Financial Planning for New Canadians

By : Richard Rizi, CFP

Canada is the destination of choice for many immigrants. According to a 2007 United Nations report, we ranked as the fourth best country in the world to live in. The report included a long list of criteria, including factors that influence a person's quality of life, GDP and life expectancy. As a result, it should come as no surprise that Canada ranked second only to Australia in terms of the number of foreign born residents making a home within its borders.

With motivating factors like our strong labor market and a better quality of life these newcomers will strive diligently to achieve success. In fact a recent study by Genworth Financial found that the average immigrant buys a home within four to five years of coming to Canada. While the purchase of a home is undoubtedly one of the biggest decisions facing newcomers it is not the only important choice that they will be confronted with.

Today, immigrants face many challenges and most have nothing to do with learning a new language or culture. Canada has a complex tax and savings system that must be fully understood and planned for in order to gain financial independence. A solid financial plan is a logical place for them to start planning for their future.

Helping these clients identify their goals and best structure their finances should become of paramount importance to financial planners. To do so, planners must be aware of both the costs and benefits of the programs available to these individuals. A prime example is the immigration trust program which allows for a tax holiday on investment income earned during the first 60 months following their arrival in Canada. While certainly advantageous from a tax perspective, the trust can be expensive to set up and its potential value must be carefully evaluated prior to settlement.

Recognizing the values and cultural differences that immigrants often bring with them will also aid in both prioritizing and identifying goals. For example while immigrants often have the same retirement dreams as other Canadians, the methods of planning for that retirement are often vastly different as many cultures see adult children take full care of their parents in retirement. Helping these individuals both recognize the importance of saving for retirement and educating them on the merits of savings vehicles such as RRSP's and the new TFSA will help bridge these cultural idiosyncrasies.

The setting and prioritizing of goals will certainly help in enabling immigrants to achieve their dreams, however in order to truly succeed they must surround themselves with a network of professionals in order to ensure that they and their families benefit from all that Canada has to offer. For instance although they may not realize it, Canadian estate law is likely greatly different than what they are used to. Thus understanding the differences and working with the right people will help in the preservation and smooth transition of their assets to the next generation.

In 2007, Canada admitted a record setting 429,649 permanent residents, temporary foreign workers and students across our borders. To many new Canadians, this country represents a fresh start, a very welcome helping hand, and the chance to benefit from a culture that relishes in its' diversity. And with proper planning, the right tools and sound advice, newcomers will quickly see that Canada really can be the land of opportunity.