Provide better tax planning advice & improve clients’ tax efficiency

How can you provide better tax planning advice and improve your clients’ tax efficiency? During this financial planning session, you will learn how to efficiently provide more in-depth tax optimization services to your clients.

The most impactful components of this tax planning lesson for Advisors 

We are going to explore several key tax optimization components (outlined below), but here are the two most impactful take-aways from the session.

1. You can instantly see the positive tax results from simply entering the client’s data into Snap — the defaults within the software do the heavy lifting and automatically result in a net positive tax outcome for the client, when compared to the outcome with no planning. 
2. In addition to the defaults, there are numerous other tax optimization strategies that can be modelled and explored in Snap to further optimize and benefit your clients.

3 scenarios built during this hour

As we move into the case study, we’re going to be building out multiple scenarios that we can compare and optimize. When it comes to focusing on tax efficiencies, we’re going to be exploring some key areas for our case study couple who are planning to retire in just 5 years.

Scenario 1 – without tax planning strategies

• Inconsistent Marginal Tax Rates
• OAS claw back

Scenario 2 – with Snap’s default tax planning strategies

• Pension Income Splitting
• Decumulation strategy for tax minimization and deferral

Scenario 3 – with additional tax planning strategies

• Pre-retirement contributions
• Target annual taxable income in retirement
• TFSA top-ups
• Tax-loss harvesting
• In-kind charitable contributions

The plan

We’ll be creating a series of projections today for our clients Hanna and Ruben Sharp. They’re 55 years old and wondering whether they’re on track for retirement and if there’s anything they can do from a tax perspective to improve their situation.

They’re wondering if they’re on track for retirement and if there are any changes they can make to improve the tax efficiency of their financial picture.

We are going to build 3 scenarios (shown above) during this financial planning lesson.

We will start with the “as-is” base plan, and will work to optimize first with default strategies from the software, and then we will get into some more advanced planning strategies with our 3rd scenario.

We will then be able to compare the scenarios, plus create a one-page financial plan summary report our clients will truly understand.

Watch the lesson

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

Case study details

If you want to follow along, here are the data entry details:

1. Client
   1. Hanna Sharp
   2. Born 1970-01-01
   3. Ruben Sharp
   4. Born 1970-01-01
   5. Living in Ontario
2. General
   1. Retirement Age 60 and 60
   2. FP Canada Guidelines for Inflation Settings
   3. Rates of return as 1%, 2%, 5% (We’ve reduced the assumption guidelines by management fees to arrive at a net return assumption)
3. Expenses
   1. Base Expenses to $108K
      1. Can enter target spending based on the client’s information, but if you don’t know what to enter, keep it $0 and run Sustainable Scenario on the Planning page
   2. Add Additional Expenses of:
      1. Additional Travel of $15K joint from age 60 to 74, Indexed to Inflation
      2. Renovation of $100K at age 61, not indexed to inflation
4. Incomes
   1. Hanna
      1. Employment Income of $130,000 indexed to Inflation until age 59
      2. DBPP (from Previous employer)
         1. Start Age of 60, $45,000, 60%, 1%, $38,000, 60%, 1%.
   2. Ruben
      1. Employment Income of $120,000 indexed to Inflation until age 59
5. Assets
   1. Hanna
      1. Joint Non-reg $300K at 100% FI
      2. Non-reg $230K/$70K at 30%/70%
      3. TFSA $130K at 30%/70%
      4. RRSP $380K at 30%/70%
      5. TFSA Contribution Room of $7K
      6. RRSP Contribution Room of $35K
      7. Home worth $1.2MM with $700K cost, Joint
   2. Ruben
      1. TFSA $125K at 40%/60%
      2. Personal RRSP $520K at 40%/60%
      3. Group RRSP $280K at 50%/50%
      4. TFSA Contribution Room of $7K
      5. RRSP Contribution Room of $50K
      6. Employer Matching to Group RRSP of 5% and 5%
6. Debts
   1. Mortgage of $120K at 5% with $1,800 monthly, link to home
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 57%. You can update this based on the client’s employment history or a Service Canada statement.
   2. Hanna
      1. Change Start Age to 65
      2. We’ll set Percent of Maximum to 85%.
      3. OAS we’ll leave as 65 and 100%.
   3. Ruben
      1. We’ll change the Start Age to 65
      2. Set Percent of Maximum to 85%
      3. OAS we’ll leave as 65 and 100%.
8. Enable Charitable Donations 
9. Three Planning pages: Combined for an overview and summary.
   1. We will use the individual pages for making further updates
   2. Hanna
      1. Set TFSA contributions to $20K and Snap will replace the value with the annual maximum.
      2. $20K to RRSP
      3. $10K annual Cash donations for all years
      4. Discuss expense for Renovation.
   3. Ruben
      1. Set TFSA contributions to $20K and Snap will replace the value with the annual maximum.
      2. $10K to Personal RRSP

Next steps

Please note, this is a more advanced webinar than what typically try to squeeze into one hour.

We’re covering this content now because tax planning has been one of the main votes when I’ve asked you all on previous sessions what you’d like to learn about next time.

With Snap, we be quick and simple, or we can conduct comprehensive planning.

You can sit down with a client or a prospect, enter a few data points, and create basic projections that are highly valuable within 5 minutes. We have plenty of previously recorded sessions on our YouTube page for anyone who would like to see something more basic.

Feel free to save this for future reference or share it with your Advisor friends who may need it.

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