Fees for non-registered accounts are shown as a tax-deductible expense each year they are paid.
We simulate the account's growth based on the defined growth rate. Then, a separate expense will be created for the fee amount.
The fee will be deducted directly from the account balance. The deducted fees will be reflected in the account's cash flow and is categorized as a tax-deductible expense, in Year View > Taxes.
Why is the non-registered fee showing as income in the plan?
We first record the fee as income when it is deducted from the account. Subsequently, we list the fee as an expense when it is paid. This sequential calculation is reflected in the annual financial view.
In non-registered accounts, when a fee is deducted from the account, it is first recorded as income because the deduction effectively increases the total taxable income for the year. This is a necessary step, especially in cases where fulfilling the fee could trigger capital gains taxes, as it may involve selling investments. After this, the fee is recorded as an expense when it's paid out, ensuring the net effect is properly reflected. This approach provides a clear, transparent view of how fees impact both income and expenses and is presented sequentially in the annual financial summary.
Why is this different from how fees are handled for other accounts in AdviserGo?
In other account types, like registered accounts, the fee rate is directly subtracted from the growth rate of the account rather than being recorded as income. This method reflects the non-registered account's distinct tax implications, where withdrawals and certain deductions can affect overall taxable income.
How to Explain Non-Registered Account Fees to Your Clients
When you’re reviewing how fees are handled in Voyant, it can help to explain what’s happening behind the scenes in simple terms.
For non-registered (non-reg) accounts:
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How fees are shown: In Voyant, when fees are deducted from a non-registered account, they first appear as income. This step helps reflect that these fees come from assets that could otherwise be considered taxable income.
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Tax impact: Once recorded, those same fees are then treated as a tax-deductible expense. This means that while the fees show up as income, they’re also offset by the corresponding deduction, so clients can clearly see how fees affect their taxable income and potential capital gains.
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Transparency in reports: In the annual financial summary, clients can see the net impact of these fees. This helps them understand how the fees are applied and how they fit into their overall financial plan.
How this differs for registered accounts:
For registered accounts (like RRSPs, RRIFs, or TFSAs), fees are handled differently. Instead of being shown as income and then deducted, the fees are simply taken out of the account’s growth. Because registered accounts have different tax rules, this approach keeps the modeling accurate and easy to interpret.