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Friday September 12, 2014

“In Victory you deserve Champagne.  In defeat you need it.”

Napoleon Bonaparte 

About a month or so ago I was treated to a wonderful dinner at a friend’s home, followed by a glass or two of Port under the stars on their balcony in the woods.  For me it was a re-introduction to Port, as it had been a while since I had last indulged. 

Buller Wines defines Port as a sweet fortified red wine that is served as a dessert wine. Port wine is a fortified red wine hailing from the terraced slopes of Douro Valley in Portugal. Port got its name from the city of Oporto, where the lodges of major port winemakers are located. These lodges, situated at Vila Nova de Gaia, are where the wines develop and mature before being shipped all over the world.  It was when the war broke out between England and France that the British turned to Portugal for their wines. It wasn’t clear when the discovery of Port wine was. But legend has it that a Liverpool merchant sent his sons to Portugal in the 1670’s to search for wine. When they reached the Douro valley, they met an abbot in a monastery in Lamego. He was adding brandy into the wine during the fermentation process to increase the alcohol content. Another story goes that brandy was added into the wine during fermentation to arrest fermentation process to prevent spoilage of wines allowing it to last the long journey from Portugal to England.

On choosing a Port to enjoy during the celebratory months ahead, Decanter Magazine quotes Richard Mayson on how to choose a Vintage Port:  “Vintage Port traditionally enjoys a bloom of youth for about two to three years before starting to close up and enter into an adolescent period.  This may last anything up to 20 years, depending on the year and the shipper.  Single-quinta vintage Port tends to emerge into fragrant adulthood a bit earlier, after about 10 years in bottle.  Having said this, over the past decade there has been a big improvement in the quality of the spirit used to fortify Port, and this has caused the wines to behave differently.  The 2000 vintage marked the change, but it is probably most evident in the widely declared 2007 and 2011 vintages – their wonderful fruit purity has been evident right from the start.  David Guimaraens, head winemaker for the Fladgate Partnership, thinks the transition from youth to maturity will be much smoother in the future, with less of the awkward adolescent stage that sometimes makes you wonder why vintage Port is so special.”

Richard Mayson will be writing an article in Decanter Magazine’s December issue suggesting Ports to buy for the holidays.  Contact me if you would like a copy of the article.

Friday September 5, 2014

 

“Demographics explain about two-thirds of everything: which products will be in demand, where job opportunities will occur, what school enrolments will be, when house values will rise or drop, what kinds of food people will buy and what kinds of cars they will drive.”

 

Dr. David Foot, Economics Professor, University of Toronto;  Boom, Bust & Echo (Author)

 

Having met Dr. Foot a number of times over the past 20 years I have always come away impressed by his ability to explain economic change and forecast future trends through the use of demographic projections.  I would put it near the top of “must reads” for anyone interested in forecasting and understanding economics.

 

Although Dr. Foot claims to be able to explain about two-thirds of everything, where can we look to for the other third?  Fortunately at RBC we have the answer to that too:  Dan Chornous, Chief Investment Officer.

 

Earlier this week I was in a discussion with Dan who was at the time in London (I mention this only to emphasize the global nature of his view).  The discussion focused on the global investment outlook and how we as investors should position our investment assets to best capitalize on returns during the quarter and year ahead.  A complete report may be found on my website under updated publications.

 

From a historic perspective stock markets in Canada and the USA are at normal levels reflecting a “fair value”.  Indices have risen from the “under valued” state that provided above average returns over the past few years.  This does not present an imminent danger but does forecast more moderate returns ahead.  Although Europe is slipping with a currency that is perhaps too strong given the “too low” inflation rate, China is slowing but still growing, and Russia causes grief, there is leadership coming from the US economy where a subdued growth rate is gaining traction.  Yields in the US are at risk of rising which is causing trepidation in the fixed income markets.

 

With equity markets at fair valuation it is reasonable to expect that if expectations for earnings or economic growth fall short, then we could experience a market correction.  It would be too optimistic to think this won’t happen.  Nevertheless, valuations are not yet excessive. 

 

For a balanced global investor we recommend an asset mix of 37% fixed income, 4% cash and 59% equities. 

 

The S&P and TSX Composite indices are forecasted to provide returns of less than 7% over the coming year, while 10 year Government of Canada bonds are expected to provide negative returns.  The Canadian dollar is forecasted to be weaker by about 4%. 

 

The foregoing comments can be seen in more detail on page 2 of the Global Investment Outlook (see my website “Updated Publications”).  Dr. Foot’s books are available in a store near you.

 

If we do some math here, based on the above forecasts and the assumption that we avoid 10 year Canada bonds in favour of shorter term bonds that provide a positive yield of 2%, then a 60/40 balanced portfolio might provide a total return of 5% over the coming year.  Somewhat less than previous years but still quite good relatively speaking.  There are no guarantees of course.  An economic surprise to the downside is always a possibility, especially in a bull market that is entering its sixth year.

 

On a more serious note, did you see that Roger Federer win over Monfils!  Unbelievable!  Yes, Roger is the greatest of all time!

Friday August 29, 2014
 

Photo by: G. Doyle 08.2014

“It is my goal that flutes will be obsolete by the day that I pass away.”

Maximillian Riedel, CEO of Riedel Glassware

 

With the US Open in full “swing” it is timely to debate the question:  “Is Roger Federer the greatest tennis player of all time?”  According to Tennis Magazine (September 2014) Roger’s long term dominance stands firmly as the greatest player of all time.  His long term dominance of the game has withstood the challenges from several other respected greats such as Nadal, Williams and Djokovic, but none have the long term record of being on top for so long.  No doubt others will come along during the years ahead and challenge Roger’s standing, but what stands out amongst the greats such as Williams, Nadal, Djokovic and Federer is their attitude and what they give back to the game.  All are great ambassadors to the game and modest about their accomplishments.  Yelling at the ball boy is not part of their game.

 

Friday August 22, 2014
“In British Columbia 30% of respondents make their own investment decisions.  In British Columbia 33% of retirees work full or part time after retirement – the highest in Canada.” 
The 2014 Fidelity Retirement Survey Report

There has been much discussion of late as to the direction that stock markets will take during the balance of the year and beyond.  The following comments from RBC research team help to answer that question.

While some risks have faded, such as the threat of deflation, others have intensified. Geopolitical risks have mounted, most obviously as the struggle for eastern Ukraine drags on. Emerging-market credit excesses remain largely unaddressed, with tentative evidence of a reckoning underway in Chinese housing. The mystery of subdued global trade constitutes a new risk, hinting that all is not harmonious in the global economy. Our sense is that the coming economic good news for the developed world is more likely than not to trump the downside risks. Normalization unbowed We continue to subscribe to an economic-normalization thesis, with the revival of risk appetite in 2013 and the abatement of fiscal austerity in 2014 enabling materially faster growth for the rest of this year and beyond. Since the turn of the year, the consensus outlook for developed-world growth has edged higher, while emerging market expectations have slipped. We welcome these developments, as they reflect the tendency for the economic reality to converge upon our relatively optimistic developed world forecasts and more cautious expectations for emerging markets. Much of the heavy lifting with respect to our improved global growth forecasts will come from the rejuvenated developed nations, the U.S. in particular. Two key drivers of the U.S. economy are housing and employment. The general trend in the U.S. housing market has been quite poor for many months. From the perspective of the U.S. Federal Reserve, the sluggish housing market is a clear concern, but the economic outlook is otherwise sufficiently promising to warrant an end to quantitative easing by the fall of this year and a turn toward rate hikes sometime in 2015. The U.S. job market has recently accelerated, a trend we believe can persist if our optimistic GDP growth forecast prevails. All of this supports our view that personal income growth can accelerate nicely, supporting consumer spending and the overall economy. Global inflation to rise At the onset of 2014, one of the market’s key concerns was that declining inflation might eventually transform into deflation. We believe that deflation is unlikely and that inflation should continue to trend higher over the next few years, conceivably even running ahead of the consensus and central-bank expectations. This view is based on our assessment that the financial crisis has eroded away a significant amount of the global economy’s potential, leaving less distance between current output and full capacity. U.S. dollar strength expected to continue We expect the U.S. dollar to continue strengthening against most major currencies over the next few years. The biggest adjustment should occur versus the euro, which is the only major currency that hasn’t weakened much against the greenback in recent years. The euro is extremely overvalued based on many models, and relative monetary policies favour the U.S. dollar. We expect the yen to keep weakening, assuming additional monetary easing by the Bank of Japan accompanied by a significant rebalancing of pension funds to favour Led by North America and other developed markets, the global economy continues to gain traction, although the U.S. suffered an unwelcome drop in first-quarter output due to unusually bad weather and a decline in inventories and exports. The market is grappling with whether the recent economic weakness will persist. We believe the answer is “no,” and our key economic theme remains that of accelerating growth in 2014.

We continue to take advantage of tactical opportunities as they are presented, and the recent bond rally has prompted us to remove one percentage point from our fixed-income allocation, expanding our modest underweight position in bonds. We remain below our benchmark exposure to fixed income as we expect that rising bond yields will eat into coupon income and lead to low returns for holders of bonds. We have maintained our overweight position in equities. We added two percentage points to our allocation in April and reversed half of that move during the month of May. While valuations suggest that near-term returns from equities should be lower than they have been since the crisis, stocks are still expected to outperform bonds across all time frames and this is reflected in our asset mix.

As highlighted in this morning’s Globe & Mail newspaper, asset mix plays a key role in a portfolio’s returns.  Managing that asset mix requires the discipline of a professional portfolio manager. 

Later this fall we will be hosting a luncheon to discuss the importance of having your portfolio professionally managed.  Contact us if you wish to be invited.

 Friday August 15, 2014

"The difference between school and life? In school, you're taught a lesson and then given a test. In life, you're given a test that teaches you a lesson."

Tom Bodett

 

The Canadian National Exhibition officially opens today, marking the countdown to the new school year.

As you enjoy the last few weeks of summer and begin to prepare them for the upcoming year it is important to remember that many preparatory life lessons are not always learned in school.

 

Taking kids to money school

Strong money management skills will serve children well in any career.  As anyone who’s visited a toy store with a child or grandchild knows, kids understand the concept of spending money at an early age. What children don’t always learn is how to save and spend wisely.

Here are some of the saving and investing basics your children or grandchildren can enjoy learning. They can practice these skills every day, no matter how young they are.

 

Learning to earn

Paying your children an allowance is a good way for them to learn the value of money. It also opens the door to a discussion about the essentials of financial planning, such as banking, saving, and spending.

With older children, you can lay the groundwork for their retirement savings by helping them file an income tax return once they start earning money. They usually won’t owe any taxes, but filing a return reporting employment income for that year will generate contribution room for a Registered Retirement Savings Plan (RSP). This contribution room can be carried forward until they have enough money to make contributions and can take advantage of the tax deductions. 

Beginning to budget

Offer to help your older children establish a workable budget. The budget could factor in money they earn or receive, regular expenses they expect to incur, and the savings they need for specific goals.  Budgeting can help them distinguish between short-term savings (a new CD or DVD), medium-term savings (a new bike or game console), and long-term savings (a car or post-secondary education). 

Investing for growth

As your children grow older, you can teach them the basics of investing. The first step might be to open a savings account for them. This is your opportunity to discuss how banks pay interest for money on deposit. With straightforward compound-interest calculations, you can show how a regular amount set aside each month can grow.

As a next step, try letting your older children invest in a company that produces something they know and like, or a mutual fund that invests in these companies. Showing them where to find information on their holdings in newspapers and on the Internet will make tracking their investment fun and rewarding, and give them a real sense of ownership.

 While teaching your children about saving and investing will help them get on the right financial track at an earlier age, remember that few children can tackle major financial undertakings — like the cost of post-secondary education — on their own.

 To help your children save for their education, consider making annual contributions to a Registered Education Savings Plan (RESP). This plan allows savings for their post-secondary education to grow tax-sheltered until they need them, and lets them benefit from the Canada Education Savings Grant (up to $500 per child per year) that your RESP contributions attract.

Friday August 8, 2014

"Everyone has an invisible sign hanging from their neck saying, "Make me feel important." Never forget this message when working with people."
Mary Kay Ash

Well there’s nothing like a few negative days on the stock market to cause some talk chatter at the summer cocktail party!  Is this the beginning of a new bear market? 

Actually, having a “ run up” in the market or” correction”, can help investors determine their overall risk tolerance and how to best position themselves  financially.  Has this recent selloff made you nervous or concerned about your portfolio?  Do you see it as an opportunity to buy equities or do you wish you had sold last month?

On an ongoing basis it is important to ensure that your portfolio is adjusted to reflect the risk and goals that you are trying to achieve.  Establishing your objectives through an investment policy statement is one of the best ways for us to ensure that your needs are met.  Using an investment policy statement to guide us, we can make the day to day adjustments on your behalf so that on those days when the market does go down it doesn’t cause any sleepless nights, but instead is just fodder for interesting conversation over the summer BBQ.

“Bullish outlook still intact” …. A comment from RBC research this week. 

Credit Related News Flow Impacts Volatility

Given the 76% market rally — spanning 1,032 days without a 10% correction, many are asking

if the 3% decline since July 24 marks a turning point. This recent hiccup is consistent with the

VIX rising from 11.8 to 17.0, and in our view is likely the result of credit-related news flow

from Argentina (default) and Portugal (Banco Espirito). Importantly, the economic

environment remains healthy. As such, volatility should decline and stocks should rebound.

Recent Economic Data Favorable

Recent economic data has been largely positive. 2Q GDP came in at 4.0% with favorable

revisions to 1Q on Wednesday, and this morning the July ISM printed at 57.1, well ahead of

expectations (56.0) and June’s reading (55.3). July non-farm payrolls came in at 209,000, the

sixth consecutive month over 200,000.

Corporate Earnings Growth Robust

With almost 80% of the S&P 500’s market cap reported, EPS is on track for a 9.0% YoY (11.4%

excluding C/BAC legal expenses) increase in 2Q. Importantly, results have been strong almost

across the board with earnings surprises in all ten sectors.

Market Rally Not Unprecedented, Valuations Remain Reasonable

On July 21, we laid out the case for a continued rally despite the lack of a recent pullback.

More specifically, we noted the 2,553 and 1,673 day rallies in 1990-1997 and 2003-2007,

which were accompanied by 233% and 95% returns. Importantly, with the market trading at

15.2x (NTM P/E), valuations are not stretched relative to the historical average

Please contact me for a more detailed comment or to discuss how you might benefit from an Investment Policy Statement.

 

Friday August 1, 2014

"People are not remembered by how few times they fail, but by how often they succeed. Every wrong step is another step forward."

  Thomas Edison -  Inventor

I was fascinated to learn that 78% of new cars sold in Canada were acquired through a loan or lease!  I was further surprised to learn that 57% of car loans have a term of 6 years (how much do think your buggy would be worth after 6 years?).  On average the monthly payments are about $520.

When you add that bit of information to the size of payments Canadians are making on mortgages and lifestyle expenses it’s not surprising that the savings rate in Canada has declined to 4.90% of household income according to StasCan. 

I doubt it’s the Government’s fault that people aren’t saving.  After all the 2014 RRSP limit is 18% of your 2013 income up to $24,270 and the Tax Free Savings limit is another $5,500 and for RESP’s the Government will actually give you free money if you start saving.

Since Canadians like spending, and seem to like to do it on a monthly basis, how about adding a new bill to the pile?  Let’s call it something fun:  “The Ferrari Fund” or “South of France pied de terre Fund”?  Then each month let’s throw $500 into it and see what happens.  After 37 years you would have way over a Million Dollars, but if you decided to cash out sooner, say after 25 years you would still have way over $400,000 (based on 7% rate of return). 

Perhaps starting next month you can slip another bill into the pile under the cable bill and see what you have to show for it at the end of the year or in ten years.

As part of our overall Family Office of financial services The Doyle Wealth Management Group would be pleased to help you to setup monthly savings plans with tax advantages and other features so that you can enjoy more financial freedom.

Please contact us for more information.

Friday July 25, 2014

“Who are you to suppose that you hold the key to the sacrosanct typicity?  Who authorized you to prevent the consumer from experiencing the real taste of wine?

Patrice Lescarret

Estate planning is an ongoing event that each of us must make a part of our financial plan if we are to consider ourselves good stewards of our wealth.  It involves several different steps, some of which may or may not apply to you, but nonetheless you need to have a proper plan in place if you wish to leave a legacy, assist family members with ongoing support, or simply transition your wealth on to someone specific (or specifically not someone). 

Failing to have a proper estate plan in place could lead to unnecessary taxes being paid, money and assets could be lost due to mismanagement, family members might lose their homes and lifestyle due to your poor planning, and of course there is always the changing dynamics within the family (your widow remarries, then dies, then that new spouse excludes your children when it comes to distributing the assets that you built over your lifetime). 

Another very important concern that was brought to my attention recently by a young man was, “Who can I trust to manage the money once I receive an inheritance?  I don’t know anything about investing and I don’t want to lose it or be taken advantage of.  A couple of million dollars is a lot of money to me.”  When I was asked this question it really hit home that the best laid plans can come undone if this final link in the chain is weak.  He was really concerned that he might do something stupid and lose all the inheritance his father had worked so hard to earn.  He also realized what a wonderful difference it could make to him and his young family if the inheritance was handled responsibly.  Imagine having your family’s trust or inheritance lost in the stock market or risky business venture?  How would that change your family’s future?

Although we have discussed and offered our services to assist you in preparing your Will, Powers of Attorney, Testamentary Trusts and Executor Services, you should also ask yourself the question, “Who will actually be managing (investing) the money?  Do I trust them with my children’s inheritance:  My spouse’s future?  Are they really qualified to do this?” 

Please feel free to call me for a chat at 416.231.5092.  As a Portfolio Manager and Vice President in RBC’s Private Investment Management division, this is something I deal with every day, and I have the best resources worldwide to execute your plan, the way you want.  Whether you are a client now or not, I would be pleased to take a few minutes to discuss your situation.



Friday July 18, 2014
 

"Someone's sitting in the shade today because someone planted a tree a long time ago."

 

Warren Buffett

 

 As an Executor, you are responsible for settling an estate according to the deceased's wishes.  With so many tasks to complete and so many people and organizations to deal with, including the beneficiaries, legal advisors and tax authorities, settling an estate is a complicated undertaking - one that can seem overwhelming when you are also grieving the loss of a family member or friend.  Executors can face responsibilities that demand a great deal of time, energy and attention to detail.

 

 As a Power of Attorney you are required to act exclusively for the benefit of the individual who appointed you.  This coupled with governments increased interest in regulating an attorney's activities has resulted in more complex tasks for attorneys. 

 

If you have been appointed as Executor or as a Power of Attorney, but do not want or have the time to administer the estate or require assistance with certain duties, you have the ability to appoint agents to help you.  RBC Estate and Trust Services can offer you a variety of services including help with all of your executor duties or only those you specifically choose. 

 

 If this service is of interest to you or anyone you know, please contact us for an information package or an introduction to one of our Estate and Trust Specialist.  They can assist in Will Reviewing and Preparation offer advice and assistance and provide specific guidance to your unique circumstances.  Alternatively, we can provide you with information regarding the roles and responsibilities for executors to assist you in your specific function.
 
Friday July 11, 2014
 

 "The person interested in success has to learn to view failure as a healthy, inevitable part of the process of getting to the top."

 

Dr. Joyce Brothers, Psychologist

 

Summer jobs for students, whether they are paying or volunteer, help them become much better prepared for choosing their secondary education programs.  The experiences and soft skills that they learn at these summer jobs give them an advantage in finding higher paying fulltime jobs that are suited to their skills and aspirations.  These observations and conclusions are part of a Canadian study of students over the past 15 years. 

 

Personally I think the summer job that I learned the most from was the one where I worked in a foundry using a hand grinder to grind spurs off freshly casted ship propellers. The propellers were about twice my size.  At the end of the day my skin would be orange from the perspiration mixing with the iron filings.  You can guess what I learned from that summer job.

 

More recently the Sauder School of Business released results from their study.  Here’s what they found:

 

Seidel and his co-authors found teens in part-time jobs progress to better-suited careers since the early exposure to work helps them hone their preferences. They enhance their soft skills, acquire better references and learn how to job-hunt more successfully – establishing wider career networks.

 

The more hours that 15-year-olds work, particularly during the school term when they have to learn to manage their time, the better their career prospects, says Seidel. The study showed benefits arose from working up to as much as 33 hours per week during the school year or 43 hours during summer.

 

Researchers used data from the Statistics Canada Youth in Transition Survey. This represented 246,661 15-year-old Canadian teenagers, looking at their work history over a 10-year period beginning at age 15 and ending at 25 in 2009.

 

“Adolescent labour has been stigmatized as exploitative with many parents opting to put their kids in summer camp rather than summer jobs,” says Seidel. “However, our research shows that working can offer educational and developmental opportunities that prepare adolescents for the real world.”

 

Over the course of the next couple of months prepare yourself to be inundated with RESP strategies from our office.  As a grandparent you will be targeted too … as you’re eligible to open a Registered Education Savings Plan for your grandchildren. 

 

For more information please contact me at 416.231.5092 and we can discuss, answer questions and mail you information.

 
 
Friday July 4, 2014

 "The time is always right to do what is right."

 

Martin Luther King Jr.

 

If you are up for lazing around in a café this weekend and are looking for an impressive magazine to tote along with you, then pick up a copy of the June 30th issue of Forbes Magazine:  The Best Investment Advice of All Time. 

 

Amongst the many great articles in this issue is a section devoted to “The best investment advice of all time.”  The premise of the article made sense to me:  Ask rich successful investors for investment advice.  Although “blowhard know it alls” are generally more entertaining; when it comes to advice I’d prefer to hear from the likes of Warren Buffett. 

 

It is best to pick up a copy of the Forbes issue and read the entire article but here are a few choice excerpts:

 

“If you buy the same securities everyone else is buying, you will have the same results as everyone else.”  Sir John Templeton.

 

“Whether socks or stocks, I like buying quality merchandise when it is marked down.”  Warren Buffett

 

“Information is money” Nathan Mayer Rothschild

 

“Destruction is a mechanism for progress.”  Joseph Schumpeter

 

“Everyone has the brainpower to follow the stock market.  If you made it through grade five math, you can do it.”  Peter Lynch

 
Friday June 27, 2014
 

“I can calculate the movement of the stars, but not the madness of men.”

 

Sir Isaac Newton

 

Newton’s comment following a tough day in the stock market rings true to this day.  Predicting the day to day direction of stocks is an impossible task.  Managing an investment portfolio requires a long term view of objectives and goals combined with a strategy and well researched knowledge. 

 

With the rainy buggy May two four weekend behind us, it’s nice to see the sun shining as we head into the CANADA DAY Long Weekend!

 

Here is our list of the Top Ten things to do this Weekend:

 

·        Attend a fireworks show or host one in your own backyard. 

·        Whether you are in Toronto or on one of Canada’s many lakes you can try your hand at fishing.  When’s the last time you sat at the river’s edge or on dangled your feet over a bridge with a fishing pole in hand, surrounded by nature?

·        Go cycling.  You will be surprised at the many sites and smells you miss when trapped in a car.  Cycling can help you rediscover your own neighbourhood.

·        Plant a vegetable garden complete with carrots, cucumbers, green beans, onions tomatoes and zucchini

·        Go to Canada’s Wonderland

·        Visit the Hockey Hall of Fame

·        Enjoy Traditional Canadian Foods - Eat Canadian back bacon, have poutine, beaver tails, and feast on pancakes with real maple syrup.

·        Have your family and friends over for an old fashioned barbecue.

·        Look up local concerts in your area. Many cities and towns hold festivals where bands will play music at outdoor venues

·        Go to your local brewery. What better way to celebrate Canada’s birthday than to take a tour of your favourite brewery. Many of these tours are free and come with samples

 

Whatever your plans may be, we wish you a Happy Canada Day and a safe and wonderful long weekend!

 

 
Friday June 20, 2014

“Patience, persistence and perspiration make an unbeatable combination for success.”

 

Napoleon Hill, Author
 

 

 

The Globe and Mail – Friday June 20, 2014

 

 

This past Thursday the seniors took part in the St. Hilda’s Foundation Snail Strut Walk in Toronto.  It is an annual walkathon to raise money for repairs and enhancements to the St. Hilda’s Towers Foundation, which provides affordable housing for seniors.  The average age of participants was 97 years old.

 

The secret to successful investing is maintaining an asset mix that reflects your needs and objectives.  By asset mix I am referring the percentage of cash, bonds and stocks. The tricky part is actually managing your savings on an ongoing basis to ensure that the asset mix targets are in place.  Most people don’t have the time, discipline or the understanding of how important it really is. 

 

There was an article in the Globe & Mail this week (June 14th) that reprinted a chart from Morningstar that showed three different scenarios for investors who started with $100,000 fully invested in the market on January 1st 2007.  The first investor endured the crash (lost about $32,000 on paper), then road the recovery over the subsequent years and has $113,355 today.  The second investor cashed out at the bottom and went to T-Bills.  They now have $69,021.  The third investor cashed out at the bottom, but got their nerve back a year later and jumped back in.  They have $76,970 today.

 

Obviously the moral of the article is to not “sell” at the bottom and buy at the “top”, or more simply just hang in there and understand that the market will go up and down, but over the long term it has historically provided good long term returns.

 

All of the above is good advice.  You would have done well to follow it over the years. 

 

The best advice in my opinion is to have someone actually managing the asset mix for you too.  In general terms, when the market goes down the portfolio manager must buy more equities to maintain your prescribed asset mix, and conversely when the market is striking new highs the portfolio manager needs to pare back on equities. 

 

An investor, who “hung in” during the tough times fared well, but adjusting the asset mix too, can improve performance even further.

 
Friday June 13, 2014
 
“Our greatest glory is not in never falling, but in rising every time we fall.”

 

Confucius

 

 

By drawing on RBC Wealth Management Services’ team of highly accredited lawyers, accountants and financial planning professionals, The Doyle Wealth Management Group is able to deliver the highest level of integrated wealth management expertise including:

Financial Planning

¡ Development of a comprehensive financial plan that includes projections to determine if you are on track to meet your goals such as retirement, estate and risk management

¡ Help you take a financial planning approach related to every financial decision that impacts your life

Taxation

¡ Recommend strategies to help reduce your family’s tax burden

¡ Discuss strategies to minimize tax through structures such as family trusts, holding companies and insurance

¡ Provide specific corporate and personal tax planning strategies for business owners

Business Succession Planning

¡ Discuss strategies to effectively transition from your business in a tax-effective manner

¡ Identify the missing elements of your succession plan and provide strategies and solutions to fill in the gaps

¡ Assist in implementing an Individual Pension Plan for yourself or your key employees as part of your succession plan

¡ Assist in providing you with an overall financial plan and contingency plan as part of your business succession plan

Charitable Giving

¡ Help you determine which charitable giving strategies are most suitable for you based on your objectives

¡ Assist you and your family to implement a charitable foundation to minimize tax and leave a lasting legacy

Education Savings

¡ Provide you with strategies and a variety of options to fund your children or grandchildren’s education in the most tax-effective manner

¡ Through a financial plan, determine the required annual savings required to meet your education funding goals

Estates and Trusts

¡ Provide tax-efficient strategies to transfer your wealth to chosen beneficiaries

¡ Review your current Will and provide Will and estate planning recommendations consistent with your objectives

¡ Help you determine which trust solutions may be appropriate for you based on your family situation and your objectives

Insurance

¡ Assist you in analyzing the need for insurance to provide for your loved ones due to disability or death

¡ Deliver creative insurance strategies to minimize tax, maximize your estate, increase retirement income or create a legacy

Retirement

¡ Help you determine strategies and techniques to meet your retirement income goals

¡ Provide you with strategies to maximize your after-tax retirement income

Holding Companies

¡ Provide creative strategies to minimize tax during your lifetime and maximize your estate for your holding company assets

¡ Provide robust, consolidated financial reporting to corporations owning significant investment portfolios and seeking professional administration

U.S. and International

¡ Provide you with information and strategies on U.S. tax and estate planning related to issues such as purchasing U.S. properties, moving to and from the U.S. and U.S. citizens living in Canada

¡ Discuss international planning strategies and issues of owning foreign assets and having family members located outside Canada

Strategies – When you meet with a member of the RBC Wealth Management Services team, we will work with you to understand your personal goals. Drawing on the depth of experience that members of our team have developed as financial, taxation and legal professionals, we are able to present strategies that are appropriate for your personal situation. Reaching your goals often requires an interaction of strategies that minimize taxation, provide sufficient retirement income, safeguard your wealth, and provide for the effective transition of assets between generations.

Solutions – RBC Wealth Management Services team members will work with you and your advisor to turn proposed strategies into actionable solutions. For example, both the Spousal Loan Strategy and the RBC Family Trust are solutions that may meet your personal goal of minimizing tax. Leveraging the experience and knowledge of both your advisor and members of the team, we can assist in determining which solutions can best allow you to reach your family’s goals.

Implementation – I work with your own tax and legal advisors and members of the RBC Wealth Management Services team to effectively execute on the strategies and solutions that will help you to reach your personal goals and bring you peace of mind.

 

Some examples of the situations in which we can help include:

¡ Business owners who need help managing their personal, holding company and business financial assets

¡ Professionals requiring assistance in structuring their affairs to both safeguard assets and minimize taxes

¡ Individuals looking to grow and protect their wealth

¡ Individuals looking to balance their current needs with a savings strategy that will help them achieve their long-term financial goals

¡ Retirees requiring strategies that will maximize their income after taxes while preserving their capital for the long-term

¡ Families looking to efficiently transfer accumulated wealth to the next generation

¡ Parents and grandparents looking to fund the educational and living costs of their offspring in a tax efficient manner

¡ Business owners looking to tax-effectively transition their businesses

¡ Charitably inclined individuals who are looking for their donations to provide maximum long-term benefit and value

¡ Individuals with U.S. and international connections requiring specialized tax and estate planning assistance

 
Whether your goals include converting the equity in your business into an enhanced retirement benefit, planning for your children’s or grandchildren’s expenses, or your desire to leave a family legacy,  The Doyle Wealth Management Group at RBC  can provide advice and suggest strategies to achieve your goals in a tax efficient manner.

 

Please call for a telephone discussion with me at 416.231.5092

 
Friday June 6, 2014
 

“The power of compound interest is the most powerful force in the world.”

 

Albert Einstein

 

If you take a regular sheet of lined paper off your desk and fold it in half, then fold it in half again, how many times would you have to fold it in half for it to touch the moon?

 

Feeling generous?  How about gifting some fresh new Ontario Savings Bonds to your children or grandchildren?

 

Once again the annual Ontario Savings Bond campaign has kicked off and will run until June 20th, the last day to purchase your bonds.  This year the maximum purchase an individual can make is $1 million and the minimum purchase is $100.  Possibly the best deal is on the 5 year step-up bond that pays 1.25% 1st year, 1.50% 2nd year, 2.00% 3rd year, 2.25% 4th year and 2.50% in the 5th year. 

 

Although the rates themselves may not seem compelling (especially when compared to the fabulous job I have been doing over the years), there is a place for many of us to hold the bonds.  All of the bonds are guaranteed 100% by the Ontario Government and most are redeemable either annually or every six months. 
  

Arguably the interest rates aren’t all that attractive (except when compared to the deposit rate recently announced in Europe), but where can you do better with a similar guarantee?

 

I’ve spoken before about my days at the Bank of Canada when I worked in the Canada Savings Bond department, and how we truly believed that offering employees the opportunity to purchase bonds on their payroll really did make a big difference in their lives.  Buying Ontario Savings Bonds for your children or grandchildren can have a similar benefit.  They can actually hold the certificate in their hand, calculate how much it is going to grow to, and gain an understanding and appreciation of the value of saving.  Imagine if you helped them out every year?  A gift or matching their savings is one strategy.  Ultimately it’s a great way to introduce the concept of “saving” and compounding interest.

 

You might want to try it yourself?

 

Oh, by the way, the answer is that you only have to fold it 42 times.
 
Friday May 30, 2014
 
"This above all: To thine own self be true; And it must follow, as the night and day; Thou canst not then be false to any man."

William Shakespeare

As a reminder High Park hosts a wonderful outdoor theatre production of Shakespearean plays throughout the summer.  It’s a great way to spend the evening under the stars, having a picnic, and drinking tea ;) from your thermos.

 

Although Shakespeare appears poised to last forever, current historically low interest rates may not.  Please take a moment to skim through the following note from my colleagues as they comment on the high yield bond market in particular.

 

Valuation alone should not be viewed as a reason to eliminate all exposure to high yield bonds, but a lofty valuation leaves this market vulnerable to a reversal in sentiment. Investors could sour on high yield if there is a pick-up in defaults, a marked increase in M&A/LBO activity, a deterioration in underwriting standards, a slowdown in economic growth or an unexpected tightening of monetary policy. We don’t know which (if any) of these potential negative catalysts will cause the market to eventually re-price, but we are concerned that high yield bonds are more vulnerable to one of these potential negative catalysts because of our worries about valuation.

 
Investors Have Flocked to High Yield Bonds Due to Historically Low Yields
 

The high yield bond market has been one of the biggest beneficiaries of the low interest rate environment. In a world where most investment grade bond indices yield between 3% and 3.5%, investors with a 6%-8% total return target on a balanced portfolio have increased exposure to the high yield bond market to try to maintain a reasonable yield on their fixed income holdings. Exhibit 1 highlights the impressive inflows to the high yield bond market that have occurred over the last five years as the yield on the BofA Merrill Lynch investment grade corporate bond index has fallen from 8% to 3%.

 

1: Yields Are Near Historic Lows
 

It’s difficult to make the argument that the valuation of the high yield bond market is compelling on an absolute basis. The BofA Merrill Lynch US High Yield Master II Index currently carries a yield of 5.19%. Exhibit 2 highlights the fact that a 5.19% yield is near an all-time low and 32 bps lower than the average yield on the BofA Merrill Lynch investment grade index since 1996.

 

2: High Yield Spreads Below Historical Averages
 

Credit spreads on the overall high yield market are not at record lows at the current time but are below the historical average. Narrow credit spreads combined with low absolute yields reduce the margin of safety that protects high yield bond investors from a move higher in government bond yields or a move wider in credit spreads. Should government bond yields start to move higher, credit spreads may not have room to tighten enough to meaningfully offset the negative impact higher interest rates will have on high yield bond prices. Conversely, if credit spreads widen (even just move back to the historical average), there is limited capacity for government bond yields to move lower and offset the impact of a move wider in spreads on high yield bond prices. The vulnerability of high yield bonds at low absolute yield levels was underscored in May-June 2013 when credit spreads widened at the same time that government bond yields moved higher.

 

3: Select Quality Spreads Are Near All- Time Tights
 

While the overall market is not yet at its all-time tightest spread level, a number of individual quality spreads are either at or approaching historic tights. It appears that the reason the high yield market has not established a fresh tight is actually the investment grade bond market. Investment grade bond spreads remain well off the tights established in 2005-07 as uninspiring all-in yields have sent investors further down the quality spectrum in search of yield. Exhibit 4 illustrates that the yield differential between high yield bonds and investment grade bonds is very close to the record tights. Furthermore, yield differentials between the different ratings buckets within the high yield market are also near the narrowest spreads ever as investors have pushed out the risk curve in search of yield.

 

4: Coupon Returns At Best From Current Price Levels
 

Most high yield bonds are callable so it is very important that investors are mindful of the average dollar price of bonds that comprise the high yield market. If prices get much above $100 it is unlikely that the high yield market will produce a return in excess of the underlying index yield. Exhibit 5 highlights the fact that the average price of the high yield bonds in the universe that KDP Advisors follows is over $105. From this level, a near-best-case scenario is one where prices remain stable and investors continue to earn their coupon.

 

Many investors don’t fully grasp the risk return profile of the market at a dollar price that exceeds $105. In our view, investors should not be buying high yield bonds today and anticipating that the asset class will be able to replicate the ~16% annual return it has generated over the last five years. This is just not mathematically possible from the current valuation. In early 2009 the index yielded ~20% and the average dollar price of a high yield bond was in the low $60s, a significant difference from today’s respective levels of ~5% and $105. Exhibit 6 lays out a more reasonable return expectation for high yield bond investors over the course of the cycle in the context of the current environment.

 

5: Beware The Annual 5%+ Correction
 

At a time when the high yield indices yield ~5%, we believe it is important to remember that the high yield market has endured at least one 5% correction in each of the past seven years (using the largest high yield ETF, HYG, as a barometer). If such a move were to occur for an eigth year in a row, it would wipe out an entire year’s worth of interest earned. While it’s always difficult to call a top in something, the lofty average dollar price (as well as the other concerns we have raised) emboldens us to recommend an underweight position in high yield because the asset class appears to offer limited upside. Exhibit 7 illustrates that there have been 12 instances where a correction of 5% or more has occurred since 2007.

 

Many investors access the HY space through funds or ETFs; with regard to these holdings the following items provide a checklist to decide on the best vehicle to use for this exposure in an effort to try to minimize volatility.

 

• Avoid funds that use leverage

 

• Favor funds that have the ability to improve credit quality when risk premiums narrow

 

Whether investors own high yield in funds, ETFs, or individual securities, as a result of these concerns about valuation, we believe investors should evaluate current portfolio allocations to this asset class with an eye toward reducing exposure. Our cautious view is predicated on investors having an inadequate margin of safety at current valuation levels. Valuation alone should not be viewed as a catalyst to eliminate all exposure to the asset class, but a lofty valuation leaves the market vulnerable to a quick and dramatic sell-off should a negative catalyst emerge.

 
Friday May 23, 2014
 

“What is important is not what happens to us, but how we respond to what happens to us.”

 

Jean Paul Satre

 

I remember once, when I was checking out a Vespa XL150 at the local dealership, asking the mechanic how to open one of the panels on the body of the machine.  You see there are several panels imbedded into the design of the machine’s body.  A couple are for storing a wallet, cell phone, purse and stuff.  The one I was curious about was the panel that gave access to the engine and I couldn’t easily get it to open.  The mechanic looked at me and said, “You don’t open that.  I open that.  If the machine needs to serviced, bring it to me, but don’t open that and start playing around.  There is no need to you to ever open it.”  I could tell by both his tone and stare that he meant it.  In fairness, he was probably correct.  I’m curious about what goes on inside that panel, but truthfully if I touched something or inadvertently turned a screw that shouldn’t be turned … well it probably wouldn’t be for the better.

 

The mechanic didn’t boot me out of the shop for asking such a question, but instead went on to describe the benefits of owning one of the legendary machines.  I had to agree that a company that has been in business since 1882 doesn’t need me fiddling around with the engine. 

 

It seems that Vespas actually come in various models.  I had never really thought of that before.  I just figured that there was one model that changed a bit from year to year. 

 

My education continued as the mechanic focused on my needs.  Was speed an issue?  How many passengers?  Where would it be driven?  The list went on. 

 

Finally he recommended a couple of models, that I had to agree, would fit the bill perfectly.  Again he assured me of the integrity of the machine but reminded me that if anything should go wrong, “Don’t open that panel.  I open that.”

 
 
Friday May 16, 2014

 

 

In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.
 

Charles Darwin

 

If your plans for this long weekend include weeding or lounging in the garden, nothing disturbs the calm serenity faster than a pesky mosquito buzzing around your head.

Ways to avoid the itchy bites include covering up with long sleeves and a hat or applying insect repellent.  Another idea is to add some mosquito-repelling plants to your garden.

 

Here is a list of six popular plants that have been proven to repel mosquitoes.

 

Lemon Balm

Also known as horsemint, this hardy perennial repels mosquitoes by giving off a strong, incense-like odour, similar to citronella grass. The smell, however, does not deter bees and butterflies. Lemon balm is extremely aggressive—it’s fast growing, drought resistant and reseeds itself easily. Try containing it in a planter that can be moved to a seating area when you want some relief from pesky mosquitoes.

 

Marigolds As a popular annual, marigolds are always found in flower beds and containers during the summer months, but their mosquito-repelling ability hasn’t been widely advertised. Many gardeners use them in the veggie garden to deter other insects, but as a mosquito repellent, marigolds are powerful. It’s not surprising since their distinct smell is unbearable to insects—and even some people.

 

Plant marigolds in containers as you normally would, but then place the containers anywhere in the garden where you want a mosquito-free zone.

 

Catnip

We all know that cats love catnip, but this perennial also has a quite a reputable history as a medicinal herb. One trait that this plant is less known for is its mosquito-repelling ability. The natural oil within the leaves has been proven to be ten times more effective than DEET at repelling mosquitoes.

 Plant catnip around your patio and deck, but remember while you’re repelling mosquitoes, you may be attracting a few of your feline neighbours.

 

Basil

Basil is one of the few herbs that give off a scent without the leaves having to be crushed or physically disturbed. There are many varieties of basil, but the ones with the most mosquito-repelling powers include lemon basil and cinnamon basil.

 

For a quick, natural insect repellent in the garden, take a few basil leaves and rub them on your skin. The oils will deter any nearby mosquito from bugging you while you work.
  

Lavender Mosquitoes and many other insects don’t like the smell of lavender. This trait makes lavender a welcome addition to any garden, especially considering how attractive this plant is when it blooms. Aside from planting lavender around seating areas to deter pests, try making your own natural insect repellent with lavender leaves

 

Citronella grass

Many natural insect repellents found on the market contain citronella oil, which of course is derived from a natural plant source—citronella grass. When candles and lanterns containing citronella oil are burned, the fumes repel mosquitoes.

 

This tropical perennial, native to Asia, is a member of the Poaceae grass family and can grow up to six feet tall. Handling citronella can cause skin irritations or allergic reactions when the grass blades are broken, so make sure you wear gloves. In addition to its mosquito-repelling abilities, it’s also quite an attractive ornamental grass. Plant it along walkways and seating areas to allow its strong fragrance to deter mosquitoes.
 
Whatever your plans include, we hope you and your family have a wonderful long weekend!!
 
Friday May 9, 2014
 

“At least half the Chateau Lafite sold in China is fake and, like other high end Bordeaux counterfeits, probably made on boats moored in international waters off the mainland coast, a senior Chinese government official has said.”

 

Decanter Magazine, May 2014

 

When I hear such comments it just reminds me that the best wines, are the ones “you like best.”  As someone who enjoys a modest collection of bottles and the occasional sip I am occasionally asked to make recommendations for friends.  Once I have ask a few questions, I can usually steer the person towards something satisfying and interesting, but in the end it really comes down to your personal taste and what you like … but if you want to have some fun at a dinner party, how about doing a “vertical”?

 

A vertical wine tasting is surveying a series of wines based on vintage years and is a nifty way of experiencing just how unique every year can be in the world of wine.  A vertical wine tasting involves tasting one wine varietal (for example Chateau Vignelaure, Coteaux D’Aix en Provence) from a single wine maker and comparing it over different vintages.  Doing so can help you and your friends understand how the same wine, made from the same vines, at the same Chateau can be affected by the varying weather from year to year. 

 

Vertical tastings can be a lot of fun and also very much an “eye opener” when it comes to comparing vintages from one year to the next.  It is interesting too to understand what exactly was different with the weather:  Was it rainy?  Buggy?  Hot and dry?  If you’ve ever wondered why critics rave about certain vintages, doing your own vertical at your next dinner party might help to explain. 

 

Perhaps the next time you are in Niagara you can stop by Vineland Estates or Peller Estates and tell them that you would like to host a vertical tasting with your friends.  I think you will be surprised at the difference each vintage makes. 

 

Personally I can’t wait to taste the 2012 Brunellos when they are released in 2017.

 

Have fun and tell me how it goes!

 
Friday May 2, 2014

An investment in knowledge pays the best interest.”

 

Benjamin Franklin

 

“Give parents an A-plus for talking up the importance of a postsecondary education for their kids, and a C-minus for backing it up with financial help.”  That is a quote by Rob Carrick from the Globe & Mail this week.  A comment that I would echo should anyone ask me.

 

A survey conducted by HSBC concluded that parents are big supporters of postsecondary education in Canada.  The survey also revealed that 82% of parents aspire to have their children attend university or college.  A Globe & Mail survey of students found that only 33% claimed to have received some assistance from an RESP that their parents had setup.  Seems to be a bit of a disconnect here when it comes to the “walk the talk” part.

 

The most successful stories come from parents or guardians who setup RESP’s right after the child’s birth (keep in mind that one plan can have multiple beneficiaries) had the largest RESP’s (ya think?) and found it the least onerous to save. 

 

If you contributed a modest sum monthly and tossed in some birthday money and perhaps some money received at holidays, you should be able to get to an annual contribution of $2500.  If you do, the Government will kick in another $500 (20% up to a maximum lifetime limit).  Assume a 5% rate of return and you’re on your way.  Actually well on your way … after 18 years you would have close to $90,000 in the plan.

 

Setting up and promoting Registered Education Saving Plans is a service I offer and we can even provide you with marketing materials to share with family members.  Whether you are an existing client or not, contact me for a quick chat on how to setup your plan.

 
Friday April 25, 2014

“A goal without a plan is just a wish.”

Antoine de Saint-Exupery

 

The hidden risks of acting as an estate executor

 

There is a good chance that at some point, you will be asked to be an executor to someone’s estate – if you haven’t been asked already. The request may come from a spouse, a parent or a close friend, and you may be well inclined to accept. But do you know what the job entails?

 

The truth is, settling an estate can be a very complicated and time-consuming process. It can mean a deluge of responsibilities that could take years to carry out: managing investments, selling real estate, dealing with upset beneficiaries, even making funeral arrangements. And you may be trying to accomplish all of this while you yourself are mourning the loss of your loved one. What’s more, executors are personally liable, so it will be your responsibility to see to it that everything gets done properly.

 

According to a recent Ipsos-Reid survey conducted on behalf of RBC Estate and Trust Services, less than half (47%) of Canadians said they were familiar with what’s involved in being an executor of a Will. In fact, more than one quarter (27%) said they have no idea how long it will take.

 

If you’re considering, or have accepted, a request to be an executor for someone’s estate, there are some important considerations to bear in mind.

 

Executor duties are numerous

Whether it’s collecting life insurance, applying for death benefits, filing a tax return or making a probate application, the range and complexity of executor responsibilities can be daunting. In fact, depending on the size of the estate, there can be upward of 70 individual tasks expected of an executor, some of which can carry a liability risk.

 

Estates can take a very long time to settle

The survey also found that 37% of respondents believe the process will take less than six months and 54% estimate less than a year. But depending on the size and complexity of the estate, it can take anywhere from an average of 18 months, to up to four years.

 

You may be working through your own grief and sorrow

Dealing with the death of a loved one is often very difficult, and the added demands of settling that person’s estate can make the situation far more trying. Be sure to ask yourself how well you think you will be able to carry out your duties while in mourning yourself, and don’t be afraid to raise your concerns with the person who has asked you to be their executor.

 

Consider family dynamics

Don’t be shy to ask if there is existing family tension and to consider how a dispute among family members and friends may affect you. As the executor, you may have to deal with discontented beneficiaries, especially if the estate is unequally distributed.

 

You can seek help

If you feel uneasy about being named an executor or you don’t think you will be able to handle the responsibility effectively, you have options. If it is not something you feel you can turn down, but you still have concerns about dealing with all the duties involved, you can seek out professional assistance for some or all of your duties – whether that assistance is provided by a trust officer for a trust services company, a lawyer, or an accountant.

 

If you need assistance with your executor duties, or to get a better understanding of the principal duties as an executor, we can help. Contact me at 416.231.5092 and I can send along our Estate Planning Guide, discuss some of the details surrounding executorship and even arrange a meeting for you with our Trust services department if necessary.

 

 
Friday April 18, 2014
 

“Easter is the only time of the year when it’s perfectly safe to put all your eggs in one basket.”

 

Best wishes for the holiday weekend and congratulations on surviving another Canadian winter!  Soon the warmest weather will be here and summer will have begun. 

 

As you finish up your taxes and hope that your personal information hasn’t been compromised on the CRA website you might be wondering if there is anything more you can do reduce your taxes.  In this week’s blog I thought I would touch upon something that you might want to think about and discuss with your accountant to ensure that you are maximizing this little opportunity. 

 

In an effort to more “fairly” tax retired couples the Government allows couples to split their pension incomes.  The idea was introduced for various reasons, but one thought is that in some households the differential in incomes between spouses is sometimes quite disproportional for very good reasons (stay at home spouse, fulltime worker versus par-time, etc.).  Pension income splitting can result in a significant tax saving in many households. 

 

In 2013 Canadians are eligible to allocate up to 50% of their pension income to a spouse or partner.  This of course can carry huge tax benefits for the household.

 

Pension income from a company pension is eligible for income splitting regardless of the pensioner’s age.

 

Some forms of pension income however carry some restrictions.  Income from a RRIF or LIF or LRIF is only eligible for splitting for those 65 or older. 

 

Typically pension incomes from CPP or OAS is not eligible for income splitting under this scenario. 

 

Before acting on the above you should consult with a qualified tax advisor who is familiar with your situation to ensure that it is right for you. 
 
Friday April 11, 2014

“I am ready to meet my Maker.
Whether my Maker is prepared for the great
ordeal of meeting me is another matter.”

 

Winston Churchill

 

Having read David Foot’s books and attended a few of his lectures I am a believer that demographics have a profound affect on economics, the media, food, sports and just about everything else that touches our life.  By studying the “population bulge” or baby boom Dr. Foot provides explanations for past events, an understanding of current events, and a prediction for future trends.  His books are worth reading if you are an investor or in a business that serves the public.

 

Looking ahead it seems obvious to me from where I sit, that one of next biggest trends in the financial industry will be dealing with the “transfer of wealth” from one generation to the next.  It is something that I think you should be thinking about.  Without going into any details, who do you want your wealth to be transferred to and who do you not want your wealth transferred to?  Perhaps you have worked hard to build a business that’s worth a lot of money, or perhaps you made a good home purchase and worked hard to payoff the mortgage, or perhaps you are just a good saver? 

 

Handling the transfer of wealth will be a “fumble” for some and a “touchdown” for others.  Having had a ringside seat during a few transfers of wealth I can attest that seeking professional service is mandatory, otherwise you will be shocked at what will actually happen to your estate. 

 

One obvious estate planning tool that lawyers often use is the “Testamentary Trust”.  A testamentary trust is a type of trust established through your Will that enables you to give assets to your beneficiaries with certain conditions that you have specified, while providing them with income tax advantages.  Through your Will you would direct your chosen trustees to hold and invest the inheritance in a trust for your children until they reach the age that you have specified. Alternatively, you can give your trustee full discretion on the amount and timing of trust distributions to the beneficiaries.  One of the major benefits of establishing a testamentary trust is the annual income tax savings for the surviving beneficiaries. These income tax benefits are not available to beneficiaries who receive outright inheritances. Taxable income earned in a testamentary trust can be subject to the same graduated tax rates as an individual taxpayer and then paid out after tax to the beneficiary.

 

In addition to the tax benefits, there are many reasons why a testamentary trust may be advantageous. A testamentary trust provision in the Will can make sense in the following scenarios:

 

> Individuals in second marriages

> Disabled or minor beneficiaries

> Parent is concerned about spendthrift beneficiaries

> Parent is concerned about inheritance being accessed by son- or daughter-in-law

> U.S. citizens

> Beneficiaries are high-income earners or will receive a large inheritance

 

If you do not have an Estate Plan in place please arrange a meeting with me to discuss.  Included in our service to you is access to our Lawyers who are specialists in this area.

 
 
Friday April 4, 2014
“It’s the sides of the mountain which sustain life, not the top.”
 

Robert M. Pirsig, Zen And The Art Of Motorcycle Maintenance

 

Not exactly a handbook on how to do oil changes.

 

It’s that time of year when many households throw open the windows, let the fresh air in, welcome back the sunshine, and begin a spring cleaning.  Historically it was a time to drag furniture, draperies and even paintings, outside to be dusted and fluffed.  According to the Encyclopaedia Britannica you can benefit both mentally and from a health perspective by doing a spring clean.

 

In today’s world you might not want to drag your Art Shoppe sofa onto the front lawn and whack it with a broom, but there are other ways to get into the spirit … starting with your investment portfolios.

 

As I have mentioned recently, stock markets around the world have recovered significantly from their lows a few years ago.  But as Warren Buffett once said, “A rising tide lifts all boats.”  Ironically he also added, “When the tide goes out you will see who’s swimming naked.” 

 

With the economy bumping along at a decent pace and stock markets reflecting the good times, now might be an ideal time to do a “spring cleaning.”  By this I mean that now would be a good time to re-evaluate some of those stray accounts and funds that you have sitting at various financial institutions.  Perhaps it’s time to show us, and let us either consolidate them into your portfolio or evaluate their potential?  Now is also the time to re-visit your asset mix.  Does your current portfolio reflect your current objectives, or have equities grown beyond their place and need to be trimmed?  Are there a few straggling investments that you’re not exactly sure where they came from, but you just hold them … because? 

 

If you’re really serious about getting your house in order contact our office.  A quick portfolio review today along with an Estate Plan review could make a huge difference in how things turn out over the next 18 months.

 
Friday March 28, 2014
 

“If you don’t lose, you cannot enjoy the victories.  So I have to accept both things.”

 

Rafael Nadal

 

Next week is a big week in the world of Bordeaux wines.  It’s “en primeur week” and much of the wine trade will arrive in Bordeaux next week for the 2013 en primeur tastings.  How things go will determine the pricing of the 2013 Bordeaux Vintages for years to come. 

 

The outlook for 2013 Bordeaux prices is likely to be flat or weaker than the 2012’s.  Aside from reduced demand from China, the grapes harvested in 2013 were challenged by very poor weather early in the growing season, then later in the season during harvest. 

 

En primeur week will be a bit more challenging this year.

 

For readers who enjoy art as well as wine, RBC recently published the spring edition of “Perspectives” for our clients.  In this month’s edition RBC’s curator discusses art as an investment and how to begin buying your collection.  Much like a 1st Growth Bordeaux, it seems that art too can rise in value if you know what to buy.

 

Contact Jessica or I for your complimentary copy.

 
Friday March 21, 2014

 

“Someone reminded me I once said "Greed is good". Now it seems it's legal. Because everyone is drinking the same Kool Aid.”

 

Gordon Gekko, Wall Street:  Money Never Sleeps

 

Dan Chornous, RBC’s Chief Investment Officer recently published his quarterly report on the outlook for world equity markets.  Attached is an excerpt from that report. 

 

Given that the TSX is up about 90% today from where it was 5 years ago, I thought it would be interesting to review the street’s take on things.
 
“For several years, we have watched the interlocking conditions for economic normalization gradually click into place. Today, bond yields are roughly in line with equilibrium as measured by our models, and several equity markets, including the S&P 500, are closing in on fair value following years of trading at a significant discount. This normalization thesis has recently been challenged by a number of new threats, but we don’t believe that these represent critical risks to the cycle. The recent stint of bad economic data is mainly due to poor weather, inflation is unlikely to remain this low for long and political unrest (like the current situation in Ukraine) rarely bleeds into the global economy or markets. With the path to normalization only slightly more challenging, and given that the Fed is set on tapering its bond-buying operations, bond yields should continue to edge higher and the equity rally should endure.
 

Global growth should improve in 2014 and be slightly stronger again in 2015, with the heavy lifting coming disproportionately from rejuvenated developed nations where consensus expectations for GDP have continued to rise over the past quarter. We expect the developed world to grow twice as quickly in 2014 as it did in 2013, and our 2015 forecasts look for a little more growth still. The previous trend of downward revisions to emerging-market growth has stopped, at least for now. The outlook for emerging nations remains a central point of uncertainty after poor growth in 2013. This year looks to be slightly improved, in large part due to the prospect of rising global trade. However, emerging markets remain imperiled by credit excesses that have built up over the past five years. These countries have grown unusually quickly since the turn of the millennium, outperforming developed nations by a greater degree than normal. An era of more normal credit growth likely signals a reversion toward a more normal outperformance relative to developed nations.”

 

Equities Nearing Fair Value

 

“Equity market valuations have risen materially, signalling investors are indeed pricing in a sustained global recovery. To us, the rise in valuations, especially since 2013, represents a regime shift as investors moved out of a post-crisis mindset into one that reflects the progressive normalization of the economy and risk premiums. While the S&P 500 has moved up to approach fair value, global equity markets generally still lie below equilibrium. However, recognizing that stock valuations are no longer extraordinarily low, we have adjusted our total-return expectations to recognize the superior returns so far in this bull market and the more demanding valuation multiples that have resulted. That said, valuations are only half of the equation, and earnings can be just as important to determining potential returns. With the global recovery gaining traction, stronger revenues and corporate profitability could contribute another leg to the rally.”

 
Friday March 14, 2014
 

“A lack of transparency results in distrust and a deep sense of insecurity.”

 

Dalai Lama

 

I couldn’t help myself.  There I was sitting in first class on an Air Canada flight enjoying a free upgrade.  I pulled out my cell phone and clicked a picture of myself and sent it along to my brother with a note saying, “nice eh, and they have free champagne too!” 

 

He sent me back a text that said, “Gerry, there’s no such thing as free Champagne.” 

 

I have already warned most of my clients that in the face of tighter anti-money laundering laws and in an effort to reduce the amount of tax fraud, everyone will be expected to provide full disclosure, confirm identities on all accounts and much more.  As an employee and shareholder at the country’s best financial institution I welcome the changes.  To me it means greater “transparency”. 

 

Transparency however is in the process of going even further over the months and years ahead.  Full transparency will soon mean disclosing all fees in detail for every investment transaction and account you hold at an institution.  No doubt there will holdouts and poor compliance by some institutions, but the best firms will comply openly. 

 

One of the aspects of my job that I enjoy the most is that I get paid for doing what’s best for you, your needs, your goals, and your objectives.  I don’t make a dime more for buying you a stock than I would for holding a GIC.  As a Vice President & Portfolio Manager in RBC’s Private Investment Management division, I sincerely work in your best interests without any temptations.  The annual management fee that RBC charges, is quite frankly in my opinion, a bargain and in many cases fully tax deductible.

 

The next time you make an investment with your financial person ask them if there are any charges for buying that:  GIC, pooled fund, ETF, IPO, bond, coupon or whatever it is.  Transparency means that you will be told the costs, hidden or not.

 

“ … because there’s no such thing as free Champagne.”
 
Friday March 7, 2014
“Time’s Fun When You’re Having Flies.”
 

Kermit The Frog

 

Benjamin Franklin first came up with the idea of shifting clocks ahead and back to save on energy (he was thinking of burning of candles).  The concept however didn’t take off until 1918.  Then it stuttered a bit during the war time, was resurrected in 1966, and was modified a bit more in 2005.  All of which lead to the hit song “Does Anybody Really Know What Time It Is”. 

 

Earlier this week I had the opportunity to review RBC’s investment outlook with the firm’s Chief Investment Officer.  Here are some observations and opinions that I found of interest:

 

During the past 35 years interest rates on the US 10 Year Bond have trended downward from around 15% to 2.65%. 

 

The global outlook for the world’s economies is positive with GDP Growth expected across the board.

 

Inflation is expected to remain low throughout the western world and short term interest rates are projected to remain at rock bottom levels. 

 

Corporations have solid balance sheets in general, and are in a position to finance acquisitions or expansion. 

 

The outlook for 2014 is for another year of economic expansion.  The outlook for equities is for another year of positive returns that should be much more in line with historic norms (read 10% range).

 

Anyone interested in the full report can simply contact me.  I will e-mail it to you or send it by regular envelope …your choice.

 

With a positive outlook we continue to believe that a properly balanced portfolio designed to meet your objectives will serve you well.  Quality and discipline are the cornerstones to success.  “Do not be tempted by passing fashions, build for the future.”

 
Friday February 28, 2014
 

“The secret of getting ahead is getting started.  The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one.”

 

Mark Twain

 

Big weekend ahead; the RBC Doyle Wealth Management hockey team is in the finals at Rennie Park this Saturday evening (outdoor rink is awesome).  Tickets are free and the hot chocolate is great! 

 

To make it an even more exciting weekend, Warren Buffett’s annual letter to shareholders (and the public if you have access to Google) will be released on the weekend.  It is always worth a read and you can be sure the newspapers will be commenting on the billionaire’s words of wisdom next week.  The “Oracle of Omaha”, as he is often called, has provided valuable advice on investing in his past letters as well as comments on the world at large. 

 

Whatever your definition of success is there is strong evidence to suggest that reaching your goal can be aided by the “company” you keep. 

 

Jim Rohn (American author, motivational speaker) claimed “You are the average of the 5 people you spend the most time with”. Look around – does this hit close to home?  Since you likely spend the most time with people who you work with or friends who share similar interests, you are going to be very much like these people. This really shouldn’t come as a surprise, as we do tend to hang out with people who share the same interests, tend to be around our age, live in our neighbourhood, etc.  But, have you ever considered the advantages of having a friend who was outside of your normal circle?  Maybe outside your comfort zone?

 

Dropping by Roger Federer’s house might be a bit of a stretch for the budding tennis player, but now may be a good time to assess who you’re spending time with and how they could be influencing you, believes Jim Rohn. 

 

No one’s suggesting you “un-friend” anyone on your Facebook page just because they have a harem scarem life that never seems to be going anywhere, but realize that hanging out with someone like this is going to bring negativity into your life. Being around people who are always negative, unhappy, inactive and scared of failure might be influencing you and causing you to be cautious when approaching your dreams.

 

Rohn believed, you shouldn’t aim to hang out with those experiencing the same success level as you and certainly not those who could drag you down, but rather those who have already surpassed you. Successful people can teach you from their mistakes.  Successful people tend to be more positive, willing to assist others, and can provide all kinds of sound advice.

 

If Jim Rohn is correct then now might be the time to make a new friend who you can look up to and grow with.

 

 
Friday February 21, 2014
 

“I had no option, I had to go for it.  Today one of my goals was to have no regrets.”

 

Dominique Maltais, Canadian Olympic Medal Winner 2014

 

Estate planning is never easy, but often amusing.  Nevertheless it is something that might be timely since you are already immersed in tax season and really having nothing better to do in the midst of the winter season.  For our clients Estate Planning is a service that is included in our relationship.  Simply contact us and we will arrange your meeting with RBC’s Estate Planning Lawyer.

 

Since your Will and Powers of Attorney are the cornerstone of  your estate it should be reviewed from time to time and adjusted whenever you experience a “life event” (new phrase created by the financial industry for marketing purposes when discussing deaths, divorce, daughter marrying some guy you may or may not approve of, etc.).  Here are some things to consider when preparing your Will:

 

Who will be named executor?  Since this person will essentially be handling all of your affairs after you’re gone (liquidating or distributing assets, paying bills, paying your taxes, managing the estate for perhaps years before it is settled), you will want to choose this person(s) with care. 

 

Who will be the beneficiaries of your estate?  Who won’t be a beneficiary?  How will the beneficiary receive the inheritance (monthly payouts from a trust because they tend to be a spendthrift, outright inheritance)? 

 

Who will be the custodian of your minor children?  Who will be the custodian of your children’s inheritance?  These aren’t loaded questions meant to cause a family squabble they are simply things that need to be addressed.

 

The above questions are just a few of the things that must be discussed.  Typically an experienced lawyer will provide lots of guidance for you to follow.

 

If you are not yet a client, please contact us before you die so that we can help pull things together for you.

 
Friday February 14, 2014

 

“Do one thing everyday that scares you.”

Eleanor Roosevelt

 

 

Louis Riel Day, Heritage Day or Family Day (depending on which Province you live in) is a fabulous Canadian Holiday!  The holiday has been phased in across the country (B.C. actually held a vote, which in some ways doesn’t surprise me) in recent years as a welcome break between Christmas holidays and Easter.  Given this year’s winter weather I’m sure everyone appreciates the day off. 

 

If you are looking for some fun activities, toss these ideas out to your family and see what they think:

 

There are many outdoor skating rinks around most cities and towns in Canada.  My favourite haunt for a skate under the stars is the Swansea Rink http://www.swanseahockeyassociation.com/index.php?option=com_content&view=featured&Itemid=181  but I also have a soft spot for the romance of Toronto’s Harbourfront “Natrel Rink” http://www.harbourfrontcentre.com/venues/natrelrink/Both offer a fun night out, even if you only do a couple of laps you can always enjoy the après skate in nearby restaurants.

 

Have you ever tried “downhill skiing” or cross country?  This weekend most every resort is open and offering lessons to newbies at special rates.  The Collingwood area is an obvious choice, but Mt. St. Louis and Horseshoe offer excellent facilities too.  What are you waiting for?

 

Maybe a tour of the Art Gallery, then lunch at Frank’s?

 

Whatever you do this weekend I hope you find it relaxing and fun!  Remember, we are one day closer to spring and this snow won’t be here forever.

 
Friday February 7, 2014
 

 Team Canada enters Fisht Stadium for opening ceremony

 

 
Good Luck Canada!!!!
 
 
Friday January 31, 2014
 

“To get the full value of joy you must have someone to divide it with.”

 

Mark Twain

 

I think the best managers and small business owners know the benefits of having their employees, co-workers, and partners “feel appreciated” and needed.  Ken Blanchard, certainly made it clear in his best selling book The One Minute Manager and further expanded upon it in the book 1001 Ways To Reward Employees.  Both books are an excellent read whether you are a small business owner or part of a household family.

 

Here are things that great companies are doing to recognize great people as taken from 1001 Ways to Reward Employees:

 

There’s only one reserved parking spot at Odetics Inc. the manufacturer of robots and spaceborne tape recorders in Anaheim California and that’s for the person selected as Associate of the Month.

 

Every Westin Hotel holds an annual banquet honouring employees with more than five years’ service.

 

Coopers & Lybrand, the consulting company, rewards its top employees with 5 day trips to New York City.

 

Blue Cross held a contest to select employees to appear in company commercials.

 

The Walt Disney Company grants an extra five-minute break (or a candy bar) to the employee who finds the guest who has travelled the farthest to come to the park.

 

There are many ways to recognize and reward your peers, co-workers, family and friends.  Some rewards involve money, but most involve little or no cash value.  It seems that simply being recognized and appreciated can be a great motivator in itself and lead to greater happiness and success for all involved.

 

Friday January 23, 2014
 

“I would rather have it said that he, “Lived usefully” than “Died rich”.”

 

Benjamin Franklin

 

I had the pleasure this week of sitting with a friend who is very much a self made person.  He has been very successful and much admired by me and others I am sure.  He is successful not because of the many hundreds of million dollars he has earned personally, but rather because of what he has done with it.  He gives it away.  My admiration for him is not because of his great skill in amassing a fortune, but rather I admire how he has maintained a simple life, goes into the office regularly even though he was eligible for OAS more than 10 years ago, and is focused on helping others. 

 

Should you ever be in a position where making a donation from your stock portfolio might make sense contact me and we can discuss some of the benefits you could enjoy from a tax point of view.  The following excerpt from an RBC article provides a nice overview.

 

When it comes to charitable giving, you have a number of different options that can help you achieve your philanthropic goals, while at the same time providing you with some tax relief.

 

Donating securities

The federal government introduced several tax incentives in recent years to encourage charitable giving by Canadians, including the elimination of capital gains tax when you donate publicly listed securities to qualified charities. Not only do you receive a tax break, you also receive a donation receipt equal to the fair market value of the donated security.

 

For example, due to the donation tax credit, your out-of-pocket cost for making an in-kind donation of a security worth $100,000 with a cost of say $40,000, if your marginal tax rate is 45% is approximately $55,000. However, if you sold the security first and then donated the cash, your out-of-pocket donation cost would be $68,500 due to paying about $13,500 in capital gains tax.

 

 

 
Friday January 17, 2014
 

"If standard of living is your major objective, quality of life almost never improves, but if quality of life is your number one objective, your standard of living almost always improves."

Zig Ziglar, Motivational Speaker

 

The first Grand Slam of the season opened in Australia and so far all the favourites are still in the race:  Genie Bouchard, Milos Raonic, and of course Federer and Nadal.  “Come on Roger, just one more time!”

 

Aside from tennis many clients are getting a hint of what’s to come as tax season approaches.  It won’t be long before you wander into your accountant’s office and drop a box on her desk, hoping that all the receipts and slips are in there somewhere.  Hope, of course, is the operative word because no doubt you will receive a phone call days later from your accountant asking for clarification or a missing T-3.  One way to avoid the stress, reduce your taxes and do the job more efficiently is to simply make the “Executive Decision” to consolidate your RRSP’s, TFSA’s and investment accounts all in one spot here.  Doing so will allow us to correspond directly with your accountant, deliver missing tax slips, answer questions on your behalf and provide missing ACB’s and other acronyms.  Consolidation may also lead to a reduction in fees.

 

Many wealthy investors open multiple accounts of the same type, with different financial institutions and different advisors, either because it simply happened this way over time or because they believe it to be an effective way to diversify.

 

Diversification is one of the golden rules of investing to reduce risk and boost your return potential over time. But diversification is really about how you invest your money – not where you keep it. Investing through multiple accounts and multiple advisors instead of consolidating your assets with one trusted advisor may impede proper diversification and potentially expose you to greater risk.

 

The benefits of consolidating your assets with RBC’s Doyle Wealth Management Team are:

 

Reduced costs. By consolidating your investable assets with us, you may pay lower fees, based on a sliding scale. By spreading your investments among multiple advisors and multiple financial institutions, you lose the economy of scale.

 

Simplified administration and consolidated reporting. With consolidation, you bring together all your investment accounts with one advisor, which makes it much easier to keep track of your investments and their overall performance. The paper statements you receive in the mail are minimized and the tax reporting related to your investment income and dispositions becomes easier to manage and more accurate. Your tax preparation fees may also be reduced since your accountant will be spending less time sorting through all the statements and determining the average cost base of identical investments.

 

Easier Estate settlement process. Having investment and bank accounts spread among many different financial institutions will make your estate settlement process administratively more difficult for your executor/liquidator and potentially more costly. By consolidating assets, you have peace of mind knowing that after you pass away, your surviving spouse or other beneficiaries will have one point of contact that you trust who will manage their overall assets to ensure they have adequate income.

 

More efficient retirement income planning. Consolidation also enables you to manage your investments more effectively, helping you structure your investments to generate the retirement income you need. In retirement, you will have many different income sources, such as government pensions, employer pensions, Locked-in Retirement Savings Plans, Registered Retirement Income Funds, non-registered income and part-time employment income. If you have one trusted advisor managing your investments, it’s easier for that advisor to determine how and in what order you should be withdrawing from all the different income sources to maximize your after-tax retirement income.

 

Diversifying by advisor. Sometimes, investors decide against consolidating their assets with one advisor, thinking that they can “diversify by advisor.” This is particularly true of investors with portfolios of $1 million or more. The idea is that if one advisor doesn’t do well, the other might.

 

Unfortunately, this is a myth. By dividing your investments among multiple advisors, you actually make it more difficult to properly manage your investments. Since each of the advisors doesn’t know what the others are doing, it often results in over-diversification, conflicting advice and needless duplication of your investments. Furthermore, it’s difficult to know how your investments are performing overall by having your assets spread among more than one advisor. A better option is to consider consolidating your assets with one knowledgeable advisor who can provide you with a properly coordinated financial strategy.

 

Consolidating your investments with us and introducing me to your accountant will accomplish to major goals:  Your costs may be reduced, your workload and stress of having to answer to your accountant will be eliminated, and the overall return on your investments will be much more coordinated and focused on your goals. 

 

Please call me so that we can discuss and make your life better and easier (416.231.5092).  Thank you.

 
Friday January, 10, 2014
 

“A person could make a career out of laying the groundwork to do something really big.  Getting ready is quite frankly, a stalling tactic, an act of anxiety, a con game you’re working on yourself.”

Price Pritchett

 

I’m not bragging, but have you checked out the Swansea Hockey site http://www.swanseahockeyassociation.com/index.php?option=com_content&view=article&id=10&tab=6&Itemid=118  to see who is in first place?  Actually what is really amazing is that the community has pulled together for over 40 years to offer the children in the area a place to play together and learn some sports.  Its success is due to the efforts of volunteers and supporters such as the City and local businesses.  Even the Toronto Maple Leafs have been known to show up in the past to lend their support!

 

During the first few weeks of this year you will be receiving phone calls and letters reminding you to make your RRSP contribution, RESP contribution for the children, and of course adding to your TFSA.  For the typical family of four, that could amount to having to write a cheque for $40,000 or more.  Not everyone keeps that amount of money in their Chequing account.

 

Rather than miss out on the benefits (need?) of saving for retirement, not sheltering some savings in a Tax Free Savings Account, or not getting the $500 Government Grant each year for your child’s RESP, perhaps it is time to put a strategy in place to achieve your dreams and goals?

 

Dollar cost averaging is simply a strategy whereby we setup an amount of money that is automatically debited monthly from your chequing account and deposited to your account here.  We will set it up for you and invest it for you.  You can adjust the amounts, etc. anytime.

 

Aside from reducing the stress at this time of year when you know what you “should do” but find it hard to come up with the cash, dollar cost averaging has many other benefits:

 

During choppy or volatile markets, dollar cost averaging can reduce the risk of trying to time the market.

 

Dollar cost averaging forces a disciplined approach that is not derailed by personal emotions.

 

Dollar cost averaging creates a good habit of saving that ultimately can lead to some positive surprises as the years pass and you become wealthy.  Once you get used to making monthly contributions it becomes as much of a habit as paying your electric bill.  The big difference is that it can lead to your personal financial freedom and happier life.
 
Friday January 3, 2014
 
 
The Best time to plant a tree was 20 years ago.  The second best time is now.
Chinese Proverb 

 

Six years ago, the Canadian government introduced the Tax-Free Savings Account, in an effort to prompt Canadians to save more.  Since its launch in 2009, the TFSA has presented Canadians with another option in their savings arsenals – arguably one of the most important since the RRSP was first launched in 1957.

 

For decades, the advice was short and simple: put as much in your RRSP as you could afford. But then the TFSA came along, and now investors are faced with new decisions about whether to put their savings in an RRSP or a TFSA (or both).

 

We get questions every day from our clients about TFSAs, such as:

 
1.With limited funds, which one should I choose – the TFSA or RRSP? How do I prioritize?

2. Are there rules of thumb that can guide the decision as to which to invest in, such as income levels, tax rates, or stages of life?

 

You contribute to an RRSP with pre-tax income; however, withdrawals are taxable.  Although RRSPs are used primarily as a retirement savings vehicle, government programs exist that allow you to borrow funds from your RRSP to, for example, buy your first home or continue your education without tax consequences.

The younger TFSA, on the other hand, is more flexible. A TFSA contribution is made with after-tax dollars and withdrawals are tax-free. You don’t lose contribution room if you make a withdrawal, but you will need to wait until the next taxation year to re-contribute the money. This makes it an ideal vehicle to fund a variety of expenditures, particularly a short term cash cushion or emergency fund.

 

One of the most important distinctions between a TFSA and an RRSP is in regards to tax. An important point to look at is your marginal tax rate. If your marginal tax rate stays about the same throughout your working career and beyond into retirement, the relative advantages of an RRSP and TFSA (assuming the same investments are made inside each) are similar. If, however, you expect marginal tax rate to decrease at retirement, an RRSP would likely be more advantageous to you. Conversely, if you expect your marginal tax rate to be higher at the time of withdrawal than at the time of contribution, the TFSA is likely a better choice. This can be tricky, as it can evolve into a guessing game when it comes to predicting your marginal tax rate in the future and making RRSP/TFSA decisions accordingly.

 

We know that it can be a challenge to make a decision between contributing to a TFSA or RRSP. It’s important to remember that one plan is not inherently better than the other; they just provide different ways to save on taxes and compound your returns over time. A successful investor can use both plans to achieve the maximum benefit for his or her savings goals.
 

The choice of a TFSA or an RRSP depends on your individual goals and objectives, as well as your current situation, needs, expected future financial situation, and future income level.  Contact us for more information, to contribute or to set up your new RRSP or Tax Free Savings Account.

 

Friday December 27, 2013

“Chi ‘E Uso Alla Zappa Non Piglia La Lancia”

“He who uses a shovel doesn’t take up a spear.”

 Slow Life In A Tuscan Town

  

It is that time of year, time to make a New Year’s resolution.  A great tradition started many years ago when The Romans began each year by making promises to the god Janus, for whom the month of January is named.  Since then resolutions have become a part of societies around the world with generally the same theme:  A promise to one’s self to improve an aspect of our life.

 

Despite the 88% failure rate (according to some polls) the tradition lives on.  According to Wikipedia some of the most popular resolutions are: 

  • Improve physical well-being: eat healthy food, lose weight, excercise more, eat better, drink less alcohol, quit smoking, stop biting nails, get rid of old bad habits
  • Improve mental well-being; think positive, laugh more often, enjoy life
  • Improve finances: get out of debt, save money, make small investments
  • Improve career: perform better at current job, get a better job, establish own business
  • Improve education: improve grades, get a better education, learn something new (such as a foreign language or music), study often, read more books, improve talents
  • Improve self: become more organized, reduce stress, be less grumpy, manage time, be more independent, perhaps watch less television, play fewer sitting-down video games
  • Take a trip
  • Volunteer to help others, practice life skills, use civic virtue, give to charity, volunteer to work part-time in a charity organization (NGO)
  • Get along better with people, improve social skills, enhance social intelligence
  • Make new friends
  • Spend quality time with family members
  • Settle down, get engaged/get married, have kids
  • Try foreign foods, discovering new cultures
  • Pray more, be closer to God, be more spiritual

In an effort to improve the success rate of New Years resolutions amongst my clients I have attached some advice from a Judy Librach (Life Coach) on how to succeed in keeping your resolution.  Judy says:

To start, don't make too many New Year's resolutions. Choose one or two really good ones. So, if you want to lose weight, be specific. Write down exactly how much you want to lose and by when. For example, "I would love to lose 10 pounds by March 15th." Then write down exactly and realistically how you are going to accomplish it. What diet plan and what exercise plan can you commit to? Keep a journal or diary and put a checkmark beside your commitments as you have accomplished them.

The top resolution pitfalls include being too vague about what you want, procrastinating, and letting your gremlin or inner critic get in the way. Having an advocate to keep you accountable to your goals is way more powerful than going it alone, and is proven to improve your success rate. Choose a friend or loved one to help you accomplish your goal, whether that's a weight goal, writing a script or organizing closets and cupboards.

Do something towards your goal every day, even if it's the tiniest action. 
 

Personally I like to make a few resolutions.  Diversify a bit, don’t you think?

 

Friday December 20, 2013
 

“In oneself lies the whole world and if you know how to look and learn, the door is there and the key is in your hand.  Nobody on earth can give you either the key or the door to open, except yourself.”

 
 J.Krishnamarti

 

Whoaa … a bit deep.  Good, but deep.

 

For those who are on our mailing list you will soon be receiving our December newsletter.  Answers to the “Estate Planning Quiz” in the newsletter are on our website under the tab “Estate Planning Quiz”.  If you aren’t on our mailing list send us a note and we will add you to our future mailings.  Aside from the occasional article on estate planning we often cover ideas on how to improve your retirement plan, tax saving ideas, and general investment ideas.

 

In addition to managing your investments, planning retirements, assisting you with your Private Banking needs and providing estate planning we also provide advice on how to build snowmen.  Since most of our clients tend to be of the “A” Type, just “any old snowman” will not do.  We focus on designing snowmen or snowwomen that are suitable for the most discerning trust child.  Size is of great importance as are the accessories chosen to adorn your snowwoman or snowman.  At the risk of “telling you” how to build it right, I have collected some tips for your consideration. 

Unless you grew up in Fiji, you probably already know the basics of snowman building.  That is why I will only highlight a few of the secrets to building a bigger, better, faster, stronger snowman. Okay, maybe not faster; Frosty’s still not going anywhere. But these tips can help you or your kids create the best snowman in the neighborhood.

Start with good snow. You can’t make a silk purse out of a sow’s ear and you can’t make a good snowman from powdery snow. You need the slightly wet stuff. Not slush mind you, but the kind of snow you get when it’s just above or just below freezing. Slightly wet snow packs easier and holds onto buttons and coal lumps better. If the snow you have to work with is too dry, you can help nature along by spraying it with a hose fit with a nozzle that produces a fine mist. You’re also going to need about 4 inches of snow on the ground to avoid hitting dirt and creating a mudman.

Make the balls. Start with a big snowball you pack in your hand and then roll it on the ground, allowing it to pick up snow and get bigger. Remember to roll it in different directions so that you don’t wind up with a cylinder instead of a nice sphere. Keep the ball from making contact with the snowless ground and from picking up dirt and twigs and such.

The bottom ball is the biggest. Place it where you want the snowman to reside; if you can see it from inside the house, all the better. Try to pick a place that’s shaded and not in direct sunlight. This will help increase the snowman’s longevity.

Positioning your snowman can not only be key to keeping it from melting, but it is also key to ensuring that everyone in the neighbourhood knows that aside from being a super-parent, you are also an awesome over the top snow sculpture. 

Stack the balls. Jim Sysko, an expert snowman builder who helped work on the largest snowman in the world, recommends that you flatten the top of the first ball. Then when you make the middle segment ball, flatten the bottom of that ball before you place it on the first ball. Flat on flat=more stability. Repeat this process so that the top of the middle ball and the bottom of the top ball are flat too.

If you’re building a gigantic snowman and find that you cannot lift the middle or top ball to be placed, get a plank and roll the ball up it.

Once you have all the balls stacked on top of one another, pack snow in-between the segments to add further stability to the structure.

Spruce up your snowman. Once you build the snowman’s basic structure, your next task is to bring Old Frosty to life. An old silk hat is key in this, although it stands a good chance of blowing away. A carrot for the nose and coal (although who can find coal these days? Little rocks work almost as well) and buttons for the eyes and mouth are classic add-ons. Just get creative and see what you have in the backyard and the kitchen. Prunes work well for the eyes and provide a snack for the birds. Place some sticks in the side for arms.  Scarves, gloves, Canadian Toque are also great ideas. 

If you can set a spotlight or two on her then go for it!  Maybe some fake jewelry that glistens and sparkles! 

In lieu of physical add-ons, consider painting your snowman with a mixture of food coloring and water. You can paint on a smile or traumatize your children by adding some tears as Frosty starts to melt. Or if you really want to traumatize the kids, you can give your snowman a bleeding bullet wound or head injury. Just kidding … but hey maybe painting on a tuxedo might be a fun New Years Eve event? 

Send us your photos! 

Friday December 13, 2013
 

"Each experience through which we pass operates ultimately for our good. This is a correct attitude to adopt and we must be able to see it in that light."

 Raymond Holliwell ( writer )
 

The Tax-Free Savings Account (TFSA)

Starting January 1, 2014, you can contribute an additional $5,500 to your TFSA to benefit from additional tax-free investment growth. With the contribution room from 2009 through 2013, you may be able to contribute up to $31,000 to your TFSA if you haven’t opened yours yet.

Within your RRSP or RRIF, your investment earnings grow on a tax-deferred basis, which means you don’t pay tax on the earnings until you eventually withdraw them – typically resulting in faster growth. But with the TFSA, your investment earnings grow on a tax-free basis, which means you never pay tax on them – not even at the time of withdrawal. This tax-free growth enables your savings to grow much faster than they otherwise would.

 

The TFSA is an extremely flexible savings account that can meet a wide range of needs. It can help you:

 

-Save for short-term goals like financing home renovations or long-term goals like retirement.

-Build additional tax-advantaged retirement savings above and beyond your RRSP.

-Earn tax-free income on surplus RRIF payments that you don’t currently need.

-Contribute to a family member’s education savings beyond their Registered Education Savings Plan (RESP).

-Reduce your family’s overall taxes when you gift investable assets exposed to your higher tax rate to your lower-income spouse or adult children to contribute to their own TFSAs.

-Shelter fully taxable interest income that you are currently earning in a taxable account.

-Create a contingency fund for emergencies or time-sensitive opportunities.

 

How does the TFSA work?

 

Opening a TFSA

Any Canadian resident aged 18 and older with a Social Insurance Number can open a TFSA. In some provinces, you have to wait until you turn 19 (British Columbia, Yukon, Northwest Territories, Nunavut, New Brunswick, Nova Scotia and Newfoundland & Labrador). However, TFSA contribution room starts accumulating at age 18 regardless of your province of residence.
 

Making contributions

From 2009-2012, you could contribute up to $5,000 per year to your TFSA. In 2013, this amount increased to $5,500.

You can also gift funds to your spouse or adult child to contribute to their own plans.

There is no income requirement to contribute to a TFSA – you can make contributions even if you have no income.

While your contributions are not tax-deductible against your income, as they are with an RRSP, any investment income they earn accumulates tax-free.

If you don’t use all of your available contribution room in a given year, you can carry it forward indefinitely. There is no age limit for contributing to your TFSA – it’s a lifelong plan.

 
Making withdrawals

You can withdraw as much as you want, whenever you want, for whatever reason you want – and you pay no taxes on the withdrawal. What’s more, any amounts you withdraw are added to your available contribution room for future years.

 
Transferring your TFSA

You can transfer the assets in your TFSA at the date of your death to your spouse (or common-law partner) tax-free by naming them as the successor holder or beneficiary on your TFSA. Your spouse can transfer these assets to their own TFSA without affecting their available contribution room. If you do not name a successor holder or a beneficiary on your TFSA, then the TFSA assets will form part of your estate.

 

 
Friday December 6, 2013
 
“Success is more a function of consistent common sense than it is of genius."
An Wang, Founder of Wang Laboratories

 

Results from  the RBC Dominion Securities National Client Survey show an increased interest among our clients in learning more about the services offered by RBC in the Estate & Trust services area.  In response to this interest, RBC has created similar marketing material around Power of Attorney services and are pleased to provide you with a sample of the new brochure called “Your Reference Guide For Acting As An Attorney under a Power of Attorney.” 

 

The brochure explains the duties an attorney for property (named under a Power of Attorney) would need to undertake. 

 

As outlined in the “Mind The Gap” special repo0rt, as Canada’s population ages, it will become increasingly important for clients to prepare for the possibility of incapacity and plan ahead by establishing a power of attorney.  An “attorney boom” is expected, where many clients will be appointed as attorneys but may face complications such as being located in a different jurisdiction, lack of financial expertise or time to devote to managing someone else’s affairs. 

 

This brochure is available to you simply by contacting Jessica or I.  We also have additional resources too.  We would be pleased to assist.
 
Friday November 29, 2013
 

“In simplest terms, a leader is one who knows where he wants to go, and gets up and goes."
 John Erksine - Author

 

Okay, I know this isn’t the first time it’s ever happened, but wasn’t that snow storm we had last week a great opener to the season?  Based on my observations of animal activity the past two months I’m betting on a cold snowy winter ahead.  This brings me to my next question, one that has been debated throughout the office and around the curling rink.  “Do snow tires really make much difference?”  Are they worth the added expense?

 

Amongst my peers their seems to be a general agreement that within the city a good set of all season tires that are in good shape will do the job.  As you stray north or into the snow belt, well that’s a different story. 

 

These are David Singh’s (writer) thoughts on the subject:  “In a very simple, non-scientific brake test We put two Ford Focuses on an icy course and had them drive at 50 km/h to a marker before slamming on the brakes. The Focus equipped with winter tires stopped a significant distance shorter than the Focus with all-season tires – 4.5-car lengths shorter, to be exact.” 

On the other hand according to the Ontario’s Ministry of Transport …“Our analysis of recent data from Quebec indicates there is not enough evidence yet to suggest that mandatory winter tire legislation has had a significant impact on traffic collisions or injuries.”

In the end I decided to get snow tires.  My reasoning was that given that I tend to drive my cars into the ground before replacing them, I do need to replace my tires over the life of the car.  If I have two sets of tires (snows & all season) then that seems to work out. 
 

Let me know your thoughts on this one.

  

Friday November 22, 2013
 

“I was asking myself why I was having these obstacles in my life … then I suddenly became aware that these obstacles were my life, and I began to enjoy them.”

 

John Kanary, Author

 

If the credit crunch has taken the fizz out of the UK's champagne market, Italy's best-kept secret – Prosecco – is emerging as the clear winner over the festive season (Rebecca Smithers, The Guardian).

Despite the general downturn in sales of fizz across all retailers this year, the sparkling tipple has been bucking the trend. Prosecco has proved to be the star of its fizz category. Sales are already double what they were this time last year, with the biggest expected concentrated sales of the year still to come in the run-up to New Year celebrations.

Alain Guilpain, said: "What makes the rising demand for Prosecco even more startling is that until about five years ago it was generally only known by connoisseurs. But it has grown by word of mouth and has become our fastest-growing fizz this year, not only riding the credit crunch storm but emerging as a true winner because of its great quality and keen price point."

Prosecco takes its name from the Glera or Prosecco white grape variety which is grown mainly in the Conegliano and Valdobbiadene wine-growing regions of north-east Italy. It is a fresh and lively wine with crisp, fruit-driven character, often compared to apples and dessert pears with a clean, refreshing finish.

It was the original wine used in the Bellini. The Bellini was invented sometime between 1934 and 1948 by Giuseppe
Cipriani founder of,Harry’s Bar in Venice Italy. Because of its unique pink color, which reminded Cipriani of the color of the toga of a saint in a painting by 15th-century Venetian artist Giovanni Bellini he named the drink the “Bellini”.  Ernest Hemingway and Orson Welles frequented Harry’s and are said to have enjoyed many a Bellini.

The next time you are in Rome or Venice stop by Harry’s, but in the meantime consider trying it as this year’s festive option. 

Friday November 15, 2013

Lost time is never found again.”

Benjamin Franklin

 

Private Investment Management

 

A more personalized approach to discretionary investment management

 

As you pursue your goals, you may discover that you have less and less time to focus on important matters such as the management of your wealth. Indeed, as you enjoy greater success in life, your financial affairs will likely become more complex and demand more of your time.

 

To help you delegate these important responsibilities with confidence, RBC is pleased to offer RBC Dominion Securities Private Investment Management. Private Investment Management is our premium level of discretionary wealth management, available exclusively to our clients. It is designed to free you from the day-to-day details of managing your wealth, so you can pursue your own personal and professional goals.

 

The highest credentials at your service

Only a select group of RBC Dominion Securities advisors are able to offer discretionary portfolio management services through Private Investment Management. In order to offer Private Investment Management, advisors must possess a certain level of experience managing significant investment assets, in addition to completing advanced investment industry accreditations. Applicants are then presented to the board for review and approval.  I am pleased to be able to offer this service to clients.

 

A fully customized experience

With Private Investment Management, you receive a completely customized portfolio, designed in close consultation with you, then managed on your behalf to free your time. Your individual portfolio is built from the ground up based on factors such as your growth requirements, income needs and risk tolerance. Furthermore, you hold segregated securities in your portfolio – providing you with greater flexibility in how your portfolio is structured. We will handle all the details on an ongoing basis, working within specific guidelines, which are established in your customized Investment Policy Statement. We are always accountable to these guidelines, which are reviewed at least annually and updated in consultation with you.

 

Advantages of personal discretionary management

 Fewer missed opportunities. We are able to take advantage of investment opportunities quickly and efficiently because your approval is not required for every single transaction. A careful process involving strict guidelines, checks and balances, and formal reviews ensures that your portfolio is managed to the highest standards of ethics and professionalism.

 

A personal touch. Most discretionary accounts offer portfolio management through a centralized source – usually an institutional investment management firm. While you enjoy a high level of money management, you don’t have a personal relationship with your Portfolio Manager. With Private Investment Management, you can sit down with us one-on-one to discuss your needs. It’s this personal understanding that makes Private Investment Management unique. It also gives you a greater degree of control compared to traditional discretionary accounts, where people you are unlikely to ever meet manage your wealth. Because you have a personal relationship with us, your portfolio can more accurately reflect your individual needs and goals on an ongoing basis.

 

Minimize your risk. Your portfolio will also be reviewed quarterly by our Private Investment Management Portfolio Risk Group to ensure it is managed according to the terms of your Investment Policy Statement. The Portfolio Risk Group also reviews your portfolio based on a second set of guidelines that overlay the entire program. These guidelines are in place to ensure that all Private Investment Management clients hold quality investments and a suitable asset mix for their situation

 

If you desire the freedom to pursue your interests, while knowing that your portfolio is in the care of trusted professionals, I invite you to consider Private Investment Management. Please contact us at 416-231-5092 for more information.

 

 

Friday November 8, 2013
 

“Parents today might be surprised to discover what kids can do if they are left to their own devices.  We certainly learned to figure things out for ourselves.  If we wanted to play (hockey), we had to do the work to make it happen.  If there is no one there to tell you to play nice, you figure out pretty quickly that there really is a code, and kids naturally respect it.”

 

Bobby Orr
Bobby Orr: Great Book. Put it on your list.

 

Did you know that as a client you can have access to many specialized resources to help manage your personal financial and estate planning?  Although the term “Family Office” is often tossed around in the financial community, I like to believe that it is a service that my clients can truly enjoy.

By drawing on the RBC Wealth Management Services' team of highly accredited lawyers, accountants and financial planning professionals, we are able to deliver a level of integrated wealth management expertise that previously was available only to the most affluent families.

The professionals within RBC Wealth Management Services and I, will work with you to help meet your goals by providing the personalized advice required for your unique financial and personal situations.  As you may be able to appreciate, having dealt with families for many years, we have seen a lot of unique situations and have created many solutions to meet personal and business needs.

Creating unique solutions to accommodate your credit needs is only one of the many services offered by our Private Banking Team.  Safeguarding your children’s inheritances is a common concern that our Estate Planning Lawyers face regularly.  Tax questions are regularly fielded by our accountants in the Financial Advisory Group. 

As a client, don’t forget to take advantage of the services that are included and part of our relationship.

Friday November 1, 2013
 

“There is no exercise better for the heart than reaching down and lifting people up.”

John Holmes - Writer, "Politics of Humanity"
 
If you have ever driven through France’s Burgundy region you may have noticed a glorious building roofed with patterned tiles of yellow, red and other colours.  It is of course the Hotel-Dieu and November is the month of the annual charity auction.  Christies will be managing the auction and for those who cannot attend, there will be website access to the live auction.

 

Each year, on the third weekend of November, Beaune plays host to the world's most famous charity wine sale. Professionals, connoisseurs and wine lovers come together for two days of festivities, the epitome of pure Burgundy tradition.

 

Nestling in the heart of  Burgundy, Beaune is the capital of wine and the domaine des hospices, its historic emblem. Beaune and its hospices (charitable institution) have been passing on the singular taste of the grapes of Burgundy since the 15th century. These highly sought-after wines are drunk around the world and this is largely thanks to the internationally renowned annual charity auction.

 

The auction takes place in a unique setting: the Hôtel-Dieu is an extraordinary collection of hospital buildings with their glazed coloured tiles, built by Nicolas Rollin, chancellor of Philippe le Bon (Philip the Good), Duke of Burgundy, in 1443. Since 1471, vast tracts of land have been donated and bequeathed to the Hospices de Beaune and its vineyards extend throughout the côtes de Nuits and the côtes de Beaune. And since 1859, the Hospices' prestigious vintages have been sold by candlelight on the third Sunday of November every year. For several centuries now, the entire proceeds of this exceptional charity auction have been dedicated to the charitable and religious works of the old hospices as well as new civil and secular hospital institutions.

 

As an aside, if you think buying a barrel of wine is a bit much (288 bottles), bottles are available within the town of Beaune. 

 

 

Friday October 25, 2013
 
“I owed the government $3,400 in taxes.  So I sent them two hammers and a toilet seat.” 
 Michael McShane

 

 

As year-end approaches your thoughts may be turning to the holidays, winter sports, spending time with family and friends, and of course ... year-end tax planning! Well, to be fair, perhaps tax planning is not the first thing you think of, however, taking a few minutes to review your financial affairs can yield significant tax savings. To ensure that you leave no stone unturned, I have summarized a popular year-end tax planning technique.

 

Understanding that there is risk when investing your capital, the Government does offer an attractive tax rate on “capital gains” that you earn.  You are taxed at your personal tax rate on only 50% of the capital gains you realize. 

 

To further minimize your taxes it is important to “net out” where possible any gains against any losses that you may have incurred.  This would then minimize your net taxable capital gain for the year. 

 

The strategy of selling securities at a loss to offset other capital gains realized during the year is probably the most popular year-end tax planning technique. When disposing of an investment, you must remember that the sale for Canadian tax purposes will be deemed to have taken place on the “settlement date”. 

 

Any capital losses generated that cannot be used in the current year can be carried back three years to be applied against capital gains of prior years (i.e., 2010, 2011 or 2012) or carried forward indefinitely. Note that this is the last year which you can carry your losses back to 2010 and offset them against your 2010 capital gains.

 

Although it is important to reduce taxes whenever possible it is important to ensure that any such action is within the context of your overall long term plan. 

 

As the year end approaches I will be reviewing your account for opportunities and as always will welcome your comments.  This is also a good time of year for me to have a chat with your accountant, as they typically keep good records of your historic gain/loss position. 

 
Friday October 18, 2013
 

“One hundred percent of the shots you don’t take won’t go in (the net).”

Hockey Dad

Howard Buffett, son of Warren Buffett.

If you had the resources to accomplish something great in the world, what would you do? That was effectively the question my dad, Warren Buffett, posed to my brother, sister, and me in 2006 when he announced he was giving the bulk of his fortune away to philanthropy. With what is now around $3 billion for each of our individual foundations, he made one thing crystal clear: we should work on the most difficult challenges and sometimes we should expect to fail. As he put it, “You can bat a thousand in this game if you want to do nothing important. Or you’ll bat something less than that if you take on the really tough problems.”

It took me almost a decade to realize that his encouragement to take risks was just as important as the financial resources he provided.

Initially our foundation focused on animal and habitat conservation. It didn’t take long, however, to figure out that poverty and hunger drive vulnerable people to do things they would not otherwise do – like poach elephants, kill cheetah, slash and burn rainforests, grow illegal drugs, or even kill each other over limited and valuable resources. I realized I couldn’t accomplish my goals in conservation without focusing on people first. Nearly one billion people in the world go to bed every night hungry or unsure where their next meal is coming from. And that level of suffering in turn fuels conflict, environmental degradation, human trafficking and other acts of desperation.

Within a few years I realized that much of the money my foundation had spent had made very little permanent difference. Yes, we had helped protect pockets of endangered species, and we had provided vital help to people in short-term crisis. But the standard development playbook dependent on aid was not addressing the fundamental causes of what we wanted to change.

Frustrated and impatient, I knew we had to figure out how to do things differently. And I realized if a private family foundation can’t take chances on new ideas, then who can? As I’ve written about in my new book, 40 Chances: Finding Hope in a Hungry World, taking higher risks meant making mistakes – and I made enough to have lots of interesting stories to tell. But in the process I gained a much clearer idea of what needs to change if we really want to address global food insecurity.

For example there is Joe Whinney, the CEO of the Seattle premium chocolate company Theo Chocolate. I think of Joe as the equivalent of a “special forces entrepreneur.” Joe is a risk-taker who sees potential even in conflict – in his case the eastern part of the Democratic Republic of the Congo, one of the poorest, most conflict-ridden, and frankly most dangerous places on earth. Today, Theo sources significant amounts of cocoa and vanilla from the DRC, creating sustainable livelihoods for local farmers with few other good options for survival.

Eva Longoria, a serious and thoughtful philanthropist who also happens to be a successful actress and producer, is also not content with the status quo. She is investing in low-income, Latina entrepreneurs in the United States, offering microloans so that women at high risk for food insecurity – a problem for 1 in 6 Americans – can start businesses and secure a better future for themselves and their families.

Former Prime Minister Tony Blair and I took very different paths to working on development, but we share a common belief that leadership and governance are vital. That is why I am partnering with his Africa Governance Initiative in Sierra Leone, Liberia, and other countries.

I am drawn to people like Ed, Joe, Eva, and Tony because I relate to their way of thinking and decision-making. I am not the kind of person who suffers from analysis paralysis. I trust my gut, and when I see a problem I jump in and try to fix it. That can be messy, I know I will make mistakes, but I always learn something that makes me smarter on the next go-around. Ed, Joe, Eva, and Tony are the kind of people who not only work intensely toward the right goals, they will keep improving the process as they go so others don’t keep making the same mistakes.

In my day job I am a farmer. In farming, you have on average 40 growing seasons – or 40 chances – to produce the best crop possible. We have to learn something every year to increase our odds that next year’s harvest will be better than the last, and there are plenty of variables outside our control like weather that we have to work around. This applies in life as well, and it is a way of thinking that has shaped my views on philanthropy and the risks we need to take to really accomplish something important.

I think my dad’s advice about risk applies whether your passion to create change involves business, philanthropy, or your personal life (or some combination of all three). Remember to ask yourself:

What are the risks worth taking to achieve something truly important?

What is my unique advantage and how can I best leverage it? (in my case, the freedom of running a private foundation)

How will I embrace and learn from failure?

Most importantly, we all need to remember that we have a limited time window to create impact. So I urge you: don’t worry about your batting average but about how to make the most of your 40 chances.

Friday October 11, 2013
 

“If you can’t live through adversity, you’ll never be good at what you do.  You have to live through the unfair things and keep you eyes focused on what you have to do.”

 

Hank Greenberg, CEO

 

Best wishes for the Thanksgiving Weekend!  Hope to talk soon.

 

 

1. According to the Butterball corporation, they recommend that you thaw a wrapped turkey in the refrigerator how long per 4  pounds of bird?

 
(a) One hour per 4 lbs.
(b) 8 Hours per 4 lbs.
(c) One Day per 4 Lbs.
(d) 4 hours per 4 Lbs (or one hour per pound)
 
2. The first department store to hold a Thanksgiving parade was:
 
(a) Montgomery Wards
(b) J.C. Penney's
(c) Gimbel's
(d) Macy's
(e) None of the above. It was a non-commercial event.
 
3. Butterball says that once the turkey is done, you should let it stand for 15 minutes before serving because:

(a) So you don't burn your tongue when you eat it.
(b) It's easier to carve
(c) To let the aroma go through the house.
(d) To let the stuffing cool a bit before you take it out.

 

4. What was the name of the ship the pilgrims came over on?
 
5. Before being harvested and sold, an individual cranberry must bounce at least how many inches high to make sure they aren't too ripe?
 

(a) 1 inch
(b) 2 inches
(c) 3 inches
(d) 4 inches

 

6. Turkeys can drown if they look up in the rain. True or False?

 
7. How fast can a turkey run?
 

(a) 7 mph
(b) 11 mph
(c) 18 mph
(d) 25 mph

 
8. Baby turkeys are called?

(a) Chicks
(b) Poults
(c) Tommies
(d) They don't have a name for them.
 
9. What are unhappy cranberries called?
 

Thanksgiving Quiz Answers:  1.(c), 2. (C), 3. (d), 4. (Mayflower), 5. (d), 6. True, 7. (d), 8. (b), 9. Blueberries!

 

 

Friday October 4, 2013
 “Decide that you want it more than you are afraid of it.”

Bill Cosby

Already this week I have had several discussions with clients regarding their children’s Registered Education Savings Plan.  Perhaps it is the fact that kids are back in school or simply that the calendar year end is fast approaching, regardless parents and grandparents understand the value of giving the gift of knowledge.

There are several different ways you can save for a family member’s education – but a registered education savings plan (RESP) offers tax-deferred investment growth and direct government assistance (free $$) to help you reach your education savings goals. 

As a client we can offer you Family RESP plans that allow you to name more than one beneficiary under the same plan.  You can also name more than one subscriber (contributors).  The lifetime contribution limit for each child named in the plan is $50,000 therefore if both the parents and the grandparents are contributing the limit is still only $50,000. 

Plans that are started early in the child’s life can grow considerably through compound earnings.  The growth is sheltered and deferred until the child withdraws the funds and given their very low tax bracket at that time, most often little or no income tax is paid by them. 

Probably the biggest attraction of RESP’s are the fact that each year (up to the child’s age 17) the Government will give you a grant of up to $500 which is directly deposited to the RESP (equal to 20% of your contribution, up to a maximum of $500 per year, lifetime total maximum grant $7200). 

Translation:  You contribute $2500 to your child’s RESP each year and Government gives you $500 each year.  You do this for 15 consecutive years to get the maximum.  The money grows at 6% each year and after 15 years you have $81,639.

Execution:  At Thanksgiving Dinner while grandparents are have children sitting on their lap show them this blog.  Tell them that for only $209 a month (we take monthly deposits) that they can ensure their lovely grandchildren can afford to get an education, a gift they will never forget.

My Phone Number:  416-231-5092

Friday September 27, 2013

Be careful when things are going well, because you can be a rooster one day and a feather duster the next.”

Syd Fischer, Australian Yachtsman

 

This week while I was walking down Bay Street I couldn’t help but notice a guy in front of the old Stock Exchange, with no shoes on, standing in a box of topsoil, wearing tree branches sticking out of his head and shoulders, with water dripping from his fingers.  Not sure what to make of that? 

Predicting investment returns is one of the most frequent questions we are asked, and one of the most difficult to answer.  There is no guaranteed answer (unless we are talking about Guaranteed Investment Certificates) and thus our response is always tempered by saying something like, “it depends on the asset mix and the time frame”.  In addition the skill of the portfolio manager is a major factor, as are management fees. 

The Government’s Canada Pension Plan (CPP) is using an after-inflation rate of return target of 4%.  This is based on an assumed long term inflation target of 2%.  Thus the number they use is about 6%.  Remember this number is a long term estimated return over a period of perhaps 20 – 25 years.

Based on actuarial calculations and investor forecasts, 6% seems to be the consensus number for a well balanced (65% equity / 35% fixed income) actively managed portfolio.  A good portfolio manager can improve those returns and reduce volatility along the way, and avoiding over priced fees can obviously help too. 

So what does this all add up to?  If you have $500,000 in your RRSP at age 65 and begin withdrawing $3,000 per month, you will run out of money somewhere around age 93.

Friday September 20, 2013

“You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.”

Warren Buffett

Being able to retire at 65, with an RRSP that can support you, and a spouse to share retirement with
is like “hitting a triactor” these days, but if you’re so lucky here are a couple of things to keep in mind:

Recent changes by Canada Revenue Agency (CRA) allow Canadians to split pension incomes with their spouses for tax purposes.  This can result in substantial tax savings for one partner is in a lower tax bracket.  Furthermore it can mean that OAS benefits, which may have been clawed back for the higher income earner, might not be clawed back and thus result in a greater income for the household. 

Keep in mind that not all income qualifies to be split.  Generally any pension income such as annuity-type pension payments from a pension plan, RRIF (registered retirement income funds) and LIF’s (Life Income Funds) are all eligible.  Note that RRSP withdrawals are not eligible as they would not be considered pension income. 

One other “factoid” is that the first $2,000 of pension income that one receives qualifies for the Federal Pension Income Credit, and is non-taxable.  So, even if you don’t need to convert your RRSP into a RRIF at age 65 (due to ample other sources of income) you might want to at least move enough money from your RRSP into a RRIF to allow you to take out $2,000 a year tax-free pension income from your RRIF.

Obviously your tax advisor is the best person to review and confirm the above ideas with.  As always you should not act until you have discussed such strategies with your personal advisor.

Friday September 13, 2013

“When I let go of what I am, I become what I might be.”

 

Lao Tzu

 

A young man I know spent a couple of summers building up a clientele of neighbours who needed their lawns cut.  He went out every week and cut their lawns, adding a few clients here and there.  The following year he had the same people and a few more, but what should he do once he finishes school and starts working fulltime?

 

It’s really surprising how many business owners don’t recognize the value that others would pay to buy their businesses.

 

Many business owners in Canada will exit their business by selling to a non-family member. However, only a small percentage of owners planning to transfer their business in the near future have a succession plan.

If you’re selling your business outside the family, bear in mind the factors that can make it more attractive to a prospective purchaser. It will be easier to find a buyer for a business that has potential for future growth. Other corporations in your business sector may also be interested in acquiring your business with a view to improving profitability.

Valuation is of central importance. You can get an indication of this by researching the selling price of similar businesses in your area.

To help you find a purchaser and obtain a better offer:

> Have a valid reason to sell

> Don’t wait until you’re under pressure to sell for economic or emotional reasons

> Have financial statements and other essential information professionally prepared for the sale

> Consider hiring a business broker to help you identify a purchaser

> Don’t let the business decline while you’re preoccupied with the sale

> Learn to judge whether a potential buyer is serious

Assemble a team of experts to help you

Your team of experts should include an experienced tax advisor to ensure you have planned your sale in the most tax-efficient manner, a qualified legal professional to prepare legal documentation and a business valuator.

As a business owner don’t wait until your ready to retire to start looking into an exit strategy.  Start exploring it now.  Keep your thoughts in your back pocket, revisit the plan and you’ll be ready to act when you want to, and also be ready to act should the situation be thrust upon you.

 

Friday September 6, 2013

 

“The highest test of courage and integrity is to be yourself in the face of adversity – choosing right over wrong, ethics over convenience and trust over prosperity.”

 

Author Unknown

 

Prompted by an article in this weekend’s Globe & Mail article by Rob Carrick, I think September would be a wonderful time for us to review our financial plans, assess our current situation and make any minor adjustments that might be necessary.  We have the kids back in school, summer holidays are over, the snow birds haven’t flown south yet and there is still time to make any year end tax changes that might be advantageous. 

 

As a client, part of our service includes helping you develop a financial plan that focuses on your personal dreams, aspirations, goals and needs in the future.  Aside from our expertise at managing money, we offer guidance and assistance that covers all of the steps for your financial future.  According to the Financial Planning Standards Council, those steps include:

 

Management of day to day finances:  banking, mortgage, investment loans, credit.

 

Investments:  professional money management that is in sync with your plan.

 

Estate Planning:  Will, Powers of Attorney, Trust services.

 

Managing Financial Risk:  disability and life insurance.

 

Taxes:  Ensuring that you enjoy all the tax benefits

 

Retirement:  Providing the income your desire

 

Life Events:  a new car, a new baby, weddings, deaths, education savings.

 

As a client of the Doyle Wealth Management Team at RBC Dominion Securities you have an opportunity to enjoy and benefit from services that are simply not available elsewhere.  Ironically, part of our service is to keep your costs as low as possible.  If you are a client and would like to take greater advantage of our services or if you are someone who simply would like to learn more, then contact us.  We look forward to chatting.

 

Friday August 30, 2013

"One sometimes finds what one is not looking for."

Alexander Fleming, Discoverer of Penicillin

 

In recent years, interest rate returns on bonds, GIC’s and other “safe” investments have declined and remained quite modest relative to their historic levels.  In addition, on a personal taxation level, interest income is fully taxable, leaving you much less on an after-tax basis.  To make matters worse a guaranteed income from a GIC for example is fixed, and thus not increased with the rate of inflation. 

 

Fixed income investments such as GIC’s and bonds do play an important role in the make-up of a well balanced portfolio.  They provide stability, no risk, and that guaranteed stream of income.  Fixed income investments definitely serve a purpose that is needed by most investors. 

 

At the same time however, as you build a portfolio to serve your income and retirement needs either now or in the future, you must also consider the important role that equities play.  In particular understand the importance of good quality blue chip equities that pay dividends, and regularly increase those dividends. 

 

In recent weeks Canadian investors have witnessed turmoil in the telecommunications industry and witnessed the stock prices of such names as BCE, Telus and Rogers fall.  Other sectors of the economy also have (and will) come under pressure from time to time too.  Such volatility is why some people simply avoid owning equities altogether … there is volatility and risk. 

 

Risk also presents opportunity, as the proverb states.  RBC research recently published an article reminding investors that dividend growth is an important quality attribute when considering purchasing stocks.  Looking back since the 1930’s RBC’s strategy group has found that dividend investing outperformed.  The resilience of the dividend strategy stems from the fact that the dividend, and in particular a dividend increase, is a reliable signal of ongoing fundamental performance.  Simply put, healthy and growing companies are typically the ones that can grow dividends over long periods of time.  More over, such stocks provide investors with reasonable capital growth over the long term. 

 

Taking into account the dividend tax credit and the capital gains tax treatment in Canada the argument becomes even stronger.

 

Did you know that if you had bought Royal Bank shares 20 years ago that today you would be earning a dividend income of 33% on your investment (and earn a dividend tax credit)?  That’s right, your $1 million investment would be paying you $330,000 a year, that is until they raise the dividend again. 
                  

Friday August 23, 2013

“The yield for the 2013 Champagne harvest has been set at 10,000 kilograms per hectare, with an additional 500kg/ha allowed to be released from producers' reserve stocks next February”

 Comité Interprofessionnel du Vin de Champagne (CIVC) has announced (August 2013)

In light of the relatively strong performance from stocks this past year (assuming you have your portfolio held with us) this news on the Champagne front may be of interest as you celebrate your successes later this year.  For those who prefer to reinvest their gains I have attached the following article (is this a hint about something that may be happening in November?):

Art collecting: A winning pursuit

Starting to collect art may be a way to find pieces that resonate deeply with you, an opportunity to give back to the art community or a mode of investment that may pay off in the long run. Regardless of what you’re looking for, you’ll find yourself rewarded.

 

Don’t know what you like?

If you don’t know what you like then you just need to do a little research, whether at home or on the road. There are plenty of sites to search, magazines to read, galleries and museums to visit, people to ask, and even more types of art to choose from.

 

You may want to focus on a particular genre because most collectors specialize in order to gain solid expertise in one category.

 

Decide what to spend

You should create an annual budget, whether it’s $1,000 or $100,000. If your plan involves less than $30,000 you’re going to have better luck finding pieces in the contemporary category (from the past 20 to 30 years). At $5,000 or less, prints and drawings, instead of paintings, are your best bets. At the low end of an art-buying budget, the best prices are for multiple-edition works such as photographs and prints, rather than unique pieces, like oil paintings.

 

Gallery rules and lingo

There are certain universal rules and jargon that you should remember when walking into a gallery. A red dot stuck on a painting's label means the work has been sold. A green or half-red dot indicates another buyer has reserved the work or has a right of first refusal. More art lingo to remember: ''Primary'' market means a work's first sale, usually through a dealer. ''Secondary'' means a resale of a major work, via a gallery or auction.

  

Friday August 16, 2013

 

"One should expect that the expected can be prevented, but the unexpected should have been expected."

Norman Ralph Augustine

 

Do you have your family covered on your vacation?

 

Between deciding where to go, what to pack and how to keep the kids busy, Canadian families heading off for a much needed holiday escape can easily forget about travel insurance. In fact, a recent RBC Insurance survey found that among the 39 per cent of Canadians planning to travel outside of Canada within the next year, only 60 per cent are planning to purchase travel insurance for their upcoming trip.

 

"It's surprising that so many Canadians don't think about purchasing travel insurance before their vacation," says Isabelle Forget, Head of Travel for RBC Insurance. "The last thing travelers want to find out is that they either don't have travel insurance or they don't have the right coverage when something unexpected happens."

 

Here are a few questions you should ask yourself before leaving on a family vacation:

 

Are there any gaps in your existing travel insurance coverage? Government health plans, employee plans and credit cards may only provide a limited amount of coverage.

 

Does your travel insurance extend to your children? Many employer plans have an age limit for children covered under their parents' insurance.

 

Who will care for your child if you are hospitalized during your trip? Travel insurance can help ensure that arrangements be made for the safe return of your child back home, with an escort if necessary, or cover the cost for  someone to come to your bedside.

 

Does your existing medical insurance arrange direct payment of medical bills? Many hospitals and treatment centres require up front payment for medical costs.

 

Are you prepared to handle additional costs? If you or your children require hospitalization, you may incur unexpected expenses. In addition to hospital fees, you may need to make numerous international calls back home as well as pay for a hotel and meals beyond your original trip, which can quickly add up.

 

What if you have to cancel your trip before you go for an unexpected medical emergency? Or miss your flight because of weather conditions? Travel insurance can provide coverage for trip cancellation or trip interruption.

 

Are your family's baggage and personal belongings protected? It can be expensive to replace lost or stolen luggage. What if your baggage is delayed? Travel insurance can provide protection for lost or damaged baggage, or when your baggage is delayed.

 

Get coverage that's right for you, contact us for more information.

 

Friday August 9, 2013

 

I really had a lot of dreams when I was a kid, and I think a great deal of that grew out of the fact that I had a chance to read a lot.”

Bill Gates

When was the last time you read a book, or a substantial magazine article? Do your daily reading habits center around tweets, Facebook updates, or the directions on your instant oatmeal packet? If you’re one of countless people who don’t make a habit of reading regularly, you might be missing out: reading has a significant number of benefits, and just a few benefits of reading are listed below (taken from Lana Winter-Hebert’s article in Lifestyle).

1. Mental Stimulation

Studies have shown that staying mentally stimulated can slow the progress of (or possibly even prevent) Alzheimer’s and Dementia, since keeping your brain active and engaged prevents it from losing power. Just like any other muscle in the body, the brain requires exercise to keep it strong and healthy, so the phrase “use it or lose it” is particularly apt when it comes to your mind.

2. Stress Reduction

No matter how much stress you have, it all just slips away when you lose yourself in a great story. A well-written novel can transport you to other realms, while an engaging article will distract you and keep you in the present moment, letting tensions drain away and allowing you to relax.

3. Knowledge

Everything you read fills your head with new bits of information, and you never know when it might come in handy. The more knowledge you have, the better-equipped you are to tackle any challenge you’ll ever face.

4. Vocabulary Expansion

This goes with the above topic: the more you read, the more words you gain exposure to, and they’ll inevitably make their way into your everyday vocabulary. Being articulate and well-spoken is of great help in any profession.

5. Memory Improvement

When you read a book, you have to remember an assortment of characters, their backgrounds, ambitions, history, and nuances, as well as the various arcs and sub-plots that weave their way through every story. That’s a fair bit to remember, but brains are marvelous things and can remember these things with relative ease. Amazingly enough, every new memory you create forges new synapses (brain pathways) and strengthens existing ones, which assists in short-term memory recall as well as stabilizing moods. How cool is that?

6. Stronger Analytical Thinking Skills

Have you ever read an amazing mystery novel, and solved the mystery yourself before finishing the book? If so, you were able to put critical and analytical thinking to work by taking note of all the details provided and sorting them out to determine “whodunnit”.

7. Improved Focus and Concentration

In our internet-crazed world, attention is drawn in a million different directions at once as we multi-task through every day.

When you read a book, all of your attention is focused on the story—the rest of the world just falls away, and you can immerse yourself in every fine detail you’re absorbing. Try reading for 15-20 minutes before work (i.e. on your morning commute, if you take public transit), and you’ll be surprised at how much more focused you are once you get to the office.

8. Better Writing Skills

This goes hand-in-hand with the expansion of your vocabulary: exposure to published, well-written work has a noted effect on one’s own writing.

9. Tranquility

In addition to the relaxation that accompanies reading a good book, it’s possible that the subject you read about can bring about immense inner peace and tranquility.

10. Low Cost Entertainment

Visiting a library or spending an evening in your neighbourhood café can not only be relaxing when you take a book, but can also be quite interesting if you peek over the top of your novel and see who’s reading what!

“What are your summer reads?  What are you taking to the hammock this August?”

 

Friday August 2, 2013

“Whoever gossips to you, will gossip about you.”

 

Ancient Proverb

Regatta Day, Simcoe Day or Civic Holiday (depends on where you live in Canada) are all synonymous with the August Long Weekend. 

Enjoy, go fishing!  Here are some tips from Dan Hall, fisherman extraordinaire:

 

1. Think of fishing a pond as unraveling a puzzle. You must figure out the proper lure for the conditions of the day and the type of pond your fishing. Is it shallow, clear, or dirty? Does it have weeds, stumps or other places where the fish can hide?

 

2. Approach the pond quietly and carefully. Small bodies of water will transfer disturbances like bushes or weeds shaking in the water and shadows from you standing on the edge. Try to blend into the surrounding environment. Stand in the shade or back off so your shadow is not on the water.

 

3. Water clarity will help determine how deep the fish will be. The dirtier the water the more shallow the fish will relate. Remember if you can see the fish, they can see you and the harder it will be to get them to bite

 

4. On windy or overcast days the fish cannot see you on the shore as well as sunny calm days. Use this to your advantage in your lure selection. Calm days dictate surface lures because the fish can see lure breaking the surface layer of the water better than windy days. On windy days the ripple on the waters surface will help hide your image making the fish less spooked. This also tells you to use a sub surface lure such as a spinner bait pictured below, because the fish will be more aggressive and willing to chase a faster moving lure.

 

5. A medium action spinning rod and reel using 6 to 10 lb. test line should be a perfect combination for most pond fishing.

 

6. A small selection of lures is all that will be needed to cover the water from top to bottom. We will start with the surface. If the pond has a large portion of weeds on the surface such as lily pads or reeds, a weedless rat or frog such as the one pictured will be your first choice. Simply cast the rat into the pond and wait for the ripples from the lure landing on the water to dissipate. Twitch the bait with short movements of your rod retrieving it slowly in a pull-wait, pull-wait motion. Be ready, the fish will usually hit the lure while it is at rest.

 

7. Another surface presentation is a fluke or slugo, which imitates a dying baitfish. This is a great lure if the pond weeds are below the surface. Cast the lure in and retrieve with short jerks to let the lure go side-to-side looking like a dying fish. When the fish strikes this lure, WAIT! Do not set the hook until you feel the weight of the fish or see your line moving sideways. This is an excellent lure but requires patience on the hook set to keep your catch ratio high.

 

8. A shallow running stick bait such as the one pictured can be excellent if there aren’t many weeds because the two treble hooks have a tendency to catch on anything near the hooks. Cast this lure and retrieve, reeling slowly, pausing every couple of feet or cast and retrieve with a rapid pull-wait motion. Let the fish tell you which method is best.

 

9. A spinner-bait or safety pin lure (pictured) will help you search the surface to mid-depth areas of a pond. Simply cast the lure out and retrieve fast enough to feel the blades thumping in the water. Vary your retrieve until the fish bite. Example: retrieve steady with small pauses. Yo yo the lure by letting it sink toward the bottom, then retrieve and sink again.

 

10. A weedless rubber worm such as the one pictured (A Charlie Brewer Slider Head with worm) is an excellent lure to use along the bottom of the pond. Cast this lure in and let it sink to the bottom. You can tell when the lure reaches the bottom because your line will go slack. Move the worm by raising your rod tip, pausing, and again watching the line go slack. Continue this motion slowly letting the lure rest on the bottom each time. When the fish eats the worm you will feel a slight tick or the slack line will jump or start moving sideways. Set the hook hard because the hook point must exit the worm body to penetrate the fishes mouth.

 

11. The sink worm or Senko rigged “wacky style” is a great method for catching big fish and is easy for a novice to use. Wacky style simply means hooking the worm in the middle with a weed less hook as pictured. Cast the worm and wait as mentioned above until it sinks to the bottom. Then move the worm slowly with a hopping motion.  When the fish bites and you feel a peck, WAIT! The line will start to move to the side or out away from you. When the line gets tight, set the hook and hang on.

 

12. Remember to use good conservation practices when fishing. Keep only what you can eat if you must keep fish. Use catch and release when ever possible so other people can enjoy the sport.  Clean up your mess and help keep the area around the pond clean whenever you are there. Ask permission and always thank the owner of the pond for letting you fish. The twelve tips mentioned above should help you become a better angler and up your odds of catching and enjoying pond fishing.

 

 

1.       

Friday July 26, 2013

Things may come to those who wait, but only the things left by those who hustle.
Abraham Lincoln

Despite their young age, Generation Y are already investing and looking for trusted advice about their finances.  According to a report produced by TD Investor Insights released on Monday, Gen Y is investing almost a fifth of their income and would like to increase this to up to about 30%, all while paying off student loans and trying to get into the housing market.  Family members have driven this early interest, with 41% of Gen Y investors saying they started to invest because of family encouragement.

Setting up automatic savings contributions and putting finances and budgets into perspective at an earlier age offers more growth potential for the younger investor.  We would be happy to meet with you and your children to discuss the benefits of financial planning earlier in life and working out a savings strategy that they can understand and achieve.

 

Friday July 19, 2013

“Necessity is the mother of taking chances.”

 

Mark Twain

 

I consider myself to be very lucky in that I have had the opportunity to meet and become friends with many successful people:  People from all walks of life who have become leaders in their particular sphere.  Generally these people are happy, outgoing, hard working, persistent and never give up.  But, why?  Why is it that some people are very successful and others are not? 

 

It is a question that has been tossed around by business professors, psychologists, and even a few parents.  The best answer that I have been able to come up with is that these people are motivated.  They have self-motivation (if there is such a word).

 

The motivation can come in the form of a “passion” to do something or simply from a “fear”, but it must come from within.  The motivation removes failure as an option.

 

As I said, I consider myself lucky to know so many people who do the craziest things for a living but are very successful. 

 

Friday July 12, 2013

 

"A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."

 Winston Churchill

 

If history is any guide, both the economy and the markets will eventually recover - despite all the negative headlines. As an investor, it's important to be properly positioned for the recovery well in advance.

 

No one can say exactly when we'll see a recovery. What looks like the beginning of a new long-term bull market today could turn out to be a short-lived "bear market rally" months from now - or vice versa. The key thing for investors to know is that the markets have always recovered strongly, even after a major economic crisis that, at the time, had many people doubting they ever would.

 

History tells us that the markets will recover - but it doesn't tell us exactly when. However, it does give us some clues. Most importantly for investors, history shows that the stock markets are a "leading indicator" of economic recovery - that is, they tend to recover before the economy as a whole.

 

Since the Second World War, the longest recession has lasted about 16 months. If the current recession lasts as long, then we should start to see signs of an economic recovery later this year. As a leading indicator, stock markets should recover even earlier. For investors who have been sitting on cash, waiting for the economy to pick up before getting back into the markets, this is a crucial point. Waiting for actual signs of economic recovery could mean missing out on all or part of the stock market recovery

 

Friday July 5, 2013

 

"The greatest use of life is to spend it doing something that will outlast it."

Williams James, Psychologist

 

Frequently our financial planning reviews and discussions turn to the subject of estate planning.  It is a subject that can be very sensitive, emotional, and require the expertise of professionals.  As part of our “home office” approach to managing your financial affairs we offer you the opportunity to meet and speak with our lawyers, accountants and trust representatives during one general meeting.  Naturally this service is available to you at no charge since it is all part of the process we use to ensure your long term goals and objectives are met.

 

One topic that invariably comes up for discussion is the use of “trusts” as a vehicle for distributing Estate assets.  Below I have an excerpt pertaining to Testamentary Trusts in particular.

 

In addition to a direct or outright distribution of estate

assets to beneficiaries, assets can be left to a testamentary

trust for the benefit of your beneficiaries. A testamentary

trust only takes effect at death. The creation of the trust is

documented within the text of the Will.

 

A testamentary trust allows you to pass specific assets to

beneficiaries without allowing them to gain control of the

assets. The assets held in the trust are invested and

managed by the trustee of the trust with income and

capital distributed to the beneficiaries in accordance

with your wishes as stated in the Will.

 

Often the trustee is also the executor/liquidator of the

estate, although you may wish to consider a separate

person to act in this capacity.

 

Typical situations where a testamentary trust might be

used include:

Spousal trusts - a trust established for the benefit of the

surviving spouse for their lifetime. Commonly,

remaining assets pass to the children on the spouse’s

death. This is an effective income-splitting opportunity

since the income in the trust can be taxed at its own

graduated tax rates separate from the spouse.

 

Trusts for minor children - established to support the

children until they reach the age of majority or beyond.

 

Trusts to provide continuing financial support for

disabled children.

 

In Quebec, if you have minor children to whom you

want to leave money, a trust is not required, but it may

be beneficial - at least until they reach the age of

majority. In Quebec, it is the responsibility of the tutor

to hold and administer the funds for the minor child.

However, if you want to bequest assets to a minor and do

not want the assets administered by the children’s tutor

then it would be wise to include this fact in your Will.

Trusts for adult children - used to protect an inheritance

from potential creditors or a divorce settlement. This

use can also provide income-splitting benefits since

income in the trust can be taxed at the trust’s tax rate.

 

Spendthrift trusts - and trusts for family members with

special needs.

 

Insurance trust - proceeds from a death benefit of

an insurance policy can be transferred to a trust.

This arrangement can avoid probate taxes, offer

the deceased some control over the asset and offer

income-splitting opportunities.

 

Friday June 28, 2013

 

“Become so wrapped up in something that you forget to be afraid.”

 

Lady Bird Johnson, First Lady

Best wishes for a safe and fun Canada Day celebration.  As the unofficial kick-off to the summer of 2013, I hope this weekend helps you set the mood for a relaxing and well deserved rest following a rather long winter. 

 

Here is a checklist of things to do between now and Labour Day that you might want to add to your list:

 

·        See a movie at the drive-in

·        Blow bubbles

·        Play golf

·        Go fishing

·        Sleep outdoors in a tent or on the beach

·        Experience an early morning canoe ride on a misty lake

·        Lie in a hammock

·        Go swimming

·        Eat El Fresco

 

E-mail some of your ideas for us to share with others.

 

Friday June 21, 2013

 

“Stare at the dark too long and you will eventually see what isn’t there.”

 

Cameron Jace, Snow White Sorrow

 

This week Ben Bernanke “pulled away the punch bowl” and the party began to peter out.  Guests were seen leaving throughout the week, cashing their chips at the door and wobbling toward the exits.

 

Ben Bernanke’s statement itself is really quite open to interpretation and even at that, the US Federal Reserve’s comments this week about reducing economic stimulus in the economy hinges upon there being evidence of sustainable economic growth.  Translation:  if we see rising employment, improved demand in the economy and expansion then there will be no further need to stimulate the economy and thus the Fed will reduce its activities.  Makes sense to me.  Then we shouldn’t bail out of the market?

 

If there is a change in interest rate policy it would be because unemployment levels have fallen.  It would be because the economy is not in a recession, instead it is in a growth phase.  Economic expansion should lead to increased profits for the companies you own and as such they should become more valuable.  Growing economies lead to increased demand for goods and services.  Tax revenues rise for Governments under such scenarios and can be used to reduce debt.  Reduced Government debt is good. 

 

Although it has been nice when the banks were giving away money it seems that the party is over in that regard.  On the other hand the good quality blue chip companies that have been paying you dividends over the past few years are likely to enter a cycle of greater prosperity. 

 

Friday June 14, 2013

 

“A woman with a voice is by definition a strong woman. But the search to find that voice can be remarkably difficult.”

Melinda Gates, philanthropist, co-founder and co-chair of the Bill & Melinda Gates Foundation

You have until June 21st to place your order for Ontario Savings Bonds and I think most everyone should make some sort of a purchase … now that’s a rather broad statement don’t you think?  To clarify let me say this:  “As a savings vehicle for amounts less than $5,000 I cannot think of a safer way to encourage your children, grandchildren and others to set some savings aside.  For individuals too, Ontario Savings Bonds can be a great way to set aside some extra dollars for a rainy day.”

As you know, the principal and interest on the bonds is fully backed by the Province of Ontario.  They are available in amounts of $100 to $1,000,000 and can be registered into certificates so you can give them away to the grandkids, or if you prefer, they can be held in your account here. 

By way of disclosure I did work for the Bank of Canada (ironically I never made it to Governor) for a number of years in the “savings bond” division and witnessed the benefits that saving had on many Canadians that I came in contact with.  Let’s just say I am a big fan.

Friday June 7, 2013

 

“The ultimate freedom for creative groups is the freedom to experiment with new ideas.  Some sceptics insist that innovation is expensive.  In the long run, innovation is cheap.  Mediocrity is expensive – and autonomy can be the antidote.”

 

Tom Kelly, General Motors CEO

 

Roland Garros is in full swing!  My hero Roger Federer was knocked out in the quarterly finals.  I still think he is amazing. 

 

For wine enthusiasts who like to buy on the cheap; “heads up” the Vintages Bin Ends Sale is now on.  I think it is one of the best ways to pick up a real bargain on a well qualified wine.  This time of year the LCBO has a sale of Vintage Bottles that are simply the end of the Bin (only a few remaining bottles, so they put them on sale to clear the bin for the next arrival).  Simply go to the LCBO website and search online to see what’s left.  Each wine comes with a description, comment and usually a short write-up by someone from Wine Spectator or other wine critic.  I think it is a great way to find an interesting wine at 25% off the regular price. 

 

Finding a Chateau Latour at 25% off with reliable provenance is a feat in itself, but how do you know it is authentic, and if your not buying directly from the LCBO, how do you know where this wine has been before ending up in your cellar?  Effective January 2013 Chateau Latour began tagging each bottle that leaves the property with a unique foolproof tag.  Buyers can simply enter the code on the tag into Chateau Latour’s website and confirm authenticity as well (perhaps) as a little history on the bottle, adding all the more to the intrigue as you present the bottle to your guests. 

 

Friday May 31, 2013

 

“Nothing is often a good thing to do, and almost always a clever thing to say.”

 

Will Durant, Philosopher

 

As I was driving into work this morning, the talk on the radio centred on “what to do if you win the lottery this weekend” which is apparently valued at over $50 million.  Callers phoned in with their advice (one guy promised to buy everyone in his office a new car if he wins) on how to spend it and how their life would change.  It’s no wonder that in the USA 70% of large lottery winners end up declaring bankruptcy.

 

Now let’s suppose for a moment that instead of buying a new car or having a bath in Moet Et Chandon, you decided to become charitable with some of your lottery winnings or investment savings.

 

Donating securities

The federal government introduced several tax incentives in recent years to encourage charitable giving by Canadians, including the elimination of capital gains tax when you donate publicly listed securities to qualified charities. Not only do you receive a tax break, you also receive a donation receipt equal to the fair market value of the donated security.

 

For example, due to the donation tax credit, your out-of-pocket cost for making an in-kind donation of a security worth $100,000 with a cost of say $40,000, if your marginal tax rate is 45% is approximately $55,000. However, if you sold the security first and then donated the cash, your out-of-pocket donation cost would be $68,500 due to paying about $13,500 in capital gains tax.

 

We can help you determine which securities would be best suited for donation and assist in the actual donation to your charity. 

 

On the other hand you could just take the money and go shopping at http://gizmodo.com/5963882/everything-you-should-buy-with-your-550-million-lottery-winnings

 

 

Friday May 24,2013

 

“Do not be tempted by passing fashions, build for the future.”

 

Dramatic volatility in the Asian trading session has cascaded across the globe for the second consecutive day …Whipsaw trading was the order of the day in Japan … Selling pressure yesterday brought the year-to-date decline in copper to nearly 10%.”

 

Those were just a few of the headlines today on a relatively quiet Friday ahead of the long weekend in the USA.  It’s no wonder that one can easily get caught up in the excitement of the moment and make decisions that in no way reflect their long term goals and strategies.  Not only can knee jerk reactions cost money in the near term, but such decisions can derail your long term strategies and goals as well. 

 

How then does a busy person, trying to manage a career and raise a family, also ensure that their savings are being watched by someone who has their best interests and goals in mind?

 

One of the luxuries of having your investments managed by a Portfolio Manager from RBC’s Private Investment Management division is that they handle all of the day to day stuff … including today’s headlines.  As a client of the Private Investment Management (PIM) division of RBC, you enjoy having your own personal Portfolio Manager manage your investments and making adjustments regularly while you take care of the more important things in your life.  We create a personalized portfolio to meet your needs, provide complete tax summarized tax packages for your accountant, transfer monthly sums to your Canadian Bank, pay your tax installments, help you set retirement dates, offer Canada Pension Plan forecasts, retirement income projections, a personalized financial plan that forecasts your revenues and assets into the future, and of course daily access and contact with your portfolio manager and team. 

 

Portfolio Managers within RBC’s Private Investment Management division must meet rigorous requirements that include education, experience and temperament amongst many other things.

 

As a Portfolio Manager I would be pleased to meet with you at anytime and discuss the benefits of Private Investment Management.  Simply contact me at 416.231.5092 and we can arrange a time that works best for you.

 

Friday May 17, 2013

“Best Wishes for the Victoria Day Weekend!”

For those who are planning on taking advantage of the warm weekend ahead and do a little camping, here are some tips from the Discovery Program on how to avoid being eaten by a bear.

Rule No. 1 when you're hiking in bear country: make noise. Most bear attacks occur when hikers stumble upon and surprise a bear, often a mother and her cubs. Don't think they'll be easy to spot; even huge grizzlies can conceal themselves in the brush or the high grass of meadows (Personally I can attest to this strategy.  Since a friend of mine gave me “bear bells” I haven’t been eaten by a bear).

If you see a bear, fight the urge to run. Repeat after me: You can't outrun a bear. Bears can sprint for short distances at speeds up to 35 mph! And don't assume you can escape by climbing a tree. That only works if you have enough time to climb at least 30 feet high. Black bears are good climbers and grizzlies can climb at least partway up a tree. And if you're near water, e.g., a lake or river, don't get in the water and try to swim away from the bear. They can swim.

OFFER SOOTHING WORDS

What you need to do is stay calm and slowly begin backing away. If you are downwind and the bear hasn't seen you, try to make as little noise as possible as you slowly backtrack. If the bear sees you, however, you also should start talking to the bear in a calm, firm voice. That will allow him or her to identify you as a human. And try not to stare into the bear's eyes. The bear may interpret direct eye contact as aggressive behaviour; it's better to avert your eyes and turn your head to the side, a more submissive pose. As you move away, it's not a bad idea to stay upwind of the bear, if possible — you want him to know you're a human.

If you're in a group, stay together. You'll look larger and that could keep the bear from charging.

Often bears will bluff a charge, meaning they will rush toward you and then stop in close proximity to your position. It's a warning to back off. Heed the warning. Back off, slowly. But should the worst happen and the bear attacks, reach for your bear pepper spray. If you carry bear pepper spray, make sure it is easy to reach — it won't do you much good in your backpack, so keep it close to your hands. 

DUCK AND COVER

Sometimes, just the sound of the spray discharge will stop a charging bear. But if the bear keeps coming, as a last resort, drop to the ground and play dead. Either lie on your stomach with your hands protecting your neck, or lie on your side in a fetal position with your legs and head tucked into your chest. And keep your backpack on. It can serve as a shield. Basically, you want to protect your soft tissue and organs to the best of your ability against a large animal that is built to maul.

Finally, don't move or get up until you're certain the bear has moved a distance away. There's a story of one hiker who made the mistake of reaching for his bear spray while the animal was nearby, an action that provoked another attack.


TAKE A BANKER   

 This one is my personal favourite.  Get chummy with that banker who always has a problem with loaning you money (preferably the least athletic banker who spends most of his day in meetings).  Invite him along on your next trip to Algonquin Park and your bear fears vanish!  In the event of an attack all you’ll have to do is outrun the banker.

 

Friday May 10, 2013

 

It's a great advantage not to drink among hard-drinking people.”


F. Scott Fitzgerald, The Great Gatsby

Speaking of sobriety, RBC just released our Global Insight report for May 2013 (call me if you would like me to send a copy along to you).  Without going into too much detail here, the report was optimistic that world economic expansion will continue without encountering a major disruption (recession) during the year or more ahead.  Beyond that things may improve considerably but at this stage judgement is being reserved.  The following comments have been lifted directly from that report.

Near term, global equities could encounter a round of profit taking or could pull back following the strong rally since last fall. Any corrective phase should be manageable so long as economic conditions don’t unexpectedly deteriorate or policymakers don’t deliver unwanted surprises. During the next six to 12 months, most major equity markets have the potential to advance modestly if the U.S. economy can regain some momentum, if China continues to work through its economic transition process, and if Europe manages to at least stabilize its economy. We maintain our Neutral with a Positive Bias rating for global equities—that is, we recommend investors hold overall equity exposure slightly above the benchmark level.

Given our generally positive outlook for investment overall it is also important to realize that not all sectors of the economy act in unison.  Much of a portfolio’s success will depend upon which sectors you own and, in the case of gold this past quarter, sectors that you don’t own.  As such watch for the new catch phrase coming to your newspaper soon called “the great sector rotation”.

 

Interest rates remain the “big elephant” in the room, but for the time being we do not see an imminent rise.

 

Friday May 3, 2013

“Your time is limited, so don't waste it living someone else's life. “

 

Steve Jobs

 

Congratulations Jessica for winning the RBC Performance Award (and all the prizes that go with it).  You went out of your way to do an outstanding job assisting one our clients who faced a difficult financial and service issue.  Your extra efforts resolved the issue and made a big difference in her life.  Way to go!

 

As the May long weekend approaches it’s time to revisit some summer cottage safety tips such as avoiding collisions with deer.  Obviously cottage country is the focus of this article, but on two occasions I have had near misses on Riverside Drive in Etobicoke (not to mention a few bucks that I’ve seen on Bay Street).   As aware as we try to be, these types of collisions are increasing each year. According to OPP Statistics and an article from this month’s Cottage Life Magazine, one of every 17 motor vehicle collisions in Ontario involves a wild animal and 90 percent of these collisions occur on two-lane roads, outside of urban areas. So what should you do if you meet a deer or another large animal on the highway? Here are some tips from Cottage Life that could reduce your risk on the road and hopefully keep you—and the deer—safe.

1. Avoid peak hours: Try to stay off the roads at dusk or dawn, which is when deer are most active and wildlife collisions most often occur.  Be especially attentive near swamps, lakes and stream crossings.

2. Slow down: If a deer crosses the road in front of you, slow down and assume that there are more following, as deer tend to travel together. Even if the deer hasn’t made it onto the road yet, you should still slow down and pass carefully—they’ve been known to suddenly bolt onto the road (this one happened to me).

3. Scan the road: At night, use your high beams when possible to get the widest possible visibility and scan the road from shoulder to shoulder, watching for glowing eyes of animals (bears too).

4. Brakes: If an animal is standing on or crossing the road, hit the brakes, says the Ministry of Transportation. Never assume the animal is going to move out of your way. If you’re not able to brakes in time, go for the deer; swerving could result in a more serious collision, perhaps with another car on the road.  Always go for the deer, seriously.

5. Keep your head up: While this is something you should always apply to your driving, it’s especially important this time of year when deer movement is high.

 Enjoy your summer and have fun, but please be careful! 

Friday April 26, 2013

“It's like wrestling a gorilla- you don't quit when you're tired, you quit when the gorilla is tired.”

 Robert Strauss, Sports Writer

 

Four ways consolidation can enhance your retirement income

Consolidation joins all your investment accounts eliminating duplication and reducing account fees, simplifying the management of your investments. In addition to convenience, consolidation enables effective management of your investments, helping you structure your investments to generate the retirement income you need.

 

Four key advantages of consolidation:

 

1. Properly coordinate your retirement income sources

Coordinating your various sources of income to ensure you’re receiving everything you’re entitled to and utilizing them most effectively can be difficult. It gets even more confusing if you have more than one RRIF or non-registered investment account.

 

Working with one advisor helps ensure all your various income sources are accounted for and structured to provide the income you need.

 

2. Make the most of your registered plans

More than one registered plan not only adds confusion – it could also mean you are missing some important tax advantages. Consolidation helps you and your advisor determine if you have sufficient income from all sources. Simplifying complicated RRIF payment calculations – often involved in owning multiple RRIF accounts – is another benefit.

 

3. Generate tax-efficient income

Consolidation allows you to properly allocate your assets and provide tax-efficient income. The structure of your assets significantly impacts your after-tax income as different types of income are taxed in different ways. Consolidation supports balancing the tax-efficient income you need, while keeping risk at an acceptable level.

 

Accountants like our service too.  Rather than sorting through various receipts, we provide one consolidated tax package that summarizes the numbers they need – and yes, we also follow it up with a phone to answer any outstanding questions… leaving you with time to do more important things. 

 

4. Get the advice you need – without conflicting opinions or finger pointing. 

As a client you will enjoy the services of a dedicated team that delivers all of your financial services on one platform – with one phone call.  One phone call to us is all you need to co-ordinate your personal tax issue, investment need, or banking requirements.

 

Please contact us at 416.231.5092 to discuss how consolidation can help you enhance your financial plan.

 

Friday April 19, 2013

 

“Stop waiting to become the person you want to be someday, and start living as that person today.”

Bruce Springsteen

 

It’s hard to believe but when Chateau Mouton Rothschild released their 2012 First Growth Bordeaux this week at 240 Euros a bottle, it became “pretty much” the cheapest First Growth on the market today.  The price being down by 33% from last year (yet double the price of the 2008 vintage, which is best left for another discussion).  Let’s just say it was no Lafite. 

 

About a year ago we discussed the effects of the “en primeur” system on the quality of wines being served at dinner.  An argument against the system simply came down to the fact that too many good wines were being drunk too soon and thus not being allowed to reach their full potential.  As you may recall Chateau Latour stepped away from the “en primeur” system about a year ago sparking both outrage in the wine industry and my personal support. 

 

A source (considered to be neutral since she is an owner of a Brunello winery in Montalcino far from the Bordeaux region) told me the whole thing was just a marketing scheme cooked up by the French to flog their wines that are a mere shadow of a good Brunello. 

 

Friday April 12, 2013

“I’d rather be dead than singing ‘Satisfaction’ when I’m 45.”

Mick Jagger

 

I was offered a pair of tickets today at face value for the May 25th Rolling Stones Concert at the ACC:  $1,275.54 a pair.

 

Are you aware that a strategy exists that enables you to attach terms and conditions to the distribution of life insurance proceeds? This strategy allowsinsurance proceeds to bypass your estate, enabling you to avoid provincial probate taxes and potential creditors. This strategy also offers a mechanism that facilitates the deferral of taxes and the splitting of income. This strategy is the use of a testamentary insurance trust.

 

Proceeds paid to a beneficiary from a life insurance benefit are protected against creditors of the deceased whose life was insured. However, whether or not the insurance proceeds are protected against the creditors of the beneficiaries depends on how the insurance trust was created.  Creditors of the beneficiaries generally have access to distributions from a trust that are paid or payable to the beneficiary. A regular trust does not protect a beneficiary from aggressive creditors. The solution is to create a fully discretionary trust for which the trustee has full discretion to distribute the assets to the beneficiaries.

 

The creation of an insurance trust or a testamentary trust created within a Will works very well if you have beneficiaries that are receiving government benefits. To have this type of insurance trust work, the trust deed must state that the trust is a fully discretionary trust and the trustee has full discretion to decide on how much income or capital to pay to the beneficiary (e.g. the child with special needs). The beneficiary (child) has no outright entitlement to the funds, which may pass to other beneficiaries when the beneficiary (child with special needs) passes away, subject to the terms of the trust.

 

This insurance trust also works very well for beneficiaries that have substance abuse problems and/or financial management problems. In both cases the settlor has control (via the trust deed) over the disbursements of the trust. The settlor can even give the trustee discretion to pay additional amounts in the hope that the beneficiaries will one day rehabilitate themselves.  

 

 It must be stressed that any such strategy must be reviewed with qualified professionals to ensure it is correct, current and sensible for your particular situation.

 

Friday April 5, 2013

 

“Clever people seem not to feel the natural pleasure of bewilderment, and are always answering questions when the chief relish of a life is to go on asking them.”

 

Frank Moore Colby

 

Today the TSX / S&P Composite Index rests near the 12,450 level.  It tends to go up and down throughout the day, ending either up or down at the end of the day.  But what exactly is it?

 

The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest Canadian based companies on the Toronto Stock Exchange (TSX) as measured by their market capitalization (size).  It does not include for example companies such as Lulu Lemon, Corby Distillers, Rogers Sugar or many other great Canadian companies.  It does include a lot of energy and material related companies, so much so that they represent about 45% of the index. 

Arguably there are about 10 economic sectors (healthcare, financials, utilities, etc.) in Canada, but two of the sectors represent 45% of our index.  Many people would argue that there is nothing wrong here.  Canada is a resource based country therefore our TSX should reflect that.

I would agree that the TSX  / S&P Composite Index is representative of Canada and its economy.  As such when the price of gold, oil and other materials fall it will have an impact on the stock exchange index.  It will have less of an impact on your individual portfolio which is much more diversified amongst the economic sectors. 

Therefore it can be said that a well diversified portfolio has a lower beta relative the TSX.

Beta?

Thursday March 28, 2013

“Don’t put all your eggs in one basket”

Easter Bunny

 

As Canadians near retirement and calculate their various sources of income during the non-working days, one consideration will be “when to take your Canada Pension Plan (CPP) benefit.”

 

One of the first steps is to determine if you qualify for CPP and if so, to what extent (%).  It depends on how many years you contributed to the plan, how much you contributed, and when you wish to begin receiving your CPP benefit.  Details can be found on the Government’s website. 

 

At this time the maximum monthly benefit for a 65 year old is $1,012.50 per month. You may however begin receiving the benefit as early as age 60, but your monthly benefit would only be $672.33 per month.  If you deferred your CPP until age 70 then your maximum monthly benefit would be $1,437.75.  Please note that the above figures are for guidance only.  Your benefit may vary depending on your circumstances.

 

Choosing when to take your CPP benefit depends on your personal situation and can be affected by many different circumstances.  It is important to make the best decision as it will affect your lifestyle and the enjoyment of your retirement. 

 

Retirement benefits are something we can discuss together as we prepare your retirement plan.  Please contact our office and arrange a meeting today.  This is what we do everyday.

 

Best wishes for the long weekend.

 

Friday March 22,2013

 

“You can tell more about a person by what he says about others than you can by what others say about him”

 

Leo Aikman, Newspaper Editor

 

This Saturday March 23rd you have the opportunity to participate and join hundreds of millions of people around the globe … and one Canadian who is circling the globe … as we celebrate Earth Hour 2013.  The primary goal of Earth Hour for the past nine years has been to draw attention to the issue of climate change. It was created by the World Wildlife Fund, which is concerned about the impact of global warming on endangered species as a result of habitat loss, wildfires, water shortages and other issues. However, the event has also been embraced by others to promote energy conservation, reduce light pollution and other causes.

Personally I will be hosting a candle light dinner cooked on a wood fired BBQ and served to a rather famous Green Entrepreneur who must remain nameless, an environmentally conscious artist, and a couple of other greenies.  If you happen to be at Chateau Whistler, stop in and “peddle power” yourself a cocktail … the City of Whistler was top of the list last year reducing power by 12.1 percent!

Earth Hour begins a 8:30 pm and lasts (you guessed it) 1 Hour.  Switch off the lights, play some family environmental trivia games, and enjoy the peace!  Who knows maybe with all the lights out you will even catch of glimpse of Chris Hadfield flying by.

 

Friday March 15, 2013 -

 "As you slide down the bannister of life, may the splinters never point the wrong way."

Even if you're solving problems and running around and working 80 hours a week, it's not enough. You have to have a strategy.'"

Roman Stanek, CEO and founder, GoodData

Creating a sensible, personal, financial strategy depends upon your unique circumstances. The factors to consider for a successful strategy are amongst others, your stage in life, the amount of risk you are willing to accept, your ability to manage debt, your desire to build a safe retirement fund, or save for your child's education.  The list goes on and it is never too late to start or to revisit your strategy, which may need to change as circumstances do.

 Events in your life play a key role in determining your personal financial strategy. A large part of the success of your portfolio is dependent on your disclosure of such variables, first and foremost to yourself.  What are you saving for? How do you envision your retirement?

We offer Financial, Will and Estate and Insurance Plans to all of our clients to help formulate or clarify your strategy. 

 

Friday March 1, 2013

 

“Courage doesn’t always roar.  Sometimes courage is the quiet voice at the end of the day saying, “I will try again tomorrow.””

 

Mary Anne Radmacher

 

Kadri … living the dream!  Nice hat trick!  Go Leafs Go!!

 

Today is the first day of a new month and as part of the ritual I spent much of the morning in discussion with the analysts and portfolio advisory team reviewing, revising, and positioning our outlook for investments.  It is a daily routine but on the first of the month we tend to take a somewhat broader outlook.

 

At the top of the list was the question, “where are interest rates going?”  The general consensus seems to be that given the current fragility of the economic recovery, the numerous outstanding political concerns and lack of inflation, we are not likely to see an increase in interest rates in 2013 by the Bank of Canada.  Having said that, assuming that the economic recovery continues to bump forward, we may see weakness in the bond market (long bonds) toward the end of this year in anticipation of rate hikes in 2014.  The reason we are so interested in interest rates has to do with their effect on individuals’ ability to service debt (mortgages, etc.) and on the effect that rising rates would have on the price of bonds (negative).  As such our overall outlook is to remain very cautious on fixed income investments by focusing on shorter term maturities of 5 years or less. 

 

The equity market has enjoyed a buoyant past couple of months and today’s question is, “How much longer will this last?”  Based on my review of RBC’s opinions it is felt that investors can expect to enjoy further growth from equities over the 12 months or more, although in the near term (6 weeks +/-) volatility may occur.  Companies in general have strong balance sheets and are well positioned to enjoy growth from manufacturing, consumer demand, telecommunications, and the financials.  Canada’s biggest risk would be a decline in demand for resources and energy (i.e. a slowdown from China or worldwide demand in general). 

 

Looking ahead then, maintaining an asset mix that is appropriate for your goals and objectives will be paramount.  There is risk in all financial instruments so it is as important today as ever to ensure that your savings are balanced and managed appropriately. 

 

For specific recommendations or articles please contact me directly.

 

Friday February 22, 2013

 

A horse walks into a Paris Café.  Bartender says, “So, why the long face?”

 

When France has problems … France has problems!

 

I truly believe that some people think that if they talk about life insurance (or worse buy a policy) they will fall over dead.  Hence, they avoid the subject all together.  At my own peril I am opening the Pandora’s box today with an excerpt from an article put together by RBC.

 

There are ways insurance can help provide financial peace of mind for you and your family.

 

1. Wealth creation

It’s important to know that your family would be financially secure if you became unable to earn an income due to illness or disability, or if you passed away prematurely.

 

 Life insurance can help provide wealth that you would have otherwise created if you hadn’t passed away. The funds can be used in any way your family needs – to help with mortgage and other debt payments, to fund your children’s education costs, or to cover daily living expenses.  How much life insurance would you need to replace your spouse’s income if they were to die while you are raising a family (a million dollar policy might generate enough income to cover a $50,000 salary).

 

2. Estate preservation

You are probably familiar with Benjamin Franklin’s famous quote, “In this world nothing can be said to be certain, except death and taxes.” Unfortunately, death and taxes often go hand in hand.

 

While you can pass along your assets tax-free to your surviving spouse, you can’t pass them along to anyone else without triggering taxes. Unless you have a surviving spouse, there is a “deemed disposition” of your assets at death which may trigger income taxes.

 

To help preserve the value of your estate for your beneficiaries, consider the cost/benefit of a life insurance policy to help fund your estate’s tax liability. A life insurance policy can either provide a fixed death benefit, or one that grows with the tax liability.

 

Tax-exempt investing

Under the federal Income Tax Act, assets accumulate within a tax-exempt life insurance contract free of annual accrual taxation. When you pass away, any proceeds of the policy are distributed to your beneficiaries on a tax-free basis outside the scope of your estate, bypassing its associated costs.

 

Because of these advantages, many high-net-worth Canadian families have come to regard tax-exempt insurance not so much as insurance, but rather as an additional investment pool, complementing their registered retirement plans and non-registered investment portfolios. However, there is also an insurance benefit to tax-exempt insurance – a tax-free death benefit that your beneficiaries can use to cover estate taxes, or for other purposes such as creating a family trust or a charitable legacy.

 

As part of our overall financial planning strategy we invite you to explore your insurance related questions with the licensed members of our team.  Please contact me directly to set up an appointment.

 

Friday February 15, 2013

“Choose a job you love and you’ll never have to work a day in your life.”

Confucius

 

 

What does employee turnover really cost your company? Although often not recognized, losing and replacing employees is one of the largest expenses many organizations incur.

 

The U.S.-based Society for Human Resource Management (SHRM) revealed in a November 2012 study that two of the biggest challenges facing HR over the next 10 years will be retaining and rewarding top employees and creating a corporate culture that attracts them to the organization. As more employees question our government’s ability to support post-retirement benefits, employees are looking for better supplementary retirement income sources for their employees’ future financial security, including Group Registered Retirement Savings Plans (RRSPs).

 

To attract and retain employees, especially the most valuable ones, companies need to create a “signature value” that sets them apart. By clearly showing what makes working at your company rewarding, you will experience significant improvement in employee loyalty, not to mention the potential increase in productivity.

 

Group Saving Plans, like Group RRSPs, give your company the right tools to start

With a Group RRSP, employees can:

 

Reduce their taxable income by contributing pre-tax dollars to their plan.

 

Control their investments to ensure a diversified portfolio that meets their individual needs.

 

 Receive tangible financial benefits that can significantly increase the value of their retirement savings and their loyalty to their organization, especially when your organization matches the employee’s contributions.

 

In today’s competitive work environment your assistance in helping an employee develop a disciplined savings plan can not only increase retention but it can also help give them a happier life. 

 

Contact me directly and I would be happy to help you setup an RRSP or even a TFSA savings plan for your employees … even if your staff is only two!

 

Friday February 8, 2013

 "When people like each other, the details rarely get in the way.  When people don't like each other, details are likely to become insurmountable obstacles."

James Henning

This thing about the pennies is getting really confusing.  Some places are rounding and others aren’t and in addition, I think some shopkeepers are rounding up, but not rounding down (they give exact change instead).  During the past week I’ve been keeping tabs on this new system and quite frankly I think some people are taking advantage of the “not so mathematically inclined” customer. 

 

In defence (I think you should join me on this) I keep four pennies in my pocket at all times, then in a situation where my bill comes to $1.31 or $1.32, I just smile and pay $1.30.  Thus saving one or two cents.  On the other hand if the bill comes to $1.33 or $1.34, I simply reach into my pocket and give the exact change.  So far this week I’ve made $0.27 off this scheme.  If all goes as planned a year from now I will have made $14.04 under the radar. 

 

I’m not cheap.  It’s just that … well maybe I am cheap?

 

Friday February 1, 2013

 

 "Though no one can go and make a new start, anyone can start from now and make a new ending.” Carl Bard

  

Even when baby boomers reach the golden age of 65, they may not necessarily pack up their desk and enjoy a quiet retirement lifestyle like their parents did. If their influence on social revolutions in the past is any indication, chances are that baby boomers are going to enjoy retirement differently.

 

If you’re part of this influential group that is redefining retirement, you’ll also need to redefine how you plan for this exciting new chapter of your life.

 

Different retirement lifestyles

Characteristically, baby boomers have enjoyed higher standards of living than their parents. In addition, healthier lifestyles and medical advances are leading to longer life expectancies. All these factors indicate that this generation will be looking to enjoy higher standards of retirement as well. Achieving this involves careful planning so that your savings are able to provide adequate income for you to enjoy the rest of your life on your terms. 

Times have changed – and so has the retirement age

Unlike their parents, baby boomers may not necessarily be working towards the goal of retirement. Many individuals have found fulfilling careers they want to continue developing past the age of 65. Some are even planning on starting a second career after “retirement.”

 

Retiring later may mean you may be able to wait longer before transitioning to strategies that protect your nest egg. On the other hand, if your dream is pursuing a new passion or to start a small business after you “retire,” you may need to save additional funds in order to avoid financial stress.

 

To longevity and good health

Living longer ultimately means very little without your health. With longer life expectancies and medical advances that allow people to recover from serious illnesses, you also need to think about building health-care costs into your retirement savings plan. By planning for these expenses, such as in-home care and specialized treatments, ahead of time by purchasing critical illness, disability and long-term care insurance, you and your family will be able to focus on your health, and not the impact recovery has on your savings.

 

Charitable giving

For a lot of boomers, writing a cheque to save taxes just isn’t enough. Many have special causes that they are passionate about. If charitable giving through time or funds is in your retirement plans, we can evaluate how you can balance both your retirement lifestyle and charitable giving at the same time. With sophisticated tax strategies, you may even be able to make more significant contributions to your cause.

 

Creating a new family tradition

Instead of focusing solely on their own needs, baby boomers place a great deal of emphasis on leaving a legacy and helping family members reach their goals. Through efficient tax and estate plan strategies, boomers are able to fulfill their own retirement objectives while making sure they can still leave a legacy to care for their families.

 

You’ve seen it before

While you’ve been saving for your retirement, you’ve experienced the ups and downs of the markets and seen generous and all-time low interest rates. After you stop working, the markets and interest rates will continue to change. With the many different demands on your retirement income, planning ahead and planning with smart strategies is important in order for you to achieve your objectives and still be prepared for economic swings.

 

Friday January 25, 2013

“It is through their work and behaviour that most individuals write the story of their lives.  They are both the author and the story’s principal character.  They are free to be the hero or the villain: to be a success or failure.”

 

Malcom Forbes

At the request of a friend I watched a panel discussion on TV the other night discussing what the best way was to prepare for retirement.  I had been asked to watch the program and comment on it.

 

Without going into too much detail I will say that I was amazed by the advice that was doled out.  I’m not sure if it was done intentionally to create controversy and raise the show’s ratings but the answers in my opinion were not helpful to an audience concerned about their retirement incomes and lifestyle.

 

For anyone wishing to save for retirement the answer is fairly simple.  Save 10% of everything you earn and you will enjoy a retirement lifestyle as good or better than you enjoyed while working.  The saving should start early to build the discipline.  Simply disciplining yourself to have 10% of your earnings on a weekly or monthly basis go into an RRSP, TFSA, or savings account will accomplish this.  The roadblock isn’t the Government or your employer, or the US Housing Crisis or China or all the other excuses.  The problem is a lack of personal discipline.  The choice between saving 10% of earnings to have the option to retire at 55, versus buying something that provides instant gratification, is just too difficult.  Many people can’t do it.

 

Regardless of whether you earn $3,000 every summer cutting lawns or $3,000,000 running your successful business, all you have to do is save 10% a year and you should be able to retire and maintain the lifestyle you are accustomed to.  Think about it … simply setup a monthly deduction from your chequing account that goes directly into your TFSA / RRSP.  Then spend whatever is left in your chequing account any way you like, and look forward to a happy well funded retirement.  If you have young children this is the best gift you can give them.  Help them setup a monthly savings plan.

 

It doesn’t matter how much you make:  Fact is 60% of NBA players go bankrupt within 5 years of retiring from the game, 80% of lottery winners in the USA file for bankruptcy within 5 years of winning.  It does matter how much you save. 

 

Please feel free to call me and set an appointment.  I enjoy my job and enjoy helping people achieve a comfortable retirement. 

Friday January 18, 2013

 

"The one thing you can do for sure, is push the luck on your side"

Roger Federer 

I have to admit I’ve been a bit distracted this week with the Australian Open being played.  Roger Federer is amazing!  If you ever get a chance to go to the Rogers Cup in Toronto you won’t be disappointed.  What makes Roger great in my mind is that he does everything very well.  No theatrics, no amazing serve that no one can return, nothing out of the ordinary except that he is really focused and good at doing everything; and it adds up to being the best tennis player in the history of the game!

As a portfolio manager I try to emulate Roger by focusing on the fundamentals, sticking with the program, and trying to improve daily.  Trying to find the next superstar stock isn’t part of the strategy but developing a sound financial plan that allows you to do the things in life that you deserve is.  It requires discipline and hard work, but in the end things tend to work out.  Then maybe you can, “push the luck on your side.”

 

 

Friday January 11, 2013

"Peace begins with a smile."                                                       Mother Teresa

Why is it that the Government has a knack for taking something simple and turning it into a “War And Peace” novel written by Stephen Hawking?  Take for example the simple document mailed out to you every year called your RRSP Deduction Limit Statement.  Sounds innocuous enough, but have you ever tried reading it?  It’s next to impossible. 

Fortunately we employ wizards at RBC who have special powers on how to read Government notices.  Here’s what they had to say: 

When faced with this …

2012 RRSP Deduction Limit Statement

The back of this notice contains important information. Amounts marked with an asterisk (*) cannot be less than zero.

RRSP deduction limit for 2011                                                                                                  $20,007

Minus Allowable RRSP contributions deducted in 2011.                                                          $11,007

Unused RRSP deduction limit at the end of 2011                                                           $ 9,000

 Plus: 18% of 2011 earned income of $148,000 = (max. $22,970) $22,970

Minus: 2011 pension adjustment                                                                    $13,200

                                                                                                                                                                              $9,770*

                                                                                                                                                                            $18,770

Minus: 2012 net past service pension adjustment.                                          $0

Plus: 2012 pension adjustment reversal                                                   $2,300

Your RRSP deduction limit for 2012                                                                                    $21,070(A)

You have $3,500 (B) of unused RRSP contributions available for 2012. If this amount is more than amount (A) above, you may have to pay a tax on the excess contributions.

How much can I contribute to my RRSP?
The maximum amount which you can contribute to your RRSP is equal to (A) – (B) + $2,000 where: 
(A) is your RRSP deduction limit for 2012 (see sample statement on the first page);
(B) is your unused RRSP contributions. "Unused contributions" are RRSP contributions you have made in a previous year, but have not yet deducted on your income tax return (see sample statement). 
$2,000 is the allowable amount of over-contribution you can make without being subject to an over-contribution penalty.
Using the sample statement as an example, this individual could contribute $19,570 to their own RRSP or to a spousal plan during 2012 or by the 2012 RRSP deadline of March 1, 2013. This is calculated as follows:
(A) – (B) + $2,000 or $21,070 – $3,500 + $2,000 = $19,570

Keep in mind that the additional $2,000 over-contribution amount would not be tax-deductible. The $2,000 can be deducted in a future year as long as it is within that year’s RRSP deduction limit.
If the individual does not want to make use of the $2,000 of allowable over-contribution amount, he or she could simply contribute $17,570 (which is (A) – (B)).

What are unused RRSP contributions or "(B)" in the statement?
Unused contributions may also be referred to as "undeducted contributions". It is called this because if (B) is greater than zero, then this means that you made RRSP contributions in a previous year (or years) and did not deduct them on your income tax return. You may have chosen not to deduct them because your taxable income was low in the particular year or you expected your income to rise significantly in a future year. However if "(B)" is zero then it means you have already deducted all the contributions you have made in past years. It is also possible that you did not deduct the contributions because you did not have sufficient RRSP deduction room. This would imply you had over-contributed to your RRSP. (See below under "Have I over-contributed to my RRSP".)

In our example above, (B) is equal to $3,500. This implies that the individual made $3,500 in RRSP contributions in a previous year (or years) that were not deducted for income tax purposes.

How much can I deduct on my tax return?
"(A)" is your "RRSP deduction limit for 2012". It is also the maximum amount of contributions you can deduct on your 2012 income tax return.

The amount you can deduct on your income tax return "(A)" may be greater than the amount you can contribute, if you have unused contributions; i.e., "(B)". This is because you can deduct both prior years’ contributions "(B)" and your current year’s contributions on your 2012 income tax return. Refer to the sample statement on the first page of this article. Without making any further contributions during 2012 (or by the 2012 RRSP deadline of March 1, 2013) this individual can deduct $3,500 of unused RRSP contributions ("undeducted contributions") on the 2012 income tax return. Assuming this individual wants to maximize his or her RRSPs and makes the additional $17,570 RRSP contribution he or she is entitled to make, he or she will be able to deduct a total of $21,070 on the 2012 return or (A) in the statement). However, if this individual decides to also make the additional $2,000 over-contribution amount, this amount will not be income tax deductible for 2012.

Have I over-contributed to my RRSP?
If (B) – (A) > $0, then you have over-contributed to your RRSP. If (B) – (A) is > 0 but <$2,000, then you are within the allowable over-contribution limit.

Alternatively, just give us a call and we will help you sort it out!  Keep smiling!

Friday January 4, 2013

“What you do when you don’t have to, determines who you will be when you can no longer help it.”

 

Jack Murray

“Retirement Readiness”, that’s the new catch phrase that has popped up early in this year’s RRSP season.  Quite aptly it refers to your ability to retire when you want and with the income you want. 

 

Once you have determined when you want to retire, and how much income you would like when you retire, the rest is relatively simple.  We actually have a computer program that does the rest.  It factors in inflation, historic growth rates, taxes, insurance, inheritances, the date of your retirement, Government OAS, CPP, RRSP, RRIF, downsizing of your home, and of course ….it even factors in your assumed date of death. 

 

Based on all of that (let’s call it a retirement plan for lack of a better word) you will see your “retirement readiness”.  The assessment will even provide you with a graph showing the change in value of your assets not being used to generate retirement income (e.g. cottage, home, art) so that you can reassure your heirs that there will be lots left for them.

 

If for example you would like to retire at age 60 and enjoy a retirement income equal to 80% of your earned income, then we can tell you whether or not you’re on track.  We can also tell you what you need to do to get on plan.  In some cases we have had to tell our clients to start spending more and enjoy life more! 

 

Contact us to determine your “retirement readiness”.