Popescu Builds Wealth Through Advanced Tax Strategies
by Geoff Howard
December 14th, 2010 12:05 PM
Most investors think financial planning means receiving a good investment return.
That’s important, says North Shore financial planning guru Daniel Popescu, but it’s only one aspect of a comprehensive wealth management plan.
“Most high net worth clients normally work with an Investment Advisor; somebody that generally only provides portfolio advice,” Popescu notes. “It’s great to see returns but if we lose much of those returns to tax, it defeats the purpose. Also, many investors don’t realize that an RRSP or a corporation is generally not a tax savings strategy, but rather just a deferral.”
“We’ve been taught to maximize our RRSP every year. For the average Canadian that’s okay advice,” he says. “For many higher net worth Canadians, an RRSP can be a tax time bomb during retirement and come estate time. With the highest tax bracket in B.C. at 43.7 per cent, depending on the taxpayer’s total income, much of the RRSP can be wiped out by tax throughout retirement or at death.
“Although CRA allows RRSPs to be rolled over to a surviving spouse tax free, upon the second spouse’s death the entire plan comes into income. This often pushes the tax hit on the RRSP into that 43.7 per cent bracket, leaving beneficiaries with only the balance. We advise some of our clients to actually stop contributing to RRSPs and look at alternatives.”
Popescu teaches his clients how to receive the same tax refund without contributing money to RRSP’s™. “The tax laws allow for other methods of creating the same annual tax breaks, it’s just a matter of understanding these options,” says Popescu.
“We have some clients who have not only stopped contributing to RRSPs altogether but have begun drawing from their registered plans even though they are still working or don’t need the money.” Popescu has taught these clients how to withdraw from your RRSP/RRIF effectively tax free™.
Although the RRSP withdrawals are taxable, his clients offset this tax with an equivalent tax deduction creating the effect of a tax free RRSP withdrawal. “We are essentially de-registering the registered plan and moving money from a taxable environment to a tax preferred one. I’m not against RRSPs, they’re not bad or good, it’s more a question of suitability, much like some of these alternatives we are talking about.”
For his clients who have an incorporated business, Popescu takes advantage of the corporation’s capital dividend account and teaches how to withdraw from your corporation 100% tax free™.
Often, when new clients review their finances with him, they start off believing they’re already doing everything necessary to manage their wealth. “It can be a big wake-up call. It’s not just one or two things they’re overlooking. Our recommended action plan on average includes anywhere from eight to 12 items that they should employ to ensure they’re taking advantage of all the options currently available to them.”
Other areas that are often overlooked are the tax implications on profits such as dividend and interest income as well as capital gains. “Most investors receive a T3 statement once a year that reports this income. They simply provide the statement to their accountants, pay the tax every year and don’t think twice about it.” Popescu has also taught his clients how to receive tax deferred growth even on non-RRSP investments™.
“Through a mechanism known as corporate class or tax class, investors can sell an investment, trigger a capital gain and defer paying the tax on this gain, so long as they use the proceeds to purchase another investment within the same corporate class structure.” Other clients use the strategy to convert taxable income into capital gains™. “If the investment yields dividends or interest income, these too can be deferred. Furthermore, when the investment is eventually sold, the profit is then treated as a capital gain whereby only 50 per cent is taxable as opposed to 100 per cent in the case of interest income. This essentially cuts the tax in half on interest income. In a low interest rate environment, this can prove quite lucrative.”
Corporate Class is not the only way to convert income into capital gains. Some of the Popescu Group’s™ clients have also used advanced flow through strategies to receive similar benefits.
Another aspect of wealth management is estate planning. “Many of our clients did not have an estate preservation plan in place, and thought that having a basic will would solve all their problems. They were surprised to find that a large portion of their assets would be subject to both tax and probate fees. In many cases, our clients weren’t aware that leaving assets directly to children can lead to creditor issues if the child goes through a divorce, possibly subjecting the inherited assets to division. One common error is to assume that leaving assets to your surviving spouse is a good choice. While it seems like the right thing to do, in some cases the survivor now has all the assets, all the income, and therefore all the tax.” Popescu works closely with a handful of Vancouver lawyers to ensure his clients set up any appropriate testamentary and living trusts.
The 8 Step Wealth Management Process
Popescu is able to dive deeply into his clients’ overall financial circumstances by taking each client through an 8 Step process, which is a series of six initial meetings with his team followed by a meeting with a lawyer. After that, he has a structured review process with every client. He can pay a high level of attention to his private client base by only adding two new clients on per month. He has a team of six working exclusively on only 160 client families. The team’s holistic approach includes, tax planning, retirement planning, estate preservation, business succession and portfolio design. As there is a great deal of demand for Popescu’s specialized knowledge and high level wealth management program, there is often a waiting list to get in to see him. “We’ve been very fortunate that we have more clients who would like us to take on their cases than we have the capacity to accommodate. As such, we interview the clients to make sure it’s a good fit. The portfolio size is just one consideration. More importantly, we want to make sure that the client’s philosophies align with ours, and that we can see ourselves working together long term as we have with our existing clients.”
Popescu Group™
Private Wealth Management
Daniel Popescu is a Senior Vice President with Wellington West Capital Inc., as well as a Senior Investment Advisor and Certified Financial Planner. He heads up the Popescu Group™ which is a private wealth management practice, primarily geared towards business owners, professionals and retirees. He is a financial planning graduate from the Canadian Institute of Financial Planners and holds three professional designations including the CFP (Certified Financial Planner), FMA (Financial Management Advisor) and he is also an FCSI (Fellow of the Canadian Securities Institute).
He has been in the financial industry since 1997, has coached and lectured to over 1,000 other advisors nationally and received many industry awards over the years. He rose to the top ranks in a large firm and is currently one of the top producers at Wellington West Capital Inc.. Popescu has delivered over 300 wealth management lectures in the past, and continues to provide them on the North Shore as well as on the West Side of Vancouver at Marine Drive Golf Club.
Upcoming lectures are at Seymour Golf and Country Club on Wednesday, Oct. 22, and at Hollyburn Country Club on Tuesday, Oct. 28. Readers can register for these workshops by going to the Popescu Group™ website www.advancedwealthstrategies.com or by contacting Daniel’s team at the number below.
Popescu has worked with the United Way and Foster Parents Plan and he recently climbed Mount Kilimanjaro, Africa’s highest peak, to raise money for BC Children’s Hospital. He and his wife, who live in West Vancouver with their young daughter, have also recently established the Popescu Family Foundation to raise funds for various charities.
The opinions expressed here are those of Daniel Popescu, and do not necessarily reflect those of the Popescu Group Private Wealth Management or Wellington West Capital Inc. This article is for information purposes only and does not provide individual financial, legal, tax or investment advice. All trademarks owned by Daniel Popescu. The strategies referred to in this article may not be suitable for all individuals some of which may involve claiming off-setting deductions on and individual’s income tax return, and/or investment loans. Individuals should consult with their professional advisors, including tax advisors, prior to making an investment decision. All trademarks owned by Daniel Popescu. Wellington West Capital Inc., member CIPF
Daniel Popescu, CFP, FMA, FCSI. Senior Vice President, Senior Investment Advisor, Certified Financial Planner. Wellington West Capital Inc. Suite 202, 545 Clyde Ave. 604.925.5644 popescugroup@wellwest.ca www.advancedwealthstrategies.com
Copyright North Shore Magazine Issue Oct - Nov 08
That’s important, says North Shore financial planning guru Daniel Popescu, but it’s only one aspect of a comprehensive wealth management plan.
“Most high net worth clients normally work with an Investment Advisor; somebody that generally only provides portfolio advice,” Popescu notes. “It’s great to see returns but if we lose much of those returns to tax, it defeats the purpose. Also, many investors don’t realize that an RRSP or a corporation is generally not a tax savings strategy, but rather just a deferral.”
“We’ve been taught to maximize our RRSP every year. For the average Canadian that’s okay advice,” he says. “For many higher net worth Canadians, an RRSP can be a tax time bomb during retirement and come estate time. With the highest tax bracket in B.C. at 43.7 per cent, depending on the taxpayer’s total income, much of the RRSP can be wiped out by tax throughout retirement or at death.
“Although CRA allows RRSPs to be rolled over to a surviving spouse tax free, upon the second spouse’s death the entire plan comes into income. This often pushes the tax hit on the RRSP into that 43.7 per cent bracket, leaving beneficiaries with only the balance. We advise some of our clients to actually stop contributing to RRSPs and look at alternatives.”
Popescu teaches his clients how to receive the same tax refund without contributing money to RRSP’s™. “The tax laws allow for other methods of creating the same annual tax breaks, it’s just a matter of understanding these options,” says Popescu.
“We have some clients who have not only stopped contributing to RRSPs altogether but have begun drawing from their registered plans even though they are still working or don’t need the money.” Popescu has taught these clients how to withdraw from your RRSP/RRIF effectively tax free™.
Although the RRSP withdrawals are taxable, his clients offset this tax with an equivalent tax deduction creating the effect of a tax free RRSP withdrawal. “We are essentially de-registering the registered plan and moving money from a taxable environment to a tax preferred one. I’m not against RRSPs, they’re not bad or good, it’s more a question of suitability, much like some of these alternatives we are talking about.”
For his clients who have an incorporated business, Popescu takes advantage of the corporation’s capital dividend account and teaches how to withdraw from your corporation 100% tax free™.
Often, when new clients review their finances with him, they start off believing they’re already doing everything necessary to manage their wealth. “It can be a big wake-up call. It’s not just one or two things they’re overlooking. Our recommended action plan on average includes anywhere from eight to 12 items that they should employ to ensure they’re taking advantage of all the options currently available to them.”
Other areas that are often overlooked are the tax implications on profits such as dividend and interest income as well as capital gains. “Most investors receive a T3 statement once a year that reports this income. They simply provide the statement to their accountants, pay the tax every year and don’t think twice about it.” Popescu has also taught his clients how to receive tax deferred growth even on non-RRSP investments™.
“Through a mechanism known as corporate class or tax class, investors can sell an investment, trigger a capital gain and defer paying the tax on this gain, so long as they use the proceeds to purchase another investment within the same corporate class structure.” Other clients use the strategy to convert taxable income into capital gains™. “If the investment yields dividends or interest income, these too can be deferred. Furthermore, when the investment is eventually sold, the profit is then treated as a capital gain whereby only 50 per cent is taxable as opposed to 100 per cent in the case of interest income. This essentially cuts the tax in half on interest income. In a low interest rate environment, this can prove quite lucrative.”
Corporate Class is not the only way to convert income into capital gains. Some of the Popescu Group’s™ clients have also used advanced flow through strategies to receive similar benefits.
Another aspect of wealth management is estate planning. “Many of our clients did not have an estate preservation plan in place, and thought that having a basic will would solve all their problems. They were surprised to find that a large portion of their assets would be subject to both tax and probate fees. In many cases, our clients weren’t aware that leaving assets directly to children can lead to creditor issues if the child goes through a divorce, possibly subjecting the inherited assets to division. One common error is to assume that leaving assets to your surviving spouse is a good choice. While it seems like the right thing to do, in some cases the survivor now has all the assets, all the income, and therefore all the tax.” Popescu works closely with a handful of Vancouver lawyers to ensure his clients set up any appropriate testamentary and living trusts.
The 8 Step Wealth Management Process
Popescu is able to dive deeply into his clients’ overall financial circumstances by taking each client through an 8 Step process, which is a series of six initial meetings with his team followed by a meeting with a lawyer. After that, he has a structured review process with every client. He can pay a high level of attention to his private client base by only adding two new clients on per month. He has a team of six working exclusively on only 160 client families. The team’s holistic approach includes, tax planning, retirement planning, estate preservation, business succession and portfolio design. As there is a great deal of demand for Popescu’s specialized knowledge and high level wealth management program, there is often a waiting list to get in to see him. “We’ve been very fortunate that we have more clients who would like us to take on their cases than we have the capacity to accommodate. As such, we interview the clients to make sure it’s a good fit. The portfolio size is just one consideration. More importantly, we want to make sure that the client’s philosophies align with ours, and that we can see ourselves working together long term as we have with our existing clients.”
Popescu Group™
Private Wealth Management
Daniel Popescu is a Senior Vice President with Wellington West Capital Inc., as well as a Senior Investment Advisor and Certified Financial Planner. He heads up the Popescu Group™ which is a private wealth management practice, primarily geared towards business owners, professionals and retirees. He is a financial planning graduate from the Canadian Institute of Financial Planners and holds three professional designations including the CFP (Certified Financial Planner), FMA (Financial Management Advisor) and he is also an FCSI (Fellow of the Canadian Securities Institute).
He has been in the financial industry since 1997, has coached and lectured to over 1,000 other advisors nationally and received many industry awards over the years. He rose to the top ranks in a large firm and is currently one of the top producers at Wellington West Capital Inc.. Popescu has delivered over 300 wealth management lectures in the past, and continues to provide them on the North Shore as well as on the West Side of Vancouver at Marine Drive Golf Club.
Upcoming lectures are at Seymour Golf and Country Club on Wednesday, Oct. 22, and at Hollyburn Country Club on Tuesday, Oct. 28. Readers can register for these workshops by going to the Popescu Group™ website www.advancedwealthstrategies.com or by contacting Daniel’s team at the number below.
Popescu has worked with the United Way and Foster Parents Plan and he recently climbed Mount Kilimanjaro, Africa’s highest peak, to raise money for BC Children’s Hospital. He and his wife, who live in West Vancouver with their young daughter, have also recently established the Popescu Family Foundation to raise funds for various charities.
The opinions expressed here are those of Daniel Popescu, and do not necessarily reflect those of the Popescu Group Private Wealth Management or Wellington West Capital Inc. This article is for information purposes only and does not provide individual financial, legal, tax or investment advice. All trademarks owned by Daniel Popescu. The strategies referred to in this article may not be suitable for all individuals some of which may involve claiming off-setting deductions on and individual’s income tax return, and/or investment loans. Individuals should consult with their professional advisors, including tax advisors, prior to making an investment decision. All trademarks owned by Daniel Popescu. Wellington West Capital Inc., member CIPF
Daniel Popescu, CFP, FMA, FCSI. Senior Vice President, Senior Investment Advisor, Certified Financial Planner. Wellington West Capital Inc. Suite 202, 545 Clyde Ave. 604.925.5644 popescugroup@wellwest.ca www.advancedwealthstrategies.com
Copyright North Shore Magazine Issue Oct - Nov 08
