Wealth Management For Lawyers
(Wealth Management 101 For Lawyers – TRANSCRIPT)
wealth management 101
for lawyers that’s the topic of this
video stay tuned we’re talking about it
right now
[Music]
this one’s fun for me because i am a
lawyer i practice law i
was a member of the bar and i did this
for a living and i know a whole bunch of
lawyers
and i think this is incredibly important
and i kind of wish someone would have
taught
me this back when i was a lawyer about
building my wealth
and you know saving and retiring because
i know a lawyer most lawyers and the
ones that i know
they have a tendency to have a real big
cash burden
so what we’re going to talk about today
first of all is some tips some ideas
we’re going to talk about some
tax structure and corporation ideas
we’re going to talk potentially about
ipps and other stuff you can do and
basically the best way to build out your
wealth
while you’re a lawyer to take advantage
of the tools that you can do
before we get to that take a sec to
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appreciate you doing that so as i
mentioned i used to be a lawyer i
practice law
now i give people wealth advice so this
video topic for me is kind of a natural
because i’ve seen both
and i do have a lot of lawyer clients a
whole bunch i do have a lot of lawyer
friends close friends that i would
consider close friends so i’ve seen a
lot of their personal situation i feel
like this advice is going to be good for
you
if you’re a lawyer and you’ve not gone
through the process of having a plan
put in place for your wealth so when you
start out as a lawyer you probably have
a ton of debt
you probably have a relatively low
income
relative to what your debt load is and
you know you’re expecting that income to
grow
first couple years might be a little
slow but then you’re probably going to
get into a period of time where
maybe you become a partner the income
grows dramatically you can participate
in profit sharing
and then the big years are kind of the
last 20 years of your career where
you’re just
hopefully things are going really well
the firm is doing really well and is
paying out
either significant share ownership
bonuses or salaries however it’s
structured so
if you’re a lawyer you likely have a
lock up and you are providing advice
through your law corp now
you may have not had that when you were
younger you probably didn’t have that as
an earlier lawyer so if you’re a first
few years out you’re likely being paid a
salary if that is the case
think of this you know how big is the
debt what should i be doing with any
disposable income
depending on your interest rate on your
debt now if your interest rate is
remarkably low on your student loans or
whatever debt you’ve accumulated
in becoming a lawyer and you have a
runway to pay that debt i would advise
you to start saving instead
right depending on your risk tolerance
depending on what this looks like but it
might make more sense for you
to put that money in a tfsa or an rrsp
and to pay down the debt kind of on a
slow
slow projection or trajectory i know
that a lot of you guys out there are
really gung-ho on paying down the debt
but if it’s at a really low rate might
not make sense for you to do that i
would suggest you just consider that
okay so now you’ve paid down the debt
you’re accumulating income you have that
money in there so
where should it go should it go to an
rsp or a tfsa if it’s not in the corp
yet we’ll get to the corps situation in
a sec so you’re getting salary early
years you’re a lawyer where should the
money go well first of all if your
income is high
you should take advantage of the rrsp
the reason being you’re young
you’re gonna have a whole bunch of years
of tax-free compound growth
inside your rrsp and you’re gonna be
able to take advantage of the fact that
there’s not gonna be any
income or any tax charged on the income
inside the rrsp
on top of that you probably have very
little in rsp so it makes sense to start
now
the idea being you know you’re a 25 26
30 year old lawyer
and you’re going to be building wealth
for the time you’re 65.
eventually you’re going to likely be
building that well through your core but
for now
if your incomes you know probably 75 100
150
that should go towards an rrsp i would
also caution you and suggest to you
to make sure you have a portion of your
investments that are put aside for a
tax-free savings account you do want to
have
liquidity in your investments liquidity
meaning able to convert
that investment into cash which is
usable so stocks inside the tfsa
are perfect for that if ever you need to
you could sell them convert the cash
pull the money out of your tfsa
and use it as a rainy day fund or
whatever need you might have for cash
liquidity
is important your structure your
corporate structure at some point you’re
likely going to be offered the
opportunity to have
an incorporated entity uh providing
legal advice
so it’s going to be you know your name
law corporation or something along the
lines of that and that becomes
effectively your operating company that
is the company that’s giving advice
the firm is likely paying that company
for its advice
and then you could choose to pay
yourself a salary from that corporation
if you’re starting out it’s okay to have
one core but eventually you’re probably
going to want to consider to have
in addition to having the operating
company the law company you’re probably
going to want a holding company or an
investment company tied to that for the
simple reason that you know you’re kind
of removing
your assets from your law company for
liability for other reasons
but more importantly it can sit there
right your asset can sit and grow
through your holding company so if your
provincial bar allows that it’s
something to consider
every province is different but if they
do allow that it’s definitely something
to consider
you’re going to want to make absolutely
sure that you’re actually saving
because what happens is if you don’t
save if you just pull out all of the
income from your corp
then you’re actually not benefiting in
any way from your corporate structure
the shirt here says keep saving
and retire early right so the key with
lawyers is you guys are gonna have such
a high income you’re gonna have so much
income that the key the power of
compounding is on your side i recognize
you’re gonna have expenses i recognize
you might have a family a young family
but when you start making those big
big big bucks you’re gonna have to put
up i would suggest you put a plan in
place as to how much you’re gonna save
annually the great thing about you is
you don’t need
to pay it out as a salary pay tax on it
and then invest it you can invest it
directly through your law corp or your
investment
core that way you’re not paying tax on
the income that’s being pulled out so
think of it this way a dollar of income
in the corp
you pull it out you pay it to yourself
as a salary if you’re making top tax
bracket
you’re down to 50 cents and you’re
investing that 50 cents whereby if it
stays in the law court
you’re gonna pay some tax on it as
income nine percent or ten percent
whatever it may be but the rest of that
ninety cents can be invested
and instead of investing fifty cents
you’re investing ninety cents
and that ninety cents is gonna compact
you could still buy the same stocks you
could still buy the same growth
companies that you wanted to buy in your
tfsa
but instead of owning them in a tfsa now
you owe them in your locker
or in your investment court all right
now the investment corp
should be the place or the lock orb
should be the place over time where you
are focusing your growth
so leave some money in the corp every
year you should be leaving money in the
corp if you’re having a good year
leave a little bit extra invest that
work with a portfolio manager an
investment advisor someone like myself
and if you’re not sure go to
www.speak2rob.com love to book a no
obligation consultation to show you
exactly how that works i’ve seen it i
don’t know how many times with my
clients
they’re building their wealth through
the wrong avenues they come here and
they go rob i don’t know what i’m doing
perfect let’s help you out let’s make
sure we’re building the wealth for you
in the most optimal place and where is
that for you a lawyer it’s in
your law corp or your invesco or your
holdco
if you have one of those or potentially
a family trust if you’ve got one of
those the key is not to pay tax on that
income and to leave it inside
one of the corporations to grow compound
at a much faster rate finally i’ll give
you another idea here an ipp
if this is allowed in your firm if this
is allowed
in your jurisdiction you should consider
an individual pension plan which might
make a ton of sense for you i work with
a whole bunch of lawyers that have ipps
and it’s a dramatic way to
increase the amount that your
corporation is paying
for your retirement the way it works is
you as an executive can structure an ipp
an individual pension plan
you can move a whole chunk of assets
upon forming it typically you got to be
over the age of 40
typically you want to be high income and
typically you want to have
disposable cash in the court so you do
that you structure an ipp
you’re then able to shelter a whole
bunch of money and then
instead of having you know a small-ish
rsp contribution every year
you can pack your personal individual
pension plan
with a whole lack of dollars it works
i’ve seen it i have a whole
whack of clients that do it every single
year they’re putting aside instead of
putting aside 25 or 28 grand in their
rsp they’re putting aside 30 to 35 and
40 and 50
000 every year in their ipp something to
consider
it works might not be for you but
depending on your age and your income
it could work it’s all right guys
remember the key right you want to save
you want to save and retire early
because nobody wants to be at their desk
when they’re 65 or maybe you do but
nobody wants to be you want to have the
opportunity to be able to leave your
desk
when you’re 65 or 60 or 55 or 70
whenever you want to on your own terms
and to do that
obviously you need to make sure you save
and you retire and you do it
the most tax efficient way possible
thanks guys for tuning in don’t forget
to subscribe i’m rob tatro from rob
tatro.com portfolio manager here at
canaccord genuity wealth management
and the tatro wealth advisory group
thanks for tuning in guys we’ll see you
in the next video
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