FP Canada has launched an effort to get a Federal tax credit for financial planning.
I disagree with this initiative of FP Canada for several reasons, even though I am a financial advisor and a big proponent of financial literacy and the value of my life's work - financial advice. Here is a short version of my first reactions to this idea.
1. It injects even more government interference into the economy.
2. Government, via regulations, has driven up the cost of advice and reduced its access. This distorted the economy. The solution to one distortion cannot be further distortion.
3, It introduces yet another aspect of private life that ends up being reported to our taxation authority.
4. This is like the children's sports activity and arts activity credits, which thankfully were axed.
5. All these reporting requirements add costs for providers, add non-productive work for taxpayers, add compliance costs to the taxman.
6. I think it is discriminatory, taking money from one class of taxpayers and favoring those who have had lobbyists work on their behalf. Essentially, political pressure is used to extract money from the group being punished to reward the favoured group, a regressive tax - one among many. This is a violation of individual rights, never mind being inequitable.
7. Most fundamentally, it is not a proper function of government to redistribute wealth according to anyone's preferences. Government is created to protect rights and not to violate them. Government representatives might choose to speak favorably about the value of financial advice but should never take my money to help others pay for the advice they seek.
8. Only plans covering advice “across multiple areas” would be eligible. This begs for jerry-rigged gaming of the credit: who is to judge when enough areas have been covered? What if multiple areas are not wanted or needed by the client? What if plans are "gamed" so as to qualify under whatever arbitrary rules are set?
9. Almost zero Canadians pay for the type of financial planning fee that would be rewarded by this credit. The overwhelming preference of Canadians, as clearly expressed in their market choices, is to pay for advice bundled with their investment and insurance products and management. The article itself says only 4% use the type of advice this credit would promote. If you want to promote this type of advisor compensation, go into the marketplace and make your case - don't use the coercive power of government to do it against the wishes of Canadians. In summary, there is so much wrong with this idea that it should be stopped in its tracks or rejected outright by politicians.
