Canadian Investors Prefer a Dentist Visit to Paying Taxes, Want Advice about Tax Planning According to Natixis Survey

  • Twenty-seven percent of investors say their financial advisor has done nothing to help them with tax planning strategies.
  • More than half of investors would be willing to fire their existing advisor for one better able to advise them on the impact of taxes on their portfolio.
  • Two-thirds of investors agree that they will need financial advice through retirement to help with tax planning, understanding financial risks, managing debt and estate concerns.

Tax Planning Tools (Graphic: Natixis Global Asset Management)

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TORONTO & BOSTON--()--According to a new survey by Natixis Global Asset Management, 41% of Canadian investors find paying their taxes is less appealing than going to the dentist, getting their vehicle fixed and filing paperwork for a mortgage. However, the results of the survey also indicate that tax planning may be where investors need the most education and professional advice to reach savings and retirement goals. Unfortunately, nearly half (46%) of the respondents surveyed indicated they aren’t having conversations with their financial advisor about tax-efficient investing.

“The demand for tax planning advice is an area that financial advisors can and should be focusing on at a time when investors are scrutinizing the value of advice for the fees they are paying. Advisors can help guide investors to navigate tax laws that are complex and confusing,” said Abe Goenka, Chief Executive Officer, Natixis Global Asset Management Canada. “Taxes can have a significant impact on investment returns. Our survey finds that the majority of Canadians are considering the tax implications of their investment decisions. If advisors don’t take action, their clients will.”

In Canada, investment income can be taxed at more than 50% depending on an individual’s tax bracket and home province. Natixis found that more than 5% of the annual taxes paid by most investors (58%) come from investment returns.

“Advisors have a wide range of tools to provide investors with more tax efficient investment strategies. Although many advisors claim to implement these strategies, our survey shows that most advisors aren’t going beyond the tip of the iceberg, namely, maximizing use of tax-advantaged registered accounts,” said Robert Handelman, Vice President of Tax and Wealth, Natixis Global Asset Management Canada.

The survey found:

  • Nearly six in ten (59%) investors say their advisor has recommended action to maximize investments in registered accounts, such as RRSPs, RESPs, and TFSAs.
  • Just 22% of investors say their advisor has focused on the tax implications by the type of investment income earned.
  • Only 17% of advisors have encouraged income splitting with lower-income family members.
  • A mere 15% have discussed facilitating charitable donations.

Retirement Readiness: Are Taxes the Only Guarantee for Investors?

Where once individuals might have relied on an employer pension, government benefits and personal savings to provide a steady stream of retirement income, 78% of Canadians feel that funding their retirement is increasingly their responsibility. But, 77% would rely on family, more so than government programs (74%), to feel more financially secure in retirement if their own savings fell short.

In a separate survey of 300 individual investors, Natixis found many are taking positive steps toward fulfilling this obligation by saving an average of 9% of their annual income toward retirement and contributing to an employer-sponsored retirement plan (64%). The majority (97%) expect their personal savings and investments, including workplace retirement savings and other personal investments and savings, to be to be a very important source of the money they’ll need in retirement. The survey found:

  • Just 23% of Canadians expect government programs such as public pensions to be a very important income source. Nearly a third (32%) don’t expect government benefits will even be available by the time they retire.
  • 60% will depend on their spouse or partner’s retirement savings.
  • 39% will look to their children for financial assistance and housing if needed.
  • 50% say inheritance is an important retirement funding source, and 45% are expecting to receive an inheritance.

Reliance on a financial inheritance may leave many shortchanged in the end – especially when investors themselves rank not saving enough (30%) as the biggest threat to their retirement security, suggesting there may be nothing left to pass down. That is followed by uncertainty of long-term care and healthcare costs (18%) and inflation (14%). Furthermore, even though a significant number of Canadians (81%) plan to leave an inheritance to their family, four in ten (43%) have not taken the basic step of writing a will, creating potential legal and tax consequences for their families and heirs.

“In many cases, depending on inheritance for retirement income is not a wise strategy, as it may assume that the previous generation has been effective in executing their own retirement plans, namely the impact of inflation, taxes and increased longevity,” said Mr. Handelman.

The Role of Planning and Advice

Canadians, in general, have taken a proactive and pragmatic approach to planning for retirement. Roughly 60% have established a financial plan to reach their savings goals, 77% have a general figure in mind for how much money they need saved by the time they retire, and 59% have a clear idea of how much they need to save each year to meet that goal. But nearly 40% haven’t estimated the expenses they will have once in retirement.

Two-thirds of investors (65%) agree that they need financial advice even in retirement. Almost half say they need professional advice to help with tax planning (46%), understanding financial risks (41%) and managing debt (40%). Nearly as many (35%) recognize that they need help with estate planning.

Methodology

Natixis surveyed 300 individual investors across Canada with a minimum of $134,894 CAD (US$100,000) in investable assets. The online survey was conducted in February/March 2017 and is part of a larger global study of 8,300 investors in 26 countries from Asia, Europe, the Americas and the Middle East. The findings are published in a new whitepaper, “Retirement, Death, and Taxes.” For more information, visit http://durableportfolios.com/Individual-Investor-Retirement-Survey-2017.

Natixis also surveyed 500 Canadian investors about tax planning needs and strategies, including 329 who use some type of financial advice. The online survey was conducted in April 2017.

About Natixis Global Asset Management
Natixis Global Asset Management serves thoughtful investment professionals worldwide with more insightful ways to invest. Through our Durable Portfolio Construction® approach, we focus on risk to help them construct more strategic portfolios that seek to endure today’s unpredictable markets. We draw from deep investor and industry insights and partner closely with our clients to put objective data behind the discussion.

Natixis Global Asset Management is ranked among the world’s largest asset management firms.1 Uniting over 20 specialized investment managers globally ($895.6 billion AUM2), we bring a diverse range of solutions to every strategic opportunity. From insight to action, Natixis Global Asset Management helps our clients better serve their own with more durable portfolios.

Headquartered in Paris and Boston, Natixis Global Asset Management, S.A. is part of Natixis. Listed on the Paris Stock Exchange, Natixis is a subsidiary of BPCE, the second-largest banking group in France. Natixis Global Asset Management, S.A.’s affiliated investment management firms and distribution and service groups include Active Index Advisors;3 AEW Capital Management; AEW Europe; AlphaSimplex Group; Axeltis; Darius Capital Partners; DNCA Investments;4 Dorval Finance;5 Emerise;6 Gateway Investment Advisers; H2O Asset Management;5 Harris Associates; IDFC Asset Management Company; Loomis, Sayles & Company; Managed Portfolio Advisors;3 McDonnell Investment Management; Mirova;5 Natixis Asset Management; Ossiam; Seeyond;7 Vaughan Nelson Investment Management; Vega Investment Managers; and Natixis Global Asset Management Private Equity, which includes Seventure Partners, Naxicap Partners, Alliance Entreprendre, Euro Private Equity, Caspian Private Equity and Eagle Asia Partners. Not all offerings available in all jurisdictions. For additional information, please visit the company’s website at ngam.natixis.com | LinkedIn: linkedin.com/company/natixis-global-asset-management

In Canada: This material is provided by NGAM Canada LP/Natixis Global Asset Management Canada.

1 Cerulli Quantitative Update: Global Markets 2016 ranked Natixis Global Asset Management, S.A. as the 16th largest asset manager in the world based on assets under management ($870.3 billion) as of December 31, 2015.
2 Net asset value as of March 31, 2017. Assets under management (AUM) may include assets for which non-regulatory AUM services are provided. Non-regulatory AUM includes assets which do not fall within the SEC’s definition of ‘regulatory AUM’ in Form ADV, Part 1.
3 A division of NGAM Advisors, L.P.
4 A brand of DNCA Finance.
5 A subsidiary of Natixis Asset Management.
6 A brand of Natixis Asset Management and Natixis Asset Management Asia Limited, based in Singapore and Paris.
7 Operated in the U.S. through Natixis Asset Management U.S., LLC.

Contacts

Natixis Global Asset Management
Elizabeth Bartlett, 617-449-2549
Elizabeth.Bartlett@ngam.natixis.com
or
Natixis Global Asset Management
Ted Meyer, 617-449-2507
Ted.Meyer@ngam.natixis.com

Release Summary

Canadian Investors Prefer a Dentist Visit to Paying Taxes, Want Advice about Tax Planning According to Natixis Survey

Contacts

Natixis Global Asset Management
Elizabeth Bartlett, 617-449-2549
Elizabeth.Bartlett@ngam.natixis.com
or
Natixis Global Asset Management
Ted Meyer, 617-449-2507
Ted.Meyer@ngam.natixis.com