360 Private Wealth Management: COVID-19 Financial Life Planning
COVID-19 Financial Life Planning
- 360 Connect/Natural Wealth Process Communications
- COVID-19 Cash (Flow) Planning
- The COVID-19 Economic Response Plan
- Online Access to Government of Canada Services
- COVID-19 Related Business Financial Aid Initiatives
- Managing Through the Storm
1. 360 Connect/ Natural Wealth Process Communications
We are working to provide relevant and timely information on financial life planning and investment planning matters to our client households during this exceptional period in ongoing blogposts. In this blogpost we are focusing on cash flow related matters for individuals, families and businesses.
At 360 Private Wealth we manage our ongoing household financial life planning activities based on our proprietary Natural Wealth™ Process planning model. During the second quarter of each calendar year we normally focus our activities and communications on the Tax and Estate element in our process model. We will continue with our usual Natural Wealth™ Process planning initiatives and communication schedule. You will be receiving Natural Wealth™ Process blogs focusing on tax and estate planning matters over the next 90 days.
If you have not fully engaged with us around the Natural Wealth Process financial life planning, please go to this link for an intro/refresher on our planning process:
If you have any suggestions for topics we might be able to address in upcoming blogs, please email or call us. We want these communications to be as relevant and useful to as many client households as possible.
2. COVID-19 Cash (Flow) Planning
A number of client households are being affected by reductions in income as a result of being laid off from their place of employment or, in the case of self-employed clients because of a drop off in contract income or sales. A number of business clients are experiencing significant drops in business revenue, as a consequence of the COVID-19 driven economic situation.
We are here to help you in any way we can to manage through this exceptional time with cash flow planning strategies.
If you have never prepared a household cash flow plan, now might be a great time to prepare one! The good news is a large number of our households have a very good idea of what they bring in and what they spend on a monthly basis and where. That said, many households manage cash flow on a ad hoc basis, essentially spending what comes in, after-tax and outside of any pre-planned/pre-arranged savings and investment deposits coming from the account. From experience, I can safely say, a number of households who engage us to build financial life plans cannot provide a budget or cash flow plan without taking time, after our request, to review bank and credit card statements to prepare this information for us. One can appreciate in these situations, there is always the question of how accurate the information provided is. Knowing your household “cost of living” provides you with the information you need to effectively manage and plan overall household finances going forward. A household cash flow statement will be one of the things we need to provide any cash flow planning guidance we are offering to client households.
There are several initiatives emerging that can assist households manage through the near-term financial pressures including the COVID-19 Economic Response Plan launched by the federal government (see below). The federal government has several direct payment initiatives. Most financial institutions are offering the ability defer payments on mortgages. Many are extending relief strategies to consumer loans and even to credit card debt. Households considering taking advantage of such offers must understand the implications of deferring payments or making smaller payments towards mortgages and other debts, including the fact that interest will continue to accrue on remaining debt balances (stretching out the length of time it will take to repay the debt) and the possible impact on their credit rating of deferred or lowered payments.
If your current pre-authorized savings plans with us are putting pressure on your cash flow here in the near term, call us. We can discuss the situation and consider a temporary “time-out” on withdrawals from your account to fund your savings and investment plans.
If you are drawing on registered retirement income plans like Registered Retirement Income Funds (RRIF’s), Locked-in Retirement Income Funds (LRIF’s), Life Income Funds (LIF’s) and/or Prescribed Retirement Income Funds (PRIF's) the amounts you are drawing may impact the value of your plans over time. If you are drawing aggressively from your plans, you may be adversely impacted by the fact that the combination of the high withdrawal rate and the decline in portfolio values will result in a high account capital burn rate, which may result in shortened estimated run time of the plan. If you want to review the situation with your registered income plans, contact us via email or phone. We will arrange a meeting to discuss your situation and make any adjustments you might feel may be appropriate.
One of the initiatives the Government of Canada has implemented is the reduction of the minimum required registered retirement income account (RRIF, LIF, RLIF, PRIF)) withdrawal for the 2020 income tax year by 25%. This means that individuals drawing the minimum payment from their RRIF accounts will have the option of reducing the payment for the 2020 income tax year by 25% to preserve the value of their RRIF accounts. This reduction is effective immediately and is grandfathered back to January 1, 2020. If you are drawing the minimum payment required from your registered retirement income plan and are interested in lowering the amount in accordance with the government initiative, contact us. We can review your situation and make adjustments accordingly. A number of clients have elected this option for various reasons and, many have elected annual payments in January which have already been made for 2020. We are waiting for guidance as to how individuals, who so choose, can “re-deposit” any amount above the revised minimum payment amount.
If you have questions or need additional information on cash flow planning, please call or email us. We will provide you with any answers and information we can or direct you to the best place to get the answers or info you need.
3. The COVID-19 Economic Response Plan
The federal government recently launched an unprecedented economic rescue/stimulus package for Canadian households and businesses being affected in this exceptional time. The COVID-19 Economic Response Plan (COVID-19 ERP) includes direct payments to eligible affected individuals along with proposed increases in existing benefits and tax filing and payment flexibility. It includes access to interest-free loans and loan guarantees to small businesses along with employee wage offsets for qualifying businesses and, tax filing and payment flexibility.
An overview of the various programs and benefits available under the COVID-19 Economic Response Plan can be found here:
The government is working to formalize COVID-19 ERP programs and benefits and set up access on their systems. They are directing individuals to the CRA My Account for Individuals and My Service Canada web portals for access to information and application processes for various individual and family related COVID-19 initiatives.
4. Online Access to Government of Canada Services: CRA My Account for Individuals/ My Service Canada Account
In preparation for accessing information, eligibility requirements and applications, we strongly urge any individuals and businesses who have not yet set up on-line access to their Canada Revenue Agency (CRA) account to do so now, under the CRA “My Account for Individuals” access portal. If you already have an online banking relationship with one of several approved financial institutions you can use the same log in info to access your CRA My Account for Individuals under the CRA Partner on-line program. Please note, based on the experience of other client households, if for any reason, you are sharing on line banking access with another individual in your household, one of you may have to go through the formal registration process (requiring additional inputs and information) to register. You can access the CRA My Account for Individuals Registration/Log-In page here:
The beauty of setting up on-line access with CRA via the My Account for Individuals portal, you can access the My Service Canada portal through a link, which gives you access to information on EI, CPP, and OAS benefits along with any other federal government programs offered under the Service Canada mantle.
If you have not set up on-line access via My Account for Individuals with CRA, but you have set up access to Service Canada via the My Service Canada portal, you can link to your CRA My Account for Individuals account from the Service Canada site. However, in my review of both methods using my own situation, there was a security check in the My Service Canada portal in order to access the link to the CRA My Account for Individuals portal. The security check required answering security questions which you will have set up at the time you set up access to the My Service Canada site. You will have to remember the answers, including any capitalizations in the answers, or refer to your answers if you stored the answers somewhere… In other words, going to the CRA My Account for Individuals portal from the My Service Canada portal may be more complicated for some than going the other way…
5. Government of Canada COVID-19 Related Business Financial Aid Initiatives
The federal government has initiated several programs for businesses of all sizes including access to interest-free loans, wage subsidies for employees of qualifying businesses and, tax filing and payment deferrals.
Interest free loans are being administered by financial institutions. Tax filing and payment deferrals have been announced for businesses. The details for wage subsidies for qualifying businesses are being finalized. A primary requirement for wage subsidies for businesses is a requirement that they are suffering a demonstrable 30% decline in revenue in order to qualify. The definition and details of the 30% revenue decline have not been publicized yet as I write.
My recommendation to clients with businesses is that they contact their banking institution about access to COVID-19 related interest-free loans. Business owners should contact their tax accountants for additional info about COVID-19 related wage subsidy and tax-related initiatives. If you do not have a tax accountant please call our office. We will refer you to one of our trusted advisors.
6. Managing Through the Storm
Again, this too shall pass… I will put my sailor hat on here. Having experienced a pretty serious three-day storm on an Atlantic Ocean crossing in a 45-foot sailboat, I can safely say ALL storms do pass. You know you are in a real storm when a Canadian frigate and the US Coast Guard planes are hailing your boat to check on your status during the night… Two boats went missing in the storm. One eventually made landfall in Bermuda a day later than scheduled without a radio. The second was never found. In an ocean storm everything (and everyone) on the boat is tested by the wind and the waves. The bow of the boat busting through some waves caused the boat and rigging to literally shudder. Every activity required careful thought. A wrong choice could have caused the loss of the boat and crew. Moving the sails required a half hour of planning because of the shear force of the maneuver on the boat’s rigging. When above deck on watch you are clipped on to the boat with a safety line in case you go overboard. There is no place to get off. You are 600 miles offshore. You have to ride it out. Minutes can mentally turn into hours. At the end of each four hour watch you fall into your bunk exhausted, only to have to get up three and half hours later to suit up for your next watch. The objective in a storm on a sailboat is to protect the boat from damage to the extent possible and, to make sure everyone stays as safe as possible until the storm passes by controlling the controllable factors.
This is a storm… a health and economic storm. Like being on a boat in an open ocean during a storm there can be real consequences if we are not thoughtful and careful about our choices. The objective here is to get through the health and economic storm being caused by the COVID-19 pandemic with as little impact as possible. Our health professionals and government leaders are all doing their level best to get us through the health and economic impacts of the situation. We are very fortunate to have the medical system we have in this country, staffed by incredibly selfless professionals who all working very hard for the very best outcomes for their patients. We are blessed and honoured to count many as clients. I am literally in awe of them and very thankful for them all.
Stay safe. Stay connected (but please practice safe distancing!). Wash your hands. Watch out for family, friends and neighbors, especially those who are elderly or suffering from health issues. Donate, if you can, to a food bank or to another charity who will be involved in aiding the truly disadvantaged in this situation.
We are here to guide you on all aspects of your financial life plan, including cash flow planning, during this time. If you need answers or help, call or email us. If we cannot provide the assistance you need, we can direct you to one of our trusted partner professionals who can.
David J. Luke, CFP, RFP, CLU, CH.F.C., CIM | Financial Advisor
360 Private Wealth Management | Manulife Securities Incorporated
Unit 1 – 25 Scurfield Boulevard, Winnipeg, MB R3Y 1G4
Main Office 204.925.5868 | Direct 204.925.2073| Fax 204.925.2263 | Toll Free 844.688.3656
This publication contained opinions of the writer and may not reflect opinions of Manulife Securities Incorporated. The information contained herein was obtained from sources believed to be reliable, but no representation, or warranty, express or implied, is made by the writer of Manulife Securities Incorporated or any other person as to its accuracy, completeness or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any of the securities. The securities discussed in this publication may not be eligible for sale in some jurisdictions. If you are not a Canadian resident, this report should not have been delivered to you. This publication is not meant to provide legal or account advice. As each situation is different you should consult your own professional Advisors for advice based on your specific circumstances.
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