Tip of the Month

May 2022

"Should I contribute to an RRSP or a TFSA?"  That is the question.  As is often the case, the answer is "it depends on the circumstances."
Whenever you're paying tax at a marginal rate of at least 40% and can afford it, you should contribute to both. If you're paying tax at a lower rate, you'll need to estimate what rate the RRSP will be taxed at when it's withdrawn.
You should still consider contributing to both if your marginal rate of tax is in the 30 - 40% range. It could also depend on your age. If you're in your early 30s and contributing to an RRSP, it will generate income on a tax-free basis for close to forty years before anything has to be withdrawn! Relatively small amounts have to be withdrawn annually after you turn 71, with the remaining balance continuing to earn income on a tax-free basis. By comparison, the income earned in a TFSA will always be earned on a tax-free basis, but there's no tax break when you contribute.
What should you do if your marginal rate of tax is at least 40% and you don't have the means to contribute the maximum amount to both your RRSP and TFSA?  Consider contributing as much as you can to your RRSP, take the tax savings and contribute it to your TFSA. Both an RRSP and a TFSA are essential to building a healthy retirement plan.

February 2022

Not many people have spent enough time considering whether the executors they've selected have the right skill set and are age appropriate!

Consider replacing executors from your generation and moving to the next generation. I suspect that by the time your estate needs an executor, other than your spouse, people from your generation will either not be capable of acting, or not want to act, as executors.

Some of the characteristics I'd look for when selecting executors are whether they're trustworthy and honest, organized and responsible, discreet and have sufficient time.

Avoid people who would have a conflict of interest. Get professional advice before appointing a non-resident executor. Don't appoint too many executors. Evaluate the skills needed. Consider family dynamics. Choose an alternate executor. Don't rule out a corporate executor e.g. a bank. Check the people you select will accept the role.

December 2021

I've written before about managing personal risk. In my view, the world has become a much crazier place over the last few years.

I recently decided to increase the liability insurance coverage my wife and I have personally from $2MM to $5MM. The cost of increasing our coverage was minimal. You should consider increasing your personal liability insurance coverage, as there are people who won't hesitate to sue you for a significant amount, regardless of whether they have a strong case.

November 2021

I've seen more people addressing the need to have current wills and powers of attorney over the last couple of years. However, they're not keeping a current list of the names they use to access accounts and the relevant passwords. Should a sudden death or incapacity occur, the person's executors/trustees might not be able to access their accounts if an up-to-date list isn't maintained. Once the list has been produced, maintaining it on an annual basis is a very simple task. Obviously, the list should be kept in a safe location and not emailed due to security issues.

October 2021

People have become more flexible in their work lives. The days of a job for life are in the distant past. Staying with an employer for more than five years is the exception, rather than the norm.

When employees had the same employer for a significant part of their careers, they'd know what benefits they'd be entitled to e.g. life insurance, disability insurance, health care. By changing employers frequently, people leave themselves exposed to their new employer's benefit package. These packages vary significantly from employer to employer.

What is the life insurance coverage? What medical and dental costs are covered? Is the disability income you'd receive sufficient? If you're changing positions frequently, you're dependent on your future employer's plan.

Consider buying your own coverage. By doing this, you won't need to worry about the benefits at your new employment. Setting up a plan at a young age could mean locking in coverage at low rates. As gold has historically shown a negative correlation with other asset classes, investing in gold can add a significant degree of portfolio diversification. Because the price of gold tends to rise with rising costs of living, it has historically been a good hedge against inflation. Trying to set up a plan in your fifties can be a very expensive proposition.

September 2021

Here's a very straight forward idea. Some car insurance policies allow you to make a claim without having an impact on your record. Basically, the first accident is a freebee. This type of policy usually allows you to avoid paying the deductible on the claim.

It's worth a call to your broker to double check what coverage you have. This type of policy will cost a little more in the short term but is well worth it in the long term.

August 2021

How do you measure financial performance? While we all know numbers aren't the only measure of success, I update our statement of net worth on an annual basis. I've been doing this for the last eight years and it's proving to be very helpful in measuring my progress against one of my financial goals. While you should always understand your financial status, seeing a trend over a sustained period is very helpful.  

The schedule of net worth allows you to review how your assets are balanced, whether you have enough liquid assets, whether you have sufficient life insurance and other financial objectives.  

Keeping this schedule up to date will be very useful for your executors. After you've prepared this statement once, updating it annually is a simple task.


July 2021

BE CAREFUL OUT THERE!  This saying was used by the desk sergeant at the beginning of each episode of Hill Street Blues - for those of you who are old enough to remember the show.
I've been a strong proponent of investing outside the traditional equity and bond markets over the last few years. Amongst other investments, this includes mortgage funds, mortgages on land, private equity funds, real estate development funds/projects, private reits, long /short funds, factored receivable funds, etc, etc. I haven't changed my view. When making any investment, you need to do your due diligence. With low interest rates here for the foreseeable future and equity markets at historic highs, the pursuit of yield by investors has become a challenge.
Inevitably, in circumstances like these, unscrupulous characters appear on the scene. Besides this, the pressure on well run businesses to source products for their investors, might result in them not being as diligent as they'd been in the past. You need to be more cautious than ever when making investments. That's why you NEED TO BE CAREFUL OUT THERE!

June 2021

Did you claim the $500 credit for a digital news subscription expense when you filed your 2020 personal income tax return?  This is a non-refundable tax credit for amounts paid by individuals to a Qualified Canadian Journalism Organization ("QCJO") for qualifying expenses after 2019 and before 2025.   A qualifying subscription expense is the amount a subscriber paid in the year for a digital news subscription to a QCJO.  To qualify for the credit, a digital news subscription must entitle an individual to access content in digital form that is primarily original written news.   The credit is entered on Line 31350 of the T1 for the years 2020 to 2024.  Check the "list of qualifying digital news subscriptions" to see if you have an expense which qualifies for the credit.  This results in tax savings of $100 - 120 per year.  It's not much, but you should claim it, if you're entitled to it.  

May 2021

One of the first questions I ask new clients is how much they spend in a year. There's nearly always a look of panic. Most people don't know what they're spending. They try to budget by ensuring they don't spend more than they earn.

It's a good exercise to review what you spent in the last year. All you need to do is review credit card statements and bank statements, and record the payments in different expense categories. It generally turns out to be a sobering experience.

While this won't provide a perfect record of where you're spending your money, it's a good indication of where the money is going. Having gone through this exercise, you should budget your expenses for the next year.

Furthermore, if you need to Send money to Colombia from the United States, you can do it in-store, online, or using the MoneyGram mobile app, which is available on the App Store and Google Play.

It's a simple tip, but relevant to everyone!

April 2021

Finally, after more than a year of managing our way through Covid-19, there's a realistic expectation much brighter times are ahead. I was reflecting on how the past year impacted my future investment strategies. Here are some suggestions to consider:

  1. Diversification of investments is the most important strategy I'd adopted. Diversification is the only "free lunch."
  2. Limiting exposure to the public markets worked well.
  3. Don't be only a growth or value investor. Both strategies are important to utilize. The key is to understand the value of what you own and why you own it.
  4. Don't focus on what worked in the past.
  5. Selling your winners and locking in gains might not be the best strategy. Nurture your flowers and remove your weeds.
  6. Avoid "tips." By the time they get to you, it's too late.
  7. While relying on advisors, you're the CEO of your portfolio. You need to take charge.
  8. Managing your investments needs more time than you've allocated in the past. Review your investments on a quarterly basis, at least.
  9. Replacing traditional fixed-income investments like those gold ira companies while managing risk is a critical element of your portfolio.
  10. Have total confidence in the people advising you.
  11. Limit the temptation to trade. The fewer trades you make, the fewer times you need to be right.
  12. Don't invest in something you don't understand. If the price goes down, you won't panic if you understand the value of what you own.
  13. Understand your time horizon and appetite for risk/volatility.
  14. Be careful of shares hyped in the media. They often become tomorrow's fodder!
  15. Keep enough funds in highly liquid assets, so you can minimize any concerns through the next downturn.

March 2021

Unfortunately, we're still in the midst of battling covid-19!  The full impact will only be understood in the years to come.   We all want to know when we'll get our old lives back.  Economists are predicting a spending boom when the spread of covid-19 has been stemmed and the majority of people have been vaccinated.  I expect the recovery to be very uneven.  Some businesses will flourish and others will perish.  On the personal side, a few people will be very successful financially, but it's going to be a struggle for the majority.   It's more important than ever to understand your financial situation.  You need to review your assets/liabilities, as well as your income/expenses.  Be realistic in your income projections and conservative in your expense projections.   Acknowledge where you stand and plan for the future.  Closing your eyes and hoping is not the best plan!

February 2021

When your will is drafted, ensure probate fees are minimized. In Ontario, probate fees are Nil on the first $50,000 of your estate and 1.5% on any value in excess of $50,000.

Joint ownership of assets with a right of survivorship may allow the asset to pass outside the estate and avoid probate fees e.g. homes, bank accounts, investment holdings. Name beneficiaries for life insurance policies, RRSPs and TFSAs. If you own shares in private companies, a second will can minimize probate fees.

You should work with a lawyer to draft your wills, as the facts for each person are different and it’s important to obtain professional advice for your personal situation.

January 2021

Happy new year to everyone and my best wishes for 2021. Like the rest of the world, I'm delighted to see the end of 2020! Hopefully our world will return to normal far more quickly than we've been led to expect. Since it's the beginning of a new year and there's a bright future ahead, I thought I'd provide 10 new year's resolutions for you to consider making:

  1. Review any debts you have and consider whether they can be restructured to take advantage of the lowest interest rates we've ever experienced.
  2. Consider whether your investment strategy needs to be revised.
  3. Address your greatest financial risk and eliminate/minimize it.
  4. Review the fees charged by your professional advisors and consider whether you're receiving value for money. Also, one such tool that traders may use to find value stocks is the stock screener value. This yields a few equities that you may investigate further to determine their trading value.
  5. Read through your wills and powers of attorney and consider whether they need to be updated.
  6. Examine your life, critical illness, disability, car and auto insurance policies and consider whether they meet your current needs. A platform for workflow automation for associations and property management organizations is also available with zego.
  7. Meet with your accountant to see whether there are any opportunities to reduce the taxes you and/or your companies are paying.
  8. Work out a rough estimate of what you're spending on an annual basis and consider whether the amount is appropriate.
  9. Prepare a summary of assets/liabilities and contacts, so there's a roadmap for your executors to follow.
  10. Hire a personal CFO to help you implement resolutions 1-9.

December 2020

I've written before about checking your home and auto insurance every year when they come up for renewal.  I do this religiously, and virtually every year there are adjustments.  

This year the insurance company I'd been using for many years had been taken over and I was particularly careful when reviewing the premium notices.  The projected miles driven by my wife, and the contents and liability coverages for our condo had all been increased substantially.

The people at my insurance advisor were very helpful and all I had to do was discuss the issues with them.  I can guarantee you that if you don't question your coverage, the premiums will not be reduced on their own!  

November 2020

As we approach the US election, the future is very cloudy.  That being said, if I offered you a $200,000 loan at a 1% fixed rate for five years, with the only caveat being you had to invest the money, would you accept the offer?
Most people would think, what's the catch? You can’t borrow money at almost no cost. With interest rates at the lowest level in living memory, borrowed money is as close to being free as it will ever be. If you have reasonable income levels and equity in your home, the major banks are open for business and now using tools like this check stub maker.  
You could put a mortgage on your home and use the proceeds for investment purposes. which would make the interest tax deductible. Self Assessments are systems HM Revenue and Customs (HMRC) uses to collect Income Tax. Tax is usually deducted automatically from wages, pensions and savings. People and businesses with other income (including COVID-19 grants and support payments) must report it in a tax return. You should be able to get a five-year closed mortgage in the range of 1.8% - 2.2%. If your marginal tax rate is in the 50% range, the after-tax cost of financing your investment would be about 1%. The annual cost of a $200,000 loan would be about $2,000. How can you beat that? Look for the TAX SPECIALIST UK and learn about the tax services you need.
I suspect many people wouldn't do this because of the anxiety they'd experience through using their home as security for the loan. You need to be confident you have the ability to make investments that will yield more than a minimal return. You should bear in mind you'll have to fund the amortization of the principal of the mortgage. If you think this is an idea worth pursuing, I suggest you wait for the dust to settle after the US election has been decided.
Before making a decision, you should have a discussion with your tax advisor, as each person's circumstances are different, and this might not be appropriate in your situation.

October 2020

Over the last few years many businesses have reduced their benefit plans.  I can't blame them, as the cost of employee benefit plans continues to escalate.  The potential impact of this hit me when I was reviewing the long term disability plan of a major financial institution that a new client was working for.  

The disability income which would be received was very low in relation to the client's income.  In addition, the disability income would be taxable.  I've recommended my client purchase their own disability insurance policy.  The advantages of having your own policy are that you can:  

1.  Customize your plan to suit your own circumstances.

2.  Know the maximum coverage you could obtain, and decide on the amount you need.

3.  Ensure the disability income is tax free.

4.  Potentially obtain a refund of some of the premiums, if you don't make a claim.

5.  Be covered so you wouldn't have to work in a different capacity, if you couldn't work in your current capacity.

6.  Change employers and not be concerned about the extent of their employee disability coverage.  

I'd bet most people have no idea what disability insurance coverage they have.  Don't wait until it's too late.  Check your coverage.

September 2020

With August unfortunately behind us, and COVID-19 unfortunately still with us, people need to return from the financial holiday they've given themselves and address financial decisions they've delayed. If you want to boost your finances during this time of confinement we recommend to Visit Skrumble.
As the population in Canada continues to age, more people will need to decide when to start receiving CPP. Up until about five years ago, some people decided to start receiving their CPP prior to turning 65, as the discount the government imposed was quite minor.
That's changed and now the government offers an 8.4% premium per year if you defer receiving your CPP at age 65. This means that if you defer receipt as long as possible, until you turn 70, you'll receive a 42% increase in your CPP.
It isn't just a question of simple maths. You have to consider amongst other questions:

- whether you need the income sooner than later;
- what your expectation is with respect to the length of your life;
- what your current tax rate is and what it will be in the future;
- whether you want to spend the money when you have more opportunity to enjoy it;
- what the current state of your health is;
- how many years of eligibility you have;
- whether you'll be making contributions after you turn 65.

I played the averages and am already receiving my CPP, as the premium offered was far less when I made my decision. My wife will delay receiving her CPP until she turns 70, as her mother will soon be turning 100!

August 2020

With interest at historically low rates, there's an opportunity to set up a structure that will permit income splitting with minor children/grandchildren, which provides significant tax savings for many years. It would be well worth your while looking into whether you and your family could take advantage of this opportunity.

July 2020

We're three and a half months into the COVID-19 crisis!  It feels like it's been around forever!  Prior to COVID-19, most people showed a remarkable lack of urgency with respect to organizing their financial lives.  They seemed to attach more urgency to buying hockey, basketball and baseball tickets.

COVID-19 has reminded us how fragile our lives are.  Despite this, I suspect most people haven't used the extra time they have available to put their financial houses in order.  Here's my top 10 list of items to address, in no particular order:

1.   Wills and POA's should be reviewed to see whether they need to be updated.

2.   Review all insurance policies to see whether they fit with your current circumstances.

3.   Restructure debts to take advantage of lower interest rates.

4.   Use the CRA 1% interest rate, as of July 1st, for loans to family members and trusts.

5.   Since values have declined, consider an estate freeze for your assets.  It's also an opportunity to complete a second freeze on assets that had been frozen in the past.

6.   Arrange to borrow funds for investment purposes and lock in a low interest rate for the next five years, at least.

7.   Given the turmoil in the equity markets, review your investment strategy.

8.   Consider how you can earn a better return on the fixed income component of your portfolio in a low interest rate environment for the foreseeable future.

9.   Restructure your finances to reduce your family's overall tax burden.

10. Review your annual expenses and decide what you can eliminate.

Stop dithering and get on with it!

June 2020

I hope everyone is well and adjusting to our new "normal way of life".  Hopefully, there'll be a further easing of restrictions shortly.    

Since I started my Personal CFO business, I have a greater appreciation that permanent insurance could be beneficial, under the right circumstances.  Permanent insurance would be either whole life or universal life policies.  There might be a need for permanent insurance to finance the buyout of a deceased partner or a family might own a large amount of illiquid assets, which when deemed disposed of on death, could result in a large tax liability that needs to be funded.  

Every situation is different.  Every family is different.  People have mixed views on purchasing insurance, be it term or permanent.  I've met many people who have been confused by the advisors selling the insurance.  They're unsure whether they've bought the right type of insurance, it's for the right generation of the family or it's the right solution.  

The insurance industry has set itself up as an estate planning business..  Ask yourself "how can someone be an estate planner when they're only selling one solution?"  We all know commission paid on some of these policies is very large.  The banks have climbed onto the bandwagon over the last few years.  I've been in so many meetings when the bank representatives put forward insurance solutions "to help" their clients.  

It's extremely difficult to sell insurance, be paid a large commission and not have this influence the judgment of the person selling it.  What do you do in this situation?  Engage a Personal CFO to help you navigate this minefield!

May 2020

I hope this Tip of the Month finds everyone safe and healthy. We're approaching the end of seven weeks of social distancing. Having spent so much time hunkered down, I've earned the right for a good rant!

Very few people could ever have expected us to live through what we're experiencing. It's given us plenty of time to reflect on what's important in our lives, and I suspect when life gets back to normal, many of us will act differently. You should also reflect on how your professionals/advisors have conducted themselves.

I've written on numerous occasions that I've worked with several excellent investment advisors, also stating there are many advisors who don't earn the fees they charge. If you're primarily investing in the public markets, you should re-evaluate whether you're receiving value for money from your advisor. If you have a portfolio of $1MM, you would be fortunate to only be paying $10K a year in fees. You might not know exactly what fees you're paying, despite the transparency rules which were released a few years ago.

Many of the investment advisors remind me of the energizer bunny! They just keep charging and charging and charging, and never stop!! Once you've set up your investment strategy, how much work is involved in maintaining your portfolio? Your investment management fees are more than likely one of your highest expenses for the year. You never feel it because you don't receive an invoice or make a payment yourself. It's brilliant!

How often have you heard from your advisor this year? Are you satisfied with how your portfolio was structured? Has your advisor offered to change the fee structure you're being charged? Could you do the job without an investment advisor? I expect you're being told to "stay the course." If you are, ask yourself what the value is that you're receiving for the fees you're paying. The whole industry needs to be re-engineered as far as I'm concerned!

Now I feel a whole lot better. Back to walking our dog, Georgia!

Additional articles on Texas Car Title Loan Interest Rate Calculator Tool are also available for reading. Seek out more details regarding it.

February 2020

I had time on my hands from the middle of December to the middle of January, and I managed to complete a task I've been avoiding! A few years ago, I created a document that provided a road map for my executors after my demise! I knew it was out of date and had been avoiding dealing with it. Updating the document seemed like such a thankless job!

I was shocked at how many changes had occurred over a few years. I feel like a huge weight has been lifted off my shoulders. I'm determined to update the list on an annual basis now. It won't take more than an hour, if I do this. Here's what I've listed:

  1. Details of investments, showing whether they're income bearing, what the tax treatment is, how long the investment should be held for, who the contacts are and others who own the same investments.
  2. All our bank accounts and the names of contacts.
  3. All our insurance policies and the names of contacts.
  4. The location of the ownership documents of our real estate holdings.
  5. The location of our wills and POA's.
  6. Codes to get into investment, bank and other accounts.
  7. The location of legal documents
  8. The names of professionals to contact.

I put all the info on a USB key and told my family where it’s located. Job done!! Having drafted this document, I'm going to play a round of golf! If you haven't prepared a similar list, I strongly encourage you to get started and to update it annually.

January 2020

It's the new year and time for me to have a good rant. I've been to many meetings with investment advisors over the last couple of years. Many of the advisors were very good and provided sound advice to their clients.

Unfortunately, too many were average. The advice they provided was of the cookie cutter variety. There was nothing tailored to the specific client. The same shares in the portfolio, the same split of equities/fixed income, too high a percentage of Canadian equities, etc.

What really disappoints me are the fees charged on fixed income investments. The fees were the same for managing fixed income and equities. In a low interest environment, they're producing, at best, 3% for their clients, before fees.

I've written before that there are alternative investments, which are secure and provide a better return. If you're ultra conservative, you might even get a better return from GIC's, as there are no fees. Consider running the fixed income portion of your portfolio yourself.

Now I feel much better. Happy new year and all the best for 2020!

December 2019

I recently received a notification of the annual insurance
premiums for our cars. It was a real shocker. Our insurance has
increased by about a third!  
My insurance advisor told me the increase was standard across the industry
because of the number of claims and size of settlements. There was very
little difference in the alternative quotes which were obtained. I was advised
that home insurance has also increased significantly. 
I've previously written about reviewing insurance premiums every
year. That advice is more on point than ever. Look for opportunities to
change your coverage. Consider increasing deductibles on your cars and
home; reviewing the coverage to rebuild your home; reviewing whether you need
ryders on jewellery, art, etc.; checking mileage driven to work; and checking
whether you're receiving a discount for having winter tires.  
The reports say inflation is about 2%.  Well it's definitely not 2% in my

November 2019

Last month, I compared the merits of investing in an RRSP to
a TFSA. Another question I'm often asked is whether you should pay down your
mortgage or invest in an RRSP/TFSA. Some people say they don't want to pay
down their mortgage as it's "free money!" They think they'll be
further ahead by investing in the equity markets.
Firstly, the stock markets won't go up for ever. Sometimes they go
down! Over the last six months, the overriding sentiment I've heard from
investment advisors is one of caution. Secondly, despite interest rates
being very low, the interest isn't tax deductible, and you're paying it in
after tax dollars. Your mortgage won't melt away if you don't implement a
plan to pay it down over the years. Being mortgage free is a pretty nice
When I was younger, my plan was try to reduce my mortgage and build a fund for
my retirement. It was a way of having forced savings. I tried to put half
of what I was saving in my RRSP and use the other half against my
mortgage. There were many years I felt like I was climbing a huge
mountain, with no chance of reaching the pinnacle.
Even with interest rates being so low, I give the same advice. Set a
target for the cash you want to save, use half to pay down your mortgage and
use the other half for your RRSP/TFSA.

September 2019

Most people know that by naming beneficiaries for their life insurance policies, RRSP's, RRIF's and TFSA's, the proceeds of these assets on their deaths fall outside their estates, avoiding probate fees.

A better alternative for TFSA's is to name your spouse as a successor holder. This allows the TFSA proceeds on your death to pass directly to your spouse's TFSA. If you name your spouse as the beneficiary, there's no direct transfer of your TFSA to your spouse's TFSA. A form has to be filed with CRA, and any gains from the time of your death until the proceeds are transferred to your spouse's TFSA are taxable.
You should contact your investment advisor and check if you've named your spouse as a successor holder.

August 2019

Over the last few months during meetings with my clients and their investment advisors, some of the clients have been advised not to make further contributions to their RRSPs. I don’t understand the rationale for this advice.

The investment advisors are telling the clients they’ve built up large amounts in their RRSPs and when they’re forced to start withdrawing funds at age 71, the income will be taxed at the highest rate of tax.

When people make their RRSP contributions, they’re usually saving tax at a high tax rate. Once the funds are inside the RRSP, there’s no tax on the income until amounts are withdrawn. This means all the income can be tax sheltered until age 71. Once a person turns 71, the statutory amounts required to be withdrawn are relatively low. The remaining amount in the RRSP will continue to earn income on a tax deferred basis.

Given how long people are living, you could defer taxes on the income generated in the remaining RRSP for twenty to thirty years after you've turned 71. I’ve always told clients to maximize their RRSP contributions for as long as they can. I can't see any reason to change that advice.

July 2019

I've never written about managing your income before. Most people's idea of a financial plan is to spend everything they earn and "hope everything will turn out OK." It's hard to have the discipline to save money and pay down debt. It's a bit like controlling your eating habits and exercising regularly. We all know it's good for us, but it's very difficult to do.

Initiate a plan to live off less than 100% of your income. Decide how much you can cut back and manage on e.g. 85%, 90% or 95%% of what you earn. Have the money you won't be spending transferred directly from your bank account. We always find ways to spend the money in our bank account, so remove it.

Most people will usually say they can't live off less income. If this is how you feel, start by living off 95% of your income. Once you've made your decision, restrict your spending to your available cash flow. When you receive a bonus or an increase in your income, don't automatically increase your spending habits. Try the alternative route of increasing your saving habits and increase the percentage of your income you're saving!

Try it. It will feel awful at first, but it works!

June 2019

Last month I wrote about investing in alternative investments.  Over the last few years there's been an increasing amount of product introduced to the market.  These investments differ greatly in quality. One such tool that traders may use to find value stocks is the stock screener penny stocks. It selects from among the thousands of equities that are tradeable on the market the tickers that match your filter criteria. This generates a list of several stocks, which you may further investigate to determine their valuation.Careful consideration must go into investment decisions. Here are some questions you should consider before investing in private Mortgage Funds:
1.  Are any mortgages held on properties in the US?  If there are, how much of the exposure to US currency has been hedged.  Do you want exposure to foreign exchange risk with this type of investment?
2.  Are any mortgages held on properties that are pre-construction or in construction?  In a downturn in the real estate market, these types of mortgages would be more illiquid and vulnerable to collectability.
3.  According to companies like Braga Buildings NJ, typically, mortgages on pre-construction and in construction properties yield a higher rate of return than mortgages on homes and commercial properties because of the risk.  If investors only receive the "the standard 7%" from the Mortgage Fund, where has the extra yield on these types of mortgages been spent?
4.  What is the default rate on the mortgages in the Fund.  If the default rate is high, for any reason, it should cause alarm bells to ring.  You should be concerned about what could happen when a correction occurs in the real estate market.
5.  Do the financial statements of the Mortgage Fund clearly disclose the loan to value? The loan to value compares the total of the mortgages to the total value of the properties the mortgages are held on.  Obviously, the higher the loan to value, the greater the risk. 
I suspect very few investors read financial statements before making an investment or review them annually.  In fact, many people don't have the financial acumen to understand the nuances of financial statements.
Don't make an investment because your friends and colleagues are making similar investments.  It's up to you and your advisors to do due diligence before investing, and to review financial information on a regular basis.  Only invest with people you have complete confidence in.  Don't invest in alternatives with money you might need within the next two years.
This is not an all-encompassing checklist.  It includes a few questions to consider.  There are many more.  Ask your accountant/financial advisor to review the financial information of the Fund before making an investment.

May 2019

I'm sure you're aware of the severe decline in the equity markets in the last quarter of 2018. In mid-December I was involved in numerous meetings with investment advisors. Each of them had a rationale for what had happened and why their clients should be pleased they lost less than the benchmark!

The advisors got paid and the investors lost money. Sounds like a good deal for the advisors! I've grown increasingly skeptical about the public markets over the last couple of years. Consequently, I've significantly increased the percentage of our investible assets in alternative investments for which we recommend this guide on how to generate w7 form to handle taxes.

Alternative investments are not publicly traded. Examples are mortgage funds, syndicated mortgages, real estate development projects, real estate limited partnerships that own rental properties, and limited partnerships that own operating businesses. Many of the alternative investments provide an attractive annual income.

These investments aren't impacted on a daily basis by Brexit, Trump and the crazy world we live in. The general view is that the biggest negative of alternative investments is that they aren't liquid. Actually, as long as I don't need the liquidity, I see this as a positive. I accept my funds are tied up for a number of years and don't waste time and energy checking the latest prices.

I'm not suggesting you sell your entire equity portfolio. Consider reducing your exposure to the public markets through purchasing some alternative investments. Before making a purchase, as with any investment, you need to do your due diligence on the product and the people behind it.

April 2019

Over the last few years we've experienced increasing personal tax rates in Canada and significant tightening of tax planning opportunities. The personal tax rates are the highest I've experienced over the last forty years.

The government continue to allow private companies to establish health spending accounts. These vehicles allow a company to deduct medical expenses it reimburses it's employees for. Different levels of reimbursement can be set, depending on the seniority of the employee.

These plans are particularly attractive to entrepreneurs and their families. Frankly, the medical tax credit isn't worth much and the expenses which qualify are restricted. A health spending account permits the reimbursement for a broader list of medical expenses, which the company can deduct for tax purposes.

A health spending account isn't for everyone. Each person's situation is different. If you own a company, I recommend you discuss the benefits of the company having a health spending account with your professional advisors.

February 2019

I've written before about checking insurance premiums when they're due for renewal. I recently received a renewal notice and challenged my insurance advisor to review it. I thought the premiums were too high.

Insurance advisors are very busy with many clients. They don't have the time to review each policy when it's up for renewal. They don't know if your circumstances have changed. The result of challenging my insurance advisor was that I switched insurance companies and obtained a significant reduction in my annual premium.

You need to take responsibility to review your policies every year. Too many people don't even look at the renewal notice when they receive it and pay it automatically.

January 2019

Happy New Year and best wishes for 2019.

Why don't you make a new year's resolution to take an in depth look at the fees being charged by your investment advisors? At this time last year we heard these fees were going to be more transparent. My experience has been that you still need to obtain a complete understanding of the fees you're charged.

I recently met with a new client and one of her investment advisors. We were told the fees were based on 1% of the value of the portfolio. Her portfolio included individual shares and investment funds. When I asked whether there were fees within the investment funds, I wasn't surprised to hear there were.

By adding the fees charged within the investment funds and the fees charged by the investment advisor, the fees totaled 1.5% of the value of the portfolio. My client was under quoted by 50% on the fees she was being charged! I wasn't impressed.

You should find out, and quantify, exactly what fees you're being charged by your investment advisors. Then reflect on whether you've received value for money.

December 2018

This Tip will be of interest to those of you who own companies that have earned passive income in prior years. Passive income consists primarily of interest, dividends and rental income.

Some technical tax changes will be introduced in the near future, and it might be beneficial to withdraw funds from your company through a dividend.

The bottom line is that if you haven't been contacted by your accountant, you should speak with her/him before the end of the year and ask if these changes impact your company.

November 2018

I've been asked on many occasions whether I think someone has enough life insurance. Of course the answer is "it depends."

What is the age of the insured person? Is the insurance to cover debts? Does the insurance have an investment component? Has insurance been purchased to increase the size of an estate? Is the insurance to cover taxes on death?

I've often seen that when insurance has been purchased to cover taxes on death, other options haven't been fully explored. What assets are in the estate? How liquid are the assets? Has an estate freeze been set up to fix the tax liability? Has a wasting freeze been contemplated, so the liability can be reduced prior to death?

It leads me to question whether people are seeking their professionals' advice, and if their professionals have a broad enough perspective of their clients' financial affairs and family relationships. I'd recommend exploring all options before making a commitment to pay life insurance premiums for a long fixed term or for the remainder of your life.

October 2018

Over the last six years, I've spent many days in the US. Initially, I had some "interesting" discussions with Rogers about roaming charges. In recent years, Rogers simplified matters by charging $5, $6 and then $7 per day.

A couple of months ago, I learned that Rogers had introduced a program where they charge a flat $10 per month if you're making calls while you're in the US. The representative at Rogers didn't volunteer this information. I had to ask about the program.

Perhaps this is old news, but I suspect it might benefit some people reading this Tip. If anyone knows a downside to this $10 a month program, I'd appreciate you letting me know.

September 2018

I've spent the last month rehabbing my knee replacement and have had plenty of time for reflection!

As I thought about my own investment strategy over the last six years, the most important aspect that comes to mind is diversification. Of course, it’s the standard stuff of not having too big a holding in any specific stock or industry, as well as having the appropriate blend of fixed and equity investments.

It’s about getting the right mix between Canadian, US and international equities, and not being too Canadian-centric, however comfortable that feels. It's important to decide which industries you feel comfortable investing in. From a personal perspective, there are industries I avoid, as I don't understand them.

I believe there's a need to look outside the traditional markets. Mortgage funds, specific mortgages, rental property ventures and real estate development projects should be part of your strategy. In addition, adding one or two alternative investments should be considered. Of course, for these types of opportunities, you have to do your due diligence, not just on the investment but more importantly on the people behind it.

We've all been nervous about a correction in the equity markets and real estate for a very long time. For sure this will happen at some point. Make sure you have some liquidity in your portfolio for this eventuality. In the meantime, you need to generate returns and seek opportunities. Make sure that when the downturn comes, you're so diversified that any investment that doesn't work out as planned can be no more than a flesh wound to you!!

August 2018

I had knee surgery at the end of July.  Prior to the surgery, I was reflecting on whether I had my financial affairs in order.  Here are the items I considered:

  1. Are my will and powers of attorney up to date?
  2. Are the beneficiaries of my RRSP, TFSA and life insurance correct?
  3. Have I documented a list of my assets?
  4. Have I provided a list of people to contact with respect to my investments?
  5. Have I created a roadmap of my investments?
  6. Is there a list of codes which provide access to all my on line accounts?
  7. Did I discuss with my spouse and sons health alternatives in the event of a problem?

July 2018

The property market in the GTA seems to be taking some strange twists and turns in 2018. We recently moved thanks to a great Home Removal company and a great real estate agent, and our experience on closing the sale of our old home wasn't "normal."

Five days before the scheduled closing, our agent notified us the buyer wanted a one-month deferral on the closing date. It wasn't a great call to receive! We had a four-month gap between the offer and closing dates, which concerned us. As part of the offer, the buyer agreed to provide a standard 5% deposit. At our request, the buyer agreed to pay a second deposit of 3% of the purchase price sixty days prior to the closing.

The bottom line is the buyer closed on the designated date. We don't know the reason why the buyer wanted to delay closing. There's no doubt in my mind a deposit of 8% of the selling price was very influential on the buyer closing on the specified date.

The moral of the story is the real estate market has changed in the GTA, and you need to do everything possible to ensure the buyer closes on the agreed date.

April 2018

I'd been musing over what to write as my April Tip of the Month when I received a note from a contact of mine. My contact suggested that I should advise people to throw out credit cards they rarely use.

Taking this suggestion further, you should also close any investment accounts or bank accounts you rarely use. These accounts have a way of mushrooming over the years.

Check what you're carrying in your wallet.  There are very few items you need to carry with you in today's world. I have friends whose wallets look like George Costanza's. Most of you know what happened to George's wallet at the end of the show.

Having received this suggestion, it made me think there must be other useful tips that people might have. If you have a suggestion you think is worth sharing, I'd be pleased to include it as a Tip of the Month. Please send me a note if you have one.

March 2018

It's the right time of year to think about tax! CRA provides a pension credit of $2,000 to all taxpayers 65 years of age and older (it's possible to receive this credit at a younger age).  CRA also allow spouses to split pension income between themselves. For the income to be considered eligible pension income, it needs to come from a source other than the government e.g. a RRIF.  Once you turn 65, consider converting part of your RRSP into a RRIF, which pays $4,000 per year for six years (both spouses would have to be over 65).

You'll have eligible pension income, but because CRA provides a credit and not a deduction, it's likely you'll pay some tax on the income. If you and your spouse pay tax at the current highest marginal tax rate of 53%, the credit would reduce the tax rate to 29%. On the assumption you'll continue to be taxed at the highest rate of tax until age 71, the tax rate on the RRIF income received between age 65 - 71 will be reduced by 24%.

For six years on $4,000 of pension income, even if you and your spouse pay tax at the highest rate, you'll save $1,000 a year based on the 2017 tax rates.  While not a huge savings, the money is better in your pocket than CRA's.

Everyone's situation is different, and you should consider what rates of tax will apply to your income after you turn 71. You should also bear in mind that by receiving income earlier, you'll be prepaying tax and the income earned on the RRIF proceeds annually will be taxable.

If you consider this suggestion to have merit, please contact your financial advisor to obtain your own tax advice. My Tip of the Month provides ideas for you to consider and discuss with your own professionals and should not be relied on.

February 2018

Over the last six to eight years, we've seen substantial increases in the price of homes in Canada, particularly in Toronto and Vancouver.  We all know this is partially due to the low interest rate environment we've been living in.

Part of the huge debt levels Canadians are carrying is from substantial mortgages on their homes. The Canadian banks are very good at selling life insurance to cover the amount of the mortgage, should an untimely death occur. Be aware that as your mortgage principal is reduced, your life insurance coverage falls, but your premiums remain the same.

You'd be smart to obtain comparative quotes.  You'll be surprised by how much cheaper the competition is!

January 2018

Happy new year and all the best for 2018.  It's hard to believe 2017 is in the rear view mirror. Time passes way more quickly these days!

Here's a suggestion which has nothing to do with investing, insurance, taxes, wills or estate planning!  We're all much more aware of identity theft these days. When it comes to preventing theft, one of the most overlooked aspects is the protection of valuable papers. Valuable papers insurance is an insurance policy that covers the cost of replacing important documents such as deeds, wills, and contracts in the event that they are lost, stolen, or damaged. Some banks will provide an alert where a text can be sent every time your credit card is used.  It's a simple way of quickly becoming aware your credit card is being used illegally.

October 2017
Investing should be a continuous process. I'm not just referring to equities and fixed income vehicles. Real estate and alternative investments should be part of your overall strategy. In the low interest rate environment we've lived in for the last decade, as well as for the foreseeable future, the push for investments which produce income has become paramount.
Diversification should be an important component of your strategy. Real estate investments should consist of properties which provide rental income, mortgage funds which yield interest income, private and public reits and properties which are being developed for resale. While I'm comfortable investing in reits and mortgage funds, I invest through property managers for my investments in rental properties and properties being developed for resale. I don't have the expertise and time to do this personally.
You should decide what percentage of your investment portfolio you need to hold in fixed income investments. When investing in equities, you need to consider the mix between small cap and large cap companies, the split between Canadian, US and international companies, the appropriate mix of industries and how important it is to receive dividend income.
Investing is a marathon, not a sprint. You need a strategy and patience. You have to continually revisit all aspects of your investments. It's your money and your responsibility to achieve the best results in your personal situation.

September 2017

I've spent a considerable amount of time with clients reviewing life insurance policies. Most policies are far more complicated than the average person expects.

In the right circumstances, there's a place for permanent insurance in the form of whole life or universal life policies. These policies usually have an underlying investment component, which is managed by the insurance company. The return on this investment component has dropped considerably over the last ten years. 

While the return on the underlying investment component could still drop a little further, the risk on these types of policies has reduced significantly. Projections are prepared using current rates of return, so the projections are considerably lower and more realistic than a number of years ago, when interest rates were far higher.

If you're considering purchasing permanent insurance, make sure you have a complete understanding of the policy. This is a long-term commitment.

August 2017
Despite increased disclosure requirements for reporting on investment portfolios, you need to take responsibility for what's happening in your portfolios.  Review your holdings, fees and investment strategy on a regular basis. 
I continue to see disappointing advice rendered by some investment advisors.  I recently reviewed a portfolio which made me question the advice provided.  There was a cash component of 25% in the investment portfolio, which earned 1%, and all the income earned on the cash was paid in fees to the investment advisor.
The advisor didn't have a full appreciation of the client's financial position.  She didn't know her client was holding three times this amount of cash outside his investment portfolio.  The portfolio should have been fully invested in equities, as there was a large amount of cash outside the portfolio.  The client was doing his own fixed income investing.
When creating an investment strategy, the investment advisor has to be aware of all the client's assets, and a co-ordinated approach should be followed.  Don't feel intimidated from asking questions.  It's your future and your money!!

March 2017

We've had low interest rates for many years. Despite this, DEBT is still a four letter word in my world!! There's smart debt and bad debt. If the interest on the debt is tax deductible because its financing a good investment, that's smart debt as far as I'm concerned.

Bad debt occurs when the interest on the loan isn't tax deductible and/or its financing a lousy investment. In recent years, even when the interest on your home mortgage hasn't been tax deductible, the gains people have made on the increased value of their home has worked to their benefit.

At some point, the party's going to be over, and interest rates will increase. None of us know when this will occur. While there's virtually no risk of large interest rate increases in the near future, a rise of 1% will have a significant impact on many people.

The time to react is sooner rather than later. There's not a one plan suits all. It will depend on the age, earning capacity, retirement plans, etc, etc, of the borrowers. Develop a plan to pay down your debt. Relieve the stress level in your lives. Having no mortgage for younger people today is almost an impossible dream. Set a realistic goal to halve the size of your mortgage by a specified date.

February 2017

Given the changes in disclosure of investment management fees as of January 1st, I thought it would be timely to provide information on these fees. I recently read an excellent article written by Scott Ronalds of Steadyhand Investment Management Ltd, who gave me permission to use it as my February Tip of the Month. The Tip is longer than usual, but I encourage you to read it as it contains important information.

"Would you be OK with investment costs of 5% a year? I can already hear your response, “No bloody way.” Yet, many investors face costs in this neighbourhood because they’re unaware of all the components that eat away at returns. Our new infographic reveals the key factors that play a role in the often-murky world of investment costs.

These costs range from commissions to advisory fees to the real wild card – our own behaviour (i.e. when and how often we buy and sell). New reporting requirements that are now in effect (referred to as “CRM2”) will provide investors with better, albeit incomplete, information on their hard costs and performance. Many investors will receive their first “Summary of Costs” report in early 2017.

The investment media anticipates that this ‘Great Reveal’ will be an eye opener for many Canadians. But while the new reporting requirements are a step in the right direction, investors should be aware that the new reports do not include a potentially large component of their overall costs – namely, product fees (which may also be referred to as investment management fees). We explain the various costs below.

Advice and service fees

The costs that will be shown to investors can be categorized as “advice and service fees”. These include administration fees, trustee fees, transaction fees, sales commissions, trailing commissions and other advice-related fees paid to investment providers. The fees may range from 0% to 1.5%. Investors who work with full-service advisors should expect their fees to come in at the higher end of this range. For a $100,000 portfolio, these fees will typically be in the range of $1,000 to $1,500 per year.

Product fees (investment management)

What’s missing in the new reports are the fees paid to investment managers for selecting and managing the stocks and bonds in the funds, and the management fees associated with owning ETFs. These fees can range from 0.2% (for a portfolio of low cost ETFs) to 2.0% or higher (for certain mutual funds). For a $100,000 portfolio of bank or broker-sold mutual funds, these fees will typically be in the range of $1,000 to $1,500 per year.

Think of these two cost components (advice and service, and product fees) as the hard costs of investing. They can be significant, which is why it’s important that investors understand them.

Behaviour impact

The other cost component is behaviour, or the impact of short-term focused advice and emotionally driven investment decisions that may cause investors to veer from their plan, usually during stressful or euphoric times in the market. This is a soft cost that firms rarely measure or report, but it can have a much bigger impact on returns over time.

Research from Dalbar (a U.S. financial research firm) indicates that investors underperform the funds they invest in by 3%+ per year over the long haul because of poor behaviour – e.g. reacting adversely to market news, chasing short-term returns, and generally trading too much."

Additionally, do you know that the U.S. Money Reserve is a legitimate company handled by highly qualified employees. Furthermore, it mostly deals in high-quality government-issued coins. Concerning the us money reserve complaints, consumer complaints about the company's sales methods have resulted in certain legal issues for the US. Money Reserve. Most notably, a case was filed against the U.S. Money Reserve alleged that the corporation inflated their commemorative coins and targeted the elderly in their promotion.

January 2017

With the markets ending on a high note, I thought I'd share some of my ideas on investing:

Don't make an investment just because a friend does.
If an advisor has been recommended to you, check if the person who made the referral receives a fee.
Don't invest in a product you don't understand.
The higher the return, the greater the risk.
It's your money and your responsibility to look after it.
Think long term when making investments i.e. five years plus.
Diversify your investments geographically and by sector.
Use a financial coach/mentor to help you learn how to play the game.
There's not such a thing as a stupid question when it's your money.
Ensure you have the right mix of fixed income, equities and alternative investments.

December 2016

If you're receiving or close to receiving a CPP pension, this Tip could benefit you.

CRA allows the sharing of CPP pensions between spouses. If one of the married or common law spouses has a lower tax rate, this will be beneficial to the couple. An election has to be made to receive CPP pensions in this fashion, as well as to revert back to each spouse receiving their own CPP pension.

If spouses share CPP pensions, note CRA requires both of them to be at least 60.

This won't produce major tax savings, but every bit helps!

November 2016

This month's Tip has nothing to do with insurance, investments, taxes or wills!! It's about how much your home phone is costing you!

Some people have dispensed with their home phone. However, there are many who still have one. Most of them monitor the service plans they have for their cell phones, and negotiate with their provider. However, they don't have the same approach when it comes to the service provider for their home phone.

Unfortunately, I fell into this category and decided to take a look at it! I considered eliminating my home phone service completely. When I started to examine what I was being charged and what my alternatives were, it resulted in a reduction in my monthly charge from $70 to $20. A great return for a minimum amount of time, and I decided to keep our home phone service.

If you have a home phone, review the charges you're paying and the service you're receiving. I'm sure it will be time well spent.