Our blog and our site has moved

Please visit us at our real site 

www.legacytracker.com

 

Advertisements

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.

 

 

Ontario-2nd try at Unclaimed Intangible Property Legislation

Originally published by LegacyTracker July 25 2013

Despite Ontario being the first province to pass Unclaimed property legislation in Canada (1989), they could not get it all together (the rules) for a period of 22 years later and the Bill was repealed in Dec 2011. Yes. Sad. Many Ontario families are no doubt owed some money.

On the upside they are trying again. Consultations have been taking place and we await next steps. Read about the consultations with the Ministry of the Attorney General here 

My many suggestions to the Attorney General inlcuded this one:

No more push to paperless until Canada gets all Provinces onboard with Unclaimed Property Legislation.

Yesterday I received a note from my RESP provider (Invesco Trimark). No more PRINTED semi-annual statements effective 2014. Not cool because this increases the risk that any funds with Invesco Trimark will go unclaimed. But Age Unfriendly as well. Do all Invesco Trimark Investors have online access? Really?

The US considers such legislation as an important component of Consumer Protection Legislation-and it is! So…why are we some 40 years behind? The US has $58B in unclaimed funds/property despite the program but searching for assets is much easier.

In Canada ? The total is at least $4B and the searching is difficult.