Toronto District School Board Continuing Education. Investment Planning. Fall 2017, Week 5. Instructor Gail Bebee

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1 Toronto District School Board Continuing Education Investment Planning Fall 2017, Week 5 Instructor Gail Bebee gbebee@gailbebee.com

2 What was the most important thing you learned from last week s lecture?

3 Week 4 Take Aways 1. ETFs low cost investing option 2. Know your risk tolerance 3. Portfolio based on investor profile risk, goals etc. 4. It s after tax that counts 5. Gov. savings plans

4 Exchange-Traded Fund Screener Morningstar ETF finder Summary of government savings plans numbers

5 EQ Bank & Oaken Financial Virtual, speciality banks Canada Deposit Insurance Corporation (CDIC) members Cdn. $ deposits insured against bank failure to $100,000 /depositor/bank Check membership CDIC website Credit unions - Provincial deposit insurance corp.

6 Where to put savings for house down payment Low risk account with access when you need the money E.g. high interest savings account, cashable GIC Consider TFSA

7 Today s Topics Retirement Planning Investing information Behavioral finance Financial advisors Direct investing Online broker demo

8 Retirement Planning

9 PLAN AHEAD To avoid retirement money worries Tax planning is key Bottom up estimate retirement income needs Lots of retirement calculators Your financial advisor & online

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13 Retirement Income Sources 1. Employment Pension(s) 2. Personal Savings -RRSPs, TFSAs 3. CPP/QPP Pension 4. Old Age Security 5. (Part time employment)

14 Employment Pension Defined benefit plans - employer takes investment risk Defined contribution plans - employee takes investment risk Personal Savings TFSAs, RRSPs, savings accounts etc.

15 CPP/QPP Pension Based on contributions while working Pension up to $1,114/mo. (2017) Indexed to Consumer Price Index Standard starting age 65 Apply as early as 60 for lower pension Delay up to 70 for higher pension

16 Old Age Security Available to most Canadians Max. $585/mo. (2017) at age 65 Defer up to 5 yr. for larger OAS

17 Old Age Security Recovery Tax OAS reduced 15% per dollar of net income over $ 74,789 (2017) OAS clawback calculator

18 RRSP Size & OAS Pension Recovery Tax Oct 2017 data $35,000 pension No pension OAS (max) income 7,026 7,026 CPP (max) income 13,370 13,370 Pension income 35,000 0 Total Income before RRIF income 55,052 20,052 Net income needed to reach $74,789 clawback threshold 19,737 54,737 RRSP yielding this income* $373,807 $1,036,686 * At age 71, RRIF mandatory withdrawal is 5.28%

19 Resources Easing your finances into retirement Retiring abroad: Should I keep my Canadian residency? Government of Canada pensions and retirement website retirement planning, CPP, OAS Canada Revenue Agency senior s tax planning excellent calculators Globe & Mail Retirement site Advisor Kurt Rosentretter retirement planning guide retirehappy.ca

20 Retirement Planning Books Atkinson, Richard. Strategies for Retiring Right. Insomniac Press, Grant, Ross. Destination: Early Financial Independence [Kindle Edition], Gray, Douglas. The Canadian Guide to Will and Estate Planning, 3rd ed. McGraw Hill, Mackenzie, Warren and Ken Hawkins. New Rules of Retirement. HarperCollins, MoneySense Guide to Retiring Wealthy A Financial Plan for Canadians of All Ages, Rogers Publishing Ltd., 2014.

21 Otar Retirement Calculator Good selection of preand post-retirement planning calculators Trahair, David. Smoke and Mirrors: Financial Myths that will Ruin Your Retirement Dreams, 8th ed. Iguana Books, Vaz-Oxlade, Gail. Never Too Late. HarperCollins Publishers Ltd, Vettese, Fred. Wiley. The Essential Retirement Guide: A Contrarian's Perspective Vettese, Fred and Bill Morneau. John Wiley & Sons. The Real Retirement

22 Investing Information Sources

23 The Internet Good general information sites: Investor Education Fund - Canadian Securities Administrators Financial Consumer Agency of Canada

24 Originating Organization Go to the source for most accurate info Company, government, research organizations etc. News releases, investor presentations etc.

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26 Regulatory Agencies Public company & investment fund filings SEDAR Canada EDGAR USA

27 Credit Rating Services Quality of debt - bonds, preferred shares. e.g. Dominion Bond Rating Service

28 Reputable Financial Websites

29 Libraries Larger branches, Business Departments Many resources, investment newsletters

30 Research Reports Media Stock analysts Understand author s affiliation & motivation

31 Investing/Business Shows Business News Network (BNN) CNBC Bloomberg Television Local television Watch out for biased investment recommendations

32 Newspapers Business section Personal finance columns, e.g. Rob Carrick, John Heinzl (Globe & Mail) Gary Marr, Jason Heath (Financial Post) Ellen Roseman (Toronto Star)

33 Investment Info Subscriptions Print and/or online Investment Reporter Money Reporter several newsletters Investor s Digest of Canada Canadian MoneySaver

34 Books Lots of choice (including mine!) Canadian vs. U.S. authors Timeliness Understand author s bias

35 Investment Clubs Group investing vs. educational groups Canadian MoneySaver ShareClubs Canadian Federation of University Women

36 Internet Blogs, Forums & Social Media Some useful. User beware. Boomer and echo Michael James on Money Young and thrifty Million dollar journey My Own Advisor See list at my website

37 Seminars & Trade Shows Investment advisor/ fund company prospecting events Canadian MoneySaver Canadian Personal Finance Conference (online) The MoneyShow Toronto,

38 When confronted with any piece of investing information, remember my #1 universal investing rule: Think for yourself

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40 Behavioral Finance Seeks to explain why investors make irrational financial decisions

41 Our brains hamper our investing in many ways Loss aversion Herd mentality Over-confidence Hang on to losers too long Impulse buying Etc.

42 Remedies Self-awareness Financial advisor Written investing plan Passive investing

43 Financial Advice Options

44 1. Hire a financial advisor 2. Online advisor (Robo-advisor) 3. Do-It-Yourself MoneySense complete financial plan kit 4. Some advice/ some DIY

45 1. Financial Advisor Person who clients pay to: 1. provide financial planning advice, &/or 2. Manage investments Not a Regulated Title! Glossary of financial certifications

46 Most Financial Advisors in Canada Provide financial advice/plan, and Provide investment management Sell you investments

47 Financial Planning Advice Only Prepare financial plan Do not sell/manage investments Look for CFP, RFP, PFP & experience Pay by project or hour Find a Certified Financial Planner Find Registered Financial Planner

48 Investment Management Only Chartered Financial Analyst - CFA 1. Portfolio managers (high net worth) Portfolio Management Association of Canada Find portfolio manager 2. Online portfolio managers (roboadvisors)

49 Advisor Duty of Care Standard Varies Fiduciary duty Act in best interest of client Suitability Act to suit client needs Most common in Canada

50 Your choice of advisors depends on $$$ you have to invest

51 $$ to Invest NA Less than $500 Less than $500 Advisor Options Financial planner paid by hour/project Bank branch advisor, online DIY, online broker account Investment Choices Advice only Bank brand mutual funds Stocks, bonds, mutual funds, ETFs etc.

52 $$ to Invest Min. $2,000-5,000 Advisor Options Investment Choices Robo-advisor ETF portfolios $25,000 (or more) $200, ,000 or more Advisor at mutual fund dealer All of above & Advisor, investment dealer, portfolio manager Several brands mutual funds Stocks, bonds, mutual funds, ETFs etc.

53 How Advisors Are Paid 1. Salary plus bonus or commissions 2. Mutual fund commissions & trailer fees

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55 How Advisors Are Paid 3. Commissions on transactions 4. % assets managed %, varies by account size 5. Fee only, by hour or project

56 Choosing Financial Advisor Interview more than one Qualifications & experience Planning CFP, RFP, PFP Investment CIM, CFA

57 Choosing Financial Advisor Registration individual company Products & services offered Fees References

58 What to Look For Sensible philosophy Personalized plan Regular communication Client education

59 What to Look For II Fees explained & competitive Clear performance reports Periodic review & update Keep things on track Stop you from doing stupid stuff

60 Before Making a Decision Confirm qualifications & registration Any disciplinary action? Online search Canadian Securities Administrators National Registration Search

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62 2. Online Financial Robo-advisors Advice Focus on investment/ portfolio management Some planning advice May need financial plan from elsewhere

63 Online Portfolio Managers Sign up starts with questionnaire Recommend portfolio (ETFs) Distributions reinvested Auto rebalance to target allocation Low fees, most % assets managed ETF MERs may be extra

64 More on Robo-advisors Advice on robo-advice: Don't rely entirely on the bots Young & Thrifty Robo-advisor Guide Canadian online investment fee calculator Globe & Mail 2016 robo-advisor guide DEMO

65 Examples of Robo-advisors Weathsimple BMO SmartFolio Nestweath Wealthbar

66 3. Do-It-Yourself YOU are client & financial advisor Not for everyone Need interest, time, knowledge, commitment, discipline Online brokerage account Education first Start slowly

67 4. DIY with Some Help Professional financial planning advice Invest on your own - online broker

68 Working with Financial Advisor Initial meeting(s)- get to know client, risk, goals Advice on financial planning wills, insurance etc. Prepare Investment Policy Statement (investment plan)

69 Investment Policy Statement Personal/financial status Objectives, time horizon, risk Asset allocation & investments Expected returns Monitoring, rebalancing, reporting, updating MoneySense.ca sample IPS worksheet 10

70 Ongoing Relationship Record instructions given advisor Monitor advisor performance vs. agreement If advisor falls short, move on!

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72 Investor Protection from Company Insolvency Investment dealers - Canadian Investor Protection Fund Mutual fund dealers- MFDA Investor Protection Corp. Insurance co.- Assuris

73 More Info on Choosing an Advisor Chapter 6 No Hype - The Straight Goods on Investing Your Money Canadian Securities Administrators Choosing an Advisor Onus Consulting Group's Investor Awareness Kit

74 Direct Investing (DIY Investing) DIY investors Research investments Decide what to buy/sell Buy/sell transactions Direct investing account

75 Direct Investing Brokers (Discount or Online) NO ADVICE You buy/sell stocks, bonds, GICs, mutual funds, ETFs etc. Trade online or by telephone Features/investments/costs vary

76 Online Broker Reviews Globe & Mail s 2016 Online Brokers Rankings DEMO 2016 Surviscor Canadian Online Brokerage Review MoneySense Canada s Best Online Brokerages 2017

77 Choosing Online Broker

78 Company Reputation Website design Trading Ease online trading Investment choice U.S.$ registered accounts Customer service

79 Tools Research, screening tools Financial planning Educational materials, videos, webinars, seminars Account Information Clear statements Performance & costs

80 Special Features Practice account Global trading Cost Commissions Admin. fees-rrsps, small accts. <$15,000-25,000 Commission-free ETFs?

81 ETF Commissions No commission National Bank No commission to buy Questrade Virtual Brokers No commission for some ETFs Qtrade Scotia itrade

82 Mutual Funds Fund line up varies by broker Most commission-free, but check Series A funds mostly Series D may be available for DIY online accounts Lower MER than Series A due to lower trailer fee

83 Further Info Is self-directed investing right for you? Canadian Portfolio Manager DIY Investing Tutorials broker specific

84 Online Broker Account Demo

85 What did you learn? 1. Debt, budget, financial plans 2. Asset classes cash, stocks, fixed income, real estate

86 3. Investment products mutual funds, ETFs, ADRs 4. Risk, your investing profile 5. Asset allocation, portfolio building

87 6. Choosing a financial advisor 7. Savings & tax TFSA, RESP, RRSP etc. 8. Retirement planning 9. Direct investing

88 Thank you for attending Notes posted to year end Questions now Questions later