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A Winning Strategy for Next-Gen Assets at Play

David Gorveatte, a financial planning veteran with four plus decades of expertise, shares his unique multi-generational approach to continually grow your client base – and protect your book.

June 2021

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David Gorveatte

Certified Financial Planner®, CPCA, Investia Financial Services Inc.

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Keeping It in the Family

Back in university, a friend’s father recognized my passion for math and finance and offered me a position at the Bank of Nova Scotia (Scotiabank). Four decades later, I still love being an educator and helping people make informed decisions, because information is power. In fact, for the last 10 years at Investia Financial Services, that drive and energy has remained at the core of what I do as an Advisor.

While pre and post-retirees constitute the bulk of my book, what I realized early on is that without a proactive multi-generational strategy, assets would be passed down from those clients to people I’d never met, and would eventually disappear off my books. So, I came up with a win-win idea: once a client reaches a certain age and investment threshold, I suggest that we give their children a test drive with a small amount of wealth through an “in-kind” transfer of assets.

I’ve been using this strategy for nearly 40 years, and I’m on the third generation now with many clients. Depending on the total amount invested, I’ll often give discounts as a further enticement. It’s been incredibly successful for my business in terms of building family assets – and keeping them. As a result, we have been growing at over 20% each year.

Once a client reaches a certain age and investment threshold, I suggest that we give their children a test drive with a small amount of wealth through an in-kind transfer of assets.

Helping the Next Generation, and Your Business

Here’s how it works: we first select two to three funds with a robust, long-term track record of performance. We then contact the child/ren to set up the original appointment and say, “we have convinced your parent(s) to give you some money – when can we meet to complete the paperwork?” Once we have the appointment, we review the details (which has been much easier lately with the proliferation of web conferencing platforms). I’ve never had anyone say that they were too busy for this. At the initial meeting, we go through the strategy of completing an “in-kind” transfer together (opening an account), which is then followed by an assessment of their financial status and our recommendations.

There have been times when we’ll tell the children that the best course of action is to cash the assets out and pay off debt, while other times we simply educate them, early on, about investing. Parents are typically very anxious for us to help their children become financially literate, and this process gives us the opportunity to talk to 20 to 40-year-olds that have never really received much in the way of advice before, and develop the foundation for a lasting relationship.

Ultimately, if the parents are happy because their youngsters are more successful as a direct result of our guidance, that’s the end goal. We’ve found that both parties, in turn, refer their friends, and our business keeps growing. We’ve had clients tell us that if it weren’t for our help, they would have had a long period of aggravation after their parents passed. But there aren’t any issues when we’re involved at the outset, as the assets are easily transitioned down (tax-efficiently) to the next generation. And because of our advice, they are less likely to blow through inheritance quickly, and instead stay invested, allowing our book to remain intact.

Another part of my wealth transition strategy that we use often for retired clients, is a tax-smart withdrawal program, or T-SWP, for the proceeds from the sale of a home, so that when the asset passes down to the children, it’s considered a capital gain, but the parent hasn’t paid significant tax on the income from the investment. We also encourage joint accounts on homes between children and parents, so that if something unexpected happens, the asset is transferred directly without any burden, or if there’s a sale, the asset can be easily split.

We’ve had clients tell us that if it weren’t for our help, they would have had a long period of aggravation after their parents passed.

Making it Easy for Your Clients

What resonates most about our approach (particularly with the next generation) is my unique ability to use simple terms and illustrations to clarify complex concepts. It’s the method I use when I teach retirement seminars, when requested, around the province. For example, a ladder is a great visual aid to talk about risk, because it conjures up an image that people understand – the higher up on the rung you go, the more risk you have. This is how I explain Standard Deviation, by using one foot for every number (up to 45) for each rung of the ladder.

I also use a teeter totter analogy to explain market volatility, and a bucket illustration to discuss investments. If I’m suggesting an RRSP or TFSA, then I just write that word out on one side of the bucket, and what goes into it is determined by the client. Many people new to investing are confused by terminology, but when you break things down – and help them to visualize – it all becomes so much clearer, and that basic knowledge gives them comfort. While they don’t need to be experts, it’s important to me that they bought something they understand, along with the risk it implies. That’s why I offer a two-hour informative session to anybody who wants to come through my door at no charge, or obligation. The value it provides is how I build ambassadors for my business, which leads to two to three referrals a week.

Our educational approach applies to technology too. Even pre-COVID, when Skype was still the popular tool, I would buy a web cam for my senior clients and set it up for them. We would then do a live demo to show them how a face-to-face chat works. For one of my 75-year-old clients, we found her granddaughter in the Skype directory, and called her at her university dorm. They were both so excited that it confirmed to me how powerful it can be to take the time to educate, and meaningfully engage with your clients one-on-one.

I offer a two-hour informative session to anybody who wants to come through my door at no charge, or obligation. The value it provides is how I build ambassadors for my business.

Know Where You Stand

For those starting out in the industry, initiating a test-run with the children of your existing base is a great business-building tool. While you may or may not gain a client from it (they could have significant debt after all), it will give you the opportunity to form/strengthen a relationship – and at the very least, it’s a way for the next generation to pay back loans if they have them. Personally, I’d rather have some assets shift now and know where I stand with the family, rather than have all of them disappear later on.

The biggest demographic right now is in retirement mode and all of that wealth will soon be in transition. If we, as Advisors, don’t have a proactive retention strategy in place, then we run the risk of losing out to the keen competitors that have already established a solid connection with the whole family. To put it bluntly, that’s why it’s essential that your first meeting with your clients’ children is not at the funeral home.

David Gorveatte on BMO Global Asset Management

We like BMO Covered Call Canadian Banks ETF Fund because you can never go wrong with it – Canadian banks pay a stable dividend. Another fund that is in a great position is the BMO Concentrated Global Equity Fund. The manager has a long track record of outperformance, and is positioned for attractive returns going forward with its high-conviction approach. It’s a strong buy right now. Both funds are also a complementary pair for client portfolios because one is a strong Canadian bank play, while the other is focused on global equities.

For more ideas to enhance your practice, or build a resilient portfolio, contact your BMO Global Asset Management Regional Sales Representative.

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