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TriDelta innovates with new optional fee structure

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Introducing TriDelta Partnership Fees – No Gain, No Pain

At TriDelta we pride ourselves on proactively responding to market trends and also client feedback. We have had a few clients say; “I lost money, how come you made money?” when market performance was poor in bad market years.  To date, this is just the way investment management fees are charged. TriDelta Financial has now decided to deal with this concern head on.

TriDelta Financial (tridelta.ca) and its Investment Counselling arm, TriDelta Investment Counsel (trideltainvestments.ca) will offer all clients with $500,000 or more of investment assets and a risk profile ranging from Balanced to Growth (minimum of 50% Equity and/or Alternative Investment asset mix to qualify), two options for fees.  One is traditional while the other is a new innovation in the Canadian market.

The Partnership Fee is effectively – if you lose money over a year, your investment management fees will be returned to your account.  Even if you have low returns (from 0% to under 3%) TriDelta will provide a partial refund of your management fee.  On the other hand if you have strong returns, starting at 7%, you will pay a performance bonus.

The message is clear.  If you do well, we do well.  If your returns are low, we do not do well either.  It aligns the interests of TriDelta Financial with our clients in a way that has simply not been found in the Canadian investment world.

Basics of our Partnership Fee program:

Based on Rate of Return on a Household Portfolio over a year, after traditional fees are charged:

  • If return is less than 0%, there is a refund of all traditional fees.
  • If return is between 0.00% and 2.99%, there is a refund of 0.5%.
  • If return is between 3.00% and 6.99%, the traditional fee applies.
  • If return is between 7.00% and 10.99%, there would be a 1% partnership fee.
  • If return is between 11.00% and 14.99%, there would be a 2% partnership fee.
  • If return is 15%+, there would be a 3% partnership fee.

The launch date on this TriDelta initiative is scheduled for Jan 1st 2017.

To participate in the Partnership Fee program, there is a 0.2% annual administrative fee charged.  This fee covers the administrative costs of the program, and is not considered part of ‘traditional fees’.

As you will appreciate this fee structure will only appeal to certain investors, but the important point is that we will offer this alternative subject to certain restrictions.

If you’re interested in exploring this further, please contact your financial advisor or if you’re not currently a client send a request to tedr@tridelta.ca and we will have a Wealth Advisor contact you to schedule a meeting.

Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
tedr@tridelta.ca
(416) 733-3292 x 221

The hardest financial question for most people to answer

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When asking questions to clients, the one that usually stumps people is “How much do you spend in a year?”

They can answer about what they have, what they owe, how much they make, even how much insurance they have, but the discussion slows down considerably around spending.

In most cases, as the advisor, we don’t care what money is being spent on.  We just need to have an accurate sense of the total.

Not surprisingly, how much people spend has a big impact on their financial picture.

Take a scenario of a 60 year old couple. They have $500,000 in RRSPs, $500,000 in non-registered savings, and a $500,000 house with no debt. If they spend $90,000 a year, we estimate they will likely leave an estate of over $400,000.  If they spend $100,000 a year, we estimate they will run out of money in their lifetime.

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Even if they say that they know how much money they spend, we find that often this number underestimates the actual spend. There are always the ‘one-off’ expenses that seem to happen regularly. There is also the odd expense that is simply forgotten.

When they finally do an analysis, they often look at certain expenses and say “do we really spend that much on that?”

Other times, they will say, “that explains why we have had trouble saving more?” The review may lead to changes that lower expenses, or even without changes, will at least provide greater clarity as to why finances are the way they are.

 

Calculate your annual expenses – the most important number in financial planning. If you do nothing else to shore up your financial picture, understand what you are spending, and you will have answered the hardest financial question of them all.

 

I actually believe that the expense number is the most important number in financial planning.  We have all heard of people saying that they are working towards THE NUMBER. This is usually some amount of savings that — when achieved — will allow them to retire in style. What I have found is that the expense number can be the foundation to everything.  It is almost like the sports debate about offense vs. defense.  I view expenses as the defense, and income and assets as the offense. Just like in many sports, the offense gets the glory, but the game is won on defence.

I once spoke to someone in their early 60s. They told me that they have little savings and no pension, and that they are very worried about their retirement. When we went through their situation, I found the following. They were a married couple. They had $25,000 of RRSPs. They had a $400,000 house. They had no debt, and no pension. As it turned out, they are also likely going to be just fine financially. The reason is that they spend about $28,000 a year.

By the time this couple is 65, they will collect well over $30,000 a year indexed, based on CPP, Old Age Security and what is called the Guaranteed Income Supplement or GIS.

In addition, this couple can keep their house, go to a bank and get a line of credit of $100,000 secured by their house (likely very doable even with their low retirement income, but easier to get while still working), and use this line of credit as both an emergency fund, and also to possibly supplement their income by a few thousand dollars a year if needed.

The other alternative is to sell their house, invest the proceeds conservatively, and at 3%, generate $12,000 a year in additional income to cover off extra rental expenses.

The point is that with virtually no savings outside of their home, because of their low expense lifestyle, they are still in decent shape. They are potentially in better shape than the other couple with $1-million in savings, who live a $100,000 a year lifestyle.

Once you can properly answer the question “How much do you spend in a year?” then the rest of the financial order will fall into place. You can begin to get accurate advice on tax savings, appropriate investment asset allocation, and truly answer whether you will be at risk of outliving your money, or instead need to focus more on estate planning.

If you do nothing else to shore up your financial picture, understand what you are spending, and you will have answered the hardest financial question of them all.

Ted can be reached at tedr@tridelta.ca or by phone at 416-733-3292 x221 or 1-888-816-8927 x221

Reproduced from the National Post newspaper article 2nd October 2013.

 

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