Financial advisors have a critical role to play during RRSP season in educating Canadians about tax-registered plans and helping clients take best advantage of the investment vehicles available, according to recent research from Mississauga, Ont.-based Credo Consulting Inc.

That’s because Canadians who work with an advisor are much more likely to own an RRSP or a TFSA, or to take advantage of both of these tax-registered plans, than are Canadians who aren’t getting the benefit of personal advice, the research found.

This research was drawn from Credo’s Financial Comfort Zone Study, an ongoing national consumer survey conducted in partnership with Montreal-based TC Media’s investment group. (TC Media publishes Investment Executive.)

“The results show clearly that advisors provide constructive guidance for clients by encouraging them to use accessible, simple and important tax-advantaged solutions,” says Hugh Murphy, managing director with Credo. “Investors who aren’t working with an advisor are missing the boat.”

This trend holds true at all levels of client net worth, but it’s most pronounced among Canadians with modest amounts to invest.

Specifically, 48% of survey participants who work with an advisor and have less than $250,000 in investible assets reported that they own both an RRSP and a TFSA, vs 17% who own neither. In contrast, only 25% of Canadians at this level of net worth who don’t work with an advisor said they own both an RRSP and a TFSA, while a whopping 42% of these Canadians said they own neither.

Among Canadians who work with an advisor and have $250,000-$500,000 in investible assets, 64% own both an RRSP and a TFSA, vs only 7% who own neither. As for Canadians at this asset level without an advisor, 58% own both plans, while 12% hold neither.

Finally, among Canadians who work with an advisor and have $500,000 or more in investible assets, 71% own both an RRSP and a TFSA, vs only 4% who own neither. And among Canadians at this level who don’t work with an advisor, 66% own both an RRSP and a TFSA, while 12% hold neither.

You can use conversations about the benefits of the RRSP and the TFSA, and the rules that govern each type of account, to initiate a broader dialogue with your clients about their overall financial plan, says Carol Bezaire, vice president, tax and estate and strategic philanthropy, with Mackenzie Financial Corp. in Toronto.

“The beginning of a new TFSA year, during RRSP season,” Bezaire says, “is a good time for investors to take a look at their financial plan to make sure it’s what they really need.”

Adds Sara Gilbert, founder of Montreal-based Strategist Business Development, “[Registered plans] are an entry point, a way to frame the discussion about a financial plan and to get it going.”

You also can help your clients determine which plan would be best to use, based on the client’s age, income, goals and overall financial plan.

Younger clients, in particular, tend to favour the TFSA relative to the RRSP, the research reveals. For example, among survey participants who were between the ages of 25 and 34, 58% own a TFSA vs 51% who own an RRSP.

In contrast, 52% of survey participants between the ages of 35 and 44 own a TFSA vs 65% who own an RRSP.

TFSAs are well suited to younger clients, who tend to have lower incomes and not be in a position to benefit much from the ability to reduce taxable income via contributions to the RRSP, says Myron Knodel, director of tax and estate planning with Investors Group Inc. in Winnipeg: “You need to compare your marginal tax rate today to what you expect it to be when you eventually withdraw money from your RRSP or RRIF.”

The TFSA’s flexibility – notably, any withdrawals result in an equal amount being added to the subsequent year’s contribution room – is an appealing feature for younger clients, Gilbert says: “For young people, retirement planning is really far off in their minds. Instead, [they wonder], ‘What’s the next step: buying a house, having kids or other goals?'”

You also can help your clients maximize the value of their tax-registered plans. For example, clients can give money to spouses and adult children to contribute toward their TFSAs without triggering the attribution rules that otherwise would make any income and portfolio gains taxable in the hands of the clients.

“With some high net-worth clients, advisors find the client has maxed out his or her [TFSA], but the spouse has nothing [in his or her TFSA],” Bezaire says. “So, you can top up [the spouse’s TFSA] because there’s no attribution.”

You also can help older clients manage RRSP withdrawals in anticipation of receiving government retirement benefits, such as the Canada Pension Plan and old-age security (OAS). Doing so many help clients smooth out retirement income and avoid the OAS clawback. In addition, RRSP and RRIF withdrawals now can be directed toward a TFSA.

“We see more clients utilizing their TFSAs because their advisors counsel them to,” Bezaire says. “Advisors tell clients: ‘You don’t need that RRIF money; you’re going to pay taxes on it. But let’s not have you pay taxes twice. We’ll move your RRIF payment into your TFSA and invest it there’.”

The online Financial Comfort Zone Study has polled 27,000 Canadians thus far. The survey is meant to gain insight into the relationships among financial advice, financial well-being and overall life satisfaction in Canadian society.