Financial Planning For Canadian Business Owners
Optimal Compensation Saving and Consumption with Braden Warwick | E107
Jason talks to Braden Warwick, research associate at PWL Capital. Braden has recently composed a study on optimal compensation savings and consumption for business owners of private corporations. Braden has recently composed a study on optimal compensation savings and consumption for business owners of private corporations. Braden's study was a deep dive at a lot of things that started by looking specifically at compensation, structures, and methodologies and had several interesting findings.
- 01:38: Braden shares how he switched his field and how he joined PWL Capital where he was tasked to answer complex problems that the firm is having.
- 07:16: Braden defines the problem while he does all the research, he explains to people everything which is foundational.
- 08:56: Jason and Braden talk about the different approaches to income as a starting point.
- 14:43: The final paper investigated over 7,000,000 financial planning outcomes, says Braden.
- 19:47: Planning should be around keeping the passive income below 150, because that's when the general corporate kicks in and then you are still in that sweet spot of the transition zone for Ontario and New Brunswick residents.
- 20:49: When the calculation comes up the IP contribution would be less than the equivalent RSP contribution, they can choose to contribute the full RRSP contribution room.
- 21:31: You can basically transfer your RSP assets into the IP and then if any additional corporate funding is required to purchase that service, then that opens up an additional contribution room from the corporation into the IP.
- 40:05: If you are primarily an equity investor, you are generating more capital gains, which is more CDA credit, which is tax free.
3 Key Points:
- Braden explains how he is trying to solve the key issues around compensation and retirement savings because dividends versus income are one thing versus notional account-type distributions.
- Braden shares how the net personal cash is higher in the transition zone than it is with either the small business rate or the general corporate.
- The longer the CDA sits in there, or the longer those tax refunds sit in those notional accounts, the lower the purchasing power becomes over time.
- "For me being relatively new to the world of finance was not a trivial task, because especially with things like IP's, you can't just Google that that information is not readily available." - Braden
- "The problem, as we could starting from the very high level of an individual would come to us with the question of how much can I sustainably spend over the course of my lifetime and then how much net worth will I be left with on average at the end of the day and what's the best plan to get me there and to maximize those." - Braden
- "For those folks that want to maximize consumption, we found that the IP with the maximum salary was the best route." – Braden
- "The lower return than the pension also resulted in a lower return within the core, but also less efficient dynamic income." - Jason
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111. 2024 Compensation Planning with Luc Lapalme | E11123:25Jason talks to Luc Lapalme, Senior Principal at Mercer. It is a very large consulting company that consults on various aspects of business. Today he will be discussing about their compensation planning survey, and this is a survey about employers and what they are looking to accomplish or what they are looking to do when it comes to salaries for staff in the coming year.Episode Highlights:01.15: Luc explains that he specializes in compensation management and advises clients on various aspects of compensation programs, including salary structures and incentive design for both executives and salaried employees.04.30: Jason mentions that in recent years, there has been a realization among many that simply matching salary increases to inflation may not be sufficient, especially when inflation rates are high.10.03: Luc mentions that organizations are increasingly providing off-cycle adjustments to their employees, which are not officially included in the budget forecasts. These off-cycle adjustments are often provided to employees at higher risk or those due for promotions.12.06: Luc notes that certain organizations are targeting the 75th percentile of the market to ensure they are highly competitive with specific roles. This highlights the efforts being made by organizations to attract and retain talent in a rapidly evolving work environment.21.48: By focusing on employee engagement and the employee experience, HR managers can enhance job satisfaction and retention, even in situations with tighter budgets, says Luc. 3 Key Points:Luc highlights the impact of the great resignation during the pandemic, which led to increased employee turnover and job changes. However, he notes that attrition rates have decreased, with one study showing a drop from 21% to 18%, indicating more stable employment.Luc provides an example of how changes in minimum wage, such as the increase in Ontario's minimum wage, can create ripple effects and competitive pressures in the labour market for more competitive pay.Jason shares an example from the accounting field in the US, where large accounting firms in cities like New York and Washington, DC, began recruiting talent from across the country. This resulted in some smaller to mid-sized cities experiencing reduced operations or becoming less attractive for talent acquisition due to the significantly higher salaries offered in larger cities.Tweetable Quotes:“The Compensation survey is conducted annually to gather information from participating organizations. Its primary purpose is to understand the organizations' intentions regarding salary adjustments, particularly for the year 2024” - Luc.“The differing salary forecasts between Canada and the United States can be attributed to various socioeconomic factors.” - Luc“While organizations are becoming more transparent about salary bands, they are generally not disclosing specific employee salary details or bonus information due to privacy concerns.” - LucResources Mentioned:Facebook – Jason Pereira's FacebookLinkedIn – Jason Pereira's LinkedInhttps://www.linkedin.com/in/luc-lapalme-mba-96563239/?originalSubdomain=cahttps://www.mercer.com/en-in/
110. Family Coaching with Alex Kirby | E11035:47Jason talks to Alex Kirby, Co-Founder and CEO of Total Family Management. It is a company focused on family coaching and helping families through the dynamics and personalities that are in the family to create better cohesion and better family Wellness and long-term satisfaction for everybody. They explore the challenges of entitlement within family businesses and how purpose can be used to unify the family's values and goals. It also touches on the initial steps of onboarding with Total Family Management.Episode Highlights:4.12: Jason wants to know how family dynamics change as young families evolve into families with teenagers and adults, and ultimately as the older generation, the patriarchs and matriarchs, transition into their senior years.4.38: Alex outlines his approach to classifying people into four distinct life stages like the wonder segment, the balance segment, the harmony segment, the wisdom or legacy segment within families and these stages are akin to being sorted into different houses like in Hogwarts.6.45: Alex highlights that having a clarified vision is crucial for a sense of direction and well-being, regardless of one's age or life stage.13.18 Alex says, maintaining a healthy, normal relationship with adult children and transitioning from a parenting role to a more peer-like relationship is an important challenge that needs to be addressed over an extended period.29:02: Alex discusses the concept of passing on values and how purpose can be a unifying factor in families, especially in the context of family businesses.32:02: Alex discusses the process of engaging with Total Family Management and outlines the steps clients typically go through to make the most of their time with the service.34:04: Alex emphasizes the authenticity of their company and how everyone in their organization goes through the processes they advocate for, ensuring that they practice what they preach.3 Key Points:Jason and Alex discuss the challenges faced by business owners, especially when it comes to succession planning and family dynamics within the business.Jason highlights several challenges and complexities that arise in family businesses when it comes to succession planning.Total Family Management offers a transparent and straightforward process for clients to engage with their coaching services, with a focus on providing ongoing support and flexibility to address family dynamics effectively.Tweetable Quotes:“Waiting until the final stage to address important family dynamic and communication issues may not be the most effective approach.” – Jason“Parents often possess the answers to the questions asked during the coaching sessions but may not have explored them before. The goal is to create a safe space for discussing important family matters. “- Alex“If parents care enough to participate in a conversation or coaching session about their children, it demonstrates a significant commitment, which is a crucial step in addressing family dynamics.” - JasonResources Mentioned:Facebook – Jason Pereira's FacebookLinkedIn – Jason Pereira's LinkedInhttps://totalfamily.io/offer
109. AI Guides with John Stroud | E10935:11Jason Pereira interviews John Stroud, the CEO of AI Guides, an AI strategy and consulting company. The episode focuses on artificial intelligence, particularly generative AI, and how it can benefit businesses of all sizes, including single-person operations. The conversation explores various options available in the AI space to improve business operations.Episode Highlights00:43: John Stroud explains that AI Guides help organizations harness the power of artificial intelligence, specifically focusing on generative AI. He mentions that AI can benefit businesses of all sizes, even single-person operations, and there are various options available to improve business processes.01:53: AI, particularly ChatGPT, is a hot topic and mentions its significant impact on technology. John highlights how ChatGPT quickly captured everyone's imagination and compares its impact to previous revolutionary technologies like the iPhone.02:48: ChatGPT's impact has made artificial intelligence a hot topic in technology.11:21 John explains how users can fine-tune the AI model with their own data for specific answers.11:40: Jason and John mention using AI-powered tools like Chat GPT in Google Docs and Microsoft Office for writing blog posts, letters, and other documents. He emphasizes the time-saving benefits of these tools and how they can be easily implemented without intimidation.15:48: John suggests treating the exploration of AI as a science experiment and considering the opportunities while managing the potential risks.16:37: If someone wants to expand their use of AI, they can consider seeking outside help for advice, says John.17:26: John mentions a system called "PDF or chat PDF" where PDFs can be uploaded, and questions can be asked.18:35: John mentions the possibility of OpenAI developing more private containers for protecting information.19:45 John discusses foundational steps and what people should be aware of before starting their AI journey.24:00: John raises the topic of prompts and their importance in AI.29:35: John advises staying ahead of the rapid pace of AI development and starting with small improvements.30:31: John emphasizes the need for continuous learning and adapting to new tools and technologies.3 Key PointsJohn and Jason discuss the potential risks, costs, and consequences of AI projects that are not properly planned or supported by the necessary infrastructure.John and Jason explain how generative AI has made AI more accessible and easier to implement, addressing some of the challenges related to data stewardship and system integration.There is a government grant in Canada that provides funding for digital strategies, making it easier for companies to explore AI opportunities.Tweetable Quotes"Chat GPT can be a helpful resource in understanding AI and its applications." - John"Open AI is going to allow for more private containers where you make sure that your information will be protected." - John"You are creating a digital strategy. So, for companies that have a $500,000 in revenue. They probably qualify for this grant, and that gives them $15,000 towards the preparation of this strategy. So, if you got a hunch about how you might be able to use AI, then the vast majority of the cost is covered through a grant." - JohnResources MentionedFacebook – Jason Pereira's FacebookLinkedIn – Jason Pereira's LinkedIn
108. Employee Ownership Trusts with Jon Shell | E10836:02Jason talks to Jon Shell, the managing director and partner at Social Capital Partners. Jon is an advocate for employee ownership trusts in Canada. The episode discusses what employee ownership trusts are, the benefits they provide to employees, and the challenges faced in implementing them in Canada. The conversation highlights the changes in tax laws related to employee ownership trusts and Canada's first attempt at implementing them. Episode Highlights03:16: Jon Shell explains that the objective of the employee ownership trust structure was to provide access to ownership for those who lacked it in the economy.05:12: In the UK, the concept of an Employee Ownership Trust (EOT) was established in 2014, allowing companies to allocate profit sharing to all employees and sell the company to employees at no cost. Jon highlights the success of EOTs in the UK, with numerous companies adopting this structure. 06:20: Jon discusses the comparison between employee ownership trusts and employee share ownership plans or stock option plans.08:11: Employee cooperatives, or co-ops, are another option in Canada. They involve democratic ownership, where all employees have the right to vote on decision-making processes. 09:37: There is a well-known example of a massive Spanish company called Mondragon, which operates with a structure similar to Athenian democracy. 10:49 Jon talks about the incentive for the owner who wants to sell their business to an employee ownership plan.11:11: In the UK, there was a structure that allowed people to use a leveraged buyout on behalf of employees. 15:23: For the vast majority of businesses, the concern about gaming the system or preventing certain types of businesses from benefiting doesn't hold true. Most businesses do not fall into the category of high-end consulting firms where only the wealthy benefit. 3 Key PointsJon shares the success story of the employee Stock Ownership Plan (ESOP) in the US, which has grown to include 6,500 companies and 14 million American workers.Jon explains how co-ops can be effective forms of employee ownership, but they are typically applied to smaller firms.The lack of tax incentives beyond deferral is a significant drawback. It creates a situation where there is no real incentive for owners to consider employee ownership beyond personal benevolence.Tweetable Quotes"Employees get access to shares at a certain price and can exercise them later to participate in the company's growth." - Jon"For larger companies with hierarchical structures, owners may be concerned about the risks associated with selling to a co-op, especially if the company has not operated in that manner before. Co-ops can be effective forms of employee ownership, but they are typically applied to smaller firms." - Jon"Setting up a worker co-op with more traditional governance and committees can be burdensome and costly. In larger companies, it may be challenging for employees to afford the shares necessary to buy the company." – JonResources MentionedFacebook – Jason Pereira's FacebookLinkedIn – Jason Pereira's LinkedIn
106. FHSA with Aaron Hector | E10629:21Jason talks to Aaron Hector about Canada's newest registered account, the FHSA - The First Home Savings Account. Aaron Hector is a private wealth advisor for CWB Wealth. He works primarily with individual clients and family direct client relationships.Episode Highlights:02:30: Aaron talks about the restrictions in the FHSA account. You can put up to $40,000 in your lifetime. But you can only put $8000 per year.03:07: Jason explains how housing is a bigger concern in Canada than in US.03:52: One of the things that always happens when new accounts come out is that invariably people don't understand the rules.06:40: Aaron talks about the penalty and additional expenses associated with the FHSA account. 09.26: Before opening the FHSA account it is extremely important to read the small prints, eligibility criteria and guidelines, says Aaron.11:05: If you start with making fresh contributions to your FHSA, maybe you marry someone who has a house already, that's hour on buying a home for whatever reason that homeownership gold doesn't come to fruition.12:38: There is a lot more nuance than people are giving credit to the FHSA account, says Aaron.15:22: You could look at again going into your RRSP and then just deferring that tax, says Aaron.18:44: You can name a beneficiary successor holder, so successor Holder can only be your spouse or common law. If you pass, then your spouse assumes the count as an FHSA, rather than just liquidating the account and getting the money, but on the beneficiary side, this is interesting.22:04: As per Jason if he had FHSA, he would use that option to roll it over into a rift.22:58: If you have to be a first-time home buyer when you open the account the only other time that it makes a difference is when you try and make it tax free.24:49: If you had money in it's like how you get a double deduction so you get a deduction when you make an RRSP contribution and then the same money you could in theory withdraw through the home buyers plan.3 Key Points:To open an FHSA account you need to be a Canadian Resident, not a Canadian Citizen. You have to be at least 18 years old, and you can't be older than 71.Aaron shares few horror stories of kids in trust for accounts going sideways. He also shares the nuances and concerns of people that one should be aware of.If you name someone who's not your spouse, as a beneficiary of your FHSA they get the money, but they pay the tax too. The tax leaves the original account holder not dealt with in the final tax return of the deceased. The beneficiary pays the taxes, so it's kind of the opposite tax treatment.Tweetable Quotes:"FHSA works both as an RRSP and a tax-free savings account." - Aaron"FHSA is almost like the HSA in the US. The health savings account and it's tax deductible." - Aaron"The timeline for FHSA is really the same timeline as an RRSP 1871 and you need to be deemed a first-time home buyer." – Aaron"For someone who maybe doesn't have a lot of spare cash, that's a way to use the FHSA program without making kind of brand-new contributions." – Jason"If I do an RFP transfer cause maybe that's what I want to do, then I don't get 40, I don't get an additional deduction." – Aaron"I am not big in putting money in the hands of young adults until they've proven that they can handle it." - AaronResources Mentioned:Facebook – Jason Pereira's FacebookLinkedIn – Jason Pereira's LinkedIn
105. Benefits Benchmarking with Matt Lister | E10524:30Jason talks to Matt Lister, CEO of Cloud Advisors. It is a company in the group benefits space, and one of the unique things they have done is they have built a benchmarking system that helps inform business owners as to basically how their plans stack up against competitors in the same space and helps advise around best practices and design. Service is free for employers. Paid by advisors and providers.Episode Highlights:01:04: Cloud advisors use the Canvas employee benefits marketplace. Matt explains how they show employers how their benefit plans stack up.1.20: The number one reason why employers have benefits in the first place is to be competitive and what Matt has done is democratized access to benchmarking data.02:23: Every advisor got their own limited pool of experience regarding different sectors, different types of companies.04:58: Employers go through different stages where they don't need benefits perhaps when they very first started, they can't afford benefits and then they quickly start adding people and they get into a world where your benefits become table stakes. So, they become that checkbox.06:35: Matt explains how their system has options for employers that have no coverage, they can get a sample plan.07:17: Matt explains how their system intakes the benefits plan and breaks it down into hundreds of different variables that one can then compare by industry, region and group size.09:57: Matt explains how they developed the bar score, and it stands for benefits, action, retention, and it's like a credit score.17.14: Matt talks about the type is benchmark that they do. There are basically 2 types, he says.19:41: Matt talks about the database that they have built and how they segregate problems and solutions.22:30: Matt says that they recognize that business owners are busy, and they have got businesses to run, and insurance is only a small component of that needs to be done efficiently and effectively and conveniently.3 Key Points:Matt talks about the big determinants, basically how benefits programs get structured in terms of, different industries or different careers, different development stages, what are the big factors implemented that should be impacting, and how a plan is designed. Cloud Advisor has been in the marketplace coming up eight years and when they first developed the database, they had a very limited amount of data in it to perform the benchmark. Matt shares how they achieved about 15,000 employee benefit plans.Matt talks about the client output and how they visualize the actual results.Tweetable Quotes:"We show them how their current programs stack up by industry, region group size as well as how they can improve their program." - Matt"When I started in the industry, my dad had spent most of his career working for a public crown corporation with the incredibly robust union." - Matt"We will connect not just with the vendor and the vendors; information will actually perform an instant quote and an instant proposal so that the employer has everything they need to." - MattResources Mentioned:Facebook – Jason Pereira's FacebookLinkedIn – Jason Pereira's LinkedIn
104. Behaviour Finance with Brian Portnoy | E10435:06Jason Pereira talks to Brian Portnoy, Founder of Shaping Wealth and author of three books, including the must-read advisor book - The Geometry of Wealth. Brian is a well-known expert in the field of behavioral finance, and he will talk about what behavioral finance is and how it affects our decision-making and our relationships with the people advising us.Episode Highlights:07:16: We think of ourselves as kind of thoughtful, critical thinkers. But the fact is that the main elements of the brain are designed or evolved to basically regulate all the different biological or physical systems inside of us, says Brian.09:19: We see good financial planners enter their practices in day-to-day is dealing with people as who they are, as opposed to who in economics textbook said they should be, says Brian.11.21: Brian says that their brain is a gas guzzler, and it soaks up a ton of energy. It doesn't want to work that hard because we are constantly trying to be efficient, and in the way we use energy, it produces specific outcomes, especially in the context of our decision-making that are quite consequential.12:34: The brain tends to seek out information that merely aligns to what we were thinking before, says Brian.14:41: Jason has read in multiple places that the brain, when under stress performs worse and our IQ gets dumber when we are under prolonged stress and our ability to process information just diminishes.19.50: We need to stop pathologizing normal human behavior and just work with the people who show up in all their messiness and complexity, says Brian.21:27: Brian explains what they are doing with Shaping Wealth and how they are trying to move beyond that general construct of just understanding dump of information checklists.24:29: Each of us is born with a certain level of emotional intelligence, just like we have a certain IQ, and emotional intelligence is just not a trait that we're born with, it's a skill.3 Key Points:There is a whole stack of evolutionary remnants that are built inside of us that really do not map to the traditional economic man model.One of the unsung tasks of modern behavioral finance is that advisors get to know themselves as well or better than they are getting to know their clients and stop acting like some diagnostic expert.Positive psychology is a distinct field of psychology and the science of happiness. It's basically saying what are the inputs to a life well lived.Tweetable Quotes:"Behavioral finance is basically a science and a discipline that sits at the intersection of economics and psychology." - Brian"One of the key assumptions in traditional economics is that more is better, and from an empirical point of view, that's not the way we are wired." – Brian"If someone is coming to you because they think that you can pick investments better than the next guy, I think you have a competitive problem. But if they think that you are better at structuring the estate just perfectly, it's hard to distinguish yourself on those sorts of things." - BrianResources Mentioned:Facebook – Jason Pereira's FacebookLinkedIn – Jason Pereira's LinkedInhttps://www.shapingwealth.com/https://www.linkedin.com/in/brianportnoy/
103. The Disability Tax Credit with Christine Brunsden | E10330:20Jason talks to Christine Brunsden, CEO of Benefits2, a web-based application designed to help people and medical practitioners identify disabilities that qualify for the Disability Tax Credit. It also assists them by saving time and money while increasing the rate of success when applying for the Disability Tax Credit.Episode Highlights02:56: Through her teenage years, Christine's daughter went downhill, and she ended up going through some really terrible stuff.03:52: Christine realized how hard it is for young people who are aging out of the system, they don't have the proper support.09:41: Christine shares an example of a woman who did her disability tax credit with Benefits 2 on January 31st.11:09: The hard part for everyone involved in tax refund is that nobody has ever taught anything about this in school.12:02: Christine explains how her platform helps people qualify for disability tax.12:45: The government tried to bring in the disability tax motors restrictions act and fix the fee at $100. 17:08: Christine thought the disability tax credit promoters were really predatory in nature, taking that big percentage.19:10: Christine is a huge advocate for diversity, equity and inclusion, and he is also a huge advocate for people with disabilities.24:18: The Canada Caregiver credit, medical expenses, and disability supports deductions home buyer's amount.25:09: 60% of all people who have the disability tax credit are over the age of 55, and the RDSP is not even a benefit for that.26:22: It's not a disability tax credit. It's really an enabling for people with ordinary everyday impairment to their activities of daily living.3 Key PointsChristine shares her daughter's ordeal and how her teacher called her out in front of all of her peers at the age of 6.Christine developed Benefits2 to leave more money in the hands of persons with disabilities and their supporting family members and to ensure Canadians have an option that complies with the disability tax credit promoters restrictions act.Christine explains how they created a platform, a complex algorithm in the background that once you have answered your questions related to your particular impairment, they write the application for success for you, you get a code and the PDF of the application and e-mail.Tweetable Quotes"My eyes are really wide open around the disability taxpayer." - Christine Brunsden"If we look at what happens with incontinence, well, somebody who suffers from incontinence is likely going to impair on their physical activity because of the whole leakage issue. They are probably not hydrating properly because of the leakage issue and that they will basically cause some other sort of disabling condition." - Christine Brunsden"Our marketplace will have diversity, equity inclusion, calendars that support all the different awareness dates throughout the country and internationally." - Christine BrunsdenResources MentionedFacebook – Jason Pereira's FacebookLinkedIn – Jason Pereira's LinkedInWoodgate.com – Sponsorhttps://www.benefits2.ca/Podcast Editing