I recently came upon a case with one of my clients who called me and stated that they had to pay an additional $2500 in income tax for 2016. I thought that was strange, as they have never had to pay such a high amount. Upon reviewing their tax return, I noticed some additional dividend income and capital gains… After discussing these with the client, they had some funds with another advisor (which is totally ok), however that advisor had made some transactions and investment decisions that triggered this large tax bill. It didn’t help that the client had received a raise in 2016 and was making more money than they had in previous years.
This is the difference between a Financial Planner and an investment advisor. The investment advisor had obviously done a decent job in investing the money, however they didn’t take into consideration the numerous other factors that should be considered before making a decision with their money. CRA should always be a factor in making the types of investment one makes. I have seen situations where people have been bumped out of Guaranteed Income Supplements (GIS) or have had their Old Age Security (OAS) clawed back because of improper planning. They made too high of returns and missed out on significant government benefits. I know what you are thinking, that this is a good problem to have, however, there are ways to minimize this risk and ensure that the client receives the amount they are entitled to, and get similar returns on investment!
In closing, the major difference between an Investment advisor and a Financial Planner is exactly that, the Plan. A good planner should look at all the facts, both hard facts and soft facts before making a recommendation. That is why I focus on the people first, and not on the product.