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TriDelta Webinar – COVID answers from a Professor of Infectious Diseases, and why we are more cautious about markets – July 23rd, 2020

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There is a huge amount of information out there about COVID-19. Yet clear answers are hard to find. In this TriDelta Webinar, we will get your biggest questions answered by Dr. Robyn Harrison, Clinical Professor, Division of Infectious Diseases in the Department of Medicine at the University of Alberta.

While COVID-19 facts and figures are only one piece of the investment puzzle today, it is an important one. Learn from TriDelta’s investment experts why we have now become more cautious of stock markets after being quite positive the past few months, and what it means for overall investment portfolios.

Hear from:
Dr. Robyn Harrison, Clinical Professor, Department of Medicine at the University of Alberta, Division of Infectious Diseases
Lorne Zeiler, CFA, MBA, SVP, Portfolio Manager
Cam Winser, CFA, SVP, Equities
Paul Simon, CFA, VP, Fixed Income

 

Hosted by: Ted Rechtshaffen, CFP, CIM, MBA, President and CEO, TriDelta Financial

 

TriDelta Webinar – Investing for today and why to include private credit in your portfolio – June 8, 2020

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In this webinar, you will learn about:

  • A unique high income, low tax solution for non-registered and corporate accounts
  • How to generate steady yields of 7%+ in a low interest rate environment
  • An update on the TriDelta Alternative Performance Fund
  • Getting access to institutional investments as a retail investor
  • Reducing your reliance on highly volatile stocks to achieve solid investment returns
  • TriDelta’s latest thoughts on the stock, bond and preferred share markets

Special Guest Speaker – Wayne Ehgoetz, President & CEO, Waygar Capital

Wayne Ehgoetz is the President and Chief Executive Officer of Waygar Capital Inc.  He has spent over 25 years in asset based lending in Canada, including as President and CEO of Wachovia Canada, where Wayne had full responsibility for both the Canadian as well as International operations.  He retired from Wachovia and was recruited by Bank of Nova Scotia to start its asset based lending capability.  Over the next 6 years, as Managing Director and Group Head, Scotiabank became the second largest asset based lending group in Canada.  Wayne retired from Scotiabank in the fall of 2014 to join Waygar Capital Inc.

Also hear from the investment heads of TriDelta’s Alternative Investment, Stock, Bond and Preferred Share areas:

Lorne Zeiler, CFA, MBA, SVP, Portfolio Manager
Cam Winser, CFA, SVP, Equities
Paul Simon, CFA, VP, Fixed Income
Hosted by Ted Rechtshaffen, CFP, CIM, MBA, President and CEO, TriDelta Financial

FINANCIAL FACELIFT: Should Wilfred and Wendy diversify their Canada-heavy stock portfolio as they inch closer to retirement?

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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.

gam-masthead
Written by:
Special to The Globe and Mail
Published July 3, 2020

Now in their 50s, Wilfred and Wendy plan to hang up their hats soon, sell their Manitoba house and move to a warmer clime. Wilfred is 58, Wendy, 53. Wilfred retired from his government job a few years ago and is now collecting a pension and working part time. He plans to continue working until shortly before Wendy is 55, when she will be entitled to a full pension. Both have defined benefit pensions indexed 80 per cent to inflation for life that will pay a combined $82,956 a year.

“We want to travel more in our younger years, so we would likely need more income in the first few years of retirement,” Wilfred writes in an e-mail. Their retirement spending goal is $75,000 a year after tax plus $25,000 a year for travel. With no children to leave an inheritance to, “we want to use up all our invested funds,” he adds. “We are extremely active, healthy people who have good chances of living a long life.”

They’re considering moving to British Columbia for the “milder winter weather and greater recreational opportunities,” Wilfred writes, but would only do so if they could buy for about the same price as their existing house fetches.

The stock market drop this spring left them feeling their investments are not sufficiently diversified, Wilfred adds. “I would like to diversify our stock holdings away from Canada only.”

We asked Matthew Ardrey, a vice-president and portfolio manager at TriDelta Financial in Toronto, to look at Wilfred and Wendy’s situation.

What the expert says

Wilfred is planning to retire fully in the spring of 2021 and Wendy in January, 2022, Mr. Ardrey says. “With the goal in site, they would like to ensure that they are financially ready for the next stage in their life,” the planner says.

First off, the pair do not keep an accurate budget, Mr. Ardrey says. “As we went through this exercise, they revised their monthly spending upwards by $1,200.” The updated numbers are shown in the sidebar. “Before they retire, I would strongly recommend that they do a full and accurate budget, he adds, because a large discrepancy in their spending “could have a dramatic effect on their financial projections and their ability to meet their obligations in retirement.”

Wendy has three options for her pension, the planner says. She can take $3,874 a month with no integration of Canada Pension Plan and Old Age Security benefits. Or she can take $4,320 a month to the age of 60 and $3,688 a month thereafter with CPP integration. The third choice is $4,621 a month to the age of 60, $3,989 a month to 65 and $3,375 a month thereafter with integration of both CPP and OAS.

According to the pension administrator’s website, the purpose of integration is to provide a more uniform amount of income throughout retirement, rather than having less income initially (prior to CPP and/or OAS eligibility) and more income in the later years (when CPP and OAS commence). Integration provides an opportunity to increase the cash flow early in retirement which, for some, is preferred.

“I thought it would be interesting to compare her three options to find which would be the most lucrative over her lifetime,” Mr. Ardrey says. Option No. 1 is the clear winner, he says, giving the largest cumulative value of payments to the age of 90.

To illustrate, by 72 Wendy will accumulate $961,000 of pension with no integration, compared with $956,000 with integration of CPP and OAS.

In drawing up his plan, Mr. Ardrey assumes Wendy chooses the first option and that they both begin collecting government benefits at 65. He also assumes they buy a condo in B.C. in 2023 for about the same price as they get selling their current home. Because it is a long-distance move, he assumes transaction and moving costs total $100,000.

“Before we can discuss their retirement projection, I need to address their investment portfolio,” Mr. Ardrey says. Wilfred is right to think they need to diversify, the planner adds. They have a portfolio of nearly $800,000 invested almost all (97 per cent) in Canadian large-cap stocks. “Further concentrating their position, they have that 97 per cent spread over only 13 stocks, and of that, 62 per cent is in only five stocks,” Mr. Ardrey says. This exposes them to “significant company-specific risk,” he says.

As well, the Canadian stock market is not as diversified by industry as U.S. and international markets, so it can lag at times. “For example, in the recent market recovery, financials and energy have been lagging, which are two of the three major sectors on the TSX,” he says.

To illustrate, the planner compares the performance of the TSX and the S&P 500 indexes from Dec. 31 and from their February highs to the market close on June 24. The TSX is down 10.4 per cent from Dec. 31 and down 14.8 per cent from February. The S&P, in contrast, is down 5.6 per cent from year-end and down 9.9 per cent from February.

“Having a portfolio almost entirely allocated to stocks in retirement is a risk that Wilfred and Wendy cannot afford,” Mr. Ardrey says. He offers two alternatives. The first is a geographically diversified portfolio with 60-per-cent stocks or stock funds and 40-per-cent fixed income using low-cost exchange-traded funds. Such a portfolio has a historical rate of return of 4.4-per-cent net of investment costs.

Or they could hire an investment counsellor that offers carefully selected alternative income investments with a solid track record, Mr. Ardrey says. Adding these securities to their portfolio ideally would lower volatility and provide a higher return than might be available in traditional fixed-income securities such as bonds, the planner says.

Either way, they meet their retirement spending goal of $75,000 a year after tax, plus $25,000 a year for travel until Wilfred is 80.

Client situation

The people: Wilfred, 58, and Wendy, 53

The problem: How to ready themselves financially to retire in a couple of years.

The plan: Draw up an accurate budget, continue saving and take steps to diversify their investment portfolio to lower volatility and improve returns.

The payoff: Financial security with a comfortable cushion.

Monthly net income: $11,230

Assets: Bank accounts $51,000; his stocks $78,000; her stocks $135,800; his TFSA $86,500; her TFSA $78,000; his RRSP $232,217; her RRSP $186,767; estimated present value of his pension plan $464,000; estimated present value of her pension plan $677,417; residence $425,000. Total: $2.4-million

Monthly outlays: Property tax $270; home insurance $75; utilities $185; maintenance $200; garden $50; transportation $580; groceries $600; clothing $200; gifts, charity $200; travel $2,000; dining, drinks, entertainment $350; personal care $150; subscriptions $50; dentists $30; health and dental insurance $100; cellphones $130; cable $200; internet $130; RRSPs $1,025; TFSAs $1,000. Total: $7,525

Liabilities: None

Want a free financial facelift? E-mail finfacelift@gmail.com.

Some details may be changed to protect the privacy of the persons profiled.

Matthew Ardrey
Presented By:
Matthew Ardrey
VP, Wealth Advisor
matt@tridelta.ca
(416) 733-3292 x230

FINANCIAL FACELIFT: Should millennial savers Sid and Kamala hit pause on their plans to buy a house?

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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.

gam-masthead
Written by:
Special to The Globe and Mail
Published May 22, 2020

Fear of missing out has inspired millennials Sid and Kamala to save diligently in hopes of buying a house in the Greater Toronto Area. They also think they’re “bleeding money” by paying rent, Sid writes in an e-mail.

Sid is 34 and earns $55,000 a year in the hospitality industry. Kamala, who is 29, earns $35,000 a year in health services. The house they are eyeing is $880,000. For now, though, the house-hunting is on hold because Kamala and their toddler are stuck overseas, where they were visiting family.

“My question is whether to stay put in the rental market and focus on investing, or get into the housing market by depleting my savings,” Sid writes. “If we buy a house valued at $880,000, will we have any savings left for retirement?” They hope to retire from work when Sid is 60 with $48,000 a year after tax in spending.

In the meantime, they are planning a big trip. “Our dream is to go to Serengeti [National Park] in Africa to see the wildlife migrations one day,” Sid writes. They also want to help their son with postsecondary education.

“Is it feasible?” Sid asks.

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

What the expert says

Mr. Ardrey explores how things might unfold financially if Sid and Kamala buy the house they want early in 2021 for $880,000. For the down payment and the estimated $15,000 in purchase costs (land transfer tax, moving costs, legal costs and furnishings), they have more than $200,000 in cash equivalents sitting in non-registered investment accounts, Mr. Ardrey says. The remaining $680,000 would be financed by a mortgage.

To help with their mortgage payments, they plan on renting out the basement for the first 10 years, Mr. Ardrey says. They expect to get about $1,400 a month. The planner assumes taxes, utilities, insurance and maintenance add another $1,500 a month over and above the $3,220 mortgage payment. One third of these costs – plus a third of the mortgage interest – will be tax deductible as long as they are renting it out.

Sid is expecting to inherit $50,000 in a few years. When he does, they plan to travel to Africa at a cost of $10,000, depositing the remaining $40,000 in their tax-free savings accounts.

“Based on these numbers, and assuming no large increases in their income, the house purchase is only viable with the renter in place” at least until the couple retires in 2046 rather than the 10 years they are planning for, Mr. Ardrey says.

As for the child’s education, their registered education savings plan contributions of $210 a month will fall short, the planner says. With food and housing, each year at university is estimated to cost $20,000, rising at double the rate of inflation, or 4 per cent a year. “With their savings, they will be able to cover about half these costs,” he says. The remainder will have to be covered by loans, grants “or other means.”

When they retire at Sid’s age 60, he is estimated to get 75 per cent of the maximum Canada Pension Plan benefit he would otherwise be entitled to and Kamala 50 per cent. By the age of 65, both will have 40-plus years of residency in Canada, allowing for full Old Age Security payments.

Their investments have a historical rate of return of 4.95 per cent a year, with an average management expense ratio of one percentage point, for a net return of 3.95 per cent. After subtracting inflation, estimated at 2 per cent a year, they will have a real return of 1.95 per cent, Mr. Ardrey says.

“Based on the above assumptions, they just break even with their $48,000-a-year spending goal,” the planner says, “with no room for unforeseen expenses or emergencies.”

To improve their circumstances, the couple could buy a less expensive home. It could be a smaller one in their desired neighbourhood or one farther afield, making their commute to work longer. Either way, they would not likely be able to command such a high rent from the lower-level apartment, the planner says.

Instead, they might want to consider one or more of the following:

Increase their annual savings now through a forced savings program, but “this would be difficult to do when they are already pushed to the edge of their budget,” Mr. Ardrey says. Or they could plan on renting out the apartment throughout their retirement years. “This would allow a non-investment asset – their home – to generate income for them,” the planner says. “They need to decide if they want to continue to have someone in their home and if so, for how long.”

Alternatively, they could sell the house and downsize after they have retired from work. Or they could work longer or spend less when they retire, “not a preferable choice,” the planner says.

The best alternative, Mr. Ardrey says, would be to improve their investment strategy. They have multiple accounts at several different financial institutions. They should consolidate at one financial institution and develop a diversified strategy using exchange-traded funds, he says.

As their portfolio grows, they should look to move to an investment counselling firm that can offer private investments to supplement the couple’s diversified equity and fixed-income strategy. If all goes well, they should be able to increase their returns net of fees by about one percentage point, the planner says. This would give them more of a financial cushion without having to sacrifice their lifestyle.

One thing that could work in Sid and Kamala’s favour is the potential effect of COVID-19 on house prices. Canada Mortgage and Housing Corp. recently estimated that in a worst-case scenario, house prices could fall as much as 18 per cent over the next 12 months, which would knock $158,000 off the price of their desired home. “If that were to happen, it would certainly make their financial goals that much more achievable,” Mr. Ardrey says.

Client situation

The people: Sid, 34, Kamala, 29, and their toddler.

The problem: Can they afford to buy the house of their dreams?

The plan: Gain a solid understanding of the potential risks and trade-offs involved in buying the house they want.

The payoff: A greater potential for financial security.

Monthly net income: $5,900

Assets: Cash and cash equivalents $210,655; his RRSPs $45,425; his TFSAs $23,505; her RRSPs $3,760. Total: $283,345

Monthly outlays: Rent $1,900; home insurance $20; electricity $40; transportation $450; groceries $400; child care (grandparents are main caregivers) $100; clothing $25; charity $20; personal care $50; dining out $200; subscriptions $30; drugstore $20; cellphones $100; internet $45; RRSPs $700; RESP $210; TFSAs $425. Total: $4,735. Surplus of $1,165 goes to unallocated spending and saving for down payment.

Liabilities: None

Want a free financial facelift? E-mail finfacelift@gmail.com.

Some details may be changed to protect the privacy of the persons profiled.

Matthew Ardrey
Presented By:
Matthew Ardrey
VP, Wealth Advisor
matt@tridelta.ca
(416) 733-3292 x230

TriDelta Webinar for Professional Corporations – May 14, 2020

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This Webinar is focused on those with a Professional Corporation. It will feature ideas and new opportunities that we see in 2020 and in a post COVID-19 world.

We will hear the best advice from a Lawyer, Accountant, Actuary and TriDelta Wealth and Planning specialists, all who work closely with Professional Corporations.

Learn about:

• How to best make use of current Government initiatives related to COVID-19
• Unique ways to draw funds out of Corporations tax free
• Unique ways to invest within your Corporation to reduce volatility and tax
• Post COVID-19 legal issues to watch out for
• Individual Pension plans (IPP) and why more Professional Corporations are using them today

Hear from these experts who all work closely with Professional Corporations:

Fraser Lang, CFP, CLU, CHS, Senior Vice President Sales & Business Development at GLB; is dedicated to strengthening the brand of GBL as a market leader in IPPs, RCAs, FMV of Insurance, and other strategies. Fraser has 20 plus years of experience in the financial services industry.

Greg Loskutov, CPA, CA, LPA principal at Omega Squared Professional Corporation; a full service accounting practice that focuses on providing accounting, taxation and advisory services to entrepreneurs and small businesses with a focus in medical professionals. Greg has 15 years of experience.

Michael E.B. Taing, BBA., LL.B is the managing lawyer for Healthcare Professionals and practices in the Corporate/Commercial and Real Estate divisions at Hummingbird Lawyers LLP.

Asher Tward, VP Estate Planning, TriDelta Financial. Asher runs the Estate Planning group at TriDelta, where he specializes in Planning and maximizing tax efficiencies across an individuals’ Corporation and Personal financial landscape.

Hosted by:
Ted Rechtshaffen, CFP, CIM, MBA, President and CEO, TriDelta Financial.

TriDelta Webinar: Estate Planning Decisions – May 7, 2020

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This Webinar will cover:

  • Making the biggest impact that you can to those you care about
  • How to sort through the tricky issues of stepfamilies and second marriages
  • The smartest ways to leave money to family and charity for the future
  • The smartest ways to leave money to family and charity this year
  • How to use Corporate assets most effectively
  • How to avoid creating family friction around the will and estate

Hear from:

Ted Rechtshaffen, President and CEO, TriDelta Financial
Asher Tward, VP Estate Planning, TriDelta Financial

 

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