Thank you, Mr. Chairman. I am delighted to be here and to present before the committee.
Advocis is the oldest and largest voluntary association of financial advisers and planners in Canada, with about 13,000 members across the country. Our goal is to work co-operatively with decision-makers and the public, stressing the value of financial advice and striving for an environment in which all Canadians have access to the advice they need.
Small business financial advisers primarily work out of independent agencies, or as exclusive advisers of life insurers and independent mutual fund and securities dealers. They are provincially licensed to provide various financial products to the public. There are about 78,000 small and medium-sized business financial advisers in Canada servicing more than 13 million client accounts.
Financial advisers are a vital part of Canada's economy and are crucial to the long-term financial health of Canadian families and small businesses. Representing $19 billion in direct GDP, Canada's small business financial advice sector is larger than the pharmaceutical, aerospace, and motor vehicle industries. Our sector accounts for 180,000 direct jobs and about $4.5 billion in total tax revenues.
The greatest value to the Canadian economy is what financial advisers do for their clients. Small business advisers are uniquely positioned to provide advice to middle-class Canadians. Over 80% of all households have less than $100,000 of investable assets. The average client assets under management are $49,000. The average life insurance coverage is $187,000.
In aggregate, Canadian households receive $27 billion annually from life insurance, annuity, and health benefit payments derived from individual solutions provided by life insurance advisers. Small business financial advisers manage $650 billion in financial assets for Canadians.
People who receive financial advice are more financially secure, better protected, and better prepared for retirement and unexpected life events than people who do not receive advice. Economic studies have shown that advised households have up to four times the financial assets compared to non-advised households. Public policy should be aimed at giving Canadians greater access to professional financial advice.
As the Minister of Finance said this week, “The economy is doing well. We are in the best place in a decade.” We agree. The Canadian economy is growing at a strong pace. That is why we have taken a keen interest in the government's proposals to change the taxation of Canadian-controlled private corporations.
Small business is the lifeblood of the Canadian economy. The 13,000 financial advisers that Advocis represents not only are small businesses themselves, but advise hundreds of thousands of small businesses across Canada with financial planning, succession and estate planning, and tax planning advice.
The small business coalition rightfully pointed out, in our recent letter to the Minister of Finance, that the changes to passive income rules could potentially result in a tax burden of 73% on corporately earned investment income, and 59% on corporately realized capital gains. The coalition also points out that the changes to income sprinkling would have an impact on all small businesses, not just the ones making over $150,000 per year. Finally, the tax bill for intergenerational transfers that result from the death of an owner could increase by 15% to 20%.
None of this, however, is new to you as members of the committee, so allow me to make an argument that doesn't solely rely on statistics or economic models.
Building a business is not an easy thing to do. They are built with blood, sweat, and tears. People use their life savings to start a small business. They take out loans and lines of credit on their houses, and borrow from friends and family. They work 80 to 90 hours a week, and deal with a level of stress that often goes unseen. At the end of the day, the sad reality is that most of the time small businesses do not succeed.
The financial advice industry is changing. Robo-advisers, regulatory challenges, and increasingly aggressive large institutions continue to put pressure on small business financial advisers.
These tax changes will not only make it more difficult for small business financial advisers to stay competitive and expand their businesses but will also limit the options for the small businesses they advise. The tax changes will make it harder for these businesses to grow at a time when large institutions in some sectors are rapidly expanding their reach.
The proposals aside, our members feel that the process, including some of the language delivered throughout the process, was not collaborative. Our members and their clients continuously hear from the government that these are tax loopholes, and that these changes will only impact the wealthy and those who make over $150,000, when we know that this is not the case.
The consultation was launched in the middle of July and finishes just two weeks after the summer. To us, that's a very short window for these fundamental changes. We would ask this committee, through the pre-budget process, to convey to the Prime Minister and the Minister of Finance the concerns and challenges that many organizations like Advocis have faced and have identified during this very short consultation.
We are worried that this is being rushed through. We must ensure that this is the right public policy for Canada.