FINANCIAL FACELIFT: Big move from Alberta to Ontario puts sharp focus on middle-aged couple’s portfolio mix


Below you will find a real life case study of a couple who are looking for financial advice on how best to arrange their financial affairs. Their names and details have been changed to protect their identity. The Globe and Mail often seeks the advice of our VP, Wealth Advisor, Matthew Ardrey, to review and analyze the situation and then provide his solutions to the participants.

Written by: DIANNE MALEY
Special to The Globe and Mail
Published April 14, 2018

As their 50th birthdays approach, Bill and Hannah are planning to leave behind their big-earning and big-spending oil patch lifestyle and move back to Ontario to help care for ailing relatives.

“Our world has taken a bit of a crazy turn,” Bill writes in an e-mail. “We decided to leave our life here in Alberta this summer and move back to Eastern Ontario.” They’ll be uprooting their two children, ages 11 and 14.

Bill will be leaving behind a salary of more than $220,000 a year, plus a substantial bonus and company stock. Hannah is not employed at the moment. In Ontario, Bill figures he will be making about $30,000 a year working part time. He hopes to retire fully in 2024, at which point they would downsize again to a condo.

Their lifestyle spending will be “pared down in retirement, and when the kids leave home,” Bill writes. They wonder whether their plans pose long-term financial risks. “Can we afford to retire soon?” he wonders. Their retirement spending goal is $80,000 a year after tax.

We asked Matthew Ardrey, a vice-president and financial planner at TriDelta Financial in Toronto, to look at Hannah and Bill’s situation.

What the expert says

Moving across the country will be expensive, Mr. Ardrey says. As well, Bill and Hannah will face selling expenses, legal fees and costs to redecorate their new house. The planner puts these costs at $100,000 on an $800,000 house, or 12.5 per cent of the sale price. He assumes they buy a house in Ontario for $700,000.

After six years, their goal is to net $250,000 from downsizing. After costs, estimated at 10 per cent of the sale price, they would be able to purchase a home worth $400,000 in today’s dollars, the planner says.

Bill and Hannah want to put their children through university. Mr. Ardrey assumes university will cost $20,000 a year for each child, rising at double the rate of inflation, or 4 per cent a year. They are tucking away $2,500 a year for each child in a registered education savings plan to take advantage of the Canada Education Savings Grant.

“Even with the amount of savings they have accumulated, they will fall slightly short of achieving their [education savings] goal,” Mr. Ardrey says. As well, the asset mix of the RESP is almost all in equities. “If markets were to fall in the next few years, it would have a substantial impact on their financial plan – and require a much more significant capital infusion.”

Bill and Hannah contribute the maximum to their tax-free savings accounts each year and Mr. Ardrey assumes they will continue to do so throughout their retirement years. In drawing up his forecast, he assumes Hannah will get 50 per cent of the maximum Canada Pension Plan benefits and Bill will get 70 per cent. They will start drawing government benefits at the age of 65 and the inflation rate will average 2 per cent a year.

As with the RESP, virtually all of their investment portfolio is in stocks. “When markets fall again, this will have a severe impact on their retirement plans,” Mr. Ardrey says. He suggests some alternatives.

In the first plan, Bill and Hannah reduce their equity exposure to 60 per cent, with 40 per cent in fixed income. Historically this balanced mix has returned 4.25 per cent a year net of investing costs. They would still achieve their goal of spending $80,000 a year. At 90, they would have an estate of $4-million, including real estate and personal effects. If they wanted to spend all of their savings instead, they could increase their spending to an inflation-adjusted $99,000 a year.

In the second plan, Bill and Hannah make no changes to their asset mix and suffer a 20-per-cent portfolio loss near the beginning of their retirement. Their asset mix historically has returned 4.75 per cent a year. “Even with this major loss, they can achieve their retirement goal of spending $80,000 per year, but they are in worse shape than if they took on a more conservative mix,” Mr. Ardrey says. At 90, they would have an estate of $3.2-million, or if they wanted to spend all their savings, they could increase their spending to $92,000 a year.

A third scenario has the couple including some alternative investments in their asset mix. They would shift their portfolio to 50-per-cent stocks, 30-per-cent fixed income and 20-per-cent alternative investments. (Examples of “alternative” investments include global real estate, private debt and private equity.) Their returns would be expected to average 5 per cent a year “while providing additional insulation from a severe market downturn,” Mr. Ardrey says. They’d have an estate of $6.8-million. Or they could deplete their savings and not leave an estate, which would increase their spending to $111,000 a year.

Because they are moving from Alberta to Ontario, there are some other financial implications to consider, the planner says. Taxes in Ontario are higher than in Alberta, especially at Bill’s income level. Deductions from his employment in 2018 would be based on Alberta rates, but he would be an Ontario resident for tax purposes because he would reside in Ontario on Dec. 31, 2018. This could result in a larger tax bill than expected next April.

Hannah and Bill should keep a record of all of their moving expenses because they could be deductible against employment income earned in Ontario, the planner says. Because estate planning is a provincial jurisdiction, they should redo their wills and powers of attorney. “Also, they may want to change executors and/or attorneys to someone local.”

Ontario has a probate fee of 0.5 per cent of the first $50,000 of an estate and 1.5 per cent on the remainder. “This contrasts sharply to Alberta, where the maximum probate fee is $400,” he says. “They should consider putting investment accounts in joint names with the right of survivorship to reduce exposure to these costs.”

Client situation

The people: Bill and Hannah, both 49, and their two children.

The problem: Will the big move they are making entail too much long-term financial risk or will they be able to retire comfortably in a few years?

The plan: Shift the asset mix in the children’s RESP and their own portfolios to a more balanced approach so they will not be so vulnerable to a market downturn. Seek expert advice about differences in tax and estate-planning law between Ontario and Alberta.

The payoff: Much less risk to their financial goals.

Monthly net income: $11,350 (excluding bonus)

Assets: Bank accounts $108,500; stocks $950,000; his TFSA $56,000; her TFSA $55,000; his RRSP $290,000; her RRSP $77,000; his defined-contribution pension plan $290,000; her defined-contribution pension plan $190,000; RESP $116,000; residence $800,000. Total: $2.9-million

Monthly outlays: Property tax $375; home insurance $100; utilities; $300; maintenance, garden $260; transportation $505; grocery store $1,000; clothing $100; gifts, charity $400; vacation, travel $1,200; dining, drinks, entertainment $660; grooming $25; pets $125; sports, hobbies $50; health care $105; phones, Internet, TV $245; RRSP $200; RESP $500; TFSA $1,000. Total: $7,150. Surplus of $4,200 a month goes to savings.

Liabilities: None

Want a free financial facelift? E-mail Some details may be changed to protect the privacy of the persons profiled.

Matthew Ardrey
Presented By:
Matthew Ardrey
VP, Wealth Advisor
(416) 733-3292 x230

The Financial Media Can Be Harmful to Your Wealth


“Success in investing doesn’t correlate with I.Q…. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”

– Warren Buffet

As Warren Buffet and countless other investment gurus have observed, one of the most important factors for being a successful investor is the ability to control your emotions.  While there are numerous analytical tools that can be used to assess the quality, value, cash flow and potential future returns of an investment, they are often trumped in decision making by an investor’s emotions, particularly greed and fear.

Fear of loss is by far the more powerful of the two emotions.  In fact, behavioural economists have found in multiple studies that investors view the pain associated with losses as twice as emotionally powerful as the joy experienced from gains.  When equity markets drop, investors become more and more risk averse as a result.  The aversion is heightened if the drops are meaningful (5%+) and if they happen over a short time period.

The media, while an excellent source for timely details on the economy and company specific information, is also known to sensationalize stories that play on an investor’s emotions.  By dramatizing a story, the news source can attain a much larger audience, meaning more clicks, views and interest.  Unfortunately, these stirring stories can lead investors to become more emotional and to make bad investment decisions.

During rising markets, stories are often tilted positively to build on an investor’s greed and desire for quick wealth.  During down or volatile markets, stories tend to focus on risks and negative factors that play upon investor’s fears.  These fears often can lead investors to react by indiscriminately selling their portfolio holdings, regardless of that investor’s goals, needs or even whether the investment is of good quality, offers attractive value or needed income.  This indiscriminate selling can result in lower long-term returns and the risk that the investors do not reach their retirement goals.

One recent example was an article on Bloomberg’s website on March 8, 2018 titled “JP Morgan Co-President Sees Possible 40% Correction in Equity Markets”.   While the title was factual, it only told part of the story and in this case, the part it did not tell was far more important.

Daniel Pinto, the co-president of JPMorgan stated that within the next 2-3 years,  there is likely to be a deep correction in US equity markets of 20-40%, so the headline is factual, but it is nuanced to indicate that the correction is imminent or at least likely to occur in the near-term, not in 2-3 years AND the headline uses the most extreme scenario of a 40% correction vs. the range of 20%-40%.  The other element the headline does not include is Pinto’s short-term views, as JPMorgan has generally been positive on the short to medium term prospects for equity markets, i.e. JPMorgan anticipates that the market will rise further prior to a correction.  For example, if Pinto sees the market going up 20% in the next two years prior to a correction and the market then drops 20%, the investor’s return is closer to 0% (including dividends earned).  A near zero percent return is likely insufficient to meet most investors’ near-term goals, but that is a lot less scary than losing perhaps 40% of their current wealth.

While the headline could incite fear in investors, a more thorough reading of the facts presented in the article should instead yield some caution and reflection.  The article highlights that we are in the latter stages of a bull market and due to the low volatility and strong performance of the equity market in late 2016 – early 2018, many investors’ expectations have become too high.  During this later stage of a rally, investors should take a breath and reflect to see if their portfolios are in line with their target asset allocations and risk tolerance.  It is also a good time for investors to meet with a financial professional to review their goals, cash flow needs, taxes, risk tolerance, time horizon and unique circumstances to create a customized and detailed financial plan and investment policy statement.  Investors with formal financial plans and investment policy statements are more likely to stick to those plans and be less swayed by emotions.

Reading a full financial article, not just the headlines, is a good way to uncover useful information for investing.  Coupled with a comprehensive financial plan, thoughtfully reading full articles (not just the headlines), is a proven way to control your emotions and to protect your wealth.

Lorne Zeiler
Written By:
Lorne Zeiler, MBA, CFA
VP, Wealth Advisor
416-733-3292 x225

Lorne Zeiler on BNN’s The Street – March 21, 2018


Lorne Zeiler, VP, Portfolio Manager and Wealth Advisor, TriDelta Investment Counsel, was the guest co-host on BNN’s The Street on Wednesday, March 21st discussing the following:

Income Investing Strategies in the Current Environment

Given the expectations of rising interest rates and renewed market volatility a traditional bond or dividend focused portfolio may be incapable of generating sufficient income at low volatility needed by investors. Lorne Zeiler, Portfolio Manager, discusses how to design a stable, income producing portfolio in this environment on BNN’s the Street.
Click here to view

Keeping Calm and Profiting from Volatile Markets

When markets drop significantly in short periods investors often let emotions take over and make bad investment decisions. Lorne Zeiler, Portfolio Manager, discusses how to take emotions out of investing by designing a stable, diversified portfolio, including alternative assets, on BNN’s the Street.
Click here to view

Lorne Zeiler
Written By:
Lorne Zeiler, MBA, CFA
VP, Wealth Advisor
416-733-3292 x225

Here’s one extraction which may save your practice a great deal of taxes


As a dentist you know that from time to time you may be presented with a challenging case of a difficult extraction.  As a Wealth Advisor and Financial Planner, I can tell you we are also often presented with a case of a potentially difficult extraction but instead of it being a molar, our challenge is to how best extract funds in the most tax efficient manner from the Dental Professional Corporation (DPC) of a practicing dentist.

One of the methods which has become more popular, especially given the recent tax changes involving Canadian Controlled Private Corporations (CCPC), is the Individual Pension Plan or IPP.

An IPP is a defined benefit pension plan tailored to small business owners such as dentists.  It allows for the DPC, as sponsor of the plan, to fund a defined benefit style pension for the dentist and even their spouse if they are also employed by the practice. Thus, extracting corporate funds and directing them to a source which will provide tax efficient retirement income.

The amount of annual funding is similar to an RRSP in that it is a percentage of T4 earnings to a maximum annual limit; however, for an IPP that limit is even higher than the RRSP contribution limit – and grows each year.  In addition to the annual funding, the company can also contribute any past service earnings as well as a lump-sum terminal funding at retirement.  All these contributions are tax deductible to the corporation.  Like an RRSP, your investment choices are broad and any income or capital gains generated inside the plan are sheltered from taxes, but unlike an RRSP, all of the administration fees and investment management fees are tax deductible expenses to the corporation.

Because an IPP is a formal pension plan, it must be registered with the provincial government and must make annual filings and reporting.  In addition, a triennial valuation must be performed by an actuary.  The plan administrator will generally perform all these requirements and the cost for these is customarily included in the annual administration fee, which is tax deductible.

When the actuary conducts this triennial review one of the items reviewed is the rate of return achieved by the plan.  IPP’s are legally mandated to achieve an annualized rate of return of 7.50%.  If there is a shortfall, the company is required to contribute the difference to the plan.  Again, this catch-up contribution will be a tax-deductible expense to the corporation. However, if the plan achieved a greater than 7.50% return, the DPC might have to take a contribution holiday if the amount is significant.

At retirement the plan can be set up to provide a regular stream of income by way of a pension or the commuted value of the pension can be transferred to a Locked-in Retirement Account or LIRA.

The difference in value over an RRSP at retirement can be significant.  One projection we had calculated for a 55-year-old dentist and his 50-year-old spouse had them with over $1 million more in the IPP than if they just went the RRSP route at retirement.

This will not only allow them to extract more money from the company in a very tax efficient manner, but it will also provide them with a known pool of capital at retirement, which will provide them with a predictable income stream through retirement.

Upon death of the annuitant the remainder of the plan can be transferred to a surviving spouse or if there is no surviving spouse, the annuitant’s estate.

However, there are some drawbacks to an IPP.  The most common drawback is that it limits contribution room to an RRSP. However, this limitation isn’t a major one for dentists since the bulk of retained earnings, is destined to provide for a retirement income in the future. Some of the other drawbacks are because regular contributions are required to be made, this can be problematic for businesses that don’t have regular income streams.  Another small limitation is that funds within the IPP can’t be accessed before the age of 55, but for most dentists these constraints are not an issue.

At TriDelta Financial we recognize that the recent tax changes, IPP’s have become a very effective tool for extracting funds efficiently from your DPC and should be given serious consideration by every incorporated dentist over the age of 45.

Michael Trklja
Written By:
Michael Trklja
Senior Wealth Advisor
(416) 904-7123

Investing like the pros


The traditional so-called 60-40 asset allocation model, has 60% invested in stocks and 40% in government or other high-quality bonds. But after a decade or more of out-of-the-ordinary market conditions, many investment professionals are tweaking the model or abandoning it altogether.

The historical 60/40 investment management approach performed reasonably well throughout the 80’s and 90’s, but a series of bear markets that started in 2000 coupled with a three decade period of declining interest rates have eroded the popularity of this approach to investing.

Bob Rice, the Chief Investment Strategist for Tangent Capital, spoke at the fifth annual Investment News conference for alternative investments and predicted that a 60/40 portfolio was only projected to grow by a mere 2.2% per year in the future and that those who wished to become adequately diversified will need to explore other alternatives such as private equity, venture capital, hedge funds, timber, collectibles and precious metals.

“You cannot invest in one future anymore; you have to invest in multiple futures,” Rice said. “The things that drove 60/40 portfolios to work are broken. The old 60/40 portfolio did the things that clients wanted, but those two asset classes alone cannot provide that anymore,” he said. “It was convenient, it was easy, and it’s over. We don’t trust stocks and bonds completely to do the job of providing income, growth, inflation protection, and downside protection anymore.”

At TriDelta we put together a brochure that summarizes alternative investments titled, Alternative Investments, A proven path to higher and stable returns (Click to download).

A case in point is the continued success of Yale Universities USD27 billion endowment plan. They recently published an update that confirms excellent performance, a return of 11.3% ending June 2017 as a result of a highly diversified portfolio that significantly limited exposure to bonds of only 7.5% and equities to 19.5% (4% domestic US and 15.5% global, ex US). The rest comprised real estate, absolute return, venture capital, leveraged buyouts and natural resources – these are so called ‘alternative investments.’

Yale University as a prime example of how traditional stocks and bonds were no longer adequate to produce material growth with manageable risk.

Alex Shahidi, JD, CIMA, CFA, CFP, CLU, ChFC, adjunct professor at California Lutheran University and managing director of investments, institutional consultant with Merrill Lynch & Co. in Century City, California published a paper for the IMCA Investment and Wealth Management magazine a few years ago. This paper outlined the shortcomings of the 60/40 mix and how it has not historically performed well in certain economic environments. He states that this mix is almost exactly as risky as a portfolio composed entirely of equities, using historical return data going back to 1926.

At TriDelta Financial we recognize the short-comings of a portfolio limited to the old traditional 60/40 stock, bond model and as a result have embraced alternative solutions as an integral part of our investment management platform.

Anton Tucker
Compiled By:
Anton Tucker, CFP, FMA, CIM, FCSI
Executive VP and Portfolio Manager
(905) 330-7448

The importance of a Will


A Will is something that most of us should have unless our net worth is limited and we’re happy with the way the government mandates distribution between spouses, children and grandchildren (detailed below).

Any special inheritance wish will however need to be properly spelled out in a legal document, which takes effect when you die.  Without a valid Will with detailed instructions, the result is often contentious with family members feeling that the deceased would have wished things to be different.  This results in more grief and often family in-fighting.

For most of us a Will is a vital part of your financial plan that must be updated throughout our lifetime.

Canadian Will surveys over the past decade reveal remarkably similar statistics showing that approximately 55% of Canadians have a written Will. This is encouraging although still leaves many without clear direction of how to handle the distribution of assets.

Another key point is how old the Will is and whether it is still applicable to one’s evolving life situation and distribution wishes. A recent survey by Legal Wills suggests that about 12% of Wills are out-of-date, which bumps the number of people needing Wills (either new or amended) to well over half of Canadian adults.

So what do we need to do? First off, let’s understand the basics:

  • Estate planning involves the transfer of someone’s assets (e.g. property, money) when they die, as well as a variety of other personal matters. Wills, estates, trusts and power of attorney are all common tools used in estate planning.
  • A person’s will is a written document that sets out the person’s wishes about how his or her estate should be taken care of and distributed after death. It takes effect when the person dies.
  • An estate is the property that a person owns or has a legal interest in. The term is often used to describe the assets and liabilities left by a person after death.
  • A trust is created to hold property or assets for the benefit of a particular person called the beneficiary. It is managed by a person called a trustee, who has an obligation to deal with the property for the beneficiary of the trust.

The bottom quintile of Canadians net worth tops out at $206,765 (Environics Canada), which means that in the event of death for couples without a will, the spouse essentially inherit all the assets, which may not be the deceased’s wish.

This is how it works when a person dies without a valid will, called “intestate”, Ontario’s Succession Law Reform Act sets out how the estate is distributed.

  • According to the Act, unless someone who is financially dependent on the deceased person makes a claim, the first $200,000 is given to the deceased person’s spouse if he or she has decided to claim his/her entitlement. The other possibility is to claim half of the net family property. A lawyer can help determine which is the better choice.
  • Anything over $200,000 is shared between the spouse and the descendants (e.g. children, grandchildren) according to specific rules.
  • If there is no spouse, the deceased person’s children will inherit the estate. If any of them have died, that child’s descendants (e.g. the deceased person’s grandchildren) will inherit their share.
  • If there is no spouse or children or grandchildren, the deceased person’s parents inherit the estate equally.
  • If there are no surviving parents, the deceased person’s brothers and sisters inherit the estate. If any of the brothers and sisters have died, their children (the deceased person’s nieces and nephews) inherit their share.
  • If there are no surviving brothers and sisters, the deceased person’s nieces and nephews inherit the estate equally. However if a niece or nephew has died, their share does not pass to their children.
  • When only more distant relatives survive (e.g. cousins, great nieces or nephews, great aunts and uncles), the rules are complex and you should speak to a lawyer.
  • If any heir was alive when his or her relative died, but died before the estate was distributed, that person’s own heirs are entitled to their share.
  • When a person dies without a will, only blood relatives, including children born outside of marriage, or legally adopted children can inherit. Half-blood relatives share equally with whole-blood relatives.

Going to a lawyer rather than drawing up your own will significantly reduces the risk that assets will not go to those you had hoped to benefit. This is especially important in today’s world in which we see more common-law relationships, blended families, and second or third marriages.

Some people simply opt for inexpensive ‘Will kits’ that may prove problematic particularly given the many blank spaces in these kits and how easy it is to make a mistake, which typically wouldn’t come to light until after you had died.

There are now also a number of online versions that serve many Canadians needs at a fraction of the cost, which may be suitable for your situation, but be sure to research your options and take the time to review the competitive offerings applicable to your province.

An advantage of these online services is that updating your will can be easily achieved, but the main attraction is the lower cost than a lawyer.

Our opinion is to be sure of all the angles and take advantage of our legal experts to discuss your needs and ensure that your Will is applicable for your needs despite a price premium. The financial peace of mind this delivers will be well worth the cost.

Regardless of the method you choose what’s important is to get your wishes properly documented and procrastinate no further.

Anton Tucker
Compiled By:
Anton Tucker, CFP, FMA, CIM, FCSI
Executive VP and Portfolio Manager
(905) 330-7448