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051: Full Practice Management Platform for an Independent Financial Advisor

Full Practice Management Platform for an Independent Financial Advisor

Eight years ago, it would have been nearly impossible to imagine the incredible impact fintech would have on the financial services industry today. And even now, we’re just scratching the surface of what this industry can become in the future. 

In a change of pace, today’s episode is an introduction to one of our favourite podcasts: Fintech Impact. You’ll hear host Jason Pereira interview Tea Nicola, CEO of Wealthbar, and our own Pawel Brzeminski, CEO of Snap Projections.

The Fintech Impact Podcast is hosted by Jason Pereira who explores the fintech space and interviews its major players — both incumbents and newcomers. Whether they’re trying to make existing finance players more efficient or looking to disrupt the industry altogether, this show explores their impact on consumers and the industry as a whole.

Listen in to hear about Wealthbar’s acquisition of Snap Projections, what that relationship will look like going forward, and Tea and Pawel’s shared vision for how fintech can impact the industry — and the lives of average Canadians.

What You’ll Learn in This Episode:

  • Why a partnership between Wealthbar and Snap Projections makes sense (2:05)
  • What the end product looks like for both clients and advisors (6:30)
  • Pawel’s product-building philosophy (16:40)
  • Revealing Tea and Pawel’s wishes for their industry (23:00)
  • The biggest challenges Tea and Pawel have faced in scaling their companies (27:05)
  • What gets these founders out of bed every morning (30:55)

Links and Resources:

Wealthbar

Tea Nicola

Snap Projections

Pawel Brzeminski

Fintech Impact

Jason Pereira

 Quotes from the Episode:

“It just made sense to basically own software that is going to eventually become what I want to see, which is a vision for a full practice management platform for an independent financial advisor.” — Tea Nicola 

“This is technology that’s gonna enable you, not threaten you.” — Jason Pereira

“In a lot of cases, it actually takes an advisor to make adjustments. I don’t think we can really have a fully automated tool that can provide the best solution for every single case.” — Pawel Brzeminski

With their shared goal of transforming the financial services industry in Canada and making the lives of both advisors and consumers easier, Tea and Pawel’s recent partnership is a match made in heaven. Today, they’re opening up about what that vision is, how it brought them together, and the impact they hope to have on Canadians.

Below, we’re sharing three key ideas from this episode:

  • A vision for personal finance in Canada
  • Where automation leaves financial advisors
  • Tea’s wish for the average Canadian

For the rest of the episode, find the podcast on iTunes or Stitcher, or hit the link above.

A vision for personal finance in Canada

Picture a busy mom walking into her home carrying bags of groceries. As she sets them down, she gets a notification on her phone. Maybe her TFSA contribution limit just increased, or RESP season has started.

With one button, she can react to the notification without a second thought. Or, if she wants support making a decision, she can easily get in touch with a real-life advisor who can talk her through next steps.

That’s Tea’s vision for what Wealthbar can be for the average Canadian consumer.

It’s a guided, one-stop-shop for Canadian consumers for everything to do with investing, planning, insurance, mortgages, lines of credit and so on. Most actions can be routine, so users barely even have to think about what they need to do — they can trust that the software’s suggestion makes sense for them. And if they need further support, a human advisor is there to act as their quarterback.

Where automation leaves financial advisors

You might be wondering where exactly this kind of automated system leaves financial advisors. Does it devalue the hard work many have put into their careers? Is it a cheap mimic of the skills advisors and wealth managers have developed over many years?

From Pawel and Tea’s perspective, robo-advisors do just the opposite: they let you manage your time more effectively by taking care of your rote tasks — the administration, much of the research and portfolio management. These tasks, which often take a lot of time, are not the true value-add that an advisor offers clients.

If you’re like one of the many advisors we’ve spoken to and worked with over the years, the part of your job that you love and value the most is the actual relationship with your clients: the advice you can give them when they’re stuck, or making sure their financial plan makes sense not only in terms of the numbers but also in terms of what they seek to get out of life.

This is also doubtlessly what your clients appreciate most about working with you. And if you can spend less time on the dreary routine tasks and more on your clients, think about the impact you can have on their lives.

Luckily, the rote tasks are the exact things that a robo-advisor lets you outsource to automation. It’s just about making more room for you to provide what technology can never replace: the human touch.

For instance, with today’s robo-advisor and planning software, you can generate a pretty solid financial plan and a solid investment strategy. But as Pawel explains, “in a lot of cases, it actually takes an advisor to make adjustments. I don’t really think we can really have a fully automated tool that can provide the best solution for every single case.”

With the time-consuming heavy-lifting out of the way, you can focus on tailoring the plan for your clients to take their plans to the next level. That human aspect — the qualitative details, the behavioural coaching — can’t be replaced by any machine.

As Jason summarizes, “this is technology that’s gonna enable you, not threaten you.”

Tea’s wish for the average Canadian

If Tea had one wish, she would love to see financial literacy among average Canadians increase tenfold.

Currently, Canada scores at about a C-minus for financial literacy. But this is a worldwide problem — sadly, we’re among the most financially literate countries in the world. But as Tea says, “being the best of the worst is still not good.”

For Tea, this lack of financial literacy is not just bad for Canadians — ignorance is actually her biggest competitor. When people don’t know any better, they buy into media sensationalism and fads, believing the hype about the shiny new thing.

If average Canadians knew enough about finance, Tea feels they would realize why they need a product like Wealthbar in their lives. They would see the value of a good financial plan, and they would love to see it better integrated into their lives.

To hear more of Tea and Pawel’s conversation with Jason, and their shared vision for the future of financial services, listen to the full episode right here on this page. You can also find us and subscribe on iTunes or Stitcher so you don’t miss any episodes. 

And to get new episodes directly to your inbox, sign up for our mailing list below.

050: Busting Your Myths and Misconceptions about Financial Advising


Busting Your Myths and Misconceptions about Financial Advising

It’s one thing for the general public to misunderstand what financial advisors do or be mistaken about important principles of personal finance. But what about financial advisors? What myths and misconceptions do you believe that might be holding you back from giving your clients the best advice? That’s what today’s guest is here to talk about.

John De Goey is a Portfolio Manager with Wellington-Altus Private Wealth. He has built a national reputation as a trusted authority on professional, transparent and evidence-based financial advice. He’s written for publications including Canadian MoneySaver, MoneySense and The Globe and Mail, and appeared on television programs like CBC’s MarketPlace, News World and BNN’s Market Call. He’s the author of The Professional Financial Advisor, now in its fourth edition, and STANDUP to the Financial Services Industry, released last year.

In today’s episode, he’ll discuss misconceptions commonly held by financial advisors, why advisors might hold these misconceptions, and what you should believe instead. Listen in to hear more about John’s work, research and advice for advisors and investors.

What You’ll Learn in This Episode:

  • The unglamorous yet insightful reason behind John becoming an advisor (3:35)
  • Common myths and misconceptions in financial advising (5:00)
  • What advisors get wrong about cost (9:15)
  • Why advisors ignore the evidence and recommend activities that don’t add value (18:20)
  • The key beliefs advisors should focus on improving (26:35)
  • Why investors will need to be part of the solution (21:55)
  • Why the reason for advisors’ beliefs isn’t the most important question to explore (38:20)

Links and Resources: 

Standup Advisors

STANDUP to the Financial Services Industry: Protecting Yourself From Well-Intended But Oblivious Advisors

Email John

Quotes by John De Goey:

“There are a lot of advisors that should be part of the solution, want to be part of the solution, but the really ugly secret that a lot of people in the industry don’t want to come to terms with is that there are many advisors that are themselves part of the problem.” 

“Any advisor who is worth his or her salt would do very well to understand that where the rubber hits the road is in the behaviour that they help to enforce or disabuse their clients of.”

“This is perhaps the only industry in the world that I’ve ever found where the low-cost products are the best products.”

We’re so thrilled that for the fiftieth episode of Growing Your Financial Advisory Practice Podcast, John De Gooey is back on the show to celebrate with us. If you missed his first episode, it was all about determining the key assumptions you should use when developing financial projections. Today, we’re looking at the opposite topic: John is here to bust the myths and misconceptions you may have as a financial advisor — myths that could be holding you, and your clients, back.

Below, we’re sharing three key ideas from this episode:

  • What advisors get wrong about cost
  • Why investors will need to be part of the solution
  • The key beliefs advisors should focus on improving

For the rest of the episode, find the podcast on iTunes or Stitcher, or hit the link above.

What advisors get wrong about cost

A lot of advisors tend to act like the cost of products is immaterial. But in fact, cost makes up a full half of the value proposition, the other half being the benefit. When you change the cost of a product, you actually change its value.

Cost is also one of the most reliable determiners of a product’s performance — it’s inversely correlated to product’s performance. Consistently, lower-cost products perform the best over time. But many advisors either don’t realize this or ignore this fact.

This might be because with most things in life, you get what you pay for. A good quality suit or vehicle, over time, deliver far more value than a cheap version.

But when it comes to investing, as Vanguard founder John Bogle used to say, “you get what you don’t pay for.” The more a product costs, the more it eats into your return and the lower your return is expected to be. So, in what might be the only exception in the world, the low-cost products are actually the highest quality products.

This fact is more relevant than ever — in a world economy in which returns are significantly lower than they used to be even just 30 years ago, this information becomes all the more important to apply.

Why investors will need to be part of the solution

For most of his career, John focused on other advisors, working to get them to challenge their assumptions and rethink the advice they give. The whole time, even through releasing four editions of his book, The Professional Financial Advisor, he’s felt ignored and overlooked inside of his industry.

Now, he’s turned his attention to investors. His newest book, STANDUP to the Financial Services Industry is written for clients, and he wants to show them how their advisor may be part of the problem.

While he’s careful to clarify that advisors’ intentions are generally very good — most people don’t go to work every day with the desire to hurt people — the results of poor financial advice can be harmful.

What investors need to do

John encourages investors to take the following three steps in ensuring their advisor is using evidence-based practices in their advising:

  1. Summon up the courage to ask their advisors tough questions (as Canadians, we know this isn’t always easy).
  2. Ask the right questions — John has included a number of questions that he recommends people ask right in his book.
  3. Discern and call out if the answer isn’t evidence-based. John includes some of the best pieces of research on his website for investors to find and use in conversations with their advisors.

There are two things keeping investors from holding their advisors accountable: not having the tools and knowledge to do so, and being too accepting of unsatisfying answers. John’s helping cover the first piece — the latter is up to each individual to combat on their own.

The key beliefs advisors should focus on improving

If there’s one area John wants advisors to focus on, it’s beliefs around behavioural economics and behavioural finance.

More and more, the emerging evidence reveals that investor behaviour is probably the most important factor of financial wellbeing, yet most advisors don’t pay much attention to it, seeing their role too firmly in the investment side of things.

John explains it like this: “When you ask a typical advisor what he or she does for a living, many of them will say, ‘Well I recommend products and I help my clients save taxes,’ and whatever. But some of the more enlightened ones will go a little bit further and say ‘I help my clients by engaging in behavioural coaching.’”

If you can help clients invest in the right registered account or save just $100 more every month, you can have a major impact on their life.

Hint: This sometimes means disappointing your client by correcting their misguided beliefs: rather than just facilitating what it is they want, challenge their assumptions and give them advice about what will actually help them in the long term.

Correcting the implementation gap

One major part of investor behaviour that you should be focusing on is implementing the plan that you put together. You spend so much time and effort doing the proper diagnostics, suggesting great solutions, and coming up with the perfect plan, but none of that helps the client if they don’t actually put anything into action.

A plan that doesn’t get updated or used isn’t worth anything. So along with actually updating plans on an ongoing basis, helping clients implement solutions should be a major focus of financial advising.

To hear more of John’s advice, listen to the full episode where he explores various financial advising myths in depth, speculates as to why advisors hold these beliefs — and explains why that’s actually the wrong question altogether. You can find the show right here on this page or subscribe on iTunes or Stitcher so you don’t miss any episodes. 

And to get new episodes directly to your inbox, sign up for our mailing list below.

049: Unraveling Cross-Border Financial Planning

Unraveling Cross-Border Financial Planning

What unique financial planning challenges do individuals face when they live full- or part-time in the US but have Canadian citizenship (or vice versa?) How can you help clients who straddle two countries? And more to the point – should you always be the one to help them? Today’s guest is diving in deep to help you understand the pertinent issues around cross-border financial advising.

Terry Ritchie is a Partner and Director of Cross-Border Wealth Services for Cardinal Point, with offices in Toronto, Calgary, Irvine, Phoenix, and Boca Raton. He is a Registered Financial Planner in Canada and is enrolled to practice before the U.S. Internal Revenue Service as an Enrolled Agent. Terry is also a Trust and Estate Practitioner affiliated with the Society of Trust and Estate Practitioners. He has been practicing cross-border financial, investment, tax and estate planning for more than 30 years. 

What You’ll Learn in This Episode: 

  • What actually drives people to move between Canada and the United States (6:45)
  • Why cross-border work matters to Terry (10:10)
  • What advisors need to know about visas and green cards (13:40)
  • Important elements of U.S. income tax (23:50)
  • Investment limitations of Canadians in the US (28:10)
  • How cross-border living affects estate planning (37:10)
  • The biggest cross-border planning mistake you can make (43:45)
  • Terry’s #1 tip for growing a career you really love (53:20)

 Links and Resources: 

Cardinal Point

Email Terry

Quotes by Terry Ritchie: 

“I can quantify the numbers that you might be better off from a tax perspective in that jurisdiction or country versus this one. But really at the end of the day, it’s truly around lifestyle. Where are they going to be happiest?”

“It’s just the nature of the business. Markets go up and down… Tax laws change. Family dynamics change.”

“Advisors have a right to say no,” he says. “There has to be a fit – on both sides.”

Terry’s firm, Cardinal Point, offers a total solution to individuals who have Canadian and American financial matters – snowbirds, those who have dependants in one country while living in the other, and those who move between the two countries. And as someone who has financial matters in both countries himself, he has unique insights into what it takes to plan for people like him.

Below, we’re sharing three key ideas from this episode:

  • What actually drives people to move between Canada and the United States
  • The biggest cross-border planning mistake you can make
  • Terry’s #1 tip for growing a career you really love

For the rest of the episode, find the podcast on iTunes or Stitcher, or hit the link above.

What actually drives people to move between Canada and the United States

If you were paying attention to social media around the 2016 American election, you probably would have heard Americans who were dissatisfied with or worried about the results and saying that they would be moving to Canada. However, that flood of Americans moving to Canada hasn’t panned out.

It turns out that tax talk doesn’t much affect people’s decisions about where to live, either.

“I can quantify the numbers that you might be better off from a tax perspective in that jurisdiction or country versus this one,” says Terry. “But really at the end of the day, it’s truly around lifestyle.” It’s about where they see themselves living and where they will be the happiest.

Healthcare is often a big factor, but family is the biggest reason for people choosing to live in one place over another. Terry has had clients go through many of the steps required to permanently move to the United States… until a grandchild in Canada came along and changed all of their plans.

It’s important to know all of the factors going into a move or change of citizenship, but people rarely act purely in their financial best interest – and that’s ok.

The biggest cross-border planning mistake you can make

The biggest mistake Terry sees financial planners making in the area of cross-border planning is… well, taking it on at all. If they’re not well-versed in it, that is.

If it’s not your niche, the truth is that you probably don’t have the skills needed to do cross-border planning effectively. And it’s not subject matter that you can just brush up on in a weekend seminar and be ready to go.

If one thing is clear from Terry’s advice, it’s that cross-border planning is very complex. From limitations on holding investment accounts depending on where an individual resides or has citizenship to multiple sets of tax laws to immigration… there is a lot of liability for the client, for you, and for your firm.

Not to mention that all of these laws change from year to year, and just keeping up with the updates and knowing how they’ll affect clients is almost a full-time job in itself.

If you don’t have the background to take on a certain aspect – or even the entirety – of your client’s planning, there’s nothing wrong with bringing someone else in or referring them to someone who can offer them the services and experience they need most. Yes, it can be hard to let go of the AUM (and the pay that comes with it…), but, put simply, “if you don’t know what you’re doing, you shouldn’t be doing it.”

Hint: If you’re looking for advice on working with other financial professionals, listen back to the show with Cindy Radu, where she discusses bridging the gap to work effectively with other advisors.

Terry’s #1 tip for growing a career you really love

Terry really wants you to take away that you don’t have to do everything for every client.

At the beginning of your career, it’s easy to feel like you have to take on any client and do whatever they ask you to do, even if it’s not within your preferred niche.

But, says Terry, “advisors have a right to say no. There has to be a fit – on both sides.”

It’s definitely not worth it to take on people you call tell are jerks – they’re only going to cause you trouble down the road. Work with nice people so that you look forward to meeting with them and putting in the work for them. You’ll not only be happier – you’ll likely do a better job for them, too.

This goes for your niche, too. If you know what niche you want to serve (and Terry recommends having one), don’t feel like you need to work for clients who aren’t a good fit for that niche. Your time is valuable, so the time you put into your business should be spent building your expertise in a particular area, not catering to anyone who comes along.

Terry’s firm has this very well defined: they only offer full-service solutions, not individual services. If someone’s just looking to get some tax advice, they’re not the right fit.  “We’re not for everybody, but for those people that we can serve, we try to do a really, really good job.”Defining guidelines

In addition to working with good people on work you want to do, make sure you’re clear for the beginning on what the relationship is and what kind of work you will or won’t do. Setting up clear boundaries is the best way to avoid uncomfortable situations in the future.

For more helpful advice from Terry, make sure you catch the full episode where he talks about the ins and outs of the tax, estate planning, and immigration considerations that can affect financial planning. You can find the show right here on this page or subscribe on iTunes or Stitcher so you don’t miss any episodes. 

And to get new episodes directly to your inbox, sign up for our mailing list below.

048: Transforming the Financial Planning Industry into an Evidence-based, Fiduciary Profession


Transforming the Financial Planning Industry into an Evidence-based, Fiduciary Profession

It’s one thing to build up your own practice. But as we approach the end of the year, we’re taking a step back to look at what it takes to build an entire profession. Today’s guest is here to show us what the financial planning industry can become at its best.

Jason Pereira is a Senior Financial Consultant with Woodgate Financial Inc and IPC Securities Corp. He is one of Canada’s most respected authorities on financial planning, the financial industry, and financial technology. He’s been awarded 7 industry designations including the CFA, CFP, and RFP. He has won and been named a finalist for several industry awards, and he is the only 3-time winner of the PlanPlus Global Financial Planning Awards. 

Jason is also the leader of a growing group of financial advisors seeking to improve financial planning, both for advisors and consumers. As the president of the newly launched Financial Planning Association of Canada (FPAC), he’s here to talk about his hopes for the future of financial planning in this country.

What You’ll Learn in This Episode: 

  • Why FPAC exists and what its goals are (2:40)
  • Why FPAC needed to be a new organization in order to reach its goals (10:30)
  • How FPAC will benefit the public (15:30)
  • How FPAC plans on handling enforcement (17:05)
  • The benefits of FPAC membership to advisors (21:40)
  • What types of memberships are available (27:05)
  • What the reception for FPAC has been like in the industry (29:45)

Links and Resources:

Financial Planning Association of Canada

FPCA Charter

Email Jason

Woodgate Financial Inc 

Quotes by Jason Pereira: 

“This is a coming together of like-minded individuals who want to see the professionalization of planning in Canada, and to basically move this industry and this country forward.”

“We’re trying to create the member body that basically is going to push for active change.”

“We’re not going to be able to build the industry up if we don’t provide the resources to do that.”

You might remember Jason from an earlier episode of the show (and if you didn’t, do take the time to hear his advice for competing – and winning – in the Canadian HNW segment). However, today’s show is a little different as we’ll be hearing from Jason about his passion project of transforming financial planning from a sales-based industry to a robust profession in Canada.

Below, we’re sharing three key ideas from this episode:

  • Why FPAC exists (2:40)
  • The goals of the Financial Planning Association of Canada 
  • The benefits of FPAC membership to advisors (21:40)

For the rest of the episode, find the podcast on iTunes or Stitcher, or hit the link above.

Why FPAC exists

Jason and others started FPAC out of frustration with the status quo of financial planning in Canada. He was seeing that worldwide, among established and even many developing markets, Canada is far behind in terms of its financial planning infrastructure.

While there are many planners who want to see the landscape improve, there hasn’t been a committed yet accessible members’ association that can use the strength of numbers to push for real change.

As Jason puts it, “this is a coming together of like-minded individuals who want to see the professionalization of planning in Canada, and to basically move this industry and this country forward.” This means pushing for regulatory, technology, tax and legal changes to build out an ecosystem supportive of a strong financial planning profession.

The goals of the Financial Planning Association of Canada 

Looking at other countries and different industries, Jason and others outlined an end state for what the industry should look like. They broke that ideal down into three main goals.

Fiduciary-level planning

This is the cornerstone of professionalization. Most consumers just assume that financial planners have a legal obligation to act in their best interest – but that’s not the case. There are certainly organizations that ask or require their members to act in clients’ best interests, but the legal weight doesn’t back the requirement up.

To be a member of FPAC, you must pledge from the first day that you will act as a fiduciary. FPAC is also calling for a legal fiduciary standard for anyone calling themselves a financial planner.

Higher professional standards

Speaking of which, right now in most provinces anyone can call themselves a financial planner – the term doesn’t really mean anything. The result is that the level of service and competence can vary wildly. 

FPAC wants the term financial planner to mean something. They also want there to be no question that anyone carrying a CFP or RFP can provide sound financial planning.

Evidence-based financial planning

Too many advisors operate on unproven heuristics, assumptions, and rules of thumb. FPAC wants advisors to operate based on evidence.

Are you recommending an investment portfolio? Make sure you have a solid risk tolerance questionnaire to back it up. If you’re advising on insurance, you have to have a solid needs analysis, and so on.

The benefits of FPAC membership to advisors

On the surface, belonging to FPAC might sound like signing up to follow a lot of rules. But Jason is committed to building up the resources planners need to help them reach the required standards. “We’re not going to be able to build the industry up if we don’t provide the resources to do that,” he explains.

While they’ve only just launched the association, they will be rolling out major initiatives to help planners improve their practices.

Best practices wiki

FPAC is creating a wiki of best practices that will act as a guide on how to run your practice from start to finish. While anyone can edit it, there will also be curators to help create definitive guidelines and suggestions and ensure the content doesn’t become outdated.

Planning portal

Jason sees this as a hybrid between an academic journal and a concept library. It will include how-tos on everything planning-related, all backed by evidence and research. For example, if you’re executing an individual pension plan, there will be a definitive article on what that is, where it fits into a financial plan, how to implement it, who to go to and what tools you can use.

You can think of it as a one-stop repository for how to actually plan for your clients.

A large online forum

They will also create an online forum for members to participate in. This will work to build a community of members who can help one another raise the bar for financial planning in Canada.

Opportunities to give back

Jason has been hearing from colleagues across the country for years that there’s not a great structure for financial planners to offer financial planning services pro bono. As a result, they want to build a pro bono community to connect financial planners with communities that most need their help.

Trust

Jason’s vision is that as consumers start to learn about FPAC, they will demand its standards of their own financial planners. Consumers want to be able to trust their financial professionals, and they will seek out those who are demonstratively working for them.

If you want to learn more about FPAC, be sure to listen to the full episode and check out the FPAC charter. And come back in two weeks for more great financial planning advice from experts like Jason.

You can find the show right here on this page or subscribe on iTunes or Stitcher so you don’t miss any episodes. And to get new episodes directly to your inbox, sign up for our mailing list below.

047: Transitioning Family Wealth: How to Increase the Odds of Success


Transitioning Family Wealth: How to Increase the Odds of Success

Family businesses inevitably come with complex scenarios for a financial advisor to sort through. But the biggest complications may not be what you expect: the emotional aspect of family, business, and money is often the foremost concern when beginning conversations around business transitions. Today’s guest brings a rock-solid technical background and soft skills that helps her see the full picture and help families navigate the wealth transition landscape.

Cindy Radu is a family wealth transition advisor. She works with individuals, family enterprises, business owners and family offices to maneuver the complexities and opportunities of multi-generational wealth. Cindy has over 25 years of legal, fiduciary, trust and governance experience, giving her a bird’s eye view of the many issues families can face.

Listen to the episode to hear how Cindy frames wealth, family enterprise, and success in a way that helps her clients handle the complicated financial and emotional factors involved in transitioning family wealth.

What You’ll Learn in This Episode:

  • Rethinking the key issues around transitioning wealth and family businesses in Canada (8:05)
  • The difference between a family business and a family enterprise – and why it matters (11:10)
  • Cindy’s first steps when advising clients (18:45)
  • How Cindy bridges critical gaps by working effectively with other advisors (25:25)
  • Helping families avoid assumptions and get on the same page (33:40)
  • What wealth and wealth management really mean (39:30)

Links and Resources:

Cindy Radu

Cindy on LinkedIn

Email Cindy

Quotes by Cindy Radu:

“Way too many families are willing to stake everything they work so hard for on basically a hope and a prayer that everything is going to turn out alright.”

“Referrals from clients are frankly the strongest possible referrals that you can get.”

“I’ve been successful in my practice because I’m able to bridge those emotional and technical aspects of the wealth planning and transition.”

Cindy has been a Chartered Accountant and estate planning lawyer, and she’s also worked with large financial institutions. And yet all of her work has had one common goal: helping families through transitions. Today, she shares her experience to reframe the conversation around family wealth transitions.

Below, we’re sharing three key ideas from this episode:

  • Rethinking the key issues around transitioning wealth and family businesses in Canada
  • The difference between a family business and a family enterprise – and why it matters
  • What wealth and wealth management really mean

For the rest of the episode, find the podcast on iTunes or Stitcher, or hit the link above.

Rethinking the key issues around transitioning wealth and family businesses in Canada

There are nearly 900,000 family businesses in Canada. Together they contribute to over 60% of GDP, employ over 6 million people, and donate annually $1.5 billion to charity.

However, successful wealth transition from the first generation of a family business to the next only has a 30% chance of success. Worse yet, the chance of a second generation transitioning their wealth to the third generation is a measly 10%.

So where does this failure come from? If you look at what most financial professionals focus on, you’d think that tax and financial planning problems are the major issue. However, together these only contribute to about 3% of transition failures.

Here’s how the other 97% breaks down:

  • The vast majority – about 60% – of wealth transition failures come from a breakdown in communication and trust between family members.
  • Around one quarter of failures is due to the next generation not being adequately prepared to be good stewards of the wealth.
  • In just over 10% of cases, a lack of mission or vision contributed to the failure.

These numbers are a stark wake-up call to anyone who believes that financial planning is all about the numbers. That’s why Cindy focuses most of her time on bringing multiple generations of a family to the table and helping them find common ground.

Hint: You’ve probably heard of the Pareto principle, which states that 20% of activities generate 80% of results. In this case, think of the amazing results you could have just by getting two or even three generations of a family discussing their plans together!

The difference between a family business and a family enterprise – and why it matters

The difference between a family business and a family enterprise amounts to a critical difference in how Cindy helps families.

A family business is exactly what most people think it is: a business owned and run by a family. They vary in scope, from your local corner store to McCain, but they’re all considered family businesses.

A family enterprise, on the other hand, includes the family business as well as all the other elements that make up a family’s financial situation: real estate, art collections, investment portfolios, registered investments, insurance products and so on.

Traditionally, we break these things out, with different experts taking on different asset classes. And that makes sense because each area is itself rather complicated. But when they just work in a silo at different points in time, the family enterprise as a whole gets forgotten.

Without really knowing how all the pieces fit together, it’s impossible to get a clear picture of the family as a whole. That’s why a major aspect of Cindy’s work is liaising with different financial specialists and making sure everything fits together in a way that helps – not hurts – the family members themselves.

Hint: For more on working effectively with other professionals, listen to our interview with Jamie Robb.

What wealth and wealth management really mean

When asked about how Cindy approaches wealth management, she pointed out that everyone has a different definition of what it means. And in most cases, the definition is far too limited – usually just involving investment management.

Cindy has been trying to shift the meaning of capital beyond just the financial – though that part matters, too. “This term of wealth management for me,” she says, “really is a very, very broad term that encompasses all of the financial, social, human, and intellectual capital that a family has, all tied up in a bow around a shared dream of where that family wants to get.”

So when Cindy works with a family on wealth transition, she’s always keeping in mind all of these pieces – not just the family business, not just the family enterprise, but the family members themselves, too.

To hear more from her on how she works successfully with teams of advisors and specialists, why you need to be honest about your blindspots and what post-mortem exercises can reveal, make sure you listen to the full episode. You can find the show right here on this page or subscribe on iTunes or Stitcher so you don’t miss any episodes.

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