How much do you need to retire in Canada? (Part 3)

When we last talked about the amount of money you need to retire, we discussed the critical research from Michael Kitces, a pre-eminent retirement expert in the United States. His work looks at the 4% safe withdrawal rule first proposed by William Bengen, which helps investors map out their wealth strategy in retirement.

This week let’s dig deeper by presenting some dissenting opinions on the 4% rule and detailing what the 4% rule actually means. I’ll also offer my suggestions on how to implement the rule into your wealth strategy.

How accurate is the 4% withdrawal rule?

Whenever we hear universal rules about investing, we need to question how universal they truly are.

Fortunately for us, Mr. Bengen himself shares some key fine print. He has suggested that the 4% rule was a creation of the media and that he actually more often than not used 4.5% with his clients. In today’s investment climate, he says, he would use 4.5% or even slightly higher as a rule of thumb. He also says he would increase his equity holdings from 50% to 70% in dividend paying stocks given today’s low interest rates—if they can be purchased at reasonable valuations.

At this juncture, I need to make like an infomercial and disclaim that while Mr. Kitces and others research have shown the 4% withdrawal rule to be safe, there is no guarantee it will apply in the future, especially given the historically low interest rate environment.

In fact, Wade Pfau, who is profiled in my 2014 series and is still at the forefront of retirement planning, says that “the 4% rule does not apply today, as retirees face the lowest interest rate environment we have ever seen. It also was never meant to apply for those who were not willing to hold at least 50% stocks throughout their retirements.” Mr. Pfau suggests a withdrawal rate as low as 2.4% may be appropriate given the low interest rates.

It is interesting to note that Mr. Kitces and Mr. Pfau both agree that a rising equity glidepath in retirement—starting with a lower equity component and increasing equity exposure over time (which is counter intuitive and in contrast to the typical advice that one should decrease equity exposure as you age)—may be beneficial. I will discuss this in greater detail in Part 4 of this series.

While I have no illusion that I am a retirement specialist, my experience with clients and the studies above have made me believe that the 4% rule is a good starting point for your retirement nest egg planning (especially if you are willing to adjust your yearly withdrawal rate in poor markets). In fact, during multiple meetings with clients and their various Investment managers this year, the consensus is almost unanimous that future returns will be lower over the next 10 to 20 years, but in most cases, the expected return of an equity-tilted portfolio is still well above four percent. Again, I caveat, these expected returns by investment managers, may vary from actual results.

My takeaways

1. Determine to the best of your ability your expected yearly cash requirements in retirement and use the 4% rule to give you an idea where you stand with your retirement planning. If you need $100,000 a year in retirement, the 4% rule says you will require a nest-egg of $2,500,000.
   
2. Engage a financial planner to prepare a detailed financial plan. The 4% rule has been proven to be historically accurate, but a detailed personalized plan is always beneficial. Have your financial planner run alternative scenarios using, say, a 3% and 4% withdrawal rate. If you have an investment advisor, see if they will prepare a financial plan free of charge as part of your investment fee. Keep in mind: a report from your investment advisor in some cases may include suggestions for certain products their institution sells.
3. If you have been retired involuntarily and were only a few years from your planned retirement date, use the 4% rule of thumb to determine what you need to earn to fund your retirement. As noted by Mr. Kitces, he has often found people forced themselves to work longer than needed, and if you can make up some of your missing salary with a part-time job or consulting gig, you may be okay to take “partial” retirement early. Again, I would suggest speaking to a financial planner to tailor your fact situation to your plan.
   
4. If you retired voluntarily, consider working part-time or at something you love, to enhance your capital, keep your mind sharp and—at least in my case—your spouse from killing you.
5. If the markets go down during retirement, always pre-plan what expenses you can reduce (or as Mr. Kitces suggests, consider reducing your inflation-adjusted spending going forward), so that you can reduce your withdrawal rate for a few years.

It has been a crazy last year and many retirement plans have been turned upside down. Whether you have been sideswiped by the topsy-turvy business climate of the pandemic or been one of the lucky ones to thrive, you should still revisit your retirement planning and nest egg objective.

I am going to briefly interrupt our retirement series to bring you a timely post on claiming home office expenses on your 2020 personal tax return during COVID-19. Following that post, I will conclude this series with a quick recap of some of the factors that impact your retirement planning.

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.

How much do you need to retire in Canada? (Part 2)

Two weeks ago, I reminisced about a six-part retirement series I wrote in 2014—and how COVID-19 has affected many people’s retirement. I noted that in some cases people have lost jobs, had the value of their small business eroded, or realized they would need to invest in technology for their business to compete in a new normal. In other cases, people have become contemplative and decided to retire early (such as I am doing on December 31st) or switch careers.

Today, I discuss a study on the subject by Michael Kitces, a pre-eminent retirement expert in the United States. We’ll analyze his views on a safe withdrawal rate in retirement. Keep in mind that the safe withdrawal rate is then used to reverse-engineer your required nest egg for retirement.

Markets

Over the six years since I wrote the retirement series, unless you were GIC centric or Canadian-equity centric, you likely would have had above average stock market returns. Consequently, your sequence of returns (whether your returns are strong or weak at the beginning of your retirement, discussed in greater detail in Part 4 of this series) would have likely been advantageous to your retirement. I personally have not seen anyone fall off the rails from their retirement plan, but six years of relatively good markets is not exactly a great sample size.

The famous 4% withdrawal rule

My 2014 series centered around what is the most commonly accepted rule of thumb for retirement, the 4% withdrawal rule. Created by William Bengen, this rule says that if you have an equally balanced portfolio of stocks and bonds, you should be able to withdraw 4% of your retirement savings each year, adjusted for inflation, and those savings will last for 30 years. So if you need $100,000 a year to live in retirement, you will need a nest egg of $2.5 million ($100,000/.04).

The 2014 series discussed some of the deficiencies experts feel are inherent in the 4% rule: the withdrawal rate doesn’t take income tax into account; it ignores management fees; the equity portfolio lacked international diversity (as it was US centric); that it was premised on a historically higher interest rates for the fixed income (bond) portion of the portfolio and used a constant set 4% withdrawal rate.

Since I wrote the initial series, Michael Kitces has come to the forefront as one of the great retirement researchers and planners in the United States. He has written several articles on the 4% withdrawal rule. Mr. Kitces is not only a great researcher, but he is also a very engaging speaker, who is able to passionately break down a complicated topic into plain English. I will therefore link to three YouTube podcasts that I think you will find highly informative and should listen to if you are interested in what your withdrawal rate should be in retirement.

What Michael Kitces says about the 4% withdrawal rule

Mr. Kitces has written and been interviewed about the 4% rule many times over the years. He has noted the following findings in respect of the 4% rule:

1. The three worst retirement start dates in history were 1907, 1929 and 1966, and these form the floor of the 4% rule. It is extremely important to understand that the historical safe withdrawal rate of 4% is not based on historical averages (if they were, he notes the withdrawal rate would be much higher), but they are based on the three worst historical 30-year retirement periods noted above. These three worst periods would have allowed a retiree to just barely meet the 4% withdrawal scenario. That is why he and others consider the 4% rule a safe withdrawal rate; it is a historical worst-case scenario, not an average.
2. The safe withdrawal rate has a 96% probability of leaving more than 100% of the original principal (these are nominal returns, not inflation-adjusted returns, but still your original principal is almost all intact in historical dollars - this was startling to me).
3. The median value (50% of the time) is 2.8 times the original principal. Thus, you have a high likelihood of having more money by the time you die, not running out of it.
4. Only one time does the retiree run out of money and that is in Year 31 of retirement.

So despite the inherent flaws in the 4% rule, I note in the fifth paragraph of this post, Mr. Kitces is of the view that because historical safe withdrawal rates are not based on historical averages but rather on historical worst-case scenarios, the 4% rule is more than an excellent rule of thumb.

Where to hear directly from Kitces

If you are serious about understanding the 4% rule and Mr. Kitces’s views on it, you need to listen to at least one of these YouTube/podcasts:

• I like this April 2020 interview of Mr. Kitces by the bloggers behind the BiggerPockets blog, because it was in the midst of the COVID stock crash and Mr. Kitces was unfazed. He just analyzed the situation and explained everything clearly but still passionately. I would scroll down to the YouTube video in lieu of the podcast. One quick comment about this podcast. There are some references to “FIRE.” FIRE is an acronym for “financial independence retire early” and is only applicable if you plan to retire early.
• Another excellent and current podcast, this one with a Canadian bent (and a different focus from the above podcast), is this August 2020 interview of Mr. Kitces by the Rational Reminder team of Ben Felix and Cameron Passmore. You may recall that the same pair interviewed me last year on various financial topics.
• Finally, for the diehards, another interesting listen is this October 2020 podcast, in which Mr. Kitces interviews the father of the 4% rule himself, Mr. Bengen (he was actually a rocket scientist before becoming a financial planner). This podcast includes a bit more about Mr. Bengen’s history, so you may want to peruse the index to listen to the parts you are interested in if you are not interested in Mr. Bengen personally.

If you prefer reading to watching, you might want to have a look at this 2015 blog post by Mr. Kitces. It should be noted that Mr. Kitces uses a 60% equity and 40% fixed income model in this study, whereas Mr. Bengen used a 50/50 model.

Have a watch (or least a look if you don’t have time to listen to any of the podcasts) at some of the links above. We’ll pick up the conversation on this series next time by fleshing out some perspective (including dissenting opinions on the 4% rule) on what the 4% rule actually means and offering my suggestions on how to implement the rule into your wealth strategy.

 

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.

How much do you need to retire in Canada?

In 2014, I wrote a six-part series on retirement called “How Much Money do I Need to Retire? Heck if I Know or Anyone Else Does!” The series was not only six parts but also over 10,700 words and I am sure over 60 hours of research, writing and editing. I recall telling myself, “Never again,” after completing this series. If you wish to read the series in full, you can find the links to the six posts on the right-hand side of my blog under the retirement planning category.

I also recall it was somewhat depressing to realize that after all that work, I couldn’t come up with a definitive determination of the actual nest egg you require. No one can. There are simply too many inputs, variables, models, simulators and varied expert opinions.

That being said, there was still a ray of sunlight in the series. I found that after using multiple models for my sample calculations, I was able to map out a range of retirement savings that likely would provide a realistic retirement goal, especially if twinned with a financial plan that is updated every few years. So, while it is likely impossible to determine your retirement nest egg to the nth degree, you can provide yourself a realistic retirement savings objective with some work and planning.

At this point you’re likely saying, why is Mark rambling on about a series he wrote almost seven years ago? The reason is COVID.

The pandemic has brought retirement savings front and centre for far too many of us.

In some circumstances, people have lost jobs or their own small businesses that they expected to work at until retirement.

In other cases, people may be succeeding financially but have become more contemplative during COVID. They have begun to think about the long term and what they really want out of life. Maybe it is time for a change in career or time to retire early while healthy and still invigorated. (Full disclosure: I am one of the people in this group and made the decision to retire from public accounting at the end of 2021.) Some have even decided to retire early and follow the advice of Mike Drak and Jonathan Chevreau in their book Victory Lap. They say people should leave their day job behind once they’ve reached financial independence, and work at something they love or always wanted to do to make some supplemental income.

Canadians who pivoted to retire early caused many a financial advisor to pull their hair out. They typically advised clients to just push through the next couple years, as there is too much financial uncertainty to retire early. But based on what I have seen and heard, early retirements have not been uncommon, despite not necessarily being the financially prudent thing to do. (Although if you listen to the Michael Kitces podcasts, I will reference in this series, you will hear his research that many people should have been retiring early for years, assuming they continued to work part-time at a minimum.)

And that’s why COVID has prompted me to revisit this series. For those retiring soon, or just planning for the future, it’s a great time to rejig these topics with some new research and expert opinions. You will be pleased to know that I have learned restraint over the last six years: The 2021 series will be “only” a few parts and a mere 3,200 words give or take.

I will stop here today. The next 1,600 words or so require a clear mind, as retirement planning and determining a safe withdrawal rate in retirement are surprisingly academic topics. I will discus this methodology in Part Two of this series and am also looking forward to reviewing a couple of the top retirement experts’ studies and suggestions.

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.

The Business Owner’s COVID Contemplation

As I track the headlines, stay up to date on the many new government programs, and advise my clients during this pandemic outbreak, I find myself coming back time and again to its impact on business owners.

Almost no industry is unscathed from COVID-19, but the business owner has had a herculean assignment. They have been tasked with keeping their business afloat (where possible) through typical or ingenious ways, while being asked to keep as many employees on payroll as possible, while watching their retirement dreams delayed or diminished before their eyes.

In today’s post, I bring you the analysis of Jeff Noble. Jeff is a colleague of mine at BDO, where he specializes in helping family enterprises, private companies, and not-for-profits transition their organization through their business lifecycle. During this time of COVID-19, Jeff’s thoughts on adopting an investment mindset are especially valuable for any business owner contemplating the future.

_________________


By Jeff Noble

Entrepreneurs are a risk-taking bunch. Creative, innovative and ambitious, they invest, re-invest and double down in their business. They give up liquidity in exchange for higher returns.

For the past decade, our private company and family enterprise clients enjoyed an unprecedented time of growth and financial success. Markets were bullish. Global and Canadian economies grew. Business valuations escalated. Capital was inexpensive and available for expansion, acquisition, and innovation. Lifestyles expanded as consumers accumulated goods and used services. The value of homes soared.

Then came COVID-19. It stunned the economy and battered the markets. Everywhere. All at once.

The COVID contemplation

Business owners remember ‘BC’—before coronavirus—and are anxious to reach ‘AC’—after coronavirus. Many are using this time to consider the intentional, strategic decisions they must make not just now but also after the outbreak ends. These decisions are based on a ‘COVID contemplation’ and are happening in real time. These choices will affect life, family and future. To master this COVID contemplation, ask yourself these questions:

• How do I keep my family safe, healthy, happy, fulfilled, and independent?
• How do I keep myself happy and fulfilled?
• Should I continue investing in my business or sell it?
• Do I monetize part—or all—of my business and redeploy the capital?
• Do I sell and divide the proceeds among my heirs and successors?
• How do I create and build a better, more valuable business?
• Do I look for acquisition opportunities and accelerate my growth?

Adopt an investment mindset

Going forward, private company owners should use an investment mindset when considering how to grow their wealth. By adopting this investment mindset, the owner takes into account not just their business but rather the entire family net worth.

The investment mindset considers the unique wealth dynamic of private company owners—where every success depends directly on the success of the business. This dependency creates risk and threatens the finances, lifestyle, and the very livelihood of private company owners and their families.

Just as investment counsellors work to create diversified wealth portfolios, business owners can adopt this practice with the objective of avoiding the risks associated with business concentration. The ultimate scorecard is not your margin or topline or even your bottom line. The ultimate scorecard is the change in the value of your business from year to year. Does this trend in valuation and outlook for the future justify your ongoing investment?

Appreciate the importance and impact of purposefully shifting risk away from the operating business towards other non-related investments. For many entrepreneurs, this focus on balancing liquidity and risk will be a strategic change of mindset. For example, there may be ways to unlock and release value from the corporate balance sheet and deploy that capital outside the business to develop a separate wealth stream, optimize working capital, and continually work to increase cash flow for investment in and out of the business. Regularly monitor the value of your business as you would any other investment. The objective is to create stronger, more stable balance sheets for your business and for your family. Use this goal as a filter when investing to decide where the best investment is for your family’s money.

This means integrating the company into the total family wealth portfolio. This family wealth portfolio consists of all tangible assets, includes the operating business (or businesses) and such things as home, vacation property, investment portfolio, life insurance, savings, and even high-value collections such as jewelry, art, cars, and boats. This emphasis puts balanced wealth creation ahead of lifestyle—creating diversified, de-risked family enterprise wealth and multiple income streams. Ultimately, you and your family will be better protected from economic volatility and shocks to your business.

6 strategies for your business and your family wealth

1. Seek out alternative and supplementary revenue streams. For example, look at online sales, new customer segments, acquisitions, or alliances with a complementary business.
2. Reduce supplier concentration. Look for new suppliers who can provide your current or similar goods and services—or for new suppliers to provide new or complementary goods and services.
3. Take an objective, unbiased look at your business model—how you make a margin. Examine businesses that operate in different sectors, and adapt practices that could improve your model.
4. Establish a level of return you want to make on your invested capital. Be sure to include a ‘risk premium’ over and above the actual and opportunity cost of that capital. Then, when looking to invest in your business—capital, equipment, buildings, people—understand the return that investment will generate. If that return does not match or exceed your objective, consider a different investment outside of your business.
5. Work through your balance sheet. Look for ways to remove capital. These could include recapitalization with leverage or selling some equity to a third party or to management or family successors. With this capital now removed from your business, work with professional advisors to find investments that balance risk against your operating business.
6. Enhance your business. Critically look at your business weaknesses and opportunities with the assistance of an expert. Look for ways to enhance your businesses value through technology, more professional management, new or reduced product lines or any number of ways to ultimately make your business more attractive to a buyer down the road. I often partner with my colleagues at BDO who specialize in enhancing the value of a business.

COVID-19 devastated the economy. It will recover. Some businesses may not survive. Many others will manage through. We expect the best of these will be well positioned to thrive in the post-crisis economy. Entrepreneurs will continue to work hard, innovate, and be creative. Those who view their business through an investment lens will create true, sustainable wealth for their families and generations to come.

Jeff Noble is a senior consultant and family enterprise advisor in the BDO Advisory Services practice. He can be reached at jnoble@bdo.ca, or by phone at 905-272-6247.

For more on how to respond, adapt, and move forward from COVID-19, check out the BDO collection of resources.

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.

Retiring at a Market Peak – Why it May Not Be as Bad as You Think

In January of 2014, I took on my most ambitious task (never to be repeated) in writing my blog: I decided to write a six-part series titled “How Much Money do I Need to Retire? Heck if I Know or Anyone Else Does!”

The first four posts dealt with various studies and reports on the appropriate withdrawal rate in retirement. The consensus seemed to be that taking 3 or 4% (depending upon your perspective) of your inflation-adjusted nest egg each year (or “withdrawing” it, to use the term that gives the withdrawal rate its name) would last you approximately 30 years. Those four posts can be found here:

• Post 1
• Post 2 
• Post 3
• Post 4 

Post 5 dealt with the factors that could impact your retirement funding, such as longevity, inflation and sequence of returns. That post can be found here.

In my final Post 6, I provided some simple retirement nest egg calculations to see if I could determine a reasonable range for the magic retirement number. That post can be found here.

Sequence of returns

In writing the above series, it became evident that not only is determining the correct withdrawal rate and approximate dollar value needed to retire a complex and somewhat impossible task — but also that the timing of your retirement could cause a significant variance in your financial position. This concept, known as “sequence of returns,” says that market performance just after your retirement date could sideswipe your retirement plans. I discussed it in my fifth post and it was very intriguing to me.

In that post I quoted retirement guru Wade Pfau as saying:

“In fact, the wealth remaining 10 years after retirement combined with the cumulative inflation during those 10 years can explain 80 percent of the variation in a retiree's maximum sustainable withdrawal rate after 30 years.”

In plain English, Wade is saying this. Let’s say two people have the same exact rate of return over 10 years. If one person’s return is better in, say, years 1 to 5, and the other’s is better in, say, years 6 to 10, the interaction between the rate of return, inflation and the standard rate of withdrawals will favour the person with the front-loaded higher returns. As a result, they will be able to continue their standard withdrawals for a longer period.

Since numbers probably illustrate this issue best, it may be useful to look at exhibit 4 on page 7 of this report from Fidelity Research written by W. Van Harlow and Moshe A. Milevsky.

Retiring at a market peak

Quite honestly, the fact that the arbitrary sequence of returns could drastically affect a well-planned retirement has always freaked me out. My luck isn’t too bad, but I just know that the market will peak the year I retire and fall for several years after.

I was thus very interested in an article titled “Solace for those worried about retiring at a market peak” (paywall protected), written by Norman Rothery, the founder of Thestingyinvestor.com in The Globe and Mail in late January of this year.

For those of you who cannot access the article, essentially Norman modelled an investor who retired at the top of the stock market in 2000 with $1 million invested in a balanced portfolio and reviewed the portfolio value using withdrawal rates of 3, 4, 5 and 6%. (“Balanced” in this case means half in the S&P/TSX Composite Index and half in the S&P Canada Aggregate Bond Index.)

What Norman found is that the portfolio using a 4% withdrawal rate lost 30% of its real value by the end of 2002 but climbed back to nearly $680,000 in inflation-adjusted terms by the end of December 31, 2017. He noted that while this unfortunate retiree did not have the greatest experience, the odds are that the 4% rule will still survive for 30 years, given the capital balance after 18 years. (It is important to understand: Norman is not saying that they did as well as the lucky investor who retired into a bull market. He is saying that the 4% rule still appears to work in that the retiree likely can continue to withdraw their intended yearly amount and make their savings likely last for at least 30 years.) 

Norman noted that the more aggressive withdrawal rates did not fare well, and this aligns with our discussion above. He suggests a 3% withdrawal rate would provide a greater margin of safety, but the model to date, reflects those who retire into a peak market should still make it through with 4% if they have a conservative retirement plan.

So, the moral of the story is to plan your retirement to occur at the bottom of the market. But seriously, this article should provide some hope to anyone unlucky enough to retire at a market peak who is using a 4% withdrawal rate and especially those using a 3% withdrawal rate.

Why Survey: Are your Employees not your best source of Client Information?

Wow, what a stunning revelation. According to a recent survey by RBC Wealth Management, the top three concerns of high net worth clients are the transfer of wealth at death, minimization of taxes and financial needs during retirement. Who would have guessed such? How shocking! Could/should RBC's wealth management advisors not have conveyed this message to the wealth management department in the first place?

RBC completed 2,500 surveys during sessions with their high net worth clients and, according to Howard Kabot, vice-president, Financial Planning, RBC Wealth Management Services, they found that their clients “are very concerned about estate planning. What happens to their wealth during retirement and after they are gone are their main priorities… Clients tell us that they want to make sure their families are appropriately taken care of and that their financial plan is as efficient, effective and prudent as possible."

If I was RBC, I would be concerned that my high net worth clients are going to ask themselves the question, "why did I have to tell RBC this, should RBC not already have been aware of my concerns via my advisor?". I have written about most if not all these “estate planning concerns” in my blog during the last year because I know that they cause apprehension to my high net worth clients. I didn’t conduct sessions and surveys, I just listened to my clients concerns during meetings and lunches etc.

This survey reminds me of a variation of this theme. Years ago a friend of mine worked at a company that in its infinite wisdom decided to engage an efficiency consultant. She told me she could tell her employer everything they needed to know about how her company could become more efficient for the cost of a free lunch. The company paid the consultant hundreds of thousands of dollars for advice that was discarded a year later when the organization became dysfunctional. Why companies do not first access the opinions of their human internal resources (employees) in these type situations is somewhat mystifying.

Obviously, I am just picking on RBC to make a point; this could be a survey by CIBC, BMO or Scotia or any other large company. In addition, before you marketing types attack me, I know this survey was probably partly undertaken by RBC to learn about their clients and partly to be released as a study. But why do companies spend money on endless surveys and consultants when their employees should have most if not all the answers?

One would think that RBC should have been able to determine its clients’ top concerns through a session with its own wealth advisors. These findings could then be confirmed with 50 or so clients to make sure the advisors are in sync with their high net worth clients.

My firm is by no means the most progressive in the world, but we constantly request feedback and suggestions from our staff on internal and client matters. We even have outside consultants solicit opinions from our staff in confidence so they won’t withhold their true feelings out of fear of recrimination.

In my opinion, most of these surveys are a waste of time and money and the resources would be better spent talking to your staff on the ground. Assuming your employees are on the ball, you will get most of the information you need from your staff and their interpretations and understandings can be confirmed by a limited survey of your clients. More importantly, if your clients’ opinions do not agree with what your employees expected, you will have identified a huge expectation or communication gap which adds further value to the whole exercise and then you can commission a full fledged survey.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.