Welcome to Your Hatch Group Retirement Plan 2017 Review ScotiaMcLeod, is a division of Scotia Capital Inc. Enriched Thinking 1
Outline < The Hatch RRSP & TFSA plan < Stock Market & Real Estate Update < ScotiaMcLeod RRSP Option Trusted long term advisors Financial planning New fee statements < Manulife RRSP & TFSA Option Efficient group plan administrators Great returns very low fees Easy online administration < Benefit of advice and consolidation Enriched Thinking 2
Presentation available on your plan website: www.scotiagroupplans.com/hatch Enriched Thinking 3
Your sources of retirement income < Canadians generally rely on three distinct sources of retirement income < Government Programs CPP/QPP: Maximum $1,093/month OAS: Maximum $571/month < Hatch Retirement Program Hatch DC Pension Plan (eligible employees) Hatch Group RRSP & TFSA < Personal Savings Personal RRSPs, TFSA, Mutual Funds, GICs Home Rental property Other investments Enriched Thinking 4
Hatch DC pension plan overview: < Details from your Hatch DC 5% + 5% Plan for eligible employees < We encourage employees to contribute extra 2% < Gets you extra 1% < 13% total savings < 18% RRSP room allowed (to 2016 maximum $25,370) < Use the RRSP and TFSA to augment your savings Enriched Thinking 5
Why RRSP? < Typical combined marginal tax rate (or RRSP refund rate) and OAS recovery in retirement 60% 50% 40% 30% 20% 10% Marginal tax rate when deducted from income Marginal tax rate when added to retirement income (including 15% OAS recovery) 20.05% 20.05% 24.15% 24.15% 29.65% 29.65% 31.48% 46.48% 33.89% 48.89% 37.91% 52.91% 43.41% 58.41% 46.41% 46.41% 47.97% 47.97% 51.97% 51.97% 53.53% 53.53% 0% 0% 0% Created by Carl Spiess, Portfolio Manager, Scotia Wealth Management from various sources. Enriched Thinking 6
Early or retired = TFSA. Mid / late career + high income = RRSP. < Annual TFSA room increased from $5,000 to $5,500 in 2013 < 2015 room increased to $10,000 < 2016 & 2017 back to $5,500 < You could have $52,000 in a TFSA which is good but: < RRSP beats TFSA if you will have lower retirement income tax rate < Visit: scotiagroupplans.com/tfsa Enriched Thinking 7
2017 Market Update Enriched Thinking 8 8
Portfolio advisory group Long term strategy www.scotiagroupplans.com/market_conditions/ Enriched Thinking 9
Daily market watch Short term commentary < Regularly updated comments from our analysts < Stocks rising to start the year < Details available on the group plan site www.scotiagroupplans.com/market_conditions/ Enriched Thinking 10
US Recovery well underway < Reflation trends evident in U.S. wage data Proof of the growing economy? Enriched Thinking 11
U.S. Elections: Trump Impact on markets < Overall: Short-term - Higher economic growth, interest % / yields, equities, USD Long-term Higher volatility, geo-political risk, de-globalization Policy U.S. Impact Can. Impact Fiscal Spending Fiscal Taxes Positive Positive Oil & Gas Positive Pipelines - Positive Pharma Financial Regulation Defense Deficit/Debt Positive Positive Positive Negative Trade Negative NAFTA - Negative Federal Reserve Negative Enriched Thinking 12
When will the next recession hit? < Yield curve slope trends suggest equity market top in late-2018? Enriched Thinking 13
Strategy: Focus on recession cycles; stay invested 1987 Crash Asian Crisis Russia Default Iraq Invasion Euro crisis US downgrade End-QE Enriched Thinking 14
The emotional rollercoaster EUPHORIA THRILL ANXIETY EXCITEMENT OPTIMISM Point of maximum financial risk DENIAL FEAR DESPERATION PANIC Point of maximum financial opportunity DESPAIR OPTIMISM HOPE DEPRESSION Source: Based on the Cycle of Emotion chart by Westcore Funds/Denver Investment Advisors, LLC, 1998 Individuals tend to buy high and sell low Enriched Thinking 15
The value of staying invested $10,000 invested: November 2005 November 2015 Continuously invested Missed 10 best days Missed 20 best days Missed 30 best days $16,543 $9,010 $6,125 $4,517 Source: Bloomberg. S&P/TSX Composite Total Return Index, November 30, 2005 to November 30, 2015. It is not possible to invest directly in an index. Assumes reinvestment of all income and no transaction costs or taxes. Value of investment calculated using compounded daily returns. Missing 10, 20 and 30 best days, excludes the top respective return days. Enriched Thinking 16
Bulls and bears 300% 250% 268 % 133 months 278 % 79 months 253 % 61 months Percentage market gain/loss 200% 150% 100% 50% 74% 44 months 39% 23 months 203 % 90 months 109% 24 months 168 % 68 months 96% 83 months 0% -50% 21% 12 months 22% 17 months 30% 9months 39% 12 months 23% 6months 20% 10 months 27% 4months 43% 25 months 43% 9months 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 Source: Bloomberg. Percentage market gain/loss based on monthly compounded returns from the S&P/TSX Composite Total Return Index from January 31, 1957 to December 31, 2015. Returns are calculated in Canadian Currency. Assumes reinvestment of all income and no transaction costs or taxes. The terms bull market and bear market describe upward and downward market trends, respectively. Bull markets are movements in the stock market in which prices are rising and the consensus is that prices will continue moving upward. Bear markets are the opposite stock prices are falling, and the view is that they will continue falling. In the above illustration, the generally accepted measure of a price increase or decline of 20% or more, respectively, over any given period, has been adopted. Enriched Thinking 17
Putting diversification to work Calendar Year Returns (in CAD) % 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 HIGHEST 32.1% 18.6% 31.1% 75.1% 38.5% 9.7% 16.0% 48.1% 23.9% 21.6% 26.4% 9.8% 6.4% 52.0% 20.2% 8.3% 15.3% 41.3% 14.4% 19.5% 17.9% 3.7% -16.1% 35.1% 17.6% 4.6% 13.8% 31.6% 11.2% 16.2% ASSET CLASS INDEX Canadian Small Cap BMO Small Cap Index U.S. Equities S&P 500 Index Canadian Equities S&P/TSX Composite Total Return Index Canadian Bonds FTSE TMX Canada Universe Bond Index International Equities MSCI EAFE Index Emerging Markets MSCI Emerging Market Free Index U.S. Small Cap Russell 2000 Index Global Bonds Barclays Global Aggregate Bond Index Balanced Portfolio 40% FTSE TMX Canada Universe Bond Index, 30% S&P/TSX Composite Total Return Index, 30% MSCI World Index 17.3% 2.3% -17.2% 15.9% 13.0% 0.4% 13.4% 13.3% 10.6% 14.6% 16.6% 2.0% -21.2% 12.5% 10.1% -1.8% 7.9% 13.0% 9.7% 11.1% 15.4% -5.3% -28.8% 8.0% 9.1% -8.7% 7.2% 7.8% 8.8% 3.5% LOWEST 12.8% -7.2% -33.0% 7.4% 6.7% -9.6% 3.6% 4.3% 7.0% 2.4% 6.2% -10.5% -41.4% 5.4% 2.6% -14.2% 2.5% 3.9% 4.1% -8.3% 4.1% -16.5% -46.6% -9.2% 0.0% -16.2% 2.0% -1.2% -0.1% -13.8% Source: Morningstar. Priced in Canadian currency, as at December 31, 2015. Assumes reinvestment of all income and no transactions costs or taxes. Annual returns compounded monthly. The asset classes are represented by their indicated indices and the balanced portfolio is hypothetical in nature. This information is for illustrative purposes only. It is not possible to invest directly in an index. Enriched Thinking 18
Chasing winners can be costly $1,000 invested each year over a 10 year period $13,819 $14,079 $15.385 Value of Investment Investing in Previous Year s Top Performing Asset Class Investing in Previous Year s Bottom Performing Asset Class Investing Equal Amounts of Each Asset Class Source: Morningstar. For illustrative purposes only. Hypothetical investment value as of December 31 2015. Assumes reinvestment of all income and no transaction costs or taxes. Calculated in Canadian dollars. It is not possible to invest directly in an index. Enriched Thinking 19
Why advice makes sense According to research, investors who work with a financial advisor: Save at twice the 2x rate of non advised investors* X Accumulate four times the assets at all income levels+ + - More confident about achieving a comfortable retirement* Less likely to let their emotions lead to poor financial decisions* + New Evidence on the Value of Advice, 2012, Dr. Jon Cockerline (IFIC). Advised households have four times the median current financial assets of non-advised households.* The Value of Advice Report 2012 (IFIC) Enriched Thinking 20
Real estate commentary < Cost of house in # of weeks of work and mortgage affordability < Costs were high in 1990 because interest rates were over 10% < Weeks of labour for average house purchase is same today as 1990 < 1975 average new house = 1,075 square feet < 2013 average new house = 2,000 square feet < Price per square foot same? Source: Cost of home, May 2016, Economist Marc Lavoie, University of Ottawa Enriched Thinking 21
Interest rates and bond returns FTSE TMX Canada Long Term Overall Bond Index Vs. Interest Rate January 1950 November 2015 Rolling 1-Year Total Returns 60% 50% 40% 30% 20% 10% 0% -10% Bonds: 1950-1981 Average Annual Return 3.7% FTSE TMX Canada Long Term Overall Bond Index Interest Rate (BoC Bank Rate) Bonds: 1982-Nov. 2015 Average Annual Return 11.2% 30% 25% 20% 15% 10% 5% 0% -5% Interest Rate Bank of Canada Rate -20% -10% 1950 1960 1970 1980 1990 2000 2010 Source: Interest Rate Bank of Canada, FTSE TMX Canada Long Term Overall Bond Index 1-Year Rolling Returns Morningstar. Returns are calculated in Canadian currency. Assumes reinvestment of all income and no transaction costs or taxes. It is not possible to invest directly in an index. Enriched Thinking 22
Canadian consumer debt at record levels Enriched Thinking 23
Real Estate vs Trimark Funds Enriched Thinking 24
The big picture Growth of $1,000 invested in various asset classes January 1, 1935 June 30, 2015 This chart shows the inferred growth of one thousand dollars invested on January 1, 1935. This chart is for illustrative purposes only; it does not constitute investment advice and must not be relied on as such. Assumes reinvestment of all income and no transaction costs or taxes. The portfolios shown are neither real, nor recommended. They were rebalanced each January. Risk is measured by the standard deviation (volatility) of annual returns. All returns are compound annual returns unless otherwise indicated. Rolling periods are monthly in frequency. All values are expressed in Canadian dollar terms, except oil and gold prices, which are in U.S. dollars. Sources: U.S. Stocks: S&P 500 Total Return Index; U.S. Small Cap Stocks: NYSE/NYSEMkt, NASDAQ Small Cap Index Center for Research in Security Prices (CRSP). International Stocks: ex-u.s.a. Total Return Index; Bonds: Canada 10-year Total Return Government Bond Index; Canadian Stocks: S&P/TSX Composite Total Return Index; T-Bills: 3-Month Treasury Bill Total Return Index; GICs: Canada 5-Year Guaranteed Investment Certificates; Exchange rates Global Financial Data, Inc. Inflation: Consumer Price Index; Recessions Statistics Canada. Prime Interest Rate Bank of Canada. House Prices: 1985-2013 Statistics Canada; all other years U.S. Case/Shiller index used as proxy for trends in Canadian market. Gold prices Kitco. Oil prices InflationData.com. The reproduction of part or all of this publication without prior written consent from Investments Illustrated, Inc. is prohibited. The Big Picture, and the Investments Illustrated name and logo, are registered trademarks. Past performance is not an indicator of future performance. 2015 Investments Illustrated, Inc. All Rights Reserved. Enriched Thinking 25
Value of the Hatch Group RRSP < Help you to build your retirement savings < Provide immediate RRSP tax savings through payroll deduction < Shelter eligible bonus and/or flex dollars < Provide access to competitive investment options (& lower fees) < Provide financial advice and education < Hatch offers two terrific carrier options 1) ScotiaMcLeod Securities-based investment platform 2) Manulife Insurance fund based investment platform Enriched Thinking 26
ScotiaMcLeod / Manulife comparison < www.scotiagroupplans.com/hatch/smi_manu.asp Enriched Thinking 27
ScotiaMcLeod Group Plan < Widest range of funds < Personalized advice < Excellent performance / higher cost < January, 2017 - new performance and fee statements Enriched Thinking 28
Your investment options: our recommended list < Recently updated with more funds Funds with great prospects Ranked by risk, Separated in categories All with no-loads < We also offer: Ethical Funds Index Funds for fee savings Exchange Traded Funds (ETFs) Stocks, REITs, Gold! Bonds, GICs from 20 issuers, High Daily Interest Funds scotiagroupplans.com/hatch/recommended.asp Enriched Thinking 29
ScotiaMcLeod top 20 Hatch employee RRSP holdings < Returns shown are net of all fees (eg. after Management Expense Ratio MER) to Dec 31, 2016 Enriched Thinking 30
Visually: Hatch plan top ScotiaMcLeod fund holdings Enriched Thinking 31
And by the numbers: Performance of 10 popular funds < Returns Dec 2005 Dec 2016 net of all fees < Funds holding bond investments have been the poorest performers < International has been among the best recently due to declining Cdn$ < Past performance does not guarantee future returns Enriched Thinking 32
Active vs. passive funds Last 16 years Returns shown are net of fees (eg. after management expense ratio) to Dec 31, 2016 Enriched Thinking 33
And for larger ScotiaMcLeod accounts: < Individual stock portfolios < Exchange traded funds (ETFs) < Fee based investment programs < Discretionary managed accounts < Or just GICs from 20 issuers for best rates and $2 million in CDIC insurance Enriched Thinking 34
Target date portfolios Automatically makes your portfolio more conservative as you approach retirement. Future allocations for the Fidelity ClearPath TM mutual fund strategies will vary. Source: Fidelity Investments Enriched Thinking 35
The importance of setting retirement goals < How much time did you spend researching a vacation? < How much time last year did you spend planning for retirement? < ScotiaOnline has a great retirement goal setting tool: Scotia Reality Check < Manulife offers STEPs Enriched Thinking 36
Retirement savings reality check < No matter what tool you use < Have a plan and stick to it < scotiagroupplans.com/tools Enriched Thinking 37
New Scotia fee and performance statement < End of January 2017 < New Scotia Wealth Management performance and fee statement < Known as CRM2 new set of reports to help with transparency < 4 year rate of return (after fees) shown for 2013-2016 as per regulations < Details of fees you paid in 2016 and services provided For most plan members, will simply reflect the 1% trailer fee ScotiaMcLeod receives $50,000 account = $500 < Call / email if you have questions Enriched Thinking 38
Choosing the right RRSP account Scotia Wealth Management < Payroll Deduction Tax Savings < RRSP Account or Spousal < 2,500 No Load Funds < Stocks, Bonds, ETFs < Lump Sum GICs < Monthly Statements < Full Service Manulife < Payroll Deduction Tax Savings < RRSP Account or Spousal < 80 Funds Including Target Date < GICs < Online Switches < Payroll GICs < Lower fees For larger accounts and sophisticated needs For simpler accounts and easier to set up and use Integrated with STEPs retirement planning Enriched Thinking 39
Your Manulife Hatch Group RRSP option 40
Manulife Plan - Agenda Investment options Significant Fee Savings i-watch STEPs retirement tool Manulife service and support Advisory services from Scotia Wealth Management 41
Selecting / reviewing your Manulife investments 42
Review your risk tolerance and investments How interested are you in selecting investments for your savings? How likely are you to monitor and rebalance your investments on an annual basis? How would you rate your investment knowledge? I am not interested I don t want to review my investments I have a little to no knowledge about investing A B C I have some interest I review my investments annually I understand the basics of investing I am very interested I check my investments on a regular basis (at least quarterly) I am confident in my investment knowledge If you chose two or more from The best investment for you is Symbol Column A Column B Column C A Retirement Date Fund An Asset Allocation Fund Build your own portfolio 43
Target Date Funds Manulife Retirement Date Funds Long Time Horizon Short For illustration purposes only. Actual equity and fixed income weights vary over time. 44
Or determine your investor style Complete the eight-question Investor Strategy Worksheet. Tally your score to learn your investor style If your score is between Your investor style is About your investor style 0 7 Conservative Protecting your money is your chief concern. You may be approaching retirement, or simply prefer to take a cautious approach to investing and preserve your money. 8-22 Moderate You want your money to grow, but are more concerned about protecting it. Retirement may be in your near future or you may prefer to be cautious with your investments and preserve your money. 23-37 Balanced You want a balance between growth and security although you will accept some risk to have the potential for higher returns over time. 38-48 Growth You want to increase your money and are somewhat comfortable riding the ups and downs of the market in exchange for the possibility of higher returns over the long term. You may have time on your side until you retire. 49-56 Aggressive You want to maximize the long-term growth of your retirement savings. You understand the ups and downs of the markets and are comfortable taking a lot of risk to maximize potential returns. You have plenty of time to wait out market cycles until you retire. 45
B Choose an Asset Allocation Fund 46
Or C - Build your own portfolio If your score is between Your investor style is About your investor style 0 7 Conservative Protecting your money is your chief concern. You may be approaching retirement, or simply prefer to take a cautious approach to investing and preserve your money. 8-22 Moderate You want your money to grow, but are more concerned about protecting it. Retirement may be in your near future or you may prefer to be cautious with your investments and preserve your money. 23-37 Balanced You want a balance between growth and security although you will accept some risk to have the potential for higher returns over time. 38-48 Growth You want to increase your money and are somewhat comfortable riding the ups and downs of the market in exchange for the possibility of higher returns over the long term. You may have time on your side until you retire. 49-56 Aggressive You want to maximize the long-term growth of your retirement savings. You understand the ups and downs of the markets and are comfortable taking a lot of risk to maximize potential returns. You have plenty of time to wait out market cycles until you retire. 47
Manulife: Good Fund Returns Plus Very Low Management Fees Gross returns to Dec 31, 2016 subtract the IMF% & add provincial tax to get actual returns or see your statement MEMBER REWARDS FOR GREATER SAVINGS Same funds and great returns in TFSA accounts 48
Lower Fees Mean Increased Savings Individual RRSP Sample Canadian Equity Fund 2.15% Hatch Group RRSP Mawer Canadian Equity Fund (code 0.85% Example: Account balance: $10,000 Fee : X 2.15% (includes taxes) Example: Account balance: $10,000 Fee: X 0.85% (plus HST 13%) Total fee paid annually: $215 $230 $96? $134 savings! 49
Manulife Member Rewards Means Low Fees For Hatch Plan Members Every fund has an Investment Management Fee (IMF aka MER) Hatch IMFs are EXTREMELY LOW Vary from.34% to 1.64% Manulife offers members IMF discounts based on size of account Rate premiums apply to Guaranteed Investments Based on total assets in each member account Account Balance Total Enhancement $25,000-$39,999 0.10% $40,000-$59,999 0.20% $60,000 Plus 0.25% A Manulife index fund in an account with $60,000 pays only.34% A great reason to consolidate other RRSPs into your Manulife Group RRSP 50
How can I access my Manulife account? www.manulife.ca/gro 51
The Manulife Steps Retirement Program The Steps Retirement Program (Steps) is an online retirement planning tool that will: Help you set a retirement income goal Show your estimated retirement income Help you track your savings progress Show whether you are on track towards your preferred retirement lifestyle 52
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Hatch GRSP Options: Your choice of two great plans Scotia Manulife Type Self-Directed RRSP Self-Service RRSP & TFSA Payroll Yes Yes Spousal RSPs Yes Yes Funds 2,500 no load 80 no load Fund Minimum $50 No minimum GICs / GIAs 20 issuers, Min $1,000 No minimum Special Feature Individual Stocks & Bonds Steps Goal Setting Internet View Online Manage Online Statements Monthly Semi-Annual Forms Comprehensive Client Discovery One Page/Online ScotiaMcLeod Advice Yes - Security Specific Yes - Limted to investments offered Transfer Out $25 to $125 per One free / yr, then $25 Annual Administration $0 $0 MERs / IMFs Standard Retail.5% - 3.0%.34% - 1.64% Best For Larger Accounts-$$$ Smaller Accounts-$ Enriched Thinking 54
The Benefit Of RRSP Consolidation < RRSP transfer forms for ScotiaMcLeod or Manulife < We recommend you use them to take advantage of the benefits of your Group Plans < Fax us a copy of your statement in advance and we can advise on the best investment and course of action for you < Fee savings Enriched Thinking 55
Your long term partners < Carl Spiess CFP, CIM, FMA, FCSI, MBA Portfolio Manager Director, Wealth Management 26 years < Allan McGlade CFP, CLU, CIM Portfolio Manager Director, Wealth Management 20 years < Nicole Keeler Investment Associate 25 years < 1.800.387.9273 Consistency and Professionalism The Spiess McGlade Team www.scotiagroupplans.com/hatch/contact.asp Enriched Thinking 56
How much to save? $1 Million? < Popular video from 2016 < Do you need to save $1 million to retire? < Check it out! www.youtube.ca/carlspiessscotiawealth Enriched Thinking 57
Service and support < www.scotiagroupplans.com/hatch < Contact the advisors listed on your statement. < We are here to help with your financial questions < Contributing to your savings plan should be a top priority < If you have specific planning questions, or want to look at other financial products and services, we are here to help < Future one on one meetings at major sites available < Email and toll free support for everyone available Enriched Thinking 58
Notice < Registered trademark of The Bank of Nova Scotia, used under licence. TM Trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management TM consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank ); The Bank of Nova Scotia Trust Company (Scotiatrust ); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod, a division of Scotia Capital Inc (SCI). Wealth advisory and brokerage services are provided by ScotiaMcLeod, a division of SCI. SCI is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. This publication has been prepared by ScotiaMcLeod, a division of Scotia Capital Inc. (SCI). This publication is intended as a general source of information and should not be considered as personal investment or tax advice. We are not tax advisors and we recommend that individuals consult with their professional tax advisor before taking any action based upon the information found in this publication. Opinions, estimates, and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither SCI nor its affiliates accepts liability whatsoever for any loss arising from any use of this publication or its contents. This publication is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity futures contracts. SCI, its affiliates and/or their respective officers, directors, or employees may from time to time acquire, hold, or sell securities and/or commodities and/or commodity futures contracts mentioned herein as principal or agent. SCI and/or its affiliates may have acted as financial advisor and/or underwriter for certain of the corporations mentioned herein and may have received and may receive remuneration for same. All insurance products are sold through Scotia Wealth Insurance Services Inc., the insurance subsidiary of Scotia Capital Inc., a member of the Scotiabank Group. When discussing life insurance products, ScotiaMcLeod advisors are acting as Insurance Advisors (Financial Security Advisors in Quebec) representing Scotia Wealth Insurance Services Inc. This publication and all the information, opinions, and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without in each case the prior express consent of SCI. < Please note: All insurance products (e.g. Manulife GRRSP) are distributed through Scotia Wealth Management Inc.. Scotia Wealth Management is an insurance subsidiary of Scotia Capital Inc., a member of the Scotiabank Group. When discussing Life Insurance Products, Scotia Wealth Management Investment Executives are acting as Life Underwriters representing Scotia Wealth Management. Enriched Thinking 59
Thank you Enriched Thinking 60