Tag Archives: Financial Planning

Keeping Your Cottage In The Family – Mistakes To Avoid

Swimming, canoeing or just chilling on the dock — your kids have grown up spending their summers at the cottage. It’s only natural that you’d want to leave the cottage to your kids when you die. After all, many people can’t afford to buy a cottage of their own. But if you’re not careful with how it’s treated in your will, your family retreat could quickly turn into a burden and a battleground. That’s because, it’s not just an emotional touchstone for your kids — it can also be prohibitive cost-wise to pass on to the next generation. If you want to keep your cottage in the family after you die, then avoid these three pitfalls:

Mistake 1. Doing nothing

You let your kids figure it out once you’re gone — after all, it won’t be your problem anymore. But if you really want your cottage to stay in the family, this is a risky proposition — and it will force your kids to decide between paying a huge tax bill and letting go of the place they love. Why? Because when you die, your cottage will be deemed to be disposed of at “fair market value” — from there, capital gains tax will be drawn from your estate and if there is no money in the estate to pay the tax bill, the cottage will ultimately have to be sold.

Mistake 2. Not talking about it with your kids

You assume your kids want the cottage — so you just leave it to them to split equally. Who wouldn’t want a cottage, right? Seems logical – but if you don’t sit down and talk to your kids about your plans, you are setting the stage for conflict. What if one of your kids doesn’t want it or can’t afford it?

Mistake 3. Assuming your kids will “play in the same sandbox”

Remember when your son was three and wouldn’t let his younger sister touch his train set? While you might think those days are over, don’t underestimate the power of sibling rivalry when it comes to sharing something like a cottage. It can turn your family toxic overnight. Will they get along? Can you reasonably expect them to share expenses, especially if one earns a lot more money than the other?

Beyond the Lost Decade

cracked eggAs we said goodbye to 2009, there was a lot to celebrate — we closed out a year of spectacular gains on world stock markets. But while 2009 was a great year, it also marked the end of one of the worst decades for stock performance in history. As of December 31, 2009, the S&P500 was down 24.1 per cent from where it started in 2000. So bad does the decade look in retrospect that it’s being called the “lost decade.”

So where do we go from here?

I’d like to tell you that world stock indices are set for more double-digit gains in the years ahead but that wouldn’t be true. There are far too many economic problems on the road ahead, with high government debt levels, leveraged consumers in developed nations and inflation on the horizon. All that adds up to a volatile environment as far as stocks go.

Which is why active management and a focused, long-term outlook will be more important than ever in the decade ahead of us. While passive strategies paid their way during times of unprecedented stock market growth, the future belongs to investors who can stay the course and actively seek value in their investments. And there are other ways you can maximize your savings — taking advantage of tax incentives (RRSPs and IPPs for example) will give you a boost going forward. You should also be focused on paying off debt, as interest rates begin to creep up from their lows.

Benjamin Graham’s student Warren Buffett has said that it only takes two things to make money – having a sound plan and sticking to it… and that of those two, it’s the sticking to it part that most investors struggle with.

Markets like we’ve seen of late create understandable stress and can lead to short-term decisions – this New York Times article from May talks about the cost to investors of acting impulsively.

At the risk of repeating a timeworn cliché, in our experience the only way to invest successfully over time is to maintain discipline and a long-term focus – to have the right plan and then stick to it.

On The Cutting Edge – Webinars

Webinar – A web-based seminar that we conduct – live – giving you the opportunity to hear directly from members of our team as well as creating a forum for education on a variety of financial topics.

In another “first”, we launched our new Webinar series in the last calendar quarter.

Now you already know that utilizing technology is nothing new at IRONSHIELD. We’ve always tried to make use of the efficiencies that technology can offer us – administratively. Next, we took it to our processes. The ones you’ll know best – to name but a few – The KAIZEN Financial Planning Process™ and the original Asset Mix Optimization Process™. Then, we used technology to improve access; access to online statements, access to online meetings and to reduce access; client data protection – and now, Webinars!

Our goal is to maximize technology, without losing the personal touch. And that seems to be getting notice. Dan Richards, President & CEO of Strategic Imperatives Corp. sought Scott out on Investment Executive TV to describe the technology platform he uses for effective webinars and online client meetings.

Back to the Webinar… The inaugural event featured an exclusive chat with Connor, Clark & Lunn’s  VP and Chief Investment Officer (CIO), Jeff Guise. As Chair of the Portfolio Strategy Team, Jeff is responsible for investment strategy within the Private Client Group and oversees both strategic and tactical changes in asset allocation.

Next up in our webinar series was – Stephen Lingard from Franklin Templeton. As co-lead manager for the Quotential Program, Lingard spoke about what drives security selection and what factors influence his decisions as a money manager.

And check out our website regularly for news of upcoming webinars…

2009 — The Year It Paid Off to Stay In

Congratulations!  You rode out the 2008 market correction without changing course – and now it’s paid off (and what a payoff).  Although we experienced an extremely tough year in global markets in 2008, those who stayed invested – and invested more – benefited from one of the biggest stock market rallies since 1979.  Close to home, the S&P TSX Composite Index was up 30.7%! Anyone who wasn’t invested in 2009, missed the steep and fast market bounce-back, which saw dramatic gains in stock prices.  And of course any new money you invested during the year benefited from the growth as well.

The sad truth is, for most Canadian investors, the gains of 2009 were left on the table – a January 2010 survey by Angus Reid and Franklin Templeton showed a whopping 87% of Canadians failed to invest because they were still spooked by the market meltdown of 2008 – moreover, they were completely unaware of the stellar market rally taking place around them.  In fact, only 20% of them knew of the TSX’s positive performance during the year.

This is a prime example of how skepticism and fear can cloud our judgment. There was certainly a lot of pain in the markets during 2008. Although it was a good time to take stock of your portfolio, the key was to avoid the temptation to panic. Your investment profile should guide your decisions, not only in up markets, but also in down markets. We urged you to stay the course – stick with your plan – and you listened. So take a moment to look back and appreciate your steely resolve – it served you well and kept you focused on your future during tough times. That’s the discipline that will see you realize the financial goals you’ve set!

And if your resolve starts to weaken, remember we are only a phone call or an email away…

Lesser-Known Signs You Need to Change Your Plan

We all know about the big life events that might trigger a change in your financial plan – a new job, an inheritance, retirement, marriage or divorce, sale of a business, the birth of a child. But there are a host of other, less earth-shattering circumstances that might signal a financial change to come. It could be related to your career or your personal life – either way, here are a few “other” signs that could mean your financial plan needs a shakeup.

The kids have finally moved out…

FINALLY, the kids have moved out and it’s time to sell off the nest. While this is likely good news for your cash flow, there are a lot of things that could impact your financial plan. Should you consider buying or renting once you’ve sold? Will you need some of the $$$ to supplement your retirement income? Is it time to consider buying a vacation property? Whatever your choices, selling your house will affect your financial plan in some way.

Your son wants a loan to go to clown school…

Okay, maybe not clown school – but perhaps your child is an exceptionally gifted writer or artist and you want to help him or her out financially while they get started. Or you want to help them buy their first house, or finance part of an MBA. Helping your kids in these ways could impact your financial plan. It’s worth a discussion, no matter how large or small the amount. There are lots of different ways to give money to your kids – whether it’s a loan, a gift, or an early inheritance – good planning can help you (and them) make the most of it.

Your boss is driving you nuts…

Or you are gradually losing interest in your job or chosen field. That’s a sign you might need a job or career change – or early retirement. Going over your financial plan sooner rather than later can help identify what’s possible now or may be in the near future by dedicating some new resources. Retraining, or even early retirement, may give you your quality of life back. Life is short – this could be your time to start writing your next chapter.

Your pay structure could be changing…

Are you about to get a raise or new benefits? Does your boss want to bonus out a bigger portion of your salary? Does a bigger bonus make sense or should you take the salary? Or should you quit and hire yourself out as an independent contractor? Anything that impacts your tax bracket or the type of income you earn, or the types of deductions you qualify for, could impact your financial plan – even in a small way. If you’re not sure, this could be the time to revisit your financial plan.

Highlights of the 2010 Federal Budget

The 2010 Federal Budget was delivered as Canada and other nations are slowly working their way out of the recent global recession.  While Canada experienced less of a decline than other countries, the Canadian economy still has some work to do before it will fully get back on its feet.

As expected, this is very much a “stay the course” budget.  The government will continue its stimulus spending for another year, while preparing to exercise restraint and reduce spending across may fronts.  On the stimulus spending front, the budget confirms $19 billion in new federal stimulus spending, in addition to the $6 billion from the provinces and territories.  This spending is a continuation of the government’s 2009 Economic Action Plan initiatives, with additional spending on training, education and other measures to help Canadians affected by the downturn.

The second major theme of this budget is restraint in spending now and into the future.  The government is planning to reduce $17.6 billion in spending over the next five years.  The government projects the debt-to-GDP (gross domestic product) ratio is expected to peak at 35.4 per cent in 2010-11 and then fall to 35.2 per cent in 2011-12 and 31.9 per cent by 2014-15.  The government is also planning a full review of government initiatives and programs to find additional savings.

This budget contains a number of initiatives that will be of particular interest to Canadian investors.

Continuing the move towards a national securities regulator.

The federal government continues to push for a national securities regulator within the next three years.  It must be noted that there is much work to do, including overcoming resistance from some provinces, before this new national body can come to be.

Tackling Canada’s growing retirement savings problem.

The government is reiterating its focus on tackling Canada’s growing retirement savings issues.  Building on the conversations the federal government has had with the provinces, the government is committing to a new round of meetings in 2010 at which it will review policy options.  This will be a hotly debated issue in coming years.

Allowing credit unions to expand across the country.

In a move that will be played out over the years to come, the government will now allow credit unions to incorporate and expand federally.  These potential new entrants into the national financial planning arena will offer investors new options when it comes to where they place their savings.

Allowing foreign ownership of Canadian telco assets.

The Canadian telecommunication services sector will now be opened up to foreign investors.  Consumers will likely benefit from increased options in the marketplace, while investors might see increased market action among incumbents.

Income trust conversion deadline looms – and the government closes loopholes.

The use of losses may be restricted in certain situations when units of income trusts are exchanged for shares of a corporation.  These rules will prohibit aggressive schemes designed to achieve inappropriate tax-loss trading.

Improved options for contributing to an RDSP.

A parent’s or grandparent’s RRSP, RRIF and/or RPP can be now rolled over tax-free upon death into a Registered Disability Savings Plan (RDSP).  Starting in 2011, unused entitlements of Canadian Disability Savings Grants and Canada Disability Savings Bonds can be carried forward up to ten years.

More options to save in RESPs and RDSPs.

Parents and grandparents can now maximize both provincial and federal granding systems with this rule clarification.  The budget is putting rules in place to ensure that both levels of these savings and granting programs are synchronized.

More foreign investment opportunities.

The proposals for non-resident trusts (NRTs) and foreign investment entities (FIEs) will be reworked and simplified.  This may allow investors and funds to invest in a broader spectrum of international investments.

Closing loopholes on stock options’ attractiveness.

The rules that allow stock option deductions by employees and corporate deductions for employers will be tightened.  Companies will have to revisit their option plans to ensure they remain onside.

Slight loosening of tax reporting for non-residents.

Non-residents will no longer be required to report certain dispositions of taxable Canadian properties.

~ Provided by Fidelity Investments ULC

Friends don’t let friends quietly suffer financial misfortune

CLIENT SUCCESS STORY #1

Client Profile: Laurence Sunderland (not his real name)

Occupation: Business Owner – Residential and commercial alarm systems

Prior to meeting with IRONSHIELD Financial Planning™, Laurence’s confidence in his advisor was diminishing. He felt that his advisor was presenting mostly “smoke and mirrors” as there seemed to be a “lot of activity without any tangible results”.

“I felt a certain level of anxiety at the thought of having to figure out how to fix the problem but knew that if I didn’t address it, years of hard work and savings would ultimately disappear”, said Laurence. As a husband and father of two university-aged children, this was unacceptable.

One good introduction was all it took to turn things around.

Laurence was talking to a good friend about his concerns. Laurence’s friend then asked “What are you going to do about it?”

Laurence thought about it and said he didn’t know.

His friend said “I know someone I could introduce you to. If I asked Scott to call you, would you take his call?”

And that was all it took to help out a friend.

After a few meetings, Laurence decided to begin working with Scott and his team because, as he put it, “[Scott] gained my confidence through his process of ‘educating me first’”.

“Never before had anyone gathered so much information… and then been able to turn around and present their findings in such a straight-forward plan” Laurence said. “Scott covered much more than I had initially been hoping for… the comprehensive approach found in The KAIZEN Financial Planning Process™ provided me with a clear and practical strategy well beyond my investments. I now have confidence in my plan.”

When Laurence was asked how he feels now, he said “I feel that Scott has earned my trust and that… leaves me feeling secure and optimistic about my choice of advisors”.

– Friends don’t let friends quietly suffer financial misfortune –

Canadian Charities – Good Giving…

Canadian charities had a rough year according to Statistics Canada. Donations were down 5.3% as recession-wary Canadians cut back on support for their favourite causes. There is still a window of time left to help a charity that means something to you. If you do decide to give, make sure you take a smart approach to making your gift. A bit of planning and discussion with your financial planner can help you make the most of your giving, not just for the organization you’ve decided to support, but in your financial plan as well. Here are a few quick tips to get you started:

Plan ahead

Set aside money annually for your charitable donations. Whether it’s a fixed dollar amount or a percentage of your gross income (say, 2.5%), you should have a good idea of how much you plan to give to the cause or causes you’d like to support during the year.

Spread it out

Think about making your donation through monthly deductions from your account. This will spread out the impact on your cash flow over the year.

Consider insurance

You can designate a charitable organization as the beneficiary on your insurance policy. Doing so allows you to leave a larger gift to a cause you’re passionate about, after you die.

Don’t Forget the Write-off

Save all your receipts, no matter how small your donation is. You can combine them and claim a tax credit for up to five years of donations, to get the biggest bang for your donation buck. Here’s how it works: the first $200 of donations earns a federal tax credit of 15%. Above that, the federal tax credit jumps to 29%. Magnify that by the provincial tax savings and you’ve got a win-win!

Pool your receipts

If you and your spouse give to different causes, pool your receipts. It doesn’t matter whose name is on the receipt – combining them will help push you over the $200 threshold to maximize your tax credits.

Think about starting a foundation

You don’t need to be a fat cat to have your own foundation. Even a $20,000 lump sum could become the basis of you or your family’s gift plan for many years.