

Projection 1: Base Case

 

  1. Client
    1. Olivia Garcia
    2. Age: 50 (1974-01-01)
    3. Province: British Columbia
  2. General
    1. Retirement Age 60 with rates of return as 1%, 2%, 5%
    2. Using recently released 2024 FP Canada assumption guidelines
  3. Expenses
    1. Olivia is targeting a retirement after-tax, inflation-adjusted income of $80,000
    2. Plus Additional Travel of $10,000 from 60 to 74
  4. Incomes
    1. We’re going to show Olivia’s salary being paid from the corporation
  5. Assets
    1. Non-reg of $50K ($40K cost base) at 30% / 70%
    2. TFSA $110K at 30% / 70%
    3. RRSP $325K at 30% / 70%
    4. TFSA Contribution Room of $7,000
    5. RRSP Contribution Room of $32K
    6. Home worth $800K with $450K cost
  6. Debts
    1. Mortgage of $125K at 5% with $1,800 monthly payment
  7. Gov’t Benefits
    1. By default, the Start Age is set to the year of retirement (or as early as possible thereafter). And the Percent of Maximum is set to the national average value of 55%. You can update this based on the client’s employment history or a Service Canada statement.
    2. We’ll change the CPP Start Age to 65 and set the Percent of Maximum to 75%
    3. OAS we’ll leave as 65 and 100%
  8. We have additional pages available to add Life Insurance, conduct a Life Needs Analysis, add RESPs, customize settings, and add Corporations. We’ll proceed directly to the corporate input section.
  9. Corporation
    1. We’ll call it Evolve Design
    2. Non-Eligible RDTOH Balance of $15,000
    3. CDA of $20,000
  10. Assets
    1. Investments $500K, $400K Cost 30% / 70%
  11. Corporate Planning Page
    1. Operating Income: $450K to age 59 (index at 2.1%)
    2. Olivia’s Salary: $200K to age 59 (index at 2.1%)
    3. All Expenses $50K to age 59 (index at 2.1%)
  12. Personal Planning Page
    1. RRSP Contribution of $32,000 indexed for inflation
    2. TFSA Contribution of $10,000, we’re over-contributing to maximize any future contributions
  13. Corporate Planning Page
    1. Non-Eligible Dividend of $70K (index at 2.1%)

 

Canadian Financial Advisors, Planners, and Investment Managers are eligible to start a 14-day Free Trial of Snap Projections financial planning software.

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