Dec 12 2018
0

Improving Your Investing Behaviour

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Has volatility in the marketplace got you down? Here are some worthwhile considerations on how to improve one’s investing behaviour:

Remember your time horizon. Staying invested and sticking to a well-thought-out plan is the key to longer term investing success. This means avoiding the temptation to engage in market timing. Nobody has ever been able to consistently predict what the markets will do next. Volatility is inevitable in the short term, but, as history has shown, its effects smooth out over time.

Pay less attention to the financial headlines. It is easy to become preoccupied with the daily financial headlines. In the worst of times, the media can sensationalize the doom and gloom, which may feed speculation and cause poor decision making. Conversely, the media may create unfounded hype. Informed decision making should not be based on isolated headlines of the day, but rather solid data, thoughtful evaluation and consideration of your own personal goals and objectives.

Avoid succumbing to emotions. As the old saying goes, the market is driven by two emotions: greed and fear. During good times, greed often entices investors to enter the market but often at premium prices. During difficult times, many investors will sit on the sidelines out of fear and overlook bargains that may exist, or, worse, liquidate their portfolios
at the market bottom. Keeping focus on your investment plan’s objectives can help during times of emotion. Working towards measurable goals within your plan will help to maintain perspective.

Revisit your plan. Change is inevitable! Financial markets are constantly changing and the prospects of specific companies, industries, or even entire asset classes that may be attractive today may not be as attractive tomorrow. When reviewing your portfolio, diversification should be a broad goal to ensure a healthy portfolio balance and minimize the impact of adverse change.

Over time, your personal needs may also change. As such, your holdings should be adjusted periodically. Don’t forget that your objective is to produce solid returns over time, and not to own particular securities forever.

Keep tax considerations in mind. They can make a difference to the bottom line, especially during times in which high returns may be difficult to achieve. Don’t forget to use tax-deferral and tax-free vehicles (such as Registered Retirement Savings Plans and Tax-Free Savings Accounts), to their fullest extent. Consider the tax status of different forms of investments when you review your portfolio allocation. Dividends enjoy the benefit of the dividend tax credit (for qualifying taxable Canadian corporations). The tax advantage can be significant. As an example, an investor in a tax bracket with 46.41 percent tax on interest income and 29.54 percent on dividend income would need approximately $1.31 of interest income to equal $1.00 of dividend income before taxes are paid. Capital gains are taxed at even lower rates.

At the same time, don’t let tax considerations control your decision making! We’ve seen situations in which investors who are reluctant to sell a holding because taxes will be triggered, overlook important factors such as the changing fundamentals of the security or the need to maintain portfolio balance.

Contact us today at 204-259-2859

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Dec 04 2018
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Emotions and Our Investing Decisions

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It’s no surprise that human emotions can often have an impact on investing. Understanding the psychology behind why we make certain decisions can provide some perspective as we pursue the task of wealth building.

It’s no surprise that human emotions can often have an impact on investing. Understanding the psychology behind why we make certain decisions can provide some perspective as we pursue the task of wealth building.

Richard Thaler, a University of Chicago professor, is one of the pioneers of behavioural economics, a field that studies how emotional factors can affect economic decision making. Neuroeconomics explains that we are not biologically wired to make the best financial decisions because the part of our brain that tells us to act rationally can easily be overtaken by powerful emotional impulses. Thaler points out that people tend to be in one of two emotional states: hot or cold. Irrational decisions tend to be made when we are in our hot state. This may explain why we make certain choices: when we aren’t hungry (cold state) we might choose a healthy salad. But once dinner rolls around and we are hungry (hot state), we may select a big bowl of pasta instead. We often overestimate the self-control that is necessary in a hot state.

Likewise, our brains can react the same way when we are investing. Some examples? We may be fixated on a particular sell-price target and refuse to sell a losing position — called anchoring — even though new information changes the target. Or, we may be led into herd behaviour, mimicking the actions of a larger group, even when we would not necessarily make the same decision on our own. This may be one reason why investors sometimes fall into the trap of buying high and selling low. Behavioural finance can also help to explain other peculiarities of human behaviour, such as why we may overlook the importance of saving or why we don’t always put away enough for retirement, even though we know how important it is.

How can we use this knowledge to improve our own investing ways? Being aware of our emotions can help to better regulate them. Those who study behavioural economics claim that many of the world’s best investors have mastered the art of treating their own feelings as reverse indicators. Excitement becomes a cue that it’s time to consider selling, while fear tells them it might be time to buy. Equally important, decisions should be made before entering into potentially emotional situations. This may include sticking to a financial plan during difficult times, refusing to succumb to emotions when the media gets heated or avoiding the urge to procrastinate when updating power of attorney or estate plan documents.

How Investment Advisors Help

Human emotion can be one of the investor’s worst enemies. According to one study that attempted to quantify the impact of human emotion, between 45 and 55 percent of an average investor’s underperformance can be attributed to psychological factors.*

As advisors, one of our more important roles is to help remove the emotion from investing. We encourage a disciplined approach that emphasizes quality, patience and participation to serve investors over the longer term. We implement risk mitigation techniques to help support portfolios throughout any market period, which may include rebalancing to a certain asset mix, limiting the size of any one holding and maintaining quality criteria for assets.

We are here to provide support and keep you on course, so that human emotion doesn’t impact your investing ways.

Source: *Dalbar, Quantitative Analysis of Investor Behaviour, 2013.

 

Contact us today at 204-259-2859

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Nov 14 2018
0

Estate Planning: A Snowbird Checklist

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Heading south this winter? Winter is the time of year when many Canadians plan their escapes from the cold and head to warm weather destinations. While many planning efforts are focused on setting up tee times, updating travel insurance and protecting houses before leaving, one important consideration should be making sure your estate plan is in good order.

 

If you are a snowbird, here is a short list of some estate planning considerations to address before you leave for your warmer destination:

  • Have a valid and updated will and powers of attorney. Those empowered by the documents should know where they are stored should something happen to you while you are away.
  • Keep an updated list of all of the institutions where you have assets or that provide professional services to you (i.e., banks, accountants, lawyers, insurance brokers, etc.) and a contact person at each company.
  • If you own property outside of Canada, you may need to seek legal advice to determine if you need a separate will and powers of attorney for that country. If so, ensure that your foreign will and powers of attorney are properly integrated with your Canadian documents.
  • Consult an accountant to plan around any potential income or estate tax liabilities relating to the ownership of foreign property.
  • Keep track of the number of days you spend away as you may be deemed a resident for tax purposes in another jurisdiction if you spend more than 182 days per calendar year outside of Canada.

To help give you further peace of mind before you depart, consider completing the following as part of your ‘to-do’ list:

  • Make a list of all your investments, bank accounts, credit and banking cards so you have a clear picture of your overall financial status before leaving.
  • Leave copies of important documents with a trusted individual back at home for safekeeping.
  • Provide instructions to your financial institution regarding term deposits and Guaranteed Investment Certificates (GICs) renewal.
  • Pre-arrange Registered Retirement Income Fund (RRIF) deposits for a steady stream of income while away.
  • Pre-arrange re-occurring bill payments through online banking or by automatic withdrawal to ensure timely payments.
  • Set up direct deposit for your government allowances such as Canada Pension Plan (CPP) and Quebec Pension Plan (QPP); GST credits; Old Age Security (OAS) to avoid missing out on income.

Contact us today at 204-259-2859

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Nov 05 2018
0

ESTATE PLANNING: Understanding Trusts

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When developing an estate plan, the inclusion of a trust, or multiple trusts, may help you to achieve your personal objectives and enhance benefits to be received by future generations.

 

WHAT IS A TRUST?

A trust is a relationship where a person (the settlor) transfers property to another person or company (the trustee) who holds that property for the benefit of another person (the beneficiary). In general, it is possible to have more than one settlor, trustee, and/or beneficiary of a trust.

TYPES OF TRUSTS

There are two categories of trusts: i) inter vivos, a trust created during the settlor’s lifetime; and, ii) testamentary, a trust created as a consequence of an individual’s death by way of their will.

TAXATION OF TRUSTS

Since a trust is a relationship and is not generally recognized as a legal entity, trusts are regarded as individuals for income tax purposes.

In an inter vivos trust, all of the trust’s income is generally subject to tax at the highest marginal rate for individuals. With the exception of a Graduated Rate Estate (a designated testamentary trust subject to tax at the graduated rates in the same manner as an individual for the first 36 months of an estate), testamentary trusts are also subject to tax at the highest marginal rate for individuals.

While trusts are treated as individuals for tax purposes, they do not receive the benefit of being able to claim personal tax credits.

All, or a portion, of the income earned by a trust in a taxation year can be paid or made payable to all, or some, of the beneficiaries of the trust. This income will retain its character (e.g., eligible dividends, capital gains, etc. earned by the trust and distributed to beneficiaries will be considered to be eligible dividends, capital gains, etc. of the beneficiaries) and will be subject to tax in the recipient beneficiaries’ hands. Any income that is not distributed to the beneficiaries in a taxation year will be subject to tax within the trust.

POTENTIAL USES AND BENEFITS

A trust may be used as part of an estate plan to provide some of the following benefits:

Income Splitting —Tax savings may be achieved by distributing all, or a portion, of the income earned by the trust to beneficiaries who are subject to tax at a lower marginal rate than the trust, or who have unused loss carry forward balances or personal tax credits, since

the income will be taxed in the beneficiaries’ hands.

In the case of an inter vivos trust, careful planning is required to ensure that the income attribution rules do not apply in any potential income splitting strategy.

Asset Protection — If structured properly, trusts may help to protect assets from your/the beneficiaries’ creditors, the potential breakdown of your/the beneficiaries’ marriage, and from the beneficiaries themselves (in the event they are minors, disabled, or not currently at a stage in life where they have the capacity to own certain assets outright).

Further, for individuals residing in certain provinces, the trust may protect the assets held within it from estate administration (i.e., probate) fees.

If you would like to further explore the potential benefits
of setting up a trust, or need assistance with other aspects of the estate planning process, please give us a call or visit our website.

Contact us today at 204-259-2859

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Oct 27 2018
0

Sandwich Boomers: Easing the Squeeze

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Today’s baby boomer generation faces a new challenge: the dual role of taking care of children and aging parents. Currently, many baby boomers provide some form of care to aging parents but also provides support to children. Increasingly, boomers are finding themselves “sandwiched”, as children take longer to become self-sufficient and elderly parents live longer. However, there may be ways to ease the challenges for those who face this dual-support role.

 

Caring for Parents 

The planning process is best started when parties are healthy and not in a position of crisis. Often, conversations are avoided until a crisis occurs, which forces the need
to make quick decisions under stressful conditions with insufficient information.

Discussions may be difficult and should be addressed
with sensitivity, care and the full cooperation of all parties, especially the parents. Be prepared for the possibility of non- cooperation — talking to elders about new circumstances, particularly those involving money or lifestyle, may be
met with suspicion or hostility. Each situation will differ: some may require several low-key approaches over time; others may be better supported by the services of outside professionals. Engaging all siblings may be helpful as they will likely be involved as time passes.

Having access to the financial information of aging parents may be an excellent start in order to determine what is feasible and where help may be required. If a comprehensive estate plan exists, it may be possible to offer assistance within its context. Such a plan will focus on achieving set retirement-planning objectives, maximizing asset value and minimizing taxes until the time that assets are passed on

to beneficiaries. An estate plan should include a will, have defined beneficiaries and executors (or liquidators/estate trustees, depending on province/territory of residence) and may also consider the use of a trust.

A power of attorney should be drawn up if one doesn’t already exist. There may be separate documents for health care and financial decisions. Depending upon the province or territory of residence, these documents may be known by different names. They should be reviewed periodically to ensure they remain relevant.

 

Considering Your Children’s Needs

In the event that you will need to care for your elderly parents, it is important to discuss the changing situation with your children. Children will likely have questions or concerns that may need to be addressed.

As you try and balance your family’s needs, you may consider having conversations with teenagers about taking a more active role in meeting the future costs of their education; or, for older children, expectations of timing for their departure from home.

Recognize that this may be a difficult and stressful time for children and do not forget the importance of your ongoing responsibility to them.

 

Looking After Yourself

The dual role of caring for elderly parents and supporting children
may be physically, emotionally, and financially challenging. However, in order to be a support to others, you must first be able to look after yourself.

Many informational resources and support organizations are available to help you make the best decisions for your family. Government assistance may also be available, including the Employment Insurance Compassionate Care Benefit, for individuals who have left work temporarily to provide care

to a gravely ill family member, and the Caregiver Tax Credit, for individuals living with a qualifying dependent.

Finally, it may be necessary to revisit your own financial plan when support needs change as your own financial well-being should always remain the priority. Don’t hesitate to contact us for assistance with any financial or investment matters.

 

Contact us today at 204-259-2859

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Oct 18 2018
0

The Gamma Factor: The Value of Advice

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Does good advice translate into value? The “gamma factor” — the discipline associated with longstanding financial advice — has been shown to make a notable difference to an investor’s wealth accumulation over the longer-term.

A recent study has suggested that an increased saving rate is one of the most significant components influencing the gamma factor. The other component is the ability to stay disciplined through both positive and negative market cycles. According to the study, Canadian households with a financial advisor for more than 15 years accumulated 290 percent more assets than households who did not use the services of an advisor. This was largely attributed to the gamma factor.

Beyond saving, there are many ways in which receiving good advice can translate into value. Here are some perspectives on how investors should be leveraging the expertise of an advisor.

Portfolio Management — One of our most important roles is to manage risk within a portfolio according to an investor’s specific risk tolerance levels. This includes having appropriate portfolio guidelines in place, such as maintaining a level of diversification and managing to a certain asset mix, while keeping individual needs in mind. Risk management often results in moderating volatility — not only on the downside, but also when higher returns are driven by higher risk. As well, we are constantly navigating through the changing investing landscape. Today’s challenges include low interest rates and slower growth; tomorrow’s may be different.

Behavioural Coaching — Emotions can be an investor’s worst enemy. A study by Dalbar, a financial services market research firm, attributed between 45 to 55 percent of an average investor’s underperformance to psychological factors.2 Why? According to the study, the average investor may react to short- term noise and trade at the wrong time, buying at highs and selling at lows. As advisors, one of our objectives is to help remove the emotion from investing.

Tax Strategies — Tax strategies can make a significant difference to overall wealth. This includes understanding and adapting to changing tax law and investing in tax- advantaged ways, such as using registered plans, or optimizing asset location.

Withdrawal Strategies — The way in which an investor withdraws investments from different accounts, as well as prioritizes different sources of income (such as government tested benefits like the Old Age Security, etc.), may help to minimize taxes and maximize wealth. This depends upon each individual investor’s situation. As the time approaches where investors need to access income, we are here to help put a plan in place.

Total Wealth Management — Wealth management extends beyond an investor’s portfolio. This may include business succession planning, estate planning or insurance planning, as examples. Managing wealth across all aspects of an investor’s life can improve an investor’s wealth position. Along with our broader team, we can act as a resource for many other wealth management activities.

We remain committed to you and are here for you to leverage our expertise.

Where Advisors Help

Canadians who work with an advisor have been shown to be more successful at building wealth and achieving their goals.

The support of an advisor can make a difference to the success of an investor, including helping to increase net worth, fostering good saving habits and improved investment habits, as well as achieving personal financial goals.

Building Wealth — Investors who were supported by an advisor were shown to have three times the net worth and four times the investable assets of those who didn’t work with an advisor. In this study, the majority of Canadians had investable assets of under $25,000 at the beginning of the advisory relationship.

Fostering Saving — Saving continues to be one of the cornerstones in investing success. Advised Canadians have been shown to have a greater savings rate than non-advised Canadians. Advisors help investors stay on track by helping investors to save and invest on a regular basis.

Helping to Achieve Financial Goals —Professional advice can help investors to stick to their financial plan, even through the volatile markets. Removing the emotion from investing can play an important role in helping investors stay focused on achieving long-term goals.

 

To get your portfolio reviewed, contact us today at 204-259-2859

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Oct 06 2018
0

Asset Allocation is Important

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From an investment perspective, asset allocation deals with the way in which your securities are allocated within broad categories.

It may not just be about equities or bonds. For example, some people may have restricted their investments to include only real estate. They may own rental properties in the U.S., with the hope that the value of the underlying property will rise in price and cover any operating costs to provide a real return over time that can be realized and used during future years for personal purposes.

During the commodity super-cycle that peaked during the first decade of the new millennium, some investors may have focused their purchases on commodities-based investments, with the hope that this tactic would result in a positive return or “outperformance” over time.

Both of these asset classes (and others) have experienced changes over time, which highlights the value of maintaining an appropriate asset allocation within a portfolio.

What is Asset Allocation?

Asset allocation is the manner in which your investments are proportioned within each investment category, such as stocks, bonds, real estate, commodities, cash and other asset classes.
Generally, the goal of asset allocation is to help you plan to meet your financial goals by adjusting and rebalancing your allocations based on a variety of factors, including such things as your age, current financial position, risk tolerance or size of estate. The risk associated with your portfolio should reduce over time as the portfolio reaches its end point.

Determining Your Asset Allocation

The process of defining an appropriate asset allocation will depend on a number of important factors. A general first step should be identifying realistic financial goals and time horizons. These may include education expenses for your children, the purchase of a house, vacation or car expenses, your retirement goals, and others. You will need to understand the timing and the amount of money needed to achieve these goals, as well as your ability to generate the required resources.

Once you have determined your goals, prioritize them according to a time frame. Short-term goals should have less risky investments and longer-term goals can have more risky investments.

Discussing these objectives is important, especially when it comes to your overall wealth management plan. The process may result in the abandonment of some of your current “wants” as being out of reach at the moment and may require you to rethink your priorities.

Changing Your Mix

Once you have your basic investment plan in place, you should try to adhere to it. Be disciplined to ensure that you don’t take unnecessary risks. Don’t be afraid to stick to a plan that has been well-thought out for your circumstances.
However, you should also consider reviewing your asset allocation each year. With the passage of time comes change in the time horizon for each of your investment goals. Longer- term goals now become intermediate or shorter-term goals. As well, different events in your life may also trigger the need for change in your allocation mix, such as marriage, the birth of a child, an inheritance or the death of a spouse.

Seek Expert Advice

Worth repeating: Investors should seek advice about any aspect of the investment process, but particularly about asset allocation. Don’t be afraid to discuss the merits of different asset classes or securities in meeting your own personal investment objectives.

To get your portfolio reviewed, contact us today at 204-259-2859

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Sep 05 2018
1

Cottage Succession Planning

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If you own a family cottage or cabin, have you considered a plan for its succession? Although the serenity of the family cottage or cabin may provide a wonderful getaway for many, it is difficult to escape from the tax issues associated with the property’s ownership.

Capital Gain on Disposition

You may be faced with a tax liability on the appreciation in value of a family cottage or cabin when it is disposed of, whether the property is sold, gifted during your lifetime, or considered a deemed disposition at death. While there are tax rules that will allow you to gift the property to your spouse at death or during your lifetime at cost, such transfers only result in a deferral, not the elimination, of any capital gains tax.

At the time of a sale, the capital gain subject to tax is calculated as the difference between the proceeds received on the sale and its adjusted cost base (ACB). In the case of a gift or a deemed disposition on death, the capital gain subject to tax will be based on the fair market value of the property and its ACB. Don’t forget — any capital improvements to the property can be added to your ACB, thereby reducing your capital gain. Remember to retain any records in respect of those amounts spent on renovations!

Principal Residence Exemption

It may be possible to shelter the capital gain on the disposition of your family cottage or cabin from tax by using your Principal Residence Exemption (PRE).

In order for the family property to qualify as a principal residence it must be “ordinarily inhabited in the year”. The Canada Revenue Agency (CRA) has stated that a seasonal residence would be considered to be “ordinarily inhabited in the year” by a person who occupies it only during their vacation, provided the main reason for owning the property is not to produce income (although incidental rental income is acceptable).

Before applying the PRE to the sale of your cottage or cabin, you must recognize that each “family unit” (consisting of you, your spouse and unmarried minor children) can claim the PRE on only one principal residence per year. Therefore, if you own multiple residences with accrued gains, you will need to determine the most effective way to utilize the PRE based on your situation.

Future Generations?

Form a Non-Profit Organization If you intend to pass the property on to future generations of family who share its use and wish to avoid incurring capital gains taxes, you may consider establishing a non-profit corporation.

Here, the non-profit corporation would own the property for the long- term benefit of the family. Family members, as members of the corporation, would pay membership fees to use the property. However, there would be no tax to pay as the generations continued to use the cottage or cabin until the time the property was sold.

Under this scenario, there may be tax to pay on the transfer of the property to a non-profit organization. However, you may be able to shelter any gains with the PRE. As the cottage is no longer directly owned by you upon transfer to the corporation, there may be implications under family law depending on the province of residence. As well, professional fees may be required to maintain the corporation’s records and other operating requirements may be necessary to keep a non-profit status, so obtaining expert advice is advised.

Ensure a Plan is in Place

We at the Tetrault Wealth Advisory Group believe the enjoyment of the cottage or cabin can be even more satisfying knowing that a succession strategy for the property is in place. As always, seek the assistance of a tax professional regarding your particular situation to determine the best path forward.

Contact a Canaccord Genuity Wealth Management Investment Advisor today.

 

Mar 05 2018
5

2018 Federal Budget Highlights for Investors and Small Business Owners

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The third Liberal budget was presented on February 27, 2018. It focused mainly on innovation, skill development and gender equality. However a few measures also impact investors and business owners.

Personal Measures

Despite much speculation, the capital gains inclusion rate remains at 50%.

CRA Funding: To combat tax evasion and tax avoidance, the government will invest $90 million over five years to target non-compliance in high risk areas including individuals with offshore accounts.

Reporting requirement for Trusts: Starting in 2021 and subsequent years, trusts will be required to report the identity of all trustees, beneficiaries and settlors. This will create a filing obligation for certain trusts where one does not currently exist. Penalties for failure to file will be $25/day with a minimum of $100 and a maximum of $2,500. Gross negligence penalties could be as high as 5% of the maximum fair market value of trust property held in the year.

Small Business Owners

Small business tax rate: A private corporation currently pays tax at 10.5% on its first $500,000 of active business income. The government confirmed it will proceed with lowering the small business tax rate to 10% starting January 1, 2018 and to 9% starting January 1, 2019. Tax rates on non-eligible dividends will be increased accordingly.

Passive investments: New rules have been introduced to limit the ability of earning passive investment income inside a corporation. Effective for tax years starting after 2018, if a private corporation (or its associated corporations) earn more than $50,000 of “aggregate investment income” it will see a grind on the $500,000 federal small business limit. The small business limit will be reduced by five dollars for every dollar of investment income in excess of $50,000. Thus will be fully eliminated once passive income exceeds $150,000.

The “Aggregate Investment Income” used in the calculation will not include capital gains on the sale of active business assets or shares of qualifying small business corporation (or certain partnerships that meet tests similar to those of a qualifying small business corporation). Net capital losses from other tax years will not be considered in the calculation but taxable dividends form non-connected corporations and investment income from non-exempt life insurance policy will increase “aggregate investment income”.

A second refundable dividend tax on hand (RDTOH) account will be created. The first RDTOH account will keep track of refundable tax on investment income and the second will keep track of refundable tax on portfolio dividends from Canadian corporations. A private corporation will no longer be able to pay eligible dividends to recover refundable tax on investment income. Instead, only non-eligible dividends will recover refundable tax on investment income. Only once that RDTOH account is depleted will the corporation be able to pay eligible dividends to recover refundable tax on Canadian portfolio dividends.

Income Sprinkling: The government confirmed its intention to proceed with the “income sprinkling” measures announced on December 13, 2017. These rules are effective for 2018, meaning that paying dividends to certain family members may no longer be an effective strategy of reducing a family’s overall tax burden.

Clearly some big changes for business owners as none of the new measures included grandfathering as was previously expected. We will be happy to meet with you to review and discuss your current passive holdings and how your small business deduction or investment strategy may be impacted.

Rob Tétrault, B.A., J.D., MBA, CIM
Senior VP and Portfolio Manager

Cedric Paquin, CPA, CA, CFP
Wealth Planning Consultant

Feb 23 2018
10

Top 9 Tips on How to Find & Choose an Investment Advisor or a Wealth Management Firm

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1. Education and Credentials.

Inquire with CSA (Canadian Securities Administrators) and look for registration of the investment advisor or wealth management firm in question. Ask the advisor about his experience in the industry and his credentials (CFP, CIM, MBA, etc.). In order to keep their designation, advisors must adhere and follow the rules from their employer’s ethics policy and are obliged to complete continuing education requirements. Look for an investment advisor from a top reputable wealth advisory group with specific credentials and who is willing and ready to assist you with your objectives and needs in portfolio management.

2. Compensation.

Carefully choose an investment advisor with a pay structure tailored to your needs. An as investor, you have the option to pick an advisor who earns their income via hourly work, a fee based on assets under management or via compensation by means of transaction commission fees.

A fee based investment advisor gets compensated by charging a percentage fee on the overall amount of assets under management. This means, a higher amount of savings in someone’s portfolio equals greater pay for the advisor. Keep in mind, the fee charged to clients by the wealth management firm may also lower when the total of assets increases and reaches a target threshold (Eg. Fee of 1.5% for +$500,000 and 1.25% for +1,000,000 in assets under management). Fees may vary depending on the advisor or wealth advisory group chosen to manage your investment portfolio.

On the other hand, advisors who are compensated via transactions commissions will collect a commission fee for every executed trade. In addition to having the overall assets under management grow in the client’s portfolio, the latter will benefit from trading securities as he or she receives commissions on the transactions taking place within the client’s portfolio.

Before going on the hunt to find an investment advisor or a wealth management group to work with, you will want to determine your financial goals and needs and the compensation method of the securities expert you are willing to team up with.

3. Discretionary or Non-Discretionary.

Ask your investment advisor if he/she runs their practice with discretionary or non-discretionary management.

What is discretionary management? Certain investment advisors may qualify as portfolio managers able to act on a discretionary basis, subject to certain criteria. If an investment advisor trades securities for his or her clients under a discretionary portfolio management model, the former trades securities as he or she sees fit for their client’s portfolio without the need of the client’s approval. In other words, discretionary portfolio managers will not require your permission to trade equities on the global financial and stock markets. The discretionary model works best when trust has been established in the relationship between the investor and the advisor.

Whereas, if you are dealing with an investment advisor under a non-discretionary model, keep in mind that the he or she will need to confirm with their clients before executing a trade. Your approval will be needed before the trade of a security takes place on the financial markets. This is a preferable scenario if the investor wants to be kept in the loop before trades are executed in his or her portfolio.

4. Minimum Requirements.

Some investment advisors only work with clients who can meet the minimum target of assets and savings to invest. In your search for a wealth management firm or an independent advisor, focus on looking for a professional who will make time for your concerns, questions and is interested in building a long term relationship. Be aware that some advisors require minimums and you should make sure to do some due diligence to determine if you’re a good fit with the investment management firm or independent advisor you are inquiring about.

5. Marketing, Social Media & Website.

How prominent is the brand presence in your area? Do you see the advisor’s brand name in local newspapers, online advertisements, local news, etc.? Is the wealth management firm’s brand mentioned and present on the radio, television and online communities?

Be aware that wealth advisory firms do differ in size and service offerings. Marketing budgets are usually correlated with the size of the firm or boutique, but this is not always the case. One could possibly evaluate a wealth management group’s marketing and brand presence in comparison to the size of the financial institution or boutique shop someone is inquiring about. Long-term branding omni-presence is often considered a sign of a successful marketing campaign. Most successful independent advisors and wealth management firms will promote and advertise their professionalism, exceptional customer service, competency and integrity in their respective practice.

Does the advisor have a LinkedIn Profile? Maybe a Twitter or Instagram account? Does he or she create and put out content videos on YouTube? Is the website layout clean, sharp and professional? Does the advisor have a financial blog? Online brand presence has never been more important in today’s business marketing plans. More and more folks like you go on-line to read, research and do the research necessary in order to make a smart, educated and calculated decision with respect to whom they choose to work with. Online brand exposure is imperative for achieving success in many other business sectors as much as it is for the top investment advisors and the best wealth management groups in your local area. The trend of searching and gathering online information on business services and offerings has never been more popular worldwide.

6. Community and Charity Involvement.

Look for an investment advisor that is passionate about making a difference in their local community. Philanthropists strive to make this world a better place by creating & founding charity programs, volunteering their time to community events and/or donating their hard-earned money to worthy causes. Advisors who have the local residents and their community’s best interests at heart reveals a lot about their respective personality, character and life priorities.

Leadership, generosity and empathy are common philanthropist personality traits. They genuinely care for other people’s well-being and aim to make positive changes to their local surrounding area. Most of them strive to give back as much as they can to their community, whether it be via monetary contributions to charities & community events, volunteering their time to help out with community service, sponsoring local sports organizations and much more. By the kindness and generosity of their actions, philanthropists and community engaged advisors will most likely be more trustworthy with your hard earned money in portfolio management. They generally want the best for everyone, especially for their loyal clients.

7. Reviews, Testimonials, Endorsements & References

If you know nothing or very little about the wealth management firm’s services, team members, work ethic and track record, no need to worry. Simply search for reviews, testimonials and endorsements online about the firm or the investment advisor you are inquiring about.

Yellowpages.com and yelp.com are two of the many online directories that also have a review section for financial services and investment advisors. Endorsements can be found on either the advisor’s website or on social media. LinkedIn has a section dedicated specifically for people to endorse other folks’ abilities by clicking the + sign beside the respective skill and expertise. Evidently, you want to look for numerous positive endorsements on the advisor’s LinkedIn profile page. Many positive reviews usually confirms and testifies the skills & aptitudes of the financial advisory group in question.

Don’t hesitate to ask the wealth management team for references, preferably from people you might know locally in your community. If the individuals from the firm are confident in their money management skills and they genuinely want to help others reach their financial goals, they should have no problem giving you a list of references for you to contact. An extensive list of respected references will significantly help build a rapport & mutual trust in what will hopefully be a great and long-lasting relationship with your potential wealth management group.

8. Product Offering

Not all investment advisors can provide the same financial products and services. Investment advisors licensed through IIROC (Investment Industry Regulatory Organization of Canada) may have different investment products than a mutual fund dealer licensed through MFDA (Mutual Fund Dealers Association) and vice versa.

Clients can invest in several financial instruments in many different investment savings vehicles. Look for products that would fit your needs and financial objectives.

The use of specific products and accounts utilized by institutional clients, charitable organizations, non-profit entities, foundations, trusts, corporations, businesses, families and individuals will vary from their respective investment portfolios.

9. Services Offered: Tax, Insurance, Investment, Retirement & Estate Planning

Beware that not all investment advisors have the same service offering. Simplify your life and save yourself some precious time by working with a wealth management firm that offers more than one service. The most proficient advisors usually offer a one stop shop for a wide range of services included in their practice. Some of the services offered are: tax planning, insurance planning, estate and retirement planning in addition to investment portfolio management.

The extra service offerings mentioned above are usually included with the remuneration paid to the fee-based investment advisor for managing your assets. There are several advantages of having one firm look after all your needs. A client would be better off having the same professional advisor look after all their planning needs since the relationship has already been established and the advisor is already aware of the client’s personal constraints, objectives and financial goals.

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