Be the Better RRSP/TFSA Advisor

Continuing Education for
Financial Service
Professionals
Be the Better
RRSP/TFSA Advisor

Copyright 2016 CLIFE Inc.
All rights reserved. Any reproduction of parts or all of this book and its contents by
any means electronic or mechanical is prohibited.
Be the Better RRSP and TFSA Advisor is relevant to all those who work in the
financial services industry or in association with life insurers. The information in
the course is provided for educational purposes only; it should not be construed
or interpreted as providing advice. Agents and advisors should always seek
guidance from their principals and compliance experts in regards to informing
themselves and others about details of the products they sell and other
considerations of their business.
We welcome all feedback and suggestions for additions to the course. Please send
your comments to info@clifece.ca.
CLIFE INC.
1595 Sixteenth Avenue
Suite 301
Richmond Hill, ON
L4B 3N9
www.clifece.ca
Be the Better RRSP and TFSA Advisor provides continuing education credits upon satisfactory completion
of an online test. Please see the website for details or email info@clifece.ca.
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Table of Contents
Your Reasons to Take This Course 4
You’re the Better Advisor: Now Prove It 7
The Basics 18
Learn from this Real-life RRSP Story 19
RRSP Benefits 21
Inner Workings of the RRSP 37
Disadvantages of RRSPs 58
TFSA Benefits 60
Inner Workings of the TFSA 64
Disadvantages of TFSAs 70
The Real Deal: Which One is Best? 71
The Final Analysis 77
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Your Reasons to Take This Course
There’s lots of free RRSP and TFSA advice available for consumers. Hard
to believe, but RRSPs have been available since 1957. Financial
institutions have had more than 58 years to develop their RRSP marketing
materials and develop a cohesive and compelling reason to buy!
RRSPs were available before the Canada Pension Plan/Quebec Pension
Plan; CPP/QPP was introduced in 1966.
TFSAs are the newcomers: they came on to the market in 2008.
Equally hard to believe about RRSPs is that they have been around as
long as they have and so many consumers are still so uncertain and
confused about them.
RRSPs may seem “old hat” to you and your financial service colleagues
and TFSAs still have some of their shine but, together, there is an
assumption of knowledge about these products and who buys them by
those who sell them.
One basic, false, assumption is that RRSPs and TFSAs on the whole are
well understood.
We think it is fair to challenge that thinking.
Many people do not understand RRSPs or TFSAs, and in failing to
understand what they are, they do not use them, or begin and quit from a
sense of frustration.
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Even highly educated professionals make serious and expensive mistakes
when it comes to RRSPs and maturity options.
The RRSP/TFSA market is not saturated. Many sales opportunities exist
and arise on an ongoing basis. They include:
o Those who have never established plans;
o Those who have plans that are languishing without making further
contributions or because they are not managing investment
performance;
o Those whose economic circumstances improve and find
themselves in a position to contribute;
o Those whose employment circumstances change and find
themselves no longer contributing to a company pension;
o Those whose personal circumstances change and find they have
extra income available for saving because, for instance, child care
costs decrease;
o New Canadian citizens.
Further, the Insurance & Investment Journal reported on October 2015
(http://insurance-journal.ca) that fewer than one in four Canadian
contribute to RRSPs.
o Just 61% of those who earn $80,000 or more were contributors ---
a decrease of 7% in ten years;
o Only 16% of those who earn between $20,000 and $40,000 were
contributors --- a decrease of 25% in ten years!
TFSA contributions are growing but even so:
o Only 30% of those earning $80,000 or more contributed to their
TFSA;
o 26% of those with income between $20,000 and $40,000
contributed.
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The Office of the Chief Actuary, a unit of the Office of the Superintendent
of Financial Institutions, found that the percentage of employees covered
by a registered pension plan has declined from 39% in 2003 to 38% in
2013. Therefore, pension coverage at work is in decline.
A study by BlackRock called the Global Investor Pulse Survey found that
40% of Canadians age 55-64 have no retirement savings.
Where do you come in? Perhaps by starting with some basic information,
since 58% of those in the BlackRock survey admitted they do not fully
understand how much they need to save for retirement.
Let’s repeat: there’s lots of room in the market for these plans.
The objective of this course is to lay out all the details of RRSPs and
TFSAa and provide points of comparison between them. Careful reading
of how to use plan features and benefits will make you the better
RRSP/TFSA adviser.
To some, this course may be financial advisory back-to-basics, yet it is
important to bear in mind that it is basics on which success is built.
“ Success is neither magical nor mysterious. Success is the natural
consequence of consistently applying the basic fundamentals.”
Jim Rohn
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You’re the Better Advisor: Now Prove It
We’ve pointed out that financial institutions have had decades to get their
RRSP information kits prepared. Undoubtedly, they are highly valuable in
the information they provide.
What they don’t provide is the benefit of interpersonal interaction such as
that which is created when you sit in front of your prospects or clients
(P&Cs). You impart information but, more importantly, you can read their
facial expressions and body language to decipher if your message is
hitting home.
You do this not just when RRSP season comes around but also every
time you meet with your P&Cs. This gives you unique abilities to provide
assurance, answer questions, and understand motivations.
In short, you have the advantage of knowing your client.
You can better know your client by meeting on a regular basis and asking
questions like:
o Do you contribute to a company pension plan?
o Is the company you are working for growing, flat, or shrinking?
o Is the industry in which the company works growing, flat, or
shrinking?
o Is there job security at work?
o Do you receive an annual bonus or on-going commission?
But, here’s an alarming fact from the Canadian Life and Health Insurance
Association (CLHIA): In a survey conducted within the last three years,
75% of those surveyed said they look to their advisor for financial advice
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and on average it had been five years since they were approached about their
needs and coverages.
Question: How do you know what’s happening in a client’s life if you are not
in regular contact?
An initial meeting or series of meetings when your relationship is beginning
sets a benchmark. But without a regular review and knowledge about whether
client circumstances have changed --- improved or deteriorated --- you don’t
know if the ground has shifted. There may be entire earthquakes of which you
are unaware!
An annual review satisfies your need for knowledge.
You can set yourself apart from your competitors by establishing the need for
review; demonstrate that you are consultative. In return, you will develop a
client base who appreciates your advice and consultation. This will be
especially true for products like RRSPs and TFSAs, which are so widely
available.
The annual review gives you the opportunity to be proactive and engage in a
relationship instead of employing transactional selling.
o Transactional selling is a sales strategy that produces quick sales
without developing a long-term customer relationship.
o Relationship, or consultative selling, is a continuum that maps out
plans and focusses on progress towards goals.
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