Year end is almost here, so this month’s newsletter is a testiment to the fall season. Remember to get your charitable donations completed before year end (especially for gifts of securities!), and if you are turning 71 this year, you will also need to convert your RRSP to a RRIF.
There is probably no better confirmation of fall in Canada than driving in October and listening to the radio. Inevitably, as October finishes and November begins, I always note that two songs begin to dominate the radio – Ghostbusters by Ray Parker Jr., and of course, Thriller by Michael Jackson. I’ve been forever trained to think of falling leaves and Halloween candy every time I hear Vincent Price’s voice. I think it’s also safe to assume that it is impossible for many of us to not yell “Ghostbusters!” every time someone asks, “Who you gonna call?” I seriously need to get that phrase out of my head, but it appears to be stuck on repeat….I should forget it in time for next fall!
The song, however, ties in nicely to a recent conversation I’ve had on exactly that topic – who do you call for advice when making financial or charitable plans? A few weeks ago I was invited as a guest on a webinar for charity fundraisers run by my dear friend Betty-Anne Howard, a fellow Financial Planner from Eastern Ontario, along with our mutual friend Peggy Killeen, who among many other things is the head of development (fundraising) for the CAGP Foundation, the charitable arm of the Canadian Association of Gift Planners. Peggy and Betty-Anne are two of my all-time favourite people. They are wise, deeply passionate and firm believers in the importance of advisors and fundraisers having constant dialogue, which was the theme of the webinar.
During our chat, while talking about estate gifts or more complicated gifts, Peggy brought up that one point of potential frustration for fundraisers is that at some point, the fundraiser asks the donor to go back and talk to their “financial advisor” as the next step, and that often things stall. The fundraisers on the call (and perhaps many of our readers) were stunned to hear Betty-Anne and I explain that there is no such thing as a “financial advisor” in Canada, or at least nothing with a universally agreed-upon meaning.
Lots of names, so little clarity
Imagine for a moment, that you were Peggy’s donor, and she asked you to talk to your financial advisor. Who would you call? For some people, it might be the person who handles their investments. In the industry, that person is often called an “Investment Representative”, or “Portfolio Manager”, or something similar. However, that person might only be looking at your investment portfolio and its performance. They may have little to no knowledge or training to help give you advice on a charitable gift.
Some folks might have a “Financial Planner”, which across most of Canada is still not a well-defined title, as most provinces have no regulatory requirements on the use of the title. Here in my home province of Ontario, fortunately, there is a move afoot (finally!) to formalize the qualifications needed to hold yourself out as a Financial Planner. To make things more confusing for many people, Financial Planners may also be an Investment Representative, and might be able to help you with investments and insurance, or, they might be a fee-for-service only planner who handles no product, but works with you to look at bigger picture items. In Peggy’s scenario, this is probably the kind of professional the charity is thinking of when they ask you to talk to your “financial advisor”. Even then, many financial planners have little or no training in handling planning around philanthropic gifts.
Of course, a different kind of financial advisor is an accountant – but even that term can have different meanings, despite being one of the most well-regulated titles. Accountants are often a key person to talk to, as they can provide advice on the tax impact of a gift you make now or later in your estate. Still, I find that the general public doesn’t always understand the difference between a qualified accountant (who would hold a CPA designation), and a person or firm offering “accounting services” such as bookkeeping. I remember one client interaction years ago, where our client had a disabled adult son. In reading through the clients will, I realized that the son would benefit from something called a Henson Trust, a specialized trust for disabled adults that is created in the parent’s will. I suggested to the clients that they should speak to their accountant and lawyer about the topic.
A week later, the client called me up and said he wasn’t going to bother, since his “accountant” didn’t think it was very important. I found out a year later that his accountant was not actually an accountant – instead it was a bookkeeper, who confided in me that he didn’t know what a Henson Trust was. “I didn’t want to look bad in front of Mr. X, so I just told him not to bother”, is what he told me. A qualified accountant – holding a CPA designation – would have at least had some basic knowledge of the trust I proposed and encouraged him to talk to his lawyer. I was aghast and went back to the client and insisted he consult with his lawyer, and fortunately, this time he agreed. The client had just assumed that his bookkeeper was a qualified accountant and had the skills and knowledge to advise him – which was, as it was abundantly clear, he did not.
Finally, there’s one other important financial advisor in many people’s lives – their close friends and family. Many times, and especially when thinking of charitable gifts, we will go and talk to the people closest to us for input and advice. I often see seniors thinking of making estate gifts having discussions with their children for input. Friends and family can be an important sounding board, but it’s incredibly important that you always get professional guidance. I once met a family whose mother took financial advice from her bridge friends to save $1,500 in probate fees, only to end up paying $76,000 in income tax instead. There is no substitute for qualified advice!
Looking for an advisor with some basic philanthropic understanding?
Fortunately, a new professional designation, the MFA-P (Master Financial Advisor – Philanthropy) has been recently created, and I’m pleased to say I was one of the professionals who helped develop content for this designation, and the first person in Canada to complete the full program. The designation is a joint project between the Canadian Association of Gift Planners, Knowledge Bureau and Spire Philanthropy. Our hope is that the MFA-P will be adopted across Canada as a new standard for financial practitioners of all types and help us grow the list of qualified advisors of all kinds who can help you evaluate a proposed donation or charitable plan.
Getting advice doesn’t have to be scary – and to borrow from Vincent Price’s thriller voiceover, you just want to make sure you find someone qualified long before “your midnight hour is close to hand!” Just remember the next time that Peggy or one of her colleagues asks you to review a proposed gift with your financial advisor, that you take the time to make sure you get to chat with the right kind of professional.
PS -Please enjoy the delightful irony of our usual disclosure below…
The information provided is accurate to the best of our knowledge as of the date of publication, but rules and interpretations may change. This information is general in nature, and is intended for informational purposes only. For specific situations you should consult the appropriate legal, accounting or tax advisor.