‘Tis the Season for A Financial Review

By Peter Sproule, CFP, CLU, CHS

Certified Financial Planner, Momentum Financial Services Inc.

The end of the year can be an exciting time: getting together with family and friends for some holiday cheer, maybe a vacation, and goal setting and planning for the year ahead. Often, this means looking at our financials over the past year to determine where exactly you want to go from here. We’ve put together a check list to help you get started.

The end of the year can be an exciting time: getting together with family and friends for some holiday cheer, maybe a vacation, and goal setting and planning for the year ahead. Often, this means looking at our financials over the past year to determine where exactly you want to go from here.

We’ve put together a check list to help you get started. If you are in a relationship, this should be discussed as a couple as inevitably, your financial goals will impact one another in some way.

It’s important to note that this list is just a starting point and designed to stimulate conversation – our job as financial planners is to determine the mathematical range of possibilities based on your broad goals or concerns and provide strategies to help you execute towards those goals.

1.Review your financial goals

Many of life’s plans can change over the course of a year, and financial goals are no different. Think about your key financial goals and if they have changed:

• Retirement: Maybe you’ve decided to retire sooner or retire later, or there is a new opportunity that you want to pursue, or one of your children has expressed interest in taking over the business which requires a transition period. Whatever the change, determine your desired age and income needs in retirement.
• Education: Maybe you’ve welcomed a child or grandchild to the family and want to start saving for their post-secondary education needs, or you or your spouse are planning on going back to school to add to your education or change careers.

3.Review your investment portfolio

Each year, our investment portfolio needs will change. Generally, as we get older, our risk tolerance and needs will shift from growth and capital appreciation to that of income and capital preservation. This means our portfolio structure should, too.

At a basic level, it’s better to take on more risk in your portfolio when you are younger as you have time to recover from market downturns and investing’s greatest force: compound growth. As you get closer to retirement, the focus should shift to preserving your retirement funds and building a strong and steady income-producing element in the portfolio.

A portfolio review will help ensure that your assets reflect your stage of life and ensure that you are set up properly for the next stage, be it more accumulation during your highest income years, retirement, or planning for the next generation.

4. Review Estate planning documents

Estate planning provides the greatest relative value when done early and often and tends to happen when there is something at stake – a young child, a new marriage – and then forgotten for years.

Reviewing your wills and powers of attorney (POA) on an annual basis is prudent and can avoid confusion and miscommunication in the event you lose mental capacity or die. Major life changes such as getting married or divorced, buying a home or cottage, changes in residency, death of a loved one can all be reason to update your will(s) or POAs. Over the last year, your estate may have grown in complexity, meaning a corporate executor such as a trust company may be a better option to manage your affairs.

If this sounds overwhelming, start with the basics. Read through your will(s) and POA and determine if your basic goals are met, then dig into the details with a lawyer if you see the need for a more thorough review. Coordinating with your financial planner on this can save both time and legal fees by making sure your estate documents also align with your financial plan and beneficiary designations on accounts such as RRSPs and TFSAs.

5. Review tax planning and income-splitting opportunities

While tax rules on income splitting have become more restrictive in recent years, there are still several options to use income splitting with a partner or spouse to achieve greater tax efficiency in your household. Below are several ways this can be achieved for personal income:

• Spousal Loans
• Spousal RRSPs
• Prescribed rate loan to a family trust
• Pension income splitting

For business owners, there are still ways to split income with family members, but you must be careful to ensure that salaries and wages paid to family member are commensurate to their contributions. We recommend you speak with your accountant to ensure you comply with the CRA’s interpretation.

6. Consider charitable and philanthropic goals and strategy

In the ‘season of giving’, it can not only feel good to support a charity, but it can also be tax-efficient. Having a strategic giving plan can help ensure financial stewardship, instill the values of philanthropy with the next generation, and leave a lasting philanthropic legacy for your family, all while creating some tax benefits to your financial plan.

First, determine what cause or charity you have conviction in and decide on what your support looks like: time, money, or both. Then, talk to your financial planner about how to provide that support in the most impactful way for both the charity and your family.

Want a copy of our 20-point Annual Review Checklist?

Request your complimentary copy by emailing us at info@momentumwealthgroup.com