Sign up for the new Globe Advisor weekly newsletter for professional financial advisors on our newsletter sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know.
One of the reasons uptake of registered disability savings plan (RDSP) remains relatively low – at less than a third (32 per cent) of eligible Canadians in 2020 – is because some advisors steer clear of the complexity of these plans.
“I think it’s fair to say that some advisors aren’t recommending it or letting clients really understand the value of the plan perhaps due to some of the complexity of setting them up and a lack of knowledge themselves,” says Nicole Ewing, director of tax and estate planning at TD Wealth in Ottawa.
“If we don’t have the knowledge, then we can’t bring that to our clients.”
Ralph Awad, RDSP support leader at BMO Wealth Management in Montreal, adds the RDSP, by nature, is the most complex plan that exists in Canada.
“This complexity can discourage some advisors to learn about it,” he says. “[However,] there are a lot of similarities between the RDSP and [registered education savings plan (RESP)], especially when it comes to grants and bonds.”
Kate Childerhose, financial advisor at Edward Jones in London, Ont., has incorporated RDSPs into her practice and finds planning for people with a disability to be one of the most rewarding things she does.
“When you help a family establish this plan, and then all of a sudden, they put a little bit of money in there and they start getting all the matching that was owed to them from the government … it’s such a relief,” she says. “I had one mother call me and she was crying on the phone [because] ... they have money in place for their children.”
Even with an enthusiastic advisor, there are significant barriers for families who are often extremely busy managing medical appointments and therapies for one or more family members who have a disability.
Ms. Childerhose makes it as easy as possible for them by offering to meet them in their home, which has the added benefit of ensuring that any required paperwork is close at hand.
She also lets clients know that once they have obtained the disability tax credit, which is required to open an RDSP, she can take care of the rest. That goes well beyond the RDSP to encompass the family’s other planning needs – from wills and estate planning to life insurance.
Advisors don’t have to do it on their own
“[An RDSP] is a little extra paperwork, [but] I don’t think it’s anything worse than an RESP,” Ms. Childerhose says. “My trusted product partners … have been an amazing support to me as an advisor.”
They have tax and estate teams and she contacts them directly to ask questions.
Carol Bezaire, vice-president of tax, estate and strategic philanthropy at Mackenzie Investments in Toronto, believes advisors can bring a lot of value to clients by offering planning in the area of RDSPs.
She adds clients are often surprised by how quickly the account grows – not just from grants and bonds – but when a parent or grandparent dies and has arranged for their registered retirement savings plan or registered retirement income fund to roll into the RDSP on a tax-deferred basis.
Ms. Bezaire says advisors should choose a financial institution partner that has RDSP expertise, provides excellent service, offers a wide range of investment choices, and keeps the client relationship with the advisor.
Also look for client-friendly content to support client education, which may be in the form of websites, brochures and scripted presentations, she says.
Mackenzie Investments, which was recently selected to administer the Ontario Office of the Public Guardian and Trustee’s RDSP program, has been making a push to let advisors know that seeing the disability amount claimed on a tax return should be a trigger to start a conversation about RDSPs. So should hearing that a client has a family member with a disability, even if that person hasn’t yet applied for the disability tax credit.
“If [the person does] qualify, [the Canada Revenue Agency] will go back to the date of diagnosis or maximum 10 years, and will adjust your tax returns and you’re going to get tax refunds because you haven’t claimed the disability amount,” she says. That sum of money could be seed money for an RDSP.
Mr. Awad of BMO says client access is another important factor to consider when choosing a financial institution with which to partner. That may include access through branches and a call centre staffed by knowledgeable people. Also, look for a firm that has the capacity to take care of legal and regulatory requirements but lets advisors choose whether to keep responsibility for plan management, including objective changes and investment switches.
Ms. Ewing says it’s important to make sure client-facing information is in accessible formats, including websites designed to work well for people with different disabilities.
“We want advisors to be comfortable speaking to these issues, understanding how to maximize grants and [having] a place where they can ask questions [and] anticipate some of the challenges or friction points that might arise,” she adds.
With RDSPs, and disability planning, more broadly, there are a lot of complexities and moving parts.
“[But advisors] shouldn’t be intimidated,” she says. “Experts in this space are very passionate about sharing their knowledge and want to ensure that others are doing a good job.”
For more from Globe Advisor, visit our homepage.