Daryl Diamond, president of Diamond Financial Planning Ltd. of Winnipeg, has carved out a niche by helping people in the "de-accumulation" phase of their investment lives. With some members of the baby-boomer generation now reaching their mid-60s, Diamond's practice is thriving.
"There's a huge need for advice on how to use assets efficiently to create a secure retirement income," Diamond says. "A lot of advisors work on the accumulation side, but fewer have the expertise on how best to use the assets when the accumulation is done."
Diamond recently wrote Your Retirement Income Blueprint: A Six-Step Plan to Design and Build a Secure Retirement, a book that, he says, creates the "most wonderful business card in the world." Since the book was published, Diamond adds, he has received a phone call a day from people looking for access to the expertise he offers in his book.
During the accumulation years, Diamond says, basic advice, such as "start early" and "pay yourself first," is effective. He calls that a "prescriptive" approach. In the de-accumulation phase, however, clients need individually tailored advice because each person is facing specific issues with their health, finances, lifestyle and family situation, so the advice must be precise or "surgical."
"It's the income market," Diamond says. "It's dynamic and keeps evolving. And it's an area in which people need quality advice."
Diamond says the de-accumulation (a.k.a. disbursement) phase presents challenges in dealing with the variables. In addition, interest rates are at historical lows, memories of the 2008 financial meltdown are still fresh and the Canada Pension Plan (CPP) is undergoing significant changes.
"We put the focus on what you can control," Diamond says, "including asset mix, tax efficiency and the timing [regarding] when to tap into various sources of income, including government benefits and registered and non-registered investment assets."
Diamond's suggested asset mix typically includes a blend of equities and fixed-income, as well as some guaranteed income, such as that provided by insurance annuities.
Rather than using high-fee guaranteed minimum withdrawal benefit products, Diamond often prefers to combine traditional annuities with variable-return investment portfolios, a less costly strategy that still provides a level of guaranteed income with potential growth and inflation protection.
"We create and execute a strategy," he says, "but leave the investment management to the professionals, such as mutual fund managers or investment counsellors."
Most clients have a handful of income sources in retirement. The keystone of Diamond's strategy is to maximize government benefits first, and then layer the more flexible personal assets on top of them.
For most clients, even wealthy clients, he advocates taking CPP benefits as early as possible. If the CPP income is not needed immediately, it can be reinvested in a tax-free savings account or tax-efficient, non-registered securities such as corporate-class funds.
Says Diamond: "Why use personal assets to create that portion of income that can be provided by CPP, which lasts as long as you do? There is time value to having the CPP money in hand as early as possible."
For many retirees, it also makes sense to tap first into the fully taxable income from registered assets like RRSPs and registered retirement income funds, leaving the non-registered assets to grow so they can be used to create income at a later date. IE
This is the second instalment in a three-part series on the strategies of veteran financial advisors.
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