According to the Manulife Bank 2022 Fall Debt Survey, 87% of Canadians think a recession is likely or that we’re already in one. Concerns over inflation, rising interest rates and housing costs have made cash flow priority #1, significantly impacting Canadians’ financial planning considerations. This case study* explores how existing investment, life insurance and real estate assets can be used to create cash flow solutions to help your clients pursue their financial plans confidently. Learn more about Manulife Bank lending solutions and strategies.

*Sample case for illustration purposes only.

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How can you facilitate the purchase of needed permanent life insurance for a high-net-worth client who might otherwise forego the insurance and purchase an investment instead? This case study looks at Michael* — a successful cardiovascular surgeon — who’s looking to fill his substantial permanent life insurance needs while minimally impacting cash flow for his investment goals. Find out how Manulife Bank lending solutions can help.

*Sample case for illustration purposes only.

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The cost of home ownership can be daunting. So, too, can the expense of growing one’s family. This case study looks at Brandon and Tina*, two young professionals who are looking to keep their income strong and cash flow steady while taking parental leave and renovating their home to welcome a new baby. Through a wealth preservation strategy explained by their Manulife Bank advisor, they can leverage their existing assets without depleting them to achieve their goals. Find out how Manulife Bank’s strategic lending solutions can help. *Sample case for illustration purposes only.

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Canadians are living longer, which can mean funding a retirement that lasts decades.  Surveys show that as people age, they also want to remain in their comfortable family homes and familiar neighbourhoods as long as possible.

Both of those realities can create a conundrum for clients. They don’t want to have to liquidate some retirement assets in down markets, take a large tax hit when tapping into certain income sources, or grudgingly downsize in order to unlock the equity built in their homes.

Fortunately, they don’t have to. There’s a way for clients to turn their homes, which are often their biggest assets, into a steady tax-free stream of funds to supplement retirement income. “This money is theirs, available to use, making their home an active asset,” says Theo Kyriakopoulos, director of mortgage products at Manulife Bank.

Solution

Can your clients live solely off their RRSPs, TFSAs, and non-registered savings in retirement? It’s time to look at real estate as a key component of their retirement income.

People can’t sell just a portion of their home, so they don’t tend to think of real estate as an asset that can help deliver consistent retirement income. Yet with a Manulife One account, clients can  unlock (up to 65%) of the equity in their homes.

They can use the cash from their home to cover ongoing expenses, unforeseen ones such as home repairs, renovations needed to stay in place, or any other purpose. It’s a quick way for clients to access tax-free cash, and help extend the life of all their other investment assets.

The money removed through home income withdrawals is considered a “good debt” – it’s tax-free equity the clients have earned and built through years of home ownership.

Unlike Management Expenses Ratios (MERs) charged to their entire investment portfolio, the cost they incur here is the interest charged on the outstanding balance in addition to the monthly account fee, if applicable.

“This can help provide a great cash flow solution, and can make real estate part of a fully diversified plan,” says Kyriakopoulos. When the home is eventually sold, any outstanding debt is repaid, and the rest is paid out tax-free to the client, if it’s the primary residence.

The more that clients tap into the equity of their homes, the less they need to draw down from other sources of potentially taxable income. For example, a $25,000 withdrawal from a RRIF might incur $6,000 in tax, and a lost opportunity cost of almost $15,000 (4% growth for 10 years). In contrast, the same $25,000 in home equity using Manulife One would be tax-free and incur only $1,000 in annual interest. And, any money going back into a Manulife One account offsets the money withdrawn against the equity.

You can be a valuable resource by letting your clients know that their market assets actually have more time to grow. Because once withdrawn, any money from other investments can no longer produce future income.

Even if you know Manulife One, you may not be aware that it also offers a good lending solution to clients for retirement. This option is much less costly than a reverse mortgage, and is more flexible than a HELOC (home equity line of credit), which is still a separate product.

“Manulife One is an all-encompassing banking solution and, for home-owning retirees, is a retirement income tool that offers easy access to their own accumulated wealth,” says Kyriakopoulos.

Digging deeper

For advisors, discussing this option with clients can make sense 10 to 15 years before they plan to retire. But it’s worth a conversation at any stage, pre- and post-retirement.

Over time, using Manulife One for retirement can evolve. It can be a retirement income buffer, a tool that offers the luxury of time to review the financial plan to make the best decision, and a cash flow safety net.

It can also be a wealth transfer vehicle, whereby clients can make gifts to their children and grandchildren using any portion of their equity. That enables people to see and enjoy the impact of their gifts while they’re still around.

Clients shouldn’t look at this option as taking on more debt. Instead, they should think differently about how to potentially make their full range of assets work for them.

Kyriakopoulos notes that, in retirement, people tend to consolidate advice channels and assets. Other financial institutions would love the chance to poach that business. Manulife One is a versatile product that can support your clients into and through retirement. By referring Manulife One to your clients in retirement, you can help better meet their income needs and increase client loyalty.

“By helping your clients to take a holistic look at their retirement income options, unlock their home equity, and have a solid banking solution,” says Kyriakopoulos, “you can help protect and strengthen the full financial relationship.”

Learn more about the benefits of Manulife One for retirement.

Advisors are busy enough managing clients’ wealth and keeping them protected. They want to make the most of their time with clients, so they may think that offering banking products isn’t worth it. Yet everything that comes an advisor’s way starts with someone giving them money from a bank account. So why wouldn’t advisors want greater insight into how clients are deploying those funds?

We’ve seen many advisors learn that talking about deposits doesn’t add much time and offers valuable benefits.

By helping clients get more for their money, with simple products like their bank accounts, advisors can help strengthen their influence on the range of their clients’ financial decisions. That can help improve client satisfaction and loyalty, boost sales, and increase cash flow for the well-being of clients’ investment portfolios and insurance plans. 

There are many decisions in choosing the right mortgage, line of credit, credit card, and even daily banking package. Advisors can add tremendous value by showing clients a better way to bank. When clients use those banking services and have their needs met, it will remind them of the value their advisors bring into their lives.

It’s prudent to get involved in deposits for other reasons. Advisors work hard to build the relationships needed for clients to direct their hard-earned income into investment and insurance recommendations. But advisors face the risk of losing clients. Every traditional and virtual bank, robo-advisor, and even some retailers want the cross-selling opportunities that bank accounts provide. Recommending deposit products can help strengthen the client-advisor bond and reduce the possibilities of competitors preying on an advisor’s business. 

Many traditional wealth and protection products are easily forgotten until they become more important later in life. But banking products support daily financial decisions. Our deposit advisors tell us stories of gaining more investment assets from clients who appreciated being helped around their savings and everyday banking. Part of the value comes from seeing clients direct more idle money based on the advisor’s recommendations for both short- and long-term goals.

Our Business Advantage Account puts retained earnings to work with a high daily rate of interest and immediate access to cash. Our average balances are quite high in our corporate accounts. Advisors are using these accounts to potentially migrate more retained earnings into higher-yielding investments. Putting idle money to work is always a win for the clients and the advisor.

High interest rates for clients

A Manulife Bank Advantage Account is a win, too. It’s one of Canada’s first high-interest, branch-free chequing accounts, which pays a premium rate on every dollar and also offers daily banking from the same account. Most advisors use it to provide a savings solution with immediate access to cash when needed. Just by maintaining a $1,000 balance, the Advantage Account can be a complete no-fee unlimited transaction daily banking account—no traditional bank is needed.

Aside from the client benefits, Manulife Bank gives advisors access to client balances through our BankLink platform. So when there’s a meeting or an annual review, the advisor may notice a large deposit balance that far exceeds their client’s savings needs. That can trigger recommendations for higher investment returns through core offerings like mutual or segregated funds.

These accounts also tend to have “sticky” money, and the assets can remain there for a long time—potentially delivering years of commission for little account maintenance.

We realize that an advisor needs to concentrate on their core investment and insurance business. So we’ve made it extremely easy for them to offer deposits to their clients. Advisors can use the Manulife Advisor Portal to open deposit accounts in minutes—with just some client ID, and a void cheque or a funds transfer authorization.

We also give advisors a unique web-based application, where they can simply send a link to an online system and have the client complete the application. Some clients still prefer to see a paper application, so we offer that option, too.

Think of deposits like the bread and milk in a grocery store. They drive traffic and customer loyalty. Every Canadian has a bank account, and advisors can help to ensure that every dollar their clients earn is working for them. Engaging with clients around deposits may be the simplest new business opportunity in an advisor’s practice today.

Learn more about the benefits of a Manulife Bank Advantage Account.

Advantage Account, Business Advantage Account are offered through Manulife Bank of Canada.

Manulife, Manulife Bank, Stylized M Design, and Manulife Bank & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by Manulife Bank of Canada under license.

With their retirement just a few years away, many Canadians are looking to ease into retirement by shifting from full- to part-time employment. But they don’t want to sacrifice their salary.

This interactive case study looks at Martha*, a 60-year-old HR executive whose plan is to reduce her days at the office (from five a week to four) until she reaches 65. Through a wealth decumulation strategy, she has the option of using the assets she’s accumulated over the years to supplement any income lost. Find out how Manulife Bank solutions and strategies can help.

* Sample case for illustration purposes only

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