The Canadian financial services market can be overwhelming — there seems to be a never-ending list of options for achieving investing, savings and planning goals. Everywhere you look there is another advertisement or argument to suggest that the answer to all your problems and worries is to “insert financial product here.” This can be exhausting, not to mention confusing. 

 

When meeting with new clients, we are frequently asked, “Is it true that I need to set up a trust/life insurance policy/financial plan/professional corporation?’’ As with most of life’s difficult questions, the answer is a resounding, “it depends.” 

 

Based on your specific circumstances, any number of products or strategies might be useful and necessary. However, more often than not, we find that the best solution is the simplest one. This, of course, is a relative fact: if your financial situation is unsophisticated, your solution may also unsophisticated, but if your financial situation is complicated from the start, your solution may also need to be more complex. 

 

In our experience, many wealthy Canadians are leveraging financial products that simply don’t fit their needs and end up overcomplicating their wealth plan. If you are not sure about whether you truly need a new complicating factor in your life, you should consult with a professional to determine the pros and cons of the offer. 

 

Preferably you should consult with another professional for a second opinion. By accurately weighing the potential costs against the potential benefits, the answer often presents itself. For example, a formal legal trust can be incredibly useful and sometimes necessary in specific circumstances. Perhaps you need to have a trust in place to ensure that your heirs are taken care of financially if they are not able to provide for themselves due to illness or disability. In circumstances like this where a legal entity is required to carry out a specific task, a trust might be justifiable. On the other hand, it may be unnecessary to open a trust in order to save a menial amount of tax for a tremendous amount of work. 

 

Life insurance is another area where people may become overwhelmed. The benefits of life insurance policies are regularly cited as clear reasons why everyone should have life insurance policies. This is often not the case for wealthy individuals whose financial assets will take care of their family in the event of their passing. However, in certain circumstances, insurance policies can be useful to, among other things, achieve a specific estate goal or to protect assets from personal or professional liability. 

 

It is important to remember that these financial and legal products are often created to service a very specific need and in the right circumstances, they do have their benefits. Unfortunately, sometimes you may find yourself with a product you don’t need or you may miss out on the right opportunity for your circumstance.