Author Archives: bpp

About bpp

Accountant, Certified Financial Planner passionate and inspired daily by entrepreneurial endeavours.

Dear Doug: Unclaimed Property Legislation is “For the people” and will help you pay for promises

There’s approximately $2 billion+ in Unclaimed Property sitting with various financial organizations across Ontario that needs to be returned to hard-working Ontarians but a large portion of that would ultimately also serve the Ontario budget in a big way now and in years to come. All we need to make that happen is long awaited Unclaimed Property Legislation to be initiated in Ontario. Such legislation fits the definition of “For the People” and for the Province.

Unclaimed property legislation is an important part of consumer protection – missing in Ontario

Ontario is the single largest jurisdiction in North America without unclaimed property law to protect consumers. Such legislation is an important aspect of consumer protection which is why all jurisdictions across the US have had such legislation in force for 50 years or more. Unclaimed property legislation also exists across the UK, Australia, New Zealand and most recently, Kenya.   In the last 10 years legislation has finally been enacted in Alberta and Quebec both offering a centralized database for searches but differing slightly in the assets that are included. BC has had legislation in place since 2000, but there is a voluntary element which is unlike any other jurisdiction.

There is no reporting of unclaimed assets which makes looking for lost assets difficult to say the least

But it is Ontario that remains the most disappointing outlier as Canada’s largest province where much of the financial sector is located. If you live in Ontario and you or a loved one have misplaced or lost a financial asset, the lack of legislation makes it hard for you to find those assets. If your Grandfather Jack made you a beneficiary on an insurance policy and forgot to tell you about it before he passed away and you don’t find any details about the policy in his belongings, you’re out of luck. There is no obligation for an insurer to look for beneficiaries even if the insured has likely passed based on age. If your Mom invested in an Ontario Savings bond 20 years ago and she died without telling you, the bond is part of the $70 million or more in unclaimed/matured Ontario Savings bonds sitting idle because the Province has indicated, it’s “not their job” to look for bond holders even if they know the address when issuing a T5 for tax purposes to the bond holder. If your Dad had an account with an Ontario Credit Union 30 years ago that he forgot about, it’s still there waiting for him because Ontario Credit Unions have been waiting for the Ministry of Finance to tell them where to send inactive and unclaimed credit union accounts for more than 20 years. Section 182 of the Ontario Credit Union Act (1994) indicated that unclaimed accounts should be set aside but didn’t specify where to forward them.  Whereas, in the case of federally regulated banks, Canadian dollar accounts without activity for 10 years or more are forwarded to the Bank of Canada by December of each year and added to the unclaimed account registry available online.

Unclaimed Property Legislation would be a Win/Win for the people of Ontario and the Province

Ironically, Ontario was the first Canadian province to pass unclaimed property legislation in 1989, in an effort to “safeguard the rights of owners of intangible property by providing a method for owners to recover, in perpetuity, their intangible property held by others. “  The program as envisioned was to rely on the services of the Public Trustee to administer the program on behalf of the province, “to hold and to return lost and forgotten property”. The Act also specified that unclaimed intangible property was to be used for the benefit of the people of Ontario until the property was claimed by its owner.  That’s the way it works in the US. In the US, despite central databases and proactive promotion to residents to look online for any missing money, a good portion of over $70 billion total in unclaimed financial assets collected across  each State will remain unclaimed and so those funds are used to support state treasuries, in particular education, infrastructure and health care. Indeed, in most US states, while claims can be made in perpetuity by legal owners or by their heirs, it’s been long considered good public policy to put unclaimed property to work which is why unclaimed financial property is a big and growing revenue generator ranking 3rd after corporate and personal tax. That makes unclaimed financial property legislation a win/win for owners and for government.

Ontario has had 2 false starts with Unclaimed Financial Property legislation

Despite the interest of those who could benefit from Unclaimed property legislation, the statute for unclaimed property legislation in Ontario was not proclaimed into force after being passed in 1989 and was repealed 22 years later in 2011. The 2012 budget announced Ontario’s intention to try again and create an unclaimed property scheme that would mirror that of the US. But despite myself and other stakeholders attending and providing input to those consultations with the Ontario Ministry of Attorney General in 2013, there has been virtually no follow up.  After making several inquiries, the only  response I could gather from the now former, Attorney General’s office was that it was “not a priority” This despite the fact that the proposed program for unclaimed intangible property could be fairly easily initiated utilizing the Uniform Unclaimed Intangible Property Act, which was developed by the Uniform Law Conference of Canada many years ago. The rules are written we just need it to move forward.

Ontario is a disappointing outlier despite an approximate $2 Billion in unclaimed financial assets

And so here we are in 2018 with Ontario remaining as the single largest outlier in North America when it comes to unclaimed property legislation.  That’s due to the fact that Ontario has an estimated $2 Billion + in unclaimed or lost financial assets in the form of unclaimed provincially regulated bank/trust/credit union accounts, insurance policies, share certificates, dividends, unclaimed wages, bonds, pensions and other property types including prepaid funeral deposits, utility deposits and tax refunds etc.  Without any legislation there is no duty for organizations holding unclaimed property to report on or to relinquish those assets or to look for those who have lost track of their financial assets (or the heirs of legal owners).

If you think that’s a lot of money here’s a comparable. The State of Illinois has had unclaimed property program in place since 1962 and has a population of about a million less than Ontario. The State of Illinois Treasurer’s unclaimed property program – now known as I-Cash  is currently safeguarding 15 million properties valued at roughly $2.9 Billion and working to reunite each with its rightful owner. 1 in four residents of Illinois who search the I-Cash database finds property to claim with an average claim of $1,000. 1 in 8 of residents living in Illinois has unclaimed property and in the last 2 years more than $300 million has been paid out to legal owners by a proactive Illinois Treasury.

No one loses track of their hard earned and generally tax paid financial assets

To be clear, no one loses their hard earned and generally tax paid financial assets on purpose. Assets generally become lost as a result of a tragic event, forgetfulness, missing or damaged records or human error. In Ontario because there is no law that requires the holders of unclaimed financial assets to look for the asset owners, generally they don’t.  Much of the unclaimed or lost financial assets owing may not be life-changing windfalls, but I believe that hard working Ontario residents deserve to have one place to search & find those unclaimed financial assets. Given that it’s 2018, it should not be this difficult to move forward to do what’s right when it would benefit consumers, taxpayers, and our cash strapped government treasury.

It seems at least to me so very “UnCanadian” to not move forward with unclaimed property legislation and do what’s right for the people of Ontario when ultimately it might serve to also be an economic action plan in waiting for Ontario and help the new Premier pay for some of his promises.

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Only 2% of Advisors know how to maintain the next generation of clients

From Advisor.ca article “Adapt to Wealthy Client Needs, or else” by Dean Dispalatro October 2013

Mr Dispalatro writes in his article about some wisdom shared by Keith Sjogren, managing director of consulting at Investor Economics including what he outlined as the 3 trends impacting the wealthy. 

  1. Sluggish economic growth resulting in income being depressed and personal wealth not growing
  2. Concentration of wealth in Canada’s is growing steadily. Those with more than $1M in investible assets now control 2/3 of the country’s wealth
  3. Debt reduction is a top priority with the wealthy

All of this leads Sjogren to conclude that the wealthy need more advice; but wealth management advice not investment advice. He also suggests that more attention should be paid to those with high incomes who have not yet accumulated assets of $1M as they probably will as real estate or business interests are sold and inheritances are received 

But he also points out the demographics of wealth at play.  By 2022, more than half of wealthy people will be older than 65. & that demographic is not made up of conspicuous consumers but  capital protectors with a big focus on leaving a legacy for their children. Hence, he concludes that advisors should shift their focus from “accumulation to preservation.”

Indeed the $900 billion that is set to change hands in the next 10 years.at least half will happen in wealthy families, making estate planning a key priority offering. But the issue remains; advisors are not doing an adequate job of getting to know the families of their clients;  which as he says “is a sure-fire way to lose the next generation when wealth changes hands

Investor Economics data backs this concern up.  When assets are transferred to a widowed spouse, only 55% keep the same Advisor.  When assets are transferred to the children, a whopping 98% move to a different Advisor.

Even millionaires are procrastinating

This from a 2010 article ” Wealthy Worry about Next Generation” in Advisor.CA magazine by John Powell 

Referencing a study by RBC Wealth Management of Canadian Millionaires:

  • 58% of millionaires think their children are facing an uphill battle when it comes to managing their finances
  • 49% don’t have confidence in their children’s abilities to manage the inheritance. 
  • 67% feel it is their responsibility to preserve wealth for future generations and leave their children with a healthy legacy,
  • But, 39% have no estate plan to speak of.

Contradictory?
Tom McCullough President/CEO of Northwood Family Office chalks it up to people just being human and not wanting to face what the future might hold for them and their loved ones. 

“Estate planning is complicated. It is about the future. It is about death. They don’t want to have to make those decisions now,” he explains. “I think it is one of the most important things people need to do is to sort through their personal affairs and their estate but there are a lot of folks who don’t do it, don’t get to it or don’t know how to do it.”

Thane Stenner, Founder/Director of wealth management at Stenner Investment Partners, an independent private family office group within Richardson GMP Limited, is not surprised by RBC’s findings as it mirrors the results of his own company’s research from 2006. which highlighted the top concern of the high-net worth clients as being how their children would handle the family finances in the future.

“What is interesting is there still seems to be some procrastination taking place. That is not surprising. Most successful, wealthy families are busy. They have a lot on the go. Estate planning or issues like that are never seen to be urgent and that is one of the reasons why a lot of the times quite candidly, that estate plans are not updated and are not properly papered,” says Stenner

Canada -34 Million people but Billions in Unclaimed Funds ?

$320M  Now…$500M* in the Bank of Canada (5 year change)LegacyTracker Poster

$125M Now    $259M*   in Matured CSBs (5 year change)

+ 20-30% of insurance policies + Pension Funds + Shares + Bonds +

Safety Deposit Boxes + Security Deposits + Credit Union Accounts + etc. etc.

Estimated Total:  $4B (Canada) 

Link

McAfee the online security organization have commissioned a few surveys over the years that show the growing value of digital assets. Their research in 2011 (provided by MSI International) surveyed more than 3,000 consumers across 10 countries and shows varying values of digital assets.

Digital Assets? They include music and video downloads, software programs, photos, career info, personal records, email etc.

mcafee-unprotected-digital-assets

Canadians estimated their digital assets on average to be worth $47,074 which is slightly behind Americans ($54,722) and ahead of the UK ($38,360). McAfee’s study also suggested that it would take an average of some 82 hours for most of us to restore our digital assets if lost. That would be the estimate if we were alive. If we are not alive…it’s anyone’s guess if they could be restored at all. Digital assets/Digital passwords need to be backed up and shared somewhere safe

mcafee-digital-assets-canad

In 2013, they released a new survey specific to Canadian consumers’ attitudes towards online surfing, web security and data protection.  This survey showed Canadians placing a value of $32,000 on the digital assets stored on their devices (not sure why the decrease from the earlier study) This study showed that most of us are not taking appropriate precautions to backup and safeguard our digital assets.

Protecting online assests needs to be made more of a priority for our families and that will come from education and having a good handle on secure technology.

McAffee Cares is an Online Safety for Kids program which hopes to train school aged children and adults on ways to stay safe, secure and maintain good ethics in online behavour.  You can learn more about their program here http://mcafee.com/onlinesafety.

LegacyTracker has made provisions for safeguarding your digital assets

Mark Carney and Dead Money

Open letter to Mark Carney dated June 11 2013

Dear Mr. Carney:

There’s been a fair bit of ongoing analysis and controversy surrounding the remarks you made some months ago about Corporate Canada sitting on huge piles of “dead money” on their balance sheets that could be better utilized to feed the economy or failing that; returned to investors.

Financial Post Aug 22 2012
The Globe and Mail Aug 22, 2012
Toronto Star Sept 17 2012
Canadian Business Feb 12, 2013
Ottawa Business Journal Dec 3 2012
CBC News August 23 2012

 

Estimates vary but it seems that the total balance of ‘dead money’ has increased as much as 40% since 2009; and may total as much as $526 Billion… and that has you concerned.

That is indeed a lot of cash.  No question there.

But, as you head out on your new adventure and leave the Bank of Canada,  I think it’s only fair to point out that corporations are not alone in holding onto ‘dead money’ that could be better utilized to grow the economy.

I am a bit embarrassed to point out that our own highly respected Bank of Canada which you have so masterfully governed for the past 5 years, is itself currently sitting on $500Million in unclaimed funds which I think we could agree may also be described as “dead money” and money that could be much better utilized to feed the economy….if not the actual owners.  That might be possible, if only the Bank of Canada took a more proactive approach to finding those owners.

Indeed, the rise in the balance of unclaimed funds in the Bank of Canada certainly appears to rival the rise in ‘dead money’ in Corporations with an increase of 55% over the past 5 years (!) That’s an extraordinary increase on an extraordinary balance of ‘dead money’ given that the this balance of $500M only includes amounts turned over by federally (not provincially) regulated banks, and only after 10 years of inactivity and only where those accounts are held in Canadian dollars (no foreign $ amounts).

Alas, despite this extraordinary increase on an extraordinary balance on a population of only some 34M Canadians, very little awareness and very little effort seems to be being made in trying to locate owners. Granted, the Bank of Canada does update this balance once a year and provides an online database for unclaimed funds; whereas, the same treatment is not afforded to the balance of Unclaimed/Matured Canada Savings Bonds which are also piling up at the BoC.

It is not a published number but I understand the value of Unclaimed/Matured Canada Savings Bonds totaled $259M as of this past April which I believe would make that an increase of $147M or 231% or over the past 5 years.

Extraordinary and Sad at the same time.

So, using the same argument you have made for ‘dead money’ in Corporate Canada…for the sake of the economy AND in this case, for the sake of Canadians generally, don’t you think we could put a little more effort into reuniting this money with owners?  

This is after all, the age of technology so one would think we could apply a little technology to finding owners and making things right. But as well,  if some inspiration is needed into this challenge, we can also look south for some good ideas given that the US has had consistent & comprehensive unclaimed property legislation in place for 50+ years. In the US, unlike the situation in Canada, unclaimed property legislation is an  important part of consumer protection legislation. Sadly, that’s not the case in Canada; but it should be. Each state in the US has enacted unclaimed property legislation requiring the transfer of all unclaimed property to  that State who then takes a very proactive role in helping to return assets to owners.

So before you go…perhaps you and Mr. Poloz could give the ‘dead money’ in the Bank of Canada some thought.