Why clients can no longer rely on their business being their retirement fund

Advisors will need to take the time to have some deeper conversations with their clients, so they’re not only empathetic, but can understand the owners’ drive to succeed, their long-term plans, the economic conditions their businesses are dealing with, and their succession plans, so they can help them work out the impact of inflation and the increased cost of borrowing.

“A lot of clients don’t realize how the current economic conditions are impacting the value of their business,” he said.

“So, you have to be aware locally what the economic cycle is, what the market conditions are, and what unique situations their businesses are dealing with, including what their cash flow looks like. You have to understand the business that they’re in. Is it seasonal? So, are they flush in the summer and working off reserves for the winter? That’s important because it ties into the advice that you can give them,” he said, noting that recommending it would be difficult for an owner to have a monthly investment package in a seasonal business. “You need to understand the impacts of their cash flow cycles and come up with a recommendation that matches that.”

Once advisors have the background information, they can offer the client different scenarios or solutions, such as how best to liquidate their investment properties or deal with how capital gains could impact their projections. They can then talk to them about registered retirement savings plans (RRSP) and mutual funds to reduce the impact of capital gains or they could even start group RRSPs to help retain key staff in this tight labour market to ensure their company’s on-going value.

“If there’s an opportunity to help them save money, that opens the door to have a broader value-based conversation,” said Bechard. “It’s shifting expectations, so new entrepreneurs entering the self-employed world are more aware of the challenges that they’re currently dealing with.