My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with BDO. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, February 10, 2020

Why Can’t People Get Their Financial Affairs in Order?

Over the last year I have met several potential client's for BDO’s Wealth Advisory Services (from both inside and outside BDO). In two specific cases, the meetings went well, and as I often do; I undertook some initial basic discovery about the prospective client’s financial affairs and personal objectives, among other things.

In both these cases, the individuals were either in the midst of selling a business or had sold their business for millions. I thus suggested they may wish to update their wills to reflect their change (or upcoming change) in financial circumstances.

I was shocked that each of the potential clients sheepishly answered they did not have wills to update. I was astonished that these highly sophisticated business people did not have wills. (I know what you’re thinking: Mark, you’ve written on this issue numerous times, like this post on Canadians not writing wills and this one on famous people who had no will, why can't you give this a break. But let just say I sometimes figure if I keep hoping, things will change - sort of like the Maple Leafs prolonged Cup drought).

The excuses


I asked the two individuals, why they had no will. One said it has been on their to-do list for several years and with the sale about to happen it will now move up the list. The other answer had something to do with bad karma in writing a will.

It seems to me that Canadians do not make wills for the following reasons (there are far more, but I will stick with five):
  1. We love to procrastinate
  2. It is a bad omen to make a will
  3. “I am young, so I don’t need to”
  4. People aren’t sure how they wish to distribute their estate
  5. Some people are oblivious about the impact on their family (dying without a will leaves a mess for the surviving spouse, children, and executors to clean up an estate)

Has your business advisor harassed you to draft a will?


I remember thinking how Prince’s team of advisors could ever have allowed him to not have a will when I wrote the post on famous people dying without a will. When meeting the two people above, I wondered: had their advisors not spoken to them about this topic?

I think many advisors do ask their clients about their personal affairs, including their wills, but may give up when no action is taken or just keep reminding and harassing them to no avail. But I also think many advisors get caught up assisting their clients with their business affairs and often do not connect the business and personal sides. This is why I really like my wealth advisory gig: I get to connect these two aspects and integrate a client’s business, personal, retirement and estate planning into one.

I know many advisors read this blog, so advisors, at your next meeting with any client, circle back on what happens if they die (if you do not have an advisor, have this conversation with yourself :). Make sure they have these basics covered:
  1. Will and a secondary will for their corporate interests if their province allows
  2. Power of attorney for finances
  3. Power of attorney for personal care (medical)
  4. Insurance in case of death

I am not letting you off easy


If you are reading this and don’t have a will, powers of attorney or life insurance on your life to support your family if you pass away, you need to get over whichever one of the five hang-ups you have for not dealing with these matters and consider the mess you will leave your family without a will or any of the other key items. Do it for them—today, this week or this month; not “sometime before year-end."

The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

Monday, January 27, 2020

My child is engaged. Do I pay for the wedding?

Late last year my colleague Carmen McHale popped by The Blunt Bean Counter to answer a question we hear a lot: Should I pay for my child’s university education?

This week I asked Carmen to come back and share her thoughts on whether parents should pay for a child’s wedding. Paying for a wedding brings up different questions from those parents ask about paying for university. But the two topics share a core theme: when parents need to cut the financial cord with their kids.

Almost everyone who has children tackles the issue at one point or another. Carmen deals with it here and wraps up with some final thoughts on teaching your children about financial responsibility.
_________________

By Carmen McHale

Weddings challenge parents to make a bunch of difficult decisions in advance of the happy occasion. One of them is finances.

Many cannot fathom not paying for their child’s wedding, at least in part. But a wedding can easily cost upwards of $50,000, so paying for even half of that can set your retirement back a year or two.

Let’s say you agree to pay half the cost – $25,000. What does that do to your retirement? If you could invest that $25,000 at 4.5% over 20 years, you will lose $60,000 in retirement savings. (This is assuming after-tax dollars.) If you are struggling to save for retirement like most Canadians, that $60,000 pays for one year of retirement. By covering half of your child’s wedding, you may have to retire a year later. Now consider that for two, three or four children – the costs begin to add up.

In practice, parents generally follow one of these courses of action, moving from covering no costs of the wedding to covering the entire cost. Parents:
  • Do not cover any costs, because they believe their children should stand on their own two feet
  • Do not cover any costs, because the wedding does not fit their budget
  • Assist child with the costs
  • Pay the full cost of the wedding and then ask their child to repay some of the outlay using wedding gifts
  • Pay the full cost of the wedding because their bank account can foot the bill
  • Pay the full cost of the wedding, even though it stretches their finances, because we love our children and want to help them in any way we can. (Just remember that this may affect your retirement.)
Deciding whether to pay for a wedding brings a host of financial complications that don’t stay in the family. If parents do pay – which set of parents should pay? And how should they divide the cost? What if one set of parents doesn’t have the same financial means as the other, or has completely different views about paying? These matrimonial nuances have spurred the imaginations of sitcom writers and generated a range of formulas to divide the financial hurt.

In the end, while easier said than done, parents need to do their best to separate their emotional concerns and love for their children, from their financial concerns when paying for a wedding; or else, the financial pain may be felt in retirement.    

Teaching financial independence to your children


My husband and I are blessed with a 13-year-old daughter, and she has been learning how to manage her money since she was six (that’s what happens when your mom is a financial advisor).

We used to give her a weekly allowance in loonies and toonies so she could learn how much a dollar would buy. She has now graduated to having her own bank account and has developed the skills to save for larger items, like a new headboard for her bedroom (the proudest moment for her mom).

It is important to teach children to make their way in the world – after all, that is what we are tasked with as parents. Part of this teaching should include finance, and it should start at a young age. Make children responsible for something – their allowance is just one example.

To help older children become financially literate, first come up with a budget and make them responsible for it. If that doesn’t work for them, help them understand they have two options: spend less or earn more. Either way, the bank of Mom and Dad is closed. This lesson in financial responsibility will hopefully keep them from a lifetime of dependence.

The decision of whether or not to pay for a wedding finds its roots in habits modeled and learned in childhood. If you plan ahead, the conversation about finances with your newly engaged child will be just one in a chain of chats – and if you have taught them how money works, they likely have thought about this already. This will help avoid the surprise that can add strain to the parent-child relationship.

BDO Canada LLP senior wealth advisor Carmen McHale is based in Calgary and helps entrepreneurs and professionals create comprehensive wealth plans.

The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

Monday, January 13, 2020

My latest podcast interview – The Rational Reminder Podcast

I was recently interviewed by Ben Felix and Cameron Passmore, portfolio managers at PWL Capital, for their Rational Reminder Podcast. I thank Ben and Cameron for the interview. It was fun and they had some great questions.

Here’s a link to the podcast.

On the podcast we discuss a bunch of really interesting topics. Here are some highlights:
  • Why it is important to ensure that both spouses are relatively financially literate
  • When it makes sense to hire a corporate executor
  • Why you should involve your adult children in financial conversations
  • Why you may want to consolidate your investment holdings
  • How to deal with potential uneven distribution in an estate
  • Why success is not always linked to money
  • How I define my own personal success

The last question, about my own personal success, was a surprising question from Ben and Cameron. I was expecting to only discuss and provide advice on getting your financial affairs in order, not my personal successes. Afterwards, I thought about that question and my answers and was a bit surprised where I went with my answers, especially my comment on jealousy. I became so introspective on that answer that during the holiday break I wrote a blog post on that topic and will publish it in a couple months.

Anyways, I think this podcast is worth a listen and you may also want to check out some of the other interesting podcasts Ben and Cameron have made.

The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.