Weekly Macro & Market Update
By iA Private Wealth, June 23, 2022
Watch Sébastien’s previous updates on YouTube.
*Refers solely to the Investment Industry Regulatory Organization of Canada licensed advisors within HollisWealth.
By iA Private Wealth, June 23, 2022
Watch Sébastien’s previous updates on YouTube.
By iA Private Wealth, June 14, 2022
By iA Private Wealth, June 13, 2022
A HELOC offers a convenient way to access the equity in your home for renovations or as an emergency source of funds. And it can be a smart way to consolidate your other debts, particularly high-interest credit card debt.
When deciding whether a HELOC is right for you, a little common sense will go a long way. For instance, taking out a HELOC for big ticket expenditures like fancy cars or lavish vacations is clearly not a prudent decision. Likewise, using a HELOC for non-essential home renovations during a recession, when job security can be fragile, is also a bad call. As long as your income is sufficient and stable, and your purpose for the HELOC is sensible, the risk of falling into a debt trap is generally low.
While a HELOC’s interest rate is comparatively low, it can go up if the Bank of Canada raises rates, as it’s doing right now. And, like a mortgage, your lender expects you to make a minimum payment each month on the interest and principal you owe. So when you’re crunching the numbers and deciding if a HELOC is right for you, be sure that you’re not stretching your finances thin, as rapid rate hikes could make your monthly payments significantly higher than at the outset of the loan.
Be aware also that there are other costs associated with getting a HELOC, from home appraisal fees to legal and title search fees, among others.
Finally, before signing the dotted line, be sure to carefully read the HELOC’s terms, as they may include provisions you won’t be comfortable with. For example, in certain circumstances lenders can demand that you pay the full amount owing. And if you miss payments, your credit score can be affected and your lender may take possession of your home.
By iA Private Wealth, May 25, 2022
By iA Private Wealth, May 24, 2022
Women’s rights have made tremendous progress throughout the decades. And now, representing more than half of Canadian bachelor’s degrees, nearly 50% of household incomes and controlling about $3 billion in financial assets, women are forging a path towards independence, equality and wealth.
But challenges remain. Women continue to earn less than men in most professions and they’re still more likely than men to be holding down low-income jobs. Many women also left the workforce during the pandemic, as they disproportionately took on the responsibility of managing their family’s schooling and childcare needs. In fact, women are more likely to take on unpaid caregiving responsibilities for family members in general.
These realities have resulted in women saving less for retirement. Couple this with the fact that women live longer — four years longer on average — and the concerning result is a longer retirement funded by a smaller nest egg.
At the same time, more women are taking control of their financial futures. They are increasingly involved in their family’s wealth and are making more decisions when it comes to wealth planning. And many women are seeking the advice of an experienced advisor to help them form a realistic view of their current finances, map out future goals and measure progress along the way. While women are becoming progressively involved, many tend to have a different perspective when it comes to investing. Women may be more likely to take a conservative approach, which is why it’s important to find an advisor who understands not only your goals when it comes to finances, but also your philosophy.
Wealth planning isn’t only about goal setting, of course. A holistic strategy can include everything from tax planning to investment and legacy planning. In the past, men took the lead on many of these decisions, but as women continue to make strides in their careers and their financial independence, they have been coming to the table with their own views on how to manage their family’s wealth.
By iA Private Wealth, May 4, 2022
Canadians adore their escapes from the city. And what’s not to love? Not only is a cottage a great getaway, bringing joy to families and friends for generations, it’s also proven to be a profitable investment for many who purchased their property decades ago.
It may be hard to believe, but this cherished home away from home that has brought your loved ones together over the years can also cause strain on family relationships in the future. When you pass away, an inherited cottage often becomes a source of sibling friction as disagreements arise about how to share it, whether to sell it and what to do about the capital gains that’s accrued on it. That’s because, unlike a principal residence, which isn’t subject to capital gains, second homes are considered investment properties, and capital gains tax is owed when an estate is transferred from parents to children.
The only way to avoid the tax — and only for a finite amount of time — is to roll over the deed to a spouse, as you would with an RRSP or RRIF. That’s not possible to do with children, so eventually, taxes must be paid.
A popular way to deal with the capital gains tax conundrum, especially if you only have one child, is to gift the cottage to them while you’re still alive. Doing so means you can pay capital gains based on the property’s value today, which makes sense if its value keeps rising.
It’s worth having a frank discussion with your children about what they may want to do with the cottage after you pass on. Parents often assume their kids will want to keep it in the family, but the reality is that many children would either prefer to buy one for their own spouse and children or aren’t interested in the upkeep once the property becomes their responsibility. Another possibility is that one child may be more attached to the cottage and want to preserve its legacy while another may prefer instead to inherit some other portion of your estate.
If you decide to sell, you may choose to do so while you’re still alive or you can stipulate in your will that the property be sold after your death, with taxes and transaction costs paid by your estate and the remaining funds shared by your heirs. While selling it may be emotionally difficult for you and your family, it may also be the most straightforward solution.
By iA Private Wealth, April 29, 2022
Most adults are responsible for making their own decisions about key aspects of their lives, such as personal finances, health care and living arrangements. When needed they might consult family members, trusted friends or professionals with proficiency in certain fields, but generally they are in control of their own choices.
No one likes to think about the possibility of having to give up control of these responsibilities, however, if there is a significant deterioration to mental or physical health, who would you want making these decisions for you? This person (or people) will act as a substitute decision maker, and is officially called a power of attorney (POA).
A POA document specifies the decision-making authority that a person (typically referred to as the “grantor” or “donor”) gives to a third party (known as the “attorney”). Note that the attorney doesn’t need to be a lawyer, but can be if the grantor so chooses. While the attorney is legally obligated to act in good faith and in your best interests (otherwise known as “fiduciary duty”), careful thought must go into choosing this person. They will have the ability to make highly impactful decisions on your behalf.
Depending on your personal circumstances, you may choose to make different types of POA arrangements. The most common are:
A POA for property only gives the attorney powers when the grantor is mentally capable. If you want this arrangement to continue should you become mentally incapacitated, then opt for an enduring POA (also known as a continuing POA). A POA for personal care takes effect only if the grantor becomes mentally incapacitated, as determined by a thorough assessment by a qualified evaluator or medical professional.
For any POA, you have the ability to place limits on the attorney’s powers, such as restricting them from selling your home. Also note that an attorney is not allowed to designate or change beneficiaries for your registered plans or insurance policies.
Since your chosen attorney cannot designate beneficiaries, it’s important to do it while you maintain adequate mental capacity. This way, you’ll have the comfort of knowing that your assets will be distributed to the people you have specifically selected. Through your will, you may also decide how your assets are distributed (for example, it’s common to set up trust accounts for minors).
Without named beneficiaries, your assets will go to your estate and the court may decide how to allocate them. This might be a slow and expensive process, plus there’s no guarantee your assets will be distributed as you desire. It’s in everyone’s best interest to designate beneficiaries on insurance policies and registered plans like RRSPs, RRIFs and TFSAs.
By iA Private Wealth, April 25, 2022
Finding an Investment Advisor who provides unbiased, professional advice is foundational to a successful relationship. Securities regulators recognize this important aspect of the investor experience and continue to enhance regulations that focus on building trust.
Reforms implemented last year require registered dealers and the advisors who work for them to inform their clients of any conflicts of interest that may arise. The CFRs place the onus on dealers and advisors to explain in clear and straightforward language what these conflicts of interest might be and how they will address them in the best interests of their clients.
An example of a potential conflict of interest would be if an advisor is in a position to earn higher compensation for selling a certain type of product, or where the dealer might stand to receive a greater benefit, such as “proprietary” mutual funds managed and operated by the firm.
Advisors continue to be responsible for determining if an investment is suitable for a given client, and the CFRs help them accomplish this important task. The advisor can gain greater insights into each client through an enhanced Know Your Client (KYC) document. An advisor uses the KYC to gather an expanded range of information about a client’s financial situation, risk tolerance, time horizon and investment objectives, while making a reasonable effort to keep the KYC updated in a timely manner as a client’s circumstances change.
Upon opening a client account, dealers and advisors must deliver enhanced information to give clients a sound understanding of their overall offering. This information includes disclosing which products and services might be available (or unavailable) to the client, how advisors are compensated, what types of costs the client may incur through their ongoing relationship, and what specific responsibilities the dealer and advisor have when serving clients and managing their accounts.
The measures contained within the CFRs help to educate clients, inform their investment decisions and keep their interests at the forefront. While it involves additional time and effort for the dealer and advisor, there isn’t any action required on the part of the investor. For iA Private Wealth, the CFRs are a welcome development as they reaffirm our longstanding commitment to meeting the highest standards of integrity, transparency and professionalism.
By iA Private Wealth, March 30, 2022
It may be hard to imagine, but older millennials are celebrating their 40th birthday this year, while the younger part of the cohort is turning 25. As millennials make their mark on the workforce, they are also redefining the way we think about retirement.
Our grandparents and great-grandparents subscribed to an ideal notion of retirement: build your career at one organization, retire at 65 and receive your coveted defined-benefit pension plan – where years of service guaranteed a steady retirement income. Add to this the equity from your home, and you’re set for life.
But times have changed. Defined-benefit pensions are now very rare, and home ownership is out of reach for most millennials. The result? These traditional sources of retirement income are hard to come by.
Many millennials are either just establishing themselves in the workplace or firmly putting down roots for family and career. What is clear for everyone is that the workforce is changing quite dramatically. While there was evidence of a shift before the pandemic, we are witnessing its acceleration with “The Great Resignation” currently underway. Employees are finding better opportunities with other companies, taking time off and even working for several employers (in the office, remotely or a mix of both). Entrepreneurship, either full-time or as a side hustle, is also an emerging trend.
Without the comfort that relative job security brings, millennials will find that saving and planning for retirement is more complicated. Add to this the likelihood of a longer lifespan – thanks to advances in health care – and this means millennials may have to save more than their parents did.
Looking at it another way, these are actually positive changes – millennials will have greater flexibility around when and how they spend their mature years, and there is good reason to believe they will be much healthier during retirement than any other generation.
If you’re a millennial, it’s never too early or too late to take what will likely be the most important financial step of your life: partnering with a skilled and trusted advisor. Here are three important ways an advisor can help you achieve your retirement goals: