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How to help clients plan for career changes

Financial advisors are seeing noticeable changes in clients’ financial and retirement planning priorities when it comes to their careers

Since early 2021, millions of workers worldwide have quit their jobs in pursuit of something better.

While Canada’s job-changing-rate is in line with the average from 2016 to 2019, the pandemic accelerated the wealth management industry’s war for talent.

And financial advisors are seeing noticeable changes in clients’ priorities when it comes to their careers.

David Boyd, senior investment advisor with BMO Private Wealth, said more of his clients are strongly considering changing jobs to achieve greater work-life balance.

“What we’re seeing is [some people saying], ‘I used to have a Monday to Friday 9 p.m. to 5 p.m. job — now, through Covid, I’ve managed to create more of a balance. [Is] this something I can maintain and [is that] realistic with my employer?’” Boyd said.

Patrick Briscoe, financial planner with Bayswater Wealth Management and Investment Planning Counsel Corp. in London, Ont., agrees. He said “the overriding theme” of why some of his clients are leaving their jobs is the pursuit of a less stressful situation.

“Covid has kind of woken people up to the fact that life is short and they want to be able to enjoy [it],” Briscoe said. “Maybe, in the past five to 10 years [they’ve] focused a lot on work and less on the life side of that balance. Now, I think, the pendulum is just swinging a little bit more [to] the life side of things.”

Two of Briscoe’s clients — a couple in their mid 50s — recently decided to retire early. Prior to becoming Briscoe’s clients two years ago, the couple’s retirement plan consisted of continuing to work their manufacturing jobs into their 60s and then drawing on their pensions. The couple brought over a portfolio of mutual funds from their previous firm.

Once the couple began considering early retirement, Briscoe adjusted their financial plan, first coming up with “buffer strategies and what-if scenarios” to ensure they would be covered during their retirement. The scenarios included “What if rates of return are not as they used to be?” and “What if inflation is higher than projected?”

“These are things that are less protected when you don’t have a defined-benefit pension. My job in this case became [to] tailor [the] plan to make sure that even on a now variable pension or retirement plan, we’re still going to have a great chance of success,” Briscoe said.

Briscoe presented them with a plan that has the couple working part-time and then downsizing their home closer to retirement, using the profits from a home sale to help fund their lifestyle. The couple is also in a globally diversified balanced portfolio that reflects a pension-style mandate.

Career changes can also happen earlier in clients’ lives.

For example, Boyd has two clients — a couple in their late 30s — who owned a small retail business before and in the earlier part of the pandemic. Frustrated with the financial and emotional adversity from opening and re-openings throughout the pandemic, the couple decided to sell the business to a competitor.

The wife had a background in law and went on to pursue a career in that field, while the husband decided to stay home and raise their two young children.

Two of the couple’s priorities, pre-pandemic, were ensuring that their RESPs were topped up on an annual basis and that their TFSAs were “current, funded fully and invested properly,” Boyd said. The couple each have an RRSP and TFSA, and a family RESP.

When the couple decided to make their change, Boyd worked with the couple’s accountant to assess different funding scenarios when they sold the business, the wife went into law and the husband became a stay-at-home parent. Boyd and the accountant realized the couple would not earn their typical income the year they sold the business, so they decided to fund the RESP and the TFSA over the RRSP account.

Boyd added the couple was also looking for more liquidity, if available, with their TFSAs in the case they needed to remove those funds quickly.

“When we were continuing to fund the RESP, we were dollar-cost averaging, which takes the volatility of the market out of play,” Boyd added, saying they did the same with the couple’s TFSAs.

Boyd said the couple were comfortable maintaining their 75% equities, 25% fixed income asset mix in their RRSPs and TFSAs. With the wife practising law again, the couple will be revisiting catching up on RRSP contributions.

For other advisors helping clients navigate a career change, Briscoe suggests going into the planning phase with an open mind.

“As advisors, we need to challenge our pre-conceived notions of what we think retirement should look like — create more of a conversation, form relationships with the client so that we’re better able to tailor advice and come up with solutions that meet their specific needs,” he said.

“It’s a team effort. Advisors need to make sure that our ears and eyes are open and we’re taking as much information from the client as possible to make sure that the plan meets their goals while also being financially responsible.”

Source: Investment Executive