Your financial plan may seem perfect and foolproof to ensure a comfortable retirement. But that’s without taking into account the blind spot that sometimes hides problems that could derail the growth of your wealth. Fortunately, there is a way to overcome the blind spot.
Published at 8:00 a.m.
Jean Gagnon
Special collaboration
“There are strategies that can allow you to reduce the impact of unforeseen events and maintain more resilient wealth management in the face of uncertainties,” explains Nicolas Schulman, senior advisor in wealth management at National Bank Financial.
Personal life
Changes in your personal situation such as illness or even death are at the top of the list of these unforeseen events. The elements of solution to counter them consist of establishing estate planning to deal with the possibility of a death, even unforeseen, and good life and disability insurance coverage to protect the financial situation of the family, explains the principal advisor of the National.
PHOTO MARTIN TREMBLAY, LA PRESSE ARCHIVES
Nathalie Bachand, financial planner at Bachand Lafleur, consulting group
A divorce or any changes in a couple’s life will also have a significant impact given the division of assets that will have to be done. “These situations are often difficult to manage,” underlines Nathalie Bachand, financial planner at Bachand Lafleur, a consulting group. The difficulties arise mainly from the animosity between the spouses which colors these situations, and it often requires the intervention of a third party to complete the process.
Volatility of financial markets
Economic, political and geopolitical events risk at any time causing strong, often unforeseen, fluctuations in the financial markets and jeopardizing your capital accumulation plan for retirement, or for any other objective. There are tools such as bonds, private market funds as well as derivatives that can help you protect capital, underlines Nicolas Schulman. Discuss this with your advisor if you are concerned about the possibility of these market fluctuations.
PHOTO DENIS GERMAIN, SPECIAL COLLABORATION
Nicolas Schulman, senior advisor in wealth management at National Bank Financial
“To cope with the volatility of the financial markets, it is wise to remain cautious in your return on invested capital objectives and to revise them as often as necessary,” suggests Nathalie Bachand.
Unexpected tax changes
During your life as a manager of your wealth, it is a safe bet that you will have to deal with new tax laws or changes in tax rates which risk reducing after-tax returns. It is therefore important to find out about the changes that occur from a financial planner or a tax specialist. This will help you modify your capital accumulation plan accordingly and it is appropriate to inform yourself about the use of tax-advantaged investment vehicles such as the RRSP, the RRIF and the TFSA, explains Nicolas Schulman.
Interest rate
We only have to look at the last few years to see how sudden and significant variations in interest rates can influence not only portfolio returns, but also the ability to repay loans. Especially since predicting the evolution of interest rates is a very difficult exercise, experts agree. There are a few possible solutions, including considering fixed-rate investments, notes Nicolas Schulman among others. Financial advisors may also suggest certain assets that are not very sensitive to interest rate movements that can be included in the portfolio.
Liquidity problems
Investments in vehicles such as real estate and private placements have many attractions, but they can also limit access to the funds invested in them. “For those who use these types of investments, it is important to maintain a reserve of cash or securities that can be easily resold in order to meet unforeseen needs without having to affect the overall strategy,” concludes Nicolas Schulman.
