FORUM Magazine - December 2023

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The Magazine of Influence for Financial Advisors

Making Hybrid Work Strategies to navigate the evolving workplace

REMEMBERING DON GLOVER

WHAT CAN ChatGPT DO FOR YOU?

HIGHLIGHTS FROM SYMPOSIUM 2023

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FORUM

VOLUME 53, 3 | DECEMBER 2023 | ISSN 1493-826X

FEATURES

10

Hybrid Strategies

How are firms and their advisors navigating the “messy middle” phase of hybrid work?

Kira Vermond investigates

DEPARTMENTS

COLUMNS

6

EDITOR’S JOURNAL Working from home was a requirement and then a choice

26 TAX UPFRONT How AMT changes affect philanthropic planning

OPENERS Why estate planning matters even more for LGBTQ2S+ clients; get ChatGPT on your side

27 ESTATE DILEMMAS The purpose and benefits of probate planning

32 ADVOCIS NEWS Association updates and events 34 THE FINAL WORD The Business of Change

BY ERIC LIDEMARK

BY KEVIN WARK

28 CORPORATE INSURANCE Exploring the impact of policy transfer rule changes

BY PATRICK UZAN

30 STRATEGIC PHILANTHROPY Unlock millions by dropping life insurance “baggage”

BY MARK HALPERN

31 LEADERSHIP & GROWTH GAMA resources can help you be a great leader

BY JASON MCMAHON

Publication Mail Agreement # 40069004 Return Undeliverable Canadian Addresses to FORUM Magazine Circulation Department, 10 Lower Spadina Avenue, Suite 600, Toronto, Ontario M5V 2Z2

4 FORUM DECEMBER 2023

Advisors gathered in November for Advocis’s 15th Symposium. Kelsey Rolfe shares insights from industry and regulatory representatives

20

A Legacy of Leadership

Don Glover championed his clients, colleagues, and industry, and is the only person to have served Advocis as both elected volunteer board chair and full-time staff president, reports Alison MacAlpine

COVER PHOTO: ISTOCK.COM / PEKIC

7

BY JAMIE GOLOMBEK

14

Navigating Complexity

THANK YOU TO OUR SYMPOSIUM 2023 SPONSORS PLATINUM SPO NSOR

G O L D SPONSORS

MED IA SPO NSO R

TO OUR SYMPOSIUM 2023 BOOTH EXHIBITORS

EDITOR’S JOURNAL

BY ALISON MACALPINE

Work in Flux

W

orking from home now has a catchy acronym — WFH — but I embraced the concept a long time ago, when I started my freelance business in November 1999. For me, the flexibility to set my own hours and the freedom to choose my own projects more than made up for any downsides. It helped that, when we moved into our current home a year later, I got a spacious room full of sunlight and bookshelves to call my office. I’ve never looked back.

However, people who abruptly found themselves working from home in March 2020 weren’t making the choice for themselves. They had to adapt overnight to what was often a less-than-ideal office setup — maybe an unergonomic chair pulled up to a kitchen table, interrupted every recess and lunchtime by the pitter patter of little feet no longer in school.

They were wrenched away from the easy camaraderie of a bustling office with no ability to replace some of that (as I did) with coffee dates and lunches out.

Despite these challenges, many loved it. More than three years later, as Kira Vermond points out in this issue’s cover story, “working from home, at least part of the time, is no longer seen as a perk, but mandatory.” Many organizations have settled on hybrid work as the best of both worlds — but how can firms and advisors make hybrid teams both effective and supportive, and how can employees access training and mentoring opportunities if they’re mostly off-site? In the article on page 10, Kira identifies four strategies that may help your organization make the most of a workplace transition that seems like it’s here to stay.

On page 14, you’ll find Kelsey Rolfe’s reporting on Advocis’s 2023 Symposium.

Sessions explored the impact of the IIROC–MFDA merger into the Canadian Investment Regulatory Organization (CIRO), what it means to be a professional advisor today, your association’s grassroots-focused advocacy work, and 6 FORUM DECEMBER 2023

FORUM PUBLISHER: Peter Wilmshurst advocisforum@gmail.com EDITOR: Alison MacAlpine alison@amcommunications.ca COPY EDITOR & PROOFREADER: Alex Mlynek ART DIRECTOR: Giselle Sabatini gisellesabatini@rogers.com ADVERTISING: Peter Wilmshurst advocisforum@gmail.com Tel: 416-766-4273 Fax: 416-760-8797 TFAAC BOARD OF DIRECTORS CHAIR Eric Lidemark, CFP, CLU, CH.F.C., CHS PAST CHAIR Rob Eby, CFP, RRC VICE CHAIR/SECRETARY Stephen MacEachern, CFP, CLU, CHS, CH.F.C. VICE CHAIR/TREASURER John Hamilton, CLU, FEA, CPCA DIRECTORS AT LARGE Arun Channan, MASc, MBA, CSP, CFP Kelly Gustafson Harris M. Jones, CPA, CA, CFP, CLU, CH.F.C., TEP Curtis Kimpton, CLU, CIM, RRC CHAIR, INSTITUTE Ejaz Nadeem, MA, CFP, CLU CHAIR, CLC Leslie Carpenter, CFP, CLU, CIM PUBLIC DIRECTOR Sara Gelgor, LLB, LLM, MBA, ICD.D

total cost reporting disclosure. There was also a session on compliance that touched on the dark side of artificial intelligence (AI) in enabling fraud — but Erin Bury shares tips on how AI tools like ChatGPT can be used for the good of your practice in her column on page 9.

In addition, this issue includes a tribute to Don Glover, which you’ll find on page 20. As I learned from speaking with his former colleagues and peers, Don was widely admired across the industry and remains to this day the only person to have held two of Advocis’s most important positions: elected volunteer board chair and full-time staff president. I wish I’d had the chance to meet him.

Finally, I’d like to thank former FORUM columnist Glenn Stephens for countless insightful interpretations of corporate insurance topics. In this issue, Glenn passes the torch to Patrick Uzan, who on page 28 explores policy transfer rule changes that affect the capital dividend account. A warm welcome to Patrick!

The FORUM team wishes all of you a wonderful holiday season and every success in 2024.

INTERIM CEO Harris Jones, CPA, CA, CFP, CLU, CH.F.C., TEP FORUM is published three times annually

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FORUM EDITORIAL ADVISORY BOARD LEONY DEGRAAF HASTINGS, CFP, EPC deGraaf Financial Strategies NICHOLAS LANDRY, CEBS, CHS, RCIS BFL Canada - CSI IZUMI MIKI-MCGRUER, CFP, CLU, CH.F.C., CHS Freedom 55 Financial MICHAEL SUSKA, CFP, CHS Helkie Financial & Insurance Services Inc.

OPENERS Fodder for the Water Cooler WHY ESTATE PLANNING MATTERS EVEN MORE FOR LGBTQ2S+ CLIENTS

PHOTO: ISTOCK.COM / RISKA

C

ommon-law relationships are very common in the LGBTQ2S+ community, and depending on the province, common-law partners don’t necessarily inherit assets. That, combined with potential family tensions, makes it especially important for advisors to work with LGBTQ2S+ couples to create airtight estate plans.

“Let’s say you’re living together for 20 years and you’re not married and you don’t have any powers of attorney or a will in place. In this situation, it will be a sibling or a parent — whoever is closest of kin — who would then make decisions,” says Ivan Steele, a family and immigration lawyer in Toronto. “In the best-case scenario, if it’s a harmonized family where everyone likes and supports each other, that’s wonderful. But in many situations, that’s not the case. Then you end up with people making decisions for you that should probably be the last people making decisions for you.”

More complexity arises if someone, for example, came out later in life and has children from a previous heterosexual relationship. This, Steele points out, can create competing interests for an estate. A will reduces the potential for conflict and enables people to consciously leave property in the proportion they want to the people they want. Steele adds that children in the current relationship must also be protected by naming a temporary guardian (who will apply for court approval of permanent custody) in case both parents die at the same time.

It’s also essential to do special planning for couples with assets in another country

that doesn’t recognize same-sex relationships. Steele stresses, “If you’re dealing with a country that is overtly intolerant or hostile to same-sex couples, you may want to consider, in addition to Canadian wills or estate planning, taking certain measures in those countries to formalize some type of property transfer upon your death.”

EXPRESSING HEALTH AND LONG-TERM CARE WISHES Advisors have a critical role to play in ensuring their clients have valid wills and powers of attorney, checking in periodically to make sure they stay current,

and making sure they’ve received competent legal and tax advice related to their individual circumstances, says Leanne Kaufman, the Toronto-based president and CEO of RBC Royal Trust.

She emphasizes it’s very important for LGBTQ2S+ couples to document their intentions and wishes if they can no longer make decisions about property or personal care. Otherwise, struggles between the family of origin and the family of choice can become contentious and end up in court.

“If you’ve taken the time to create proper documentation through powers of attorney, then your wishes are articulated, DECEMBER 2023 FORUM 7

OPENERS clear, and legally enforceable,” Kaufman says.

One area LGBTQ2S+ couples should take time to consider, she adds, is care choices if they ever need health support at home or in a facility. “We have heard of concerns in the LGBTQ2S+ community about not feeling confident in being true to who they are in situations where they’re suddenly dependent on others for

care or for their living arrangements, and trying to find places and services that they know will respect the choices that they’ve made in the way that they identify.”

Steele says, “My approach is to draft the document which authorizes your spouse or your common-law partner to be your power of attorney and make these medical decisions, and then to also include in that document a very clear statement of wishes and preferences if certain situations occur.”

From Steele’s perspective, estate plan-

ning can be empowering for LGBTQ2S+ community members, many of whom have experienced generational trauma and injustice.

“In the past, we did not have much of a choice and the laws were hostile and society was hostile,” he says. “Now, we can in fact do exactly as we please with our lives, with our money, with our families, so there is really no justification to not take responsibility for yourself, for your actions, and for how those actions are going to affect your loved ones in the future.” – Alison MacAlpine

DID YOU KNOW? Opportunity for advisors to provide affluent clients with additional guidance

78% 54% 42% 36%

Respondent has a financial advisor

Respondent has a life insurance policy

Advisor provides strategies to minimize tax burdens using life insurance

Advisor discusses life insurance in context of financial and estate plan

SOURCE: IG WEALTH MANAGEMENT LIFE INSURANCE SURVEY, SEPTEMBER 2023

Consider reminding clients about the risks of fraud. Close to half (49%) of Canadians report they were recently targeted by fraud, most frequently through:

47%

Phishing (fraudulent emails, websites, social posts, QR codes)

43%

Vishing (fraudulent phone calls)

41%

Smishing (fraudulent text messages)

SOURCE: TRANSUNION Q3 2023 CANADA CONSUMER PULSE SURVEY

8 FORUM DECEMBER 2023

PHOTOS: ISTOCK.COM / PATTANAPHONG KHUANKAEW AND ISTOCK.COM / CNYTHZL

A survey of 500 affluent Canadians, with $1 million or more in investible assets, found that although most work with a financial advisor, just 17% say they are “very knowledgeable” about the tax and other benefits life insurance can provide in estate planning.

BRANDING & SOCIAL MEDIA

BY ERIN BURY

GET ChatGPT ON YOUR SIDE

J

obs like social media influencer and cryptocurrency analyst simply didn’t exist 20 years ago. Now, thanks to the introduction of ChatGPT, there’s another new job title waiting in the wings: prompt engineer.

Launched by OpenAI in November 2022, ChatGPT is a powerful conversational artificial intelligence (AI) engine that allows users to input prompts (requests) and get nearly real-time answers that become smarter as the engine learns more. Its launch means that instead of having to get a computer science degree to engage with an AI model, anyone can harness the power of AI — and more than 180 million users have flocked to the tool, with chat.openai.com receiving well over a billion visits a month.

Maybe you’ve embraced ChatGPT readily, becoming an amateur prompt engineer yourself by inputting requests, whether they’re personal (“tell me the most economical cities in Europe that are at least 20 degrees Celsius in April”) or professional (“reword this email so it’s relevant to a client who is 23 years old”). Or perhaps instead of using ChatGPT, you’ve followed from the sidelines, noting concerning criticisms that range from copyright infringement to the potential for job elimination.

Either way, Pandora is out of the box when it comes to conversational AI, and as financial advisors it’s important to assess how this new technology can elevate your practice. Here are two use cases to consider as you evaluate how to — and whether to — incorporate ChatGPT into your practice’s toolkit.

AMP UP MARKETING

No, ChatGPT is not going to replace marketers and content creators. However, it can be a powerful tool for idea generation and content generation, whether you’re targeting existing or potential clients. For example, at my company Willful, we asked ChatGPT to generate tagline ideas for a billboard campaign brainstorming session. We were able to get very granular, tasking it to provide suggestions for a billboard next to a daycare versus a billboard next to a funeral home. These were great thought starters for our team.

You can also ask ChatGPT to generate content ideas. For example, you could prompt ChatGPT to share a list of 20 article topics that relate to your core target customer and incorporate key trends, such as inflation or interest rates.

ChatGPT can provide bullet points on that topic that a writer can expand on. You could also load in these or your own

bullet points and ChatGPT can provide the first draft of an article or video script with a set word count limit.

In addition, ChatGPT is great at repurposing content for other channels. For example, you can copy and paste the text of an article into the tool and ask it to create short social media posts or an email newsletter blurb based on the content.

The results will always be more powerful, and more human, with a writer or editor involved to polish, edit, and fact check. Importantly, a person can incorporate recent information in a way ChatGPT cannot, since its engine only pulls information up to 2021. That said, the tool has the potential to supercharge your marketing with a limited investment of resources.

SIMPLIFY CLIENT COMMUNICATIONS

ChatGPT can summarize and simplify complex content very quickly. For example, as the CEO of a legal tech company, I can load in a legal document like a will and ask for a summary in plain language. Within seconds, out comes something the average person can truly understand.

This functionality is a gift to advisors who regularly need to explain complex investment vehicles, concepts like inflation, and lengthy contracts and agreements. Keep in mind, too, that the tool can summarize long-form content for you — for example, providing a quick recap of a lengthy report you’ve been putting off reading.

How about adding some personalization to your communications at scale? Simply load in details about different categories of clients, give ChatGPT direction on the topics you want to include, and the tool can create emails that reference the life situation of each group.

The key when sitting in front of ChatGPT’s blank screen is to start with a specific task in mind — otherwise, it can be overwhelming. When writing prompts, remember you might have to try a few different ones before you get an answer you like. And, if you’re confident in your prompt but still don’t like the response, simply ask ChatGPT to regenerate its answer and it will come up with something entirely different.

There are countless other ways to leverage ChatGPT and other AI technologies in your practice — from powering customer service chatbots, to transcribing and summarizing client interviews, to automating administrative tasks like data entry. At the end of the day, it’s important to remember that although firms like JPMorgan Chase are investing in AI-powered investment advisors, human financial advisors like you still play an absolutely essential role.

As ChatGPT itself will tell you, it cannot provide personalized financial advice. So, look at it as a tool to augment your work, not replace you.

ERIN BURY is the CEO at willful.co, an estate planning startup that provides an affordable, convenient, and easy way for Canadians to make a will online. Willful works with financial advisors across Canada to help their clients get a solid estate plan in place.

DECEMBER 2023 FORUM 9

COVER STORY

Hybrid

Strategies How are firms and their advisors navigating the “messy middle” phase of hybrid work?

Kira Vermond investigates

B

10 FORUM DECEMBER 2023

in person over a year later, we had already become the closest of friends,” she says, mentioning the only surprise was realizing many were taller or shorter than she’d expected.

HYBRID WORK HERE TO STAY While Izmirliyan was already a pro at hybrid work pre-pandemic, today almost everyone needs to cultivate the skills necessary to combine online and in-person work in a cohesive and effective way.

Nearly two-thirds of Canadian employers (62%) said they were using a hybrid model in a January 2023 report by Colliers Real Estate Management Services. Employees appear to be driving the

PHOTO: ISTOCK.COM / PEKIC

efore the COVID 19 pandemic hit and shut down the world in March 2020, Annie Izmirliyan was ahead of her time. Part of her job focused on onboarding new advisors to her team — and she did it all virtually. Forget sitting around a company boardroom with other nervous new hires staring at PowerPoint presentations about corporate culture and professional expectations. Instead, people logged on from their home offices and let Izmirliyan lead the way.

The arrangement worked. Then came the lockdown and it was required by law.

A certified financial planner and business development consultant for Sun Life and mentorship chair on the Advocis Toronto board of directors, Izmirliyan is a dynamo. Energetic and passionate about helping others succeed, it’s easy to see how her personality reached across a screen and kept her team engaged through months of lockdown. It was an environment in which all prospect and client meetings were virtual, too, with Izmirliyan and the advisors engaging in preparation and debrief meetings before and afterward.

So, what was it like when the team of recruits finally met face to face?

“By showing up consistently, building trust over time, and finding ways to collaborate, I established such a bond and relationship with this team of advisors that by the time we did meet

trend, with four in five Canadian workers (81%) in a February 2023 Cisco Canada study saying flexible work policies had an impact on whether they stayed at or left a job.

So, working from home, at least part of the time, is no longer seen as a perk, but mandatory — and that’s true across age groups.

The Cisco Canada study also found that 86% of people aged 18 to 54 evaluated hybrid or remote work positively, while a still strong majority of 65% of those 55 and older said the same.

If hybrid is here to stay, firms and advisors need to catch up and figure out how to creatively navigate its complexities. There are lots of questions to answer. How can advisors and their firms provide consistent training and mentoring opportunities to a hybrid team? How do they ensure their teams gel, when only,

say, a third ever step across the workplace threshold and grab coffee together in the office kitchen? Or if half of the advisors come to work on Tuesday and Thursday while the other half are in Monday and Wednesday? And does it make sense for support staff to be on site all week (without causing an all-out war)?

How exactly can we make hybrid work, well, work?

“I’m not sure that anybody really has the hybrid thing worked out yet,” says Janet Candido, founder and principal of Candido Consulting Group Inc., and a human resources strategist in Toronto. “Employers are still iffy about whether they want people in the office full time. Employees are generally iffy about whether they want to go in at all. So what you have in the workplace is a combination of all of the above.”

DECEMBER 2023 FORUM 11

COVER STORY This new messy middle phase is playing out differently across the country for financial advisors and their firms, says April-Lynn Levitt, partner and coach for The Personal Coach in Waterloo, Ont. Those working in Western Canada are mostly back in the office and aren’t doing as much hybrid work anymore, although she knows at least one firm is allowing advisors to work from home one day a week. Meanwhile, Eastern Canada is embracing the hybrid model, likely because of longer commute times and the financial and emotional costs of sitting in traffic every day.

“But it’s a decision you make as an individual. What works best for your clients and for you?” Levitt says.

HOW TO MAKE HYBRID WORK If you’re going the hybrid route, here are four strategies to help teams thrive.

1. MAKE THEM WANT TO COME IN

2. DIVIDE THE WORK, NOT THE HOURS

One of the biggest mistakes companies make? Telling advisors and staff they’re expected to come in, say, three days a week, work at home the other two, and then leaving it at that. This kind of arrangement focuses on the wrong metric: hours worked.

Instead, it’s better to think about what employees are actually expected do in the office to make it most worthwhile for everyone. Maybe that means collaborating on a project, having a team meeting, attending a lunch-and-learn, or some other activity where it’s evident there’s value in being there in person.

“Don’t have employees come in to the office, go to their cubicles, hunker down, and do solo work for the day,” says Candido.

“There’s no point in them having come in for that.”

Levitt adds it’s perfectly OK to teach the technical aspects of the job online. Slot that into the “work from home” part of an employee’s job. However, she says, in person is often the way to go when discussing a company’s culture, values, and vision.

Better yet, show culture, values, and vision in action while employees are together. For example, gather everyone for a team-building exercise or schedule a mentoring lunch at a local restaurant.

12 FORUM DECEMBER 2023

3. IN PERSON TO START

Starting off with, say, three months in person is especially important for younger advisors and those new to the industry, according to Levitt. The “proximity principle,” which describes our inclination to form bonds and relationships with those who are nearby, is a real thing. It’s why we develop friendships with people we may never have connected with outside the office.

They’re what makes work fun.

Being in person also gives new hires access to those unplanned interactions with mentors and more experienced professionals that can lead to professional opportunities later. The founder loved your joke about the company coffee while you were both grabbing a cup? That makes you memorable. Or maybe a new hire is quickly brought into a last-minute meeting with a highnet-worth client family because the young adult children want someone their own age in the room.

“Those opportunities aren’t going to happen as much for virtual workers, or it’s going to take a lot more work,” says Levitt.

“So if I was giving career advice to a younger advisor I’d say, ‘be in person.’”

One caveat, though: being in person is only an advantage to a new advisor if other advisors are working on site, too.

ILLUSTRATION: ISTOCK.COM / ELENABS

Whenever employers start talking to Candido about why they want their employees to come in to the office, she stops them.

The real question should be, why would the employee want to come in?

Just because it’s good for the firm doesn’t mean they feel it’s good for them. Forget saying “having people back is good for company culture.” Instead, be specific and talk about all the benefits of being in the office, learning casually from one another, and making connections. Besides, being around other humans can be more fun than staring at a screen all day, particularly if more client meetings are being handled over Zoom.

And, for goodness’ sake, stay away from the word “productivity,” or “you’ll be more productive in the office.” Employees often believe they’re more productive at home, Candido explains. “It’s an incendiary word.”

4. COMMUNICATE AND CHECK IN

For Maria José Flores, president at Carte Wealth Management Inc., in Mississauga, Ont., remote and hybrid work was nothing new before the pandemic. She still works Mondays and Fridays from her home office, and the company uses a combination of in-person meetings, video conferences, and online collaboration tools.

She says biweekly check-ins and open communication are the best ways to help her team feel connected. To keep the meeting on track, an agenda is sent out ahead of time, they begin the meeting with any challenges, and then move on to ways to thrive.

“It’s very important that we have an environment for them to ask questions and be able to share updates, whether formal or informal,” Flores says.

That’s what Izmirliyan discovered, too, when she developed a six-month hybrid mentorship program for Advocis Toronto in 2023. While the first and last meetings were in person, complete with guest speakers and catering at a Toronto office boardroom, the monthly meet-ups were virtual. The Kolbe A Index assessment proved to be a very useful tool, helping advisors understand their instinctive need for in-person or virtual interactions.

“Knowing their modus operandi can help leaders coach advisors more effectively, as well as build synergy on a team,” she points out.

Izmirliyan attributes much of the mentorship program’s success — it was recognized with two Advocis chapter awards of excellence, for professionalism and community — to the fact that it was developed with feedback from the advisor participants. In the end, even though most of the meetings were remote, multiple check-ins meant people got to know one another faster. Also, any sense of competition dissolved.

Izmirliyan emphasizes that when it comes to making hybrid work successful, firms need to listen to advisors and staff to get a better sense of how important autonomy is to them. Some people need more in-person time than others — but it’s also critical to level the field between in-person and remote advisors as much as possible to avoid an “us versus them” mentality.

“All you really need is to open up the conversation,” Izmirliyan says. “Collaboration is what people are looking for. Ultimately, they’re looking for a sense of belonging and connection. And they will find different ways to do that.”

KIRA VERMOND is a writer and editor based in Guelph, Ont. DECEMBER 2023 FORUM 13

SYMPOSIUM

Kelly Gustafson, director at large, Advocis, welcomes attendees to Symposium 2023.

Navigating Complexity Advisors gathered in November for Advocis’s 15th Symposium. Kelsey Rolfe shares insights from industry and regulatory representatives PHOTOGRAPHY BY RICK CHARD

14 FORUM DECEMBER 2023

T Advocis state of the union speaker Harris Jones, interim CEO, Advocis.

he financial services industry is undergoing significant regulatory and technology changes that add new complexities to the role of financial advisor, speakers told the 2023 Advocis Regulatory Affairs Symposium.

The merger of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA) at the beginning of 2023 is set to change the way both groups of advisors are regulated. The Canadian Securities Administrators (CSA) and Canadian Council of Insurance Regulators published their total cost reporting disclosure requirements for investment and segregated funds, also known as CRM3, in April this year, which will prompt a wave of new conversations with clients when they come into effect. And all the while, advisors must contend with keeping clients’ data safe in the face of increasingly sophisticated fraud technology.

“Over the last number of years, it has become harder to do your job,” said Andrew Kriegler, the inaugural president and chief executive officer of the Canadian Investment Regulatory Organization (CIRO), the result of the IIROC–MFDA merger. “Regulation … has raised the bar and it’s putting more burden, if you want to call it that, on the day-to-day job.”

Anthony Giglio, president and CEO of Quadrus Investment Services, said Client Focused Reforms (CFRs) have evolved the definition of compliance, with “disclosing away” conflicts of interest no longer considered an acceptable practice, and advisors also needing to provide evidence for the advice they give their clients.

He said these reforms have caused plenty of confusion throughout the industry around interpreting the principles of the regulation.

Jean-Paul Bureaud, executive director, FAIR Canada; Ellen Bessner, commercial litigator, Babin Bessner Spry; Anthony Giglio, president and CEO, Quadrus Investment Services; Andrew Kriegler, president and CEO, Canadian Investment Regulatory Organization.

DECEMBER 2023 FORUM 15

SYMPOSIUM Jack Mazakian, vice-president, Advocis Broker Services; Nataša Milojević, vice-president, business governance and controls, Sun Life Financial; Jill McCutcheon, partner, Torys LLP; Monica Hovsepian, financial services lead, OpenText, and member of Forbes Financial Council.

“I don’t think it’s clear what’s good compliance: where’s the line between providing support to your client and evidencing the advice provided?”

An August 2023 report from CIRO and the CSA found just 20% of 172 surveyed investment dealers, fund dealers, portfolio managers, and exempt market dealers were handling conflicts of interest according to the CFRs’ standards.

“I think that is evidence that this is a journey we’re all on together,” Kriegler said of the report, adding that CIRO was sympathetic to the challenges firms and advisors face.

Kriegler said that as CIRO integrates the two selfregulatory organizations, it is seeking to harmonize the regulatory approach, advance the number of firms registered simultaneously as mutual fund and investment dealers, and streamline the process for evidencing compliance with regulations.

“One of the ways we have to make the system better is to enable more access to advice. And the only way we’re going to get there is by being able to make the regulatory system scale, the compliance system scale, the advice delivery scale, and the technology scale,” he said.

Jean-Paul Bureaud, executive director of FAIR Canada, credited CIRO with prioritizing its Investor Advisory Panel and its Office of the Investor.

16 FORUM DECEMBER 2023

Ali Ghiassi, vice-president of industry affairs and government relations, Canada Life; keynote speaker Jim Ruta, president, Advisorcraft Media.

Sara Gelgor, director, human rights, enterprise ESG strategy, RBC; Kris Birchard, chair, Advocis National Government Relations Committee; Sara La Gamba, senior advisor, SPM Financial; Trevor Theobald, member, Ontario Provincial Advocacy Committee.

COMPLIANCE CHALLENGED

BY FRAUD High-profile data breaches at Mackenzie Investments and Equifax in recent years have contributed to “a growing concern regarding security, privacy, and fraud within the financial services space,” said Jack Mazakian, vice-president of Advocis Broker Services.

Jill McCutcheon, partner at Torys LLP, said advisors have to balance the need to have Know Your Client paperwork and other important client data in their files against privacy regulations that require collecting only what is needed for as long as it’s needed.

“Unfortunately, for the field we’re in, that’s a very long time.”

She said cyber insurance is “one of the most important things” businesses and individuals can put in place to help manage risk.

“I know that a lot of people in this room might think it’s not necessary, but I can tell you that every single client we have — institutional and smaller — could at some point be the victim of a cyberattack.”

Nataša Milojević, vice-president of business governance and controls at Sun Life Financial, said the cybersecurity regulatory regime and navigating vulnerability to cyber threats “is a whole massive area that, from an expertise perspective, cannot be absorbed by a single advisor.” Her firm has been handling it at an enterprise level by requiring advisors to use secure Wi-Fi and

update their software regularly, as well as monitoring advisors on the internet to catch any impersonators quickly.

McCutcheon said financial services firms and advisors need to be aware of the federal government’s Digital Charter Implementation Act, which will beef up individuals’ privacy rights and establish a tribunal to adjudicate complaints from citizens whose privacy has been breached, with fines for breaches. In addition, it will introduce rules around the use of artificial intelligence — an area she said insurance companies and investment firms are likely to find themselves embroiled in.

COST DISCLOSURE MOVES FORWARD Advisors must also begin preparing for CRM3, which will give clients the total dollar amount of their investment fund expenses and charges for all funds owned by the investor, as well as the fund expense ratio for each fund the investor holds. The disclosure will take effect for the year ending December 31, 2026, with clients receiving the disclosure documents in early 2027.

Geoff Gibson, vice-president of investment product and marketing for Empire Life, said the disclosure will mark a significant change in how clients understand investment costs, as management fees have traditionally been displayed as a percentage rather than a dollar figure. “A danger of this could DECEMBER 2023 FORUM 17

SYMPOSIUM

Wade Baldwin, president, Baldwin and Associates Financial Services Ltd.; Huston Loke, executive vice-president of market conduct regulation, Financial Services Regulatory Authority of Ontario; Melaina Vinski, associate client partner, behavioural science, AI, and analytics, IBM Consulting; Louise Gauthier, senior director, distribution policies, Autorité des marchés financiers.

be sticker shock, and that’s something we all want to avoid,” he said.

Louise Gauthier, senior director of distribution policies for Quebec’s Autorité des marchés financiers (AMF), said the regulators wanted investors to have comparability between reports for their segregated and investment funds. “If, of course, this transparency put pressure on costs, that would be a good thing for investors as well.”

Gauthier noted the content of the disclosure is mandated, but the way advisors present it is not. The AMF worked with behavioural science specialists at the Ontario Securities Commission to test disclosure models with real investors, finding that it’s best to put the most important information on the first page and highlight what’s important for clients to know.

“There are risks, and I recognize that, but I think that’s where the advisor’s role comes in,” she said, adding that the report can be a “powerful tool” for starting conversations with clients about other aspects of their portfolio, including concentration and liquidity.

Melaina Vinski, associate client partner for behavioural science, AI, and analytics at IBM Consulting, said advisors should strive for simplicity in their reporting, avoid technical jargon, and tie the cost of the fund back to the client’s overall financial goals and the role of the advisor in helping to achieve them.

Huston Loke, executive vice-president of market conduct regulation for the Financial Services Regulatory Authority of Ontario, noted fund performance will also be baked into these statements, information that has previously been hard for investors to determine.

18 FORUM DECEMBER 2023

Geoff Gibson, vice-president, investment product and marketing, Empire Life.

Gauthier said that in the CFRs, regulators have enhanced advisors’ obligations to ensure an investment product is suitable for the client, with cost being one of the determining factors.

“When you have this report in hand, you’ll have a personalized report of the cost for clients, and you can use that to help make a suitability determination,” she said.

KELSEY ROLFE is a Toronto-based business reporter and editor.

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TRIBUTE

A Legacy of

Leadership Don Glover and Ralph Simmons, who both served as Advocis chairs, take a break from serious discussions about the industry and share a light moment together.

20 FORUM DECEMBER 2023

Don Glover championed his clients, colleagues, and industry, and is the only person to have served Advocis as both elected volunteer board chair and full-time staff president, reports Alison MacAlpine

W

hen Don Glover, CFP, CLU, CH.F.C., passed away on August 16, 2023, two weeks shy of his 85th birthday, he left behind his wife, Joyce, two children, two grandchildren, and an enviable legacy of contributions to the industry he loved.

In a career spanning almost five decades, Glover built an exceptionally successful London Life branch, advocated for policyholders facing the threat of taxation of their life insurance policies, and developed his profession through his work with the Life Underwriters Association of Canada (LUAC), now Advocis.

His colleagues remember his achievements — but also his wisdom, generosity, humour, and genuine interest in other people.

Glover started at London Life straight out of university in 1961. By 1973, he was managing the Calgary Elveden branch, responsible for recruiting, training, and motivating a team of advisors. One of his 1976 recruits was Hal Couillard, now president of The Couillard Group in Calgary. Couillard met Glover at a reception on the University of Calgary campus, where Couillard was completing his bachelor of commerce.

“Top-class professionalism — just his whole demeanor,” Couillard recalls. “I thought, wow, this is a cool industry …

I chose London Life particularly because of the culture of the [branch], which stemmed from Don.” Couillard soon discovered that his branch was one of the top agencies in Canada, with persistency (how much of its business was well placed and therefore renewed) at 98%. Glover maintained a dress code in the office — no jeans allowed — because clients were coming in and out all the time. He also had a noexcuses expectation that all new advisors would join Advocis. “[Applying to join] was automatic, and then [Don] really encouraged everyone to come to the meetings. ‘Encourage’ is probably a soft word. He would just drag you into the meetings if he had to!” Couillard says. “In his agency, he wanted people looking sharp, acting sharp, doing the right thing with clients, taking the designations, [and] being involved with your industry and your community.”

Couillard says Glover had an ability to see the industry from a 30,000-foot vantage point and to understand what needed to be done and undone. That vision served him well as he himself became increasingly involved with Advocis.

GIVING POLICYHOLDERS A VOICE Glover didn’t just set volunteerism expectations for his team. He walked the walk, actively participating in Advocis, locally and then nationally.

Cliff Sadgrove, now retired and based in Toronto, met him in the mid 1970s when Glover would attend national committee

and board meetings. Sadgrove remembers Glover stopping to chat with staff on his way through the Advocis offices, treating everyone as he would the advisors in his branch — like a partner or associate on his level.

“He was a great communicator,” Sadgrove says. “He was always interesting to talk to, and when he talked to you, he looked you in the eye and listened to what you had to say.”

Glover was elected chair of the Advocis board of directors in both 1980 and 1981. It was a critical time for the industry, with the federal government proposing significant changes to the taxation of life insurance in its 1981 budget. Glover and the board quickly reprised the Action Committee Taxation, originally formed in 1978.

Then, as chair, Glover wrote to all members of Parliament.

He also urged Advocis members to request face-to-face meetings with their federal and provincial elected representatives to explain the negative impact on policyholders and the unfairness of making the proposals retroactive. Meanwhile, Advocis presented numerous briefs and held meetings with all relevant levels of government.

“By 1983, some of the budget proposals were removed and others adapted to remove retroactivity or apply amendments that the industry felt [were] reasonable,” says Sadgrove. “In the final analysis, over 85% of policies were exempt from the accrual tax on policy interest and the tax at death.”

Glover had also solidified his reputation as someone with a level and depth of knowledge that enabled him to speak at a DECEMBER 2023 FORUM 21

TRIBUTE

Clockwise from top left: Don and Joyce Glover at an Advocis board of directors dinner; Don Glover through the ages; Advocis staff at a Summer Sizzle barbecue; Don Glover’s humour shines through at an Advocis annual general meeting.

very technical level about legislation and regulations. That led to other successful engagements with the government on tax-related issues, Sadgrove says.

ADVOCIS’S FIRST FULL-TIME PRESIDENT From 1906 when Advocis was founded, the position of president had always been filled by a volunteer. However, by the early 1990s, the Advocis board of directors had recognized that increasing demands on the president required a full-time, salaried leader.

Glover was selected to step into the redefined role in 1991. He served as president for five years.

“Staff back in the early 1990s were really like a family, and Don came from his family in the branch business to the family here, so it was an easy transition for him,” says Sadgrove, who was by then Advocis’s senior vice-president and general manager.

Glover started the tradition of “Summer Sizzle” barbecues — even supplying a new barbecue — and made a point of spending time with every employee who attended.

“It was such a great way of getting to know your fellow workers in a casual and relaxed setting,” remembers Karen Beier, a Toronto-based former director of human resources at Advocis.

“It was a huge hit.”

Kris Birchard, owner of Eagle Insurance Agency in Ottawa, got to know Glover around this time through his role on Advocis’s board of directors and as chair of the Institute.

“Having somebody with the stature of Don Glover and his experience in the industry and in our association come on and be a full-time president was very meaningful,” Birchard says.

22 FORUM DECEMBER 2023

“You had somebody in the management team who understood and knew everything that was involved in being an independent financial advisor. [Don] was quite frankly a very, very valuable asset to the association and to the industry.”

Birchard recalls one meeting that Glover joined remotely from the Mayo Clinic, where he was recovering from surgery.

He made a point of reminding his colleagues how the products they sold, and that he had purchased for his family, had proven their worth as he faced his own health challenges.

“He took the opportunity of his own misfortune to reinforce the work that our members do with their clients to help them prepare and plan for these kinds of medical emergencies,” says Birchard.

One of his most recent memories of Glover is of his hospitality and continuing engagement with the industry even after retiring. In 2009, Birchard had been profiled in FORUM as the new Advocis chair, and Glover reached out to congratulate him and suggest a meal the next time he was in Calgary.

A few months later, Glover picked Birchard up at his Calgary hotel and took him to his golf club where they had a leisurely lunch talking about the industry, old times, new times, and where everything was headed. Birchard appreciated having another chance to get Glover’s take on the best ways forward.

“When you first met him, if you knew of him ahead of time, you had some respect. But that respect was borne out with your interactions with him and the way he treated people,” says Birchard. “Don was very respectful. He was very thoughtful.

He truly was a leader.”

ALISON MACALPINE is a Toronto-based writer and FORUM’s editor.

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TAX UPFRONT

BY JAMIE GOLOMBEK

AMT Impact on Giving How AMT changes affect philanthropic planning

D

ecember is traditionally the month when most of the year’s charitable giving takes place. The reason? Donors want to ensure they get a tax receipt for the current year, which can be used to reduce their tax payable when they file their tax returns next April. But December 2023 may see even more significant gifts due to the looming changes to the alternative minimum tax (AMT), set to come into force in 2024.

Before reviewing the new AMT rules and their impact on charitable giving, let’s review some of the tax advantages of giving to charity.

TAX RECEIPT FOR ALL DONATIONS

For many donors, simply donating cash — by writing a cheque, using a credit card, or applying some form of digital payment — is the way to go. As with any type of donation, these donors can receive a donation receipt to claim both federal and provincial non-refundable tax credits.

On the federal side, donors get a credit of 15% for the first $200 of annual charitable donations. The credit rate jumps to 29% for cumulative donations above $200 (or 33% if the donor has income subject to the top 33% federal rate, which is income of more than $235,675 in 2023). Parallel provincial credits work similarly, providing most Canadians with a minimum combined federal/provincial tax credit worth at least 40% for donations above $200 annually.

TAX SAVINGS FROM DONATING “IN-KIND”

In-kind donations of publicly traded shares, mutual funds, or segregated funds to a registered charity provide the donor with a tax receipt equal to the fair market 26 FORUM DECEMBER 2023

value of the securities or funds being donated and allow them to avoid paying capital gains tax on any accrued gain.

A similar rule applies to the donation of securities obtained through the exercise of employee stock options. The employee may be able to avoid paying tax on employee stock option benefits by donating the obtained securities in-kind to a charity within 30 days of exercise.

PROPOSED CHANGES TO THE AMT

Changes proposed to the AMT system in 2024 may motivate some large gifts in December 2023, depending on the donor’s personal tax situation. The AMT imposes a minimum level of tax on taxpayers who claim certain deductions, exemptions, or credits to reduce the tax they owe to very low levels.

In the 2023 federal budget, the government announced that “to better target the AMT to high-income individuals,” several changes would be made to the rules for calculating the AMT, beginning in 2024. The changes, which were formally introduced in Parliament over the summer, include raising the AMT rate to 20.5% from 15%, increasing the amount of income below which AMT will not apply ($173,000 in 2024), and broadening the AMT base by limiting certain amounts that reduce taxes. All provinces and territories also impose AMT, which is generally calculated as a percentage of the federal AMT. Since AMT can only arise in 2024 if income calculated under the AMT rules exceeds the proposed $173,000 AMT exemption, most taxpayers don’t have to worry about it. But AMT could be an issue for higher-income taxpayers if a charitable gift is made in 2024, as opposed to 2023.

Why? Because a couple of AMT changes specifically target charitable giving.

First, starting in 2024, only 50% of the donation tax credit will be allowed when calculating the AMT. This alone, however, is not enough to trigger AMT, even for high-income donors. It’s only a concern when a donor earns some tax-preferred income or takes certain deductions. For example, a donor who has a significant capital gain, exercises qualifying employee stock option benefits, or has losses carried forward from a prior year could be affected.

The second AMT adjustment relates to in-kind donations of publicly traded shares, mutual funds, or segregated funds to a registered charity. Starting in 2024, 30% of the capital gains on securities that are donated in-kind will be included in income under the new AMT rules. Since only 50% of the donation credit will be allowed for AMT purposes, as explained above, significant donations of publicly listed securities may result in additional AMT in 2024 that would not have arisen had the donation been made in 2023.

This means that now is the time to reach out to your clients to determine whether they should do some proactive planning as 2023 draws to a close to minimize the impact of AMT in 2024.

Such planning could include triggering a capital gain in 2023, exercising employee stock options, or making a charitable gift before year-end. Those who opt to make a charitable gift but haven’t decided how to allocate it yet can consider donating to a donor advised fund (DAF) — an account at a public foundation that will hold the donation. The donor gets a 2023 tax receipt for the donation and avoids any 2024 AMT consequences of delaying the gift. Then, in 2024 and beyond, the donor can have the DAF make distributions to any favourite charities.

JAMIE GOLOMBEK, FCPA, FCA, CFP, CLU, TEP, is the managing director, tax & estate planning with CIBC Private Wealth in Toronto. He can be reached at Jamie.Golombek@cibc.com.

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ESTATE DILEMMAS

BY KEVIN WARK

Probate Basics The purpose and benefits of probate planning

W

hen discussing estate planning with clients, the terms “probate planning” and “will planning” are often used interchangeably. Indeed, there are significant linkages between the two. But ideally, and with your guidance, probate planning should take place before a client sits down with a lawyer to draft a will. This column outlines the potential benefits of probate planning and how it ties into will planning. A future column will discuss the pros and cons of taking steps while alive to arrange for the transfer of assets outside a person’s estate.

WHAT IS THE PURPOSE OF PROBATE PLANNING? Probate planning identifies those assets that either need to be, or should be, distributed to beneficiaries through a will versus those assets that will be transferred outside the deceased’s estate. This is critical to the proper drafting of the client’s will and should also lead to a review of strategies that will effectively permit the transfer of assets outside the client’s estate.

Advisors can play an important role in probate planning by helping clients develop an inventory of their assets and decide how they would like those assets to be distributed on death. Determining the best way to transfer assets not only simplifies the will planning process but can provide a significant financial payback for estate beneficiaries.

PHOTO: ISTOCK.COM / FABIOBALBI

WHAT ARE THE BENEFITS OF PROBATE PLANNING? One of the main reasons to engage in probate planning is to develop an inventory of assets. As part of this process, it is important to: • Specify where assets are physically located and who may be involved in managing or administering them • Understand the nature of the client’s ownership interests — such as joint

ownership, corporate ownership, or a beneficial interest in a trust • Be aware of any restrictions that may apply to the transfer of the property, such as a mandatory buy-sell agreement between shareholders or a mortgage on the family cottage All of this information is extremely helpful to a lawyer in drafting the client’s will and assists with other planning.

Clients who reside in British Columbia, Ontario, or Nova Scotia often undertake probate planning to avoid estate taxes/probate fees, which can be as much as 1.5% of the value of estate assets. For example, a client who lives in Ontario and can arrange for the transfer of $1 million of assets outside the estate will save about $15,000.

In all provinces and territories, the executor of an estate (whether a family member or not) is generally entitled to claim fees for work done to administer the estate. These fees can be as much as 5% of the value of the estate. Thus, even in provinces with no or low probate fees, moving assets outside the estate can result in cost savings for the estate and beneficiaries.

Note also that assets distributed under the deceased’s will are subject to claims by the deceased’s creditors, family law claims, lawsuits by unhappy family members, and/or tax claims by the Canada Revenue Agency. Greater protection from

these claims may be available by arranging while alive for assets to be gifted to beneficiaries or entering into other asset transfer arrangements outside the will.

Furthermore, many clients, wealthy or otherwise, wish to keep private the nature of their assets and the identity of beneficiaries under their estates. In particular, they often want to avoid media publicity related to the distribution terms of their estates.

However, once a will is probated (a formal process that requires filing the original will and a description of estate assets), this information becomes part of the public domain and searchable by others. Clients may, therefore, be attracted to planning strategies that achieve the same estate goals while avoiding prying eyes.

Finally, the time it may take to obtain probate approval for a will can be problematic. For example, in large urban areas, probate may not be granted for several months or even longer. Further delays can occur when there is a legal challenge to the validity of the will. The inability of the named executor to deal with estate assets before probate is finalized can have serious repercussions, particularly when the deceased holds property such as shares in a business or the beneficiaries are in dire financial need. Once again, strategies that allow for the transfer, management, and control of assets outside the estate can be very beneficial to those who have an interest in the deceased’s estate.

STAY TUNED FOR STRATEGIES Now that we’ve covered off the basics of probate planning, stay tuned for the next column on common probate planning strategies.

KEVIN WARK is managing partner of Integrated Estate Solutions and a tax advisor to CALU. He is the author of several tax/estate planning books entitled “The Essential Canadian Guides” that are available through Amazon.ca and Kindle.

DECEMBER 2023 FORUM 27

CORPORATE INSURANCE

BY PATRICK UZAN

Know Your CDA

Exploring the impact of policy transfer rule changes

M

any shareholders of private corporations have transferred life insurance policies to corporations in the past. Tax changes to the policy transfer rules in 2016 could impact the credit to the capital dividend account (CDA) of a corporation on the death of the life insured. As demonstrated by the following example, understanding these rules is key to getting the CDA calculation right when the corporation receives the death benefit.

OUR EXAMPLE Assume that on December 1, 2015, a valuation was performed on a $2-million permanent policy owned by Mr. X, the sole shareholder of a private corporation.

The policy’s cash surrender value (CSV) and adjusted cost basis (ACB) at the time were $120,000 and $200,000, respectively.

The valuation determined the fair market value (FMV) of the policy to be $400,000.

On the same date, Mr. X transfers ownership of the policy to the corporation for a promissory note in the amount of $400,000, and the corporation is named as beneficiary of the policy.

Under the tax rules at that time, the shareholder would be deemed to have disposed of the policy for proceeds of $120,000 (i.e., the CSV of the policy) and no gain would arise for tax purposes. In addition, the starting ACB to the corporation would be equal to the CSV of the policy, which was $120,000. The result is the extraction of $400,000 from the corporation without tax to the shareholder (payments to settle the promissory note can be received tax-free) and the “resetting” of the ACB to $120,000 — $80,000 less than it was in the hands of the shareholder.

Life insurance proceeds create a credit to a private corporation’s CDA, which permits the payment of tax-free capital dividends. The amount added to the corporation’s CDA from life insurance proceeds is generally equal to the proceeds 28 FORUM DECEMBER 2023

received minus the policy’s ACB immediately before death. Therefore, resetting the policy’s ACB to a lower amount may be significantly favourable to beneficiaries of Mr. X’s estate.

CHANGE IN RULES The rules changed for such policy transfers made after March 21, 2016, and now the policy ACB and FMV of any consideration paid by the corporation for the policy is factored into the calculation of proceeds of disposition to the shareholder.

Thus, had the policy transfer taken place four months later, Mr. X would have a policy gain of $200,000 (i.e., proceeds of $400,000 less ACB of $200,000) and the starting policy ACB to the corporation would have been $400,000.

Does this mean that, in our example, Mr. X executed the planning “just under the wire”? Unfortunately, what goes around, comes around. The 2016 changes also introduced rules intended to offset advantages realized on previous transfers.

These rules adjust the calculation of the CDA at the time life insurance proceeds are received by the corporation. The rules are applicable when anyone, other than a taxable Canadian corporation, had previously transferred a policy to the corporation after 1999 and before March 22, 2016.

The second calculation (the “soft grind”) is more complex and designed to offset the advantage of resetting the starting ACB of the policy in the hands of the corporation. Let’s assume the ACB reduces by $150,000 from date of transfer to time of death of the life insured. In that case, the ACB of the policy immediately before death would be –$30,000 (starting ACB of $120,000 less reduction of $150,000).

However, the tax rules dictate the ACB cannot be less than zero. The soft grind is calculated as follows: Amount by which the lesser of: • FMV of consideration received by the shareholder • ACB at the time of transfer exceeds CSV at the time of transfer, minus the absolute value of any negative ACB immediately before death

FMV of the consideration received by the shareholder minus the greater of: • The CSV at the time of transfer, and • The ACB at the time of transfer

In our example, the soft grind is $50,000 (i.e., the amount by which the ACB of $200,000 at time of transfer exceeds the CSV at time of transfer of $120,000, which is $80,000, minus the absolute value of the negative ACB immediately before death of $30,000 = $50,000). If the ACB was not reset under the old rules, the ACB for tax purposes at time of death would be $50,000 (i.e., ACB in the hands of Mr. X immediately before the transfer of $200,000 minus $150,000 of ACB reductions from time of transfer to time of death) — but instead it is zero ($120,000 minus $150,000, which is zero for tax purposes). The soft grind eliminates this $50,000 difference by reducing the CDA by that amount.

In the final analysis, the addition to the CDA in our example would be $1,750,000, calculated as $2 million (death benefit) minus $0 (ACB) minus $200,000 (hard grind) minus $50,000 (soft grind). While this would be the same CDA credit if the transfer took place after the 2016 changes, the taxpayer did benefit from having the use of $400,000 (tax-free) received at the time of transfer.

In our example, the hard grind reduces the CDA by $200,000, calculated as the FMV of consideration received by Mr. X of $400,000 minus the ACB of the policy at the time of transfer of $200,000.

PATRICK UZAN, CPA, CA, TEP, CLU, is vicepresident, planning services at PPI Advisory in Calgary, where he supports advisors in developing and implementing estate and tax planning strategies in the high-net-worth market.

THE CALCULATIONS The first adjustment, often referred to as the “hard grind,” is calculated as:

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STRATEGIC PHILANTHROPY

BY MARK HALPERN

Don’t Miss Out Unlock millions by dropping life insurance “baggage”

I

recently met with a successful family in the process of developing a succession plan to transition wealth to the second and third generations. I presented three potential scenarios following an estate freeze: 1. Use cash on hand to pay the tax bill on death 2. Use life insurance to pay the tax bill on death 3. Donate frozen private company preferred shares on death and use life insurance donation to buy them back The numbers were crystal clear. No life insurance resulted in significant estate erosion. Life insurance to pay taxes left the family $12 million ahead. Donating shares created a $33-million family foundation, left more money for the family compared to doing nothing, and turned taxes into charity. Despite this, the family chose to stay the course and use cash to pay taxes.

They missed an opportunity to expand their legacy by creating a transformational gift to a family foundation. Why?

LIFE INSURANCE OFTEN COMES WITH “BAGGAGE”

This isn’t the only ultra-high-net-worth family to resist using life insurance strategically. I’ve learned that in most cases what holds people back is baggage.

Many people view life insurance as a grudge purchase, only needed while building wealth to pay off the family home mortgage, replace income to support day-to-day expenses, and provide for kids’ education.

It’s like home and car insurance — a necessary but resented expense. Others had a negative experience with an advisor or a different type of insurance, or they know someone who made a travel, property, or auto claim that an insurance company denied. They don’t realize life insurance is different, and it’s hard to argue with a death certificate and built-in guarantees.

Whatever the reason, successful families need to drop the baggage and consider 30 FORUM DECEMBER 2023

these six reasons to use life insurance: • Estate tax funding • Estate equalization for children in and out of the business and for blended families • Shareholder agreement funding • Key person coverage • Tax-exempt asset diversification using corporate-owned insurance and the capital dividend account (CDA) • Philanthropy Life insurance is a powerful tool to optimize or preserve family wealth at a low cost with high tax efficiency. It can be a multiplier of wealth and philanthropy.

Think of it as switching out your putter for a driver to amplify the effect of your golf swing and make your ball go farthest.

ILLUSTRATING THE MULTIPLIER EFFECT

The Cooper family (name changed) lives in Ontario and previously executed an estate freeze, which froze the value of the parents’ preferred shares at $62,400,000. Half that amount will be taxed as a capital gain on death and result in a tax bill of $16,692,000 (tax rate of 53.5%). There are three ways to handle the tax liability.

SCENARIO 1: Pay the tax bill in cash saved up for this purpose — a significant sum to tie up for an uncertain number of years.

This is the “no planning” scenario. Heirs will receive $45,708,000.

SCENARIO 2: Buy just enough life insurance to cover the tax bill. For illustration purposes, a joint last-to-die level-premium universal life policy with a death benefit of $16,692,000 will cost them $509,974 annually. Assuming the second spouse

dies 21 years from now, at age 90, the cost of insurance will amount to $10,709,454.

With this option, the estate will pay the same amount of tax to the government, but the cost to the family is about $6 million less. In addition, the next generation will be able to use the resulting $12,665,521 capital dividend account (CDA) credit to withdraw cash from the company taxfree — a $6-million tax savings for the next generation by using the insurance CDA credit (assuming a 47.74% tax rate).

Heirs will receive $57,737,074.

SCENARIO 3: Most people know about donating non-registered appreciated public securities such as stocks, exchangetraded funds, mutual funds, and seg funds in-kind and paying no capital gains tax.

Few know you can donate private company preferred “frozen” shares. This family can donate their private company shares to charity on death and use life insurance of $33 million to fund the generous donation and redeem the shares for the family.

This transforms tax into charity. Heirs will receive $53,084,486.

FAMILY, CHARITY, OR TAX DEPARTMENT?

When we die, our money will go to some combination of family, charity, and the tax department. Appropriate planning directs more to family and/or charity — and can even, as in scenario 3, take the tax department out of the equation.

This type of planning is easily scaled up or down and applies to high-net-worth and ultra-high-net-worth families alike.

Baggage aside, it’s critical to objectively look at the numbers — they speak for themselves.

MARK HALPERN, CFP, TEP, MFA-P, is CEO of WEALTHinsurance.com and has developed the Power of PlatinumTM program with Jim Ruta to train, coach, and mentor insurance and investment advisors. Connect with him on LinkedIn, where he shares case studies and success stories.

SCENARIO 1 No planning

SCENARIO 2 Life insurance pays tax bill

SCENARIO 3 Shares donated, eliminating tax bill; life insurance proceeds buy them back

Total value of preferred shares

$62,400,000

$62,400,000

$62,400,000

Paid in taxes

$16,692,000

$16,692,000

$0

Donated to charity

$0

$0

$33,384,000

Left to family

$45,708,000

$57,737,074

$53,084,486

LEADERSHIP & GROWTH

BY JASON MCMAHON

Suddenly a Leader GAMA resources can help you be a great one

PHOTO: ISTOCK.COM / MONKEYBUSINESSIMAGES

H

ow did you get started as an advisor? I came up in a traditional career agency model. Someone recruited me (convinced me) to take the plunge into a commission-based career, leaving behind the certainty of my salaried position. Over the years, I’ve heard many advisors’ origin stories.

They’re unique, of course, but many are very similar to mine.

Here’s what it looked like for me. In my early years as a financial security advisor, I was supported by layers of management, training, and camaraderie. I enjoyed it and I feel it was the most significant reason I found success as a young advisor. The transition into management came naturally. I simply moved from receiving management support to providing management support to the advisors who were in the early stages of building their own careers in the industry. I already knew very clearly what that support needed to be.

However, we operate in an evolving industry. Regulation, educational rules, and consumer expectations have changed, largely in a positive direction, and we are all in the midst of a shift in how we offer advice and service to Canadians. Gone are the days where an advisor can manage a plethora of clients and be mostly reactive to their needs.

At the same time, leadership in financial services is changing. As an increasing number of advisors build their own firms and teams geared toward offering a more holistic approach to the planning process, they’re thrust into the role of leader while continuing to manage their own practice.

All of a sudden, they’re finding themselves heading up boardroom meetings and strategy sessions and covering off areas such as succession planning, client segmentation, and team accountability — to name just a few.

There’s an exciting rush that comes with independence from traditional mindsets and models — but there can also be some

uncertainty without access to in-house guidance and mentorship in all kinds of areas. Today’s advisors may feel they need to essentially reinvent the wheel as they work to engage and motivate their teams.

I’m here to say that isn’t necessary.

YOU ARE NOT ALONE

What hasn’t changed is that there is a real art that goes with the science of leading and managing people. More than ever, I’m having conversations with advisors about that art and science based on solid principles on how to lead a team that have stood the test of time. I love these conversations and the impact that comes from thoughtful dialogue, talking strategy, and sharing what I’ve seen work (and not work) in so many other teams and firms.

For over a decade, I’ve volunteered with GAMA Global Canada, and I feel it’s time to reintroduce my industry colleagues to what GAMA (formerly the General Agency Managers Association) can do for you. GAMA is an organization that prides itself on developing leaders and giving advisors access to tools and training that will directly help them and their practices. This organization has allowed me to develop my own leadership skills, given

me international speaking opportunities, taught me best practices, and provided the camaraderie I value so much with peers across Canada and internationally.

Traditionally, it was a field manager representing an insurance company who recruited, trained, developed, and led financial advisors. More often now, it’s an experienced advisor leading the team.

With this change, I believe we need to shift our mindset on who is a leader in our industry. I challenge financial advisors who find themselves leading a team to access the resources offered by GAMA. Here’s some of what I’ve learned through my involvement with GAMA. Leaders need to devote time and energy to: • Establish a proper cadence of communication, including carefully considering how, when, and through what medium they communicate • Ensure alignment with the firm’s vision and values, including facilitating 360-degree feedback that incorporates conversations about team members’ vision, values, ideals, and goals • Agree on working parameters, including understanding how each person works best and what blend of office time, face-to-face time, and digital time is mutually acceptable • Acknowledge that feedback is a gift that lets teams grow together, including building in appropriate feedback mechanisms that help to establish individual and team paths forward Looking ahead to 2024, in an industry that continues to evolve, needs succession planning, and demands leadership more than ever before, start planning how you’ll explore all the ways GAMA can help you and your team progress from good to great.

Reach out. We can help.

JASON MCMAHON, B.Comm. M.Sc., CHS, CFP, is the president of GAMA Global Canada and a regional vice-president in Ontario with PPI. DECEMBER 2023 FORUM 31

Advocis News ASSOCIATION UPDATES AND EVENTS

CHAPTER NEWS HOMETOWN TOURISTS

Filled backpacks ready for GTA children.

A

dvocis Vancouver Island tried something different this summer to connect for fun and fellowship. Instead of the traditional golf tournament and sporting events, the chapter hosted two “Tourist in Your Hometown” themed events: a guided stroll along Victoria’s Inner Harbour that featured tales of the Indigenous Lekwungen people who first lived there, and continue to do so, and a tour of Victoria’s Chinatown. Even members born and raised in Victoria were amazed to learn something new about the history of their hometown.

GIVING BACK

A Taking in the sights of Victoria’s Chinatown.

dvocis Toronto members came together to prepare backpacks with essential school supplies for underprivileged students in the Greater Toronto Area in an event made possible through partnership with Foresters Financial and in support of the Education Bank. The chapter would like to thank all the volunteers who contributed!

COLLECTIVE WISDOM

A

dvocis Simcoe-Muskoka runs a monthly Wisdom Wednesday series as an ongoing learning opportunity for members, featuring a variety of industry topics and speakers. Sessions have focused on investing, succession, tax and financial planning updates, practice management, professional conduct, business practice skills, and even human trafficking. Attendance is usually 25 to 35 people, with a hybrid format in winter months.

32 FORUM DECEMBER 2023

Presenters at recent Wisdom Wednesday events.

WHY BECOME A

FIND YOUR WHY...

Register: CICEA.ca/advocis Visit: CICEA.ca Ask: info@cicea.ca

?

FINAL WORD

The Business of Change

E

BY ERIC LIDEMARK

arly in my career, I was presented with a quote that has stuck with me ever since: “If you can’t accept change, you’re in the wrong business.” It was true then and it remains true now — and it reflects not only the market and the needs of our clients, but how we face the future of our industry, our profession, and our association.

That said, my experience has also been that successful financial advisors do far more than accept change — they see it first and foremost as an opportunity.

For example, one of the most significant issues in our business right now is succession planning (retirement planning for advisors, as I like to call it) and how advisors need to plan as much for their own transitions in life as they do on behalf of their clients. When they see it as an opportunity, advisors can approach retirement planning in a way that empowers them to maximize the value of their practice while also passing the torch to the next generation of advisors. Most important of all, this can ensure that their clients will continue to be well served.

On the other hand, advisors who are averse to change and see retirement only as something to be in denial about for as long as possible will fail to see these opportunities before them — and with that failure will come a series of unfortunate events that the working advisor should see a mile away: no agreements, no timelines, no insurance, and perhaps even no candidates. This is the cost of attempting to avoid the inevitable.

Beyond this, I think about the opportunities we could be doing more to embrace as we see change throughout the industry — particularly when it comes to finding more ways to co-operate. While we may work on behalf of different companies and seek to develop our own practices independently, consider just a few examples of how much change we have in common: the same regulatory developments, the same evolutions in educational requirements, and the same increasingly complex financial needs of Canadians as they come up against the considerable

34 FORUM DECEMBER 2023

challenges that are emerging in the economy.

When we refuse to accept these changes and see them only as obstacles, it is no wonder that they can seem difficult or even scary to confront, especially for new advisors. But if we see new regulations as opportunities to work toward the public interest, new educational requirements as opportunities to raise the professional bar, and new financial pressures that Canadians face as opportunities to teach them about the value of financial advice, financial literacy, and what we have to offer as financial advisors, we can create outcomes in which everyone benefits.

Of course, it isn’t as simple as reaching the end of this article, agreeing with it in principle, and instantly possessing this kind of mindset. I know this because I had to grow into it myself. In fact, the quote I mentioned above was given to me after taking a vocational personality test in which I was classified as — and no, I’m not making this up — a stick. Rigid, set in my ways, and resistant to change of any kind. At this point, you can probably understand why the quote has remained with me ever since.

So, what happened? Well, Advocis happened. As I made lifelong relationships within my own chapter and across Canada, earned designations through educational courses offered by the Association, and learned a great deal about volunteering and leadership through it as well, I became a financial advisor (and a person!) who always sees change through the lens of opportunity.

As your chair, my hope is that those connections between us will continue to grow so that we can work through change together — not only within Advocis, but through fellowship with other associations and partnerships with educational organizations, industry groups, and beyond.

If we can accept the changes we are facing, I am confident the opportunities before us will be limitless.

ERIC LIDEMARK, CFP, CLU, CH.F.C., CHS, is the chair of Advocis.

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YOUR CLIENTS: May benefit from zero taxable capital gains.

Provide recommendations on which charities to support, and when they should receive that support.

Receive a donation receipt for the fair market value of the securities on the day they are donated.

For nearly 50 years, Abundance Canada has helped individuals, business owners, entrepreneurs, and corporations with significant and complex gift-planning scenarios. And we work with advisors to help them provide gift planning solutions to their clients. Our process is simple, efficient, and includes anonymous giving to charity.

Visit abundance.ca or call 1.800.772.3257 to speak with a Gift Planning Consultant and learn more about this and other tax-efficient ways for your client to give to the causes that are important to them.

Financial advisors across Canada continue to rise to the occasion 2023 has been a year with many challenges, including the far-reaching effects of inflation, the unpredictable nature of the stock market, and persistent global uncertainties. In the face of all of this, Canadians turned to financial advisors for guidance, seeking sound advice and forward-thinking strategies to navigate through these obstacles while still pursuing their financial goals.

ON BEHALF OF YOUR PROFESSIONAL ASSOCIATION,

WE THANK YOU FOR YOUR RESILIENCE, DEDICATION, AND EXCEPTIONAL COMMITMENT THROUGHOUT 2023.

Members