Category Archives: In the Media

Choose the goal with the better ROI

Plagued by crippling household debt, millions of Canadians are torn between saving for retirement and paying off the mortgage, the largest of all debts. For the vast majority of Canadians, the option of doing both is just out of the question.

The higher your interest rate, the more will be going to interest expenses and not home equity, goes the argument.

Many people, however, only consider the short-term implications. Cynthia Kett, a principal with advice-only firm Stewart & Kett Financial Advisors Inc. in Toronto, says people should be thinking about their financial planning as a whole.

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If you’ve just finished school and landed your first real job, you likely have multiple financial commitments and goals. While it might be a priority to start paying down debt and maybe even reward yourself a little for starting your career, now’s also the time to lock down good financial habits that will stick with you for life.

Cynthia Kett, a CERTIFIED FINANCIAL PLANNER® professional and principal of Stewart & Kett Financial Planning, an advice-only financial planning services firm in Toronto, suggests some financial moves to consider now.

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It’s a good idea to review your financial plan at least once a year

The Globe & Mail, Linda Nguyen

Certified financial planner Cynthia Kett advises clients to do a checkup on their finances at least once a year to ensure they’re on track with their goals.

January is often a good time to conduct a budget review because you’ll have the benefit of the full year’s receipts and expenses, she says.

“It’s good to review partway through the year too, because then you can take some corrective action instead of waiting until the end of the year and go ‘Oh my goodness, that was a disaster,'” says Ms. Kett, who is also an accountant at Stewart & Kett Financial Advisors Inc.

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Need for regulation and professional, human guidance rising in era of robo-advice

Financial Planning Standards Council

financial planning

Certified Financial Planner, Cynthia Kett of Stewart & Kett Financial Advisors Inc. says, “Technology makes financial information accessible to a broader segment of the market. However, it should be viewed as a complement to traditional investment advice and portfolio management, not as a substitute for a CFP® professional’s involvement and guidance.”

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A Solid Financial Plan Boosts Financial and Emotional Well-Being

Cynthia Kett, principal at Stewart & Kett, an advice-only financial planning, investment consulting, and tax services firm in Toronto, says understanding the concept of financial planning can be a challenge for some people.

“It’s much more than just budgeting, saving or having a good investment strategy,” she says. “Financial planning is a long-term process towards achieving personal goals, needs and priorities through the proper management of your financial affairs.”

She too believes the reluctance of many people to develop a financial plan is the biggest mistake they make.

“Some people don’t even have an idea of how much money they spend each month, let alone what they need to do to manage their money effectively and plan for the future,” says Cynthia. “It’s like any other problem; if you don’t know where you’re at, how are you going to know if you are improving?”

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Woman and Personal Finance Industry Report

etfcm, Kelley Keehn

“One of the biggest fears women clients have is outliving the money. This (amount of money) has to get me from here to there—how do I plan for it?” says Cynthia Kett of Stewart and Kett. Along with other leaders and trailblazers, Kett advises women, facing complex financial decisions during critical phases in their lives such as a divorce, death of a spouse, inheritance, or the sale of a business.

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Women, money & sudden wealth

etfcm, Kelley Keehn

Government and industry experts sat down for a first-ever round table on women and personal finance for a robust discussion on the issues that face women when receiving a sudden sum of money from a divorce, inheritance, sale of a business and more.

Sponsored by ETF Capital Management and hosted by personal finance educator, Kelley Keehn, seven experts and successful business women shared their views on the realities that are causing women financial stress. An edited twenty minute video, a full length one hour unedited video, an industry report and a comprehensive micro website have been created for this year’s International Women’s Day.

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Women and Personal Finance Round table discussion

etfcm, Kelley Keehn

Did you know that it’s estimated that at some point, 90% of all wealth will be controlled by women? Yet, the financial industry (and that of accounting, law, banking and more) still primarily focus on men? Cynthia Kett, of Stewart and Kett, participated in a round table of women – from industry experts to government to female trail blazers – to discuss how to level the playing field. Insights were shared on how women can better equip themselves with a solid financial foundation and where much work still needs to be done. Women, by design, accident or choice are facing complex financial decisions during critical phases in their lives such as a divorce, death of a spouse, inheritance, or the sale of a business. Without a firm financial footing, these pivotal points in her life can cause undue stress, leave her vulnerable to being taken advantage of and more.

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Plan early and see it through

Randall Anthony Communications

Cynthia Kett, principal at Stewart & Kett, an advice-only financial planning, investment consulting, and tax services firm in Toronto, says understanding the concept of financial planning can be a challenge for some people.

“It’s much more than just budgeting, saving or having a good investment strategy,” she says. “Financial planning is a long-term process towards achieving personal goals, needs and priorities through the proper management of your financial affairs.”

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Rich at any age: In your 40s

MoneySense, David Hodges

On track with your mortgage? Well, now’s not the time to get house lust and buy a bigger home. “You may feel like you deserve it, but ask yourself, ‘Is that reasonable?’ It’s a trap if you’re not looking further into the future,” says Hallett. Keeping up with bigger house payments could cause you to lose focus on all your other goals—and you may never catch up. Bottom line: match your home to your needs, and not your status.

Also keep in mind that it’s around your 40s that couples start divorcing and have to divide their assets. Or you may be dealing with aging parents who require help. “Unfortunately things don’t always roll along merrily,” says Cynthia Kett, a principal at Stewart & Kett Financial Advisors in Toronto. “That can create a lot of financial pressure.”

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Rich at any age: In your 30s

MoneySense, David Hodges

Having three to six months of easily accessible funds set aside in an emergency fund is a nice thing to have, but it’s also quite acceptable to have a line of credit that’s only used in the event of something like a job loss, says financial advisor Cynthia Kett. “It really depends on the person. But I’d suggest a line of credit provided you don’t tap into it for other reasons like a vacation. That frees up your cash flow to be used more effectively to pay off your home or to invest in your retirement savings or your kid’s education.”

Hopefully, though, if you’re hitting the tail-end of your 30s, you’re starting to feel more relaxed with your money. The kids might be out of daycare, which frees up cash, and your improving career prospects are starting to pay off too. With your 40s just on the horizon, you’re now in a great position to stop worrying about the mortgage so much and start focusing on building up your nest egg.

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Canadians raiding their savings to splurge, if they save at all: survey

Andrew Seale, Yahoo Finance

Canadian’s fake-it-‘til-you-make-it financial approach doesn’t seem to be working out.

While 59 per cent of Canadians say they are dedicated to their savings plan, closer scrutiny shows otherwise with a third of Canadians regularly biting into their long-term savings for trips, cars or interior decorations, according to a survey by Tangerine bank.

“For most of us, money is a limited resource (but) despite that, many don’t look at their finances strategically – they spend in the moment,” says Cynthia Kett, a chartered professional accountant and financial planner at Stewart and Kett. “They should be asking themselves, ‘How shall I prioritize spending of my scarce dollars?’”

Kett sees it as a sort of dissociation between long-term goals and the day-to-day reality, which can be headache inducing.

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Gone with the windfall

CPA Magazine, Rosalind Stefanac

Many lottery winners go through their new riches in no time. Here are five of their most common mistakes — and how they can be avoided with some help from a CPA.

With a large amount of unexpected cash in hand, it’s tempting to start doling out gifts and spending with abandon. Cynthia Kett, a principal at Stewart & Kett Financial Advisors Inc. in Toronto, says there is a tendency among many lottery recipients to become overwhelmed and make decisions too quickly. “It’s better to take a tiny bit to have some fun but then park the rest for at least a few months before you make any big decisions,” says Kett, who has dealt with several big-ticket winners.

Portrait of a lottery winner

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Should you save for your retirement or child’s education first?

Global News, Brian McKechnie

Interest earned on an RESP is also not taxed until the money is withdrawn. And if an eligible student — registered with a post-secondary institution — is the one who withdraws the money, the tax falls on them, not you. Financial advisor Andrew Rice from the Toronto firm Stewart & Kett says this is what makes an RESP attractive.

‘Let’s say a student didn’t work at all. Didn’t work part-time, didn’t work in the summer and their income was under $12,000 a year, then any growth and grants under $12,000 a year would be tax-free,” he says.

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The future’s looking bright for advice-only advisors

Wealth Professional, Will Ashworth

This past Friday WP had the pleasure of speaking with David Stewart, a partner in Toronto-based advice only firm Stewart & Kett. In the financial planning business since 1986, Stewart’s partnered with Cynthia Kett for the last 20 years. He’s a great example of the talent that exists in the rather obscure advice-only arena.

There’s a limited number of people in this business because it’s easier to make money on the advisor side selling product. “But there’s always going to be a market for it,” says Stewart. “There will always be people that value objectivity… There are those that aren’t willing to spend money for fees and there are those that are.”

But will advice-only planning grow?

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Pay down the mortgage? Or build up your RRSP?

Morningstar, Vikram Barhat

How to decide? Cynthia Kett, a principal with the advice-only firm Stewart & Kett Financial Advisors Inc. in Toronto, suggests considering your mortgage rate on a pre-tax basis.

“If you’re in a 50% marginal tax bracket, your pre-tax mortgage rate would be double your stated rate,” she says. “A 2.5% mortgage rate would be equivalent to 5% on a pre-tax basis. By paying down your mortgage, you’re earning a guaranteed rate of return equal to the pre-tax mortgage rate. Where else could you get the same risk-free rate of return?”

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Should you skip the RRSP contribution and pay off your mortgage first?

The Globe and Mail, Kira Vermond

The big push is on to convince Canadians to load their extra cash into registered retirement savings plan (RRSP) investments before the Mar. 3 deadline. But though it may seem as though contributing is the only option when it comes time to decide what to do with the money, it’s not.

Many financial planners, accountants and other experts suggest there’s an even better way to work toward a well-heeled retirement down the road: Pay off the mortgage first. And do it as fast as you comfortably can.

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Should Eleanor, 67, sell her nest to fund retirement?

The Globe and Mail, JOEL SCHLESINGER

Eleanor lives in a nice neighbourhood in Toronto in a heritage home that is a gold mine of equity.

Yet that wealth is out of reach for the 67-year-old, single retiree, and she now wonders whether she should sell it to capitalize on its $750,000 of equity.

“I get a lot of pressure from people who are looking at me and saying, ‘I have a lot of capital invested in the house,’” she says.

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Copy-cat ETFs no threat, say fee-based advisors

Wealth Professional, Sophie Nicholls

“BlackRock is essentially taking their existing multi-asset class ETFs and building in a trailer fee to improve their market penetration with the advisory community,” says Cynthia Kett of Stewart & Kett Financial Advisors in Toronto. “For investors, it just means more mutual funds to choose from. However, if investors are do-it-yourselfers, they may be better off buying the ETFs themselves and paying separately for the advice.”

Newer “investors will have heard of BlackRock and/or iShares and believe that they’re receiving the ETFs’ diversification and passive investment style at a low cost,” says Kett. “Yes, they’re getting the diversification and passive style, but the costs aren’t necessarily lower.”

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Money Troubles

Tamar Satov, Today’s Parent

We talked to three Canadian families about their biggest financial worries — and what to do about them.

When Pattie Reynolds and Eri c Stotts decided to start a family in 2007, they figured they had a solid financial footing. They had purchased their house — the same one Reynolds grew up in — two years earlier, and were both well-established in their careers. “We got started on our family later in life — I had my babies at 37 and 38 — so we thought we were in a good position,” says Reynolds.

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Younger Retirees Need Some Risk in their Portfolios

The Globe and Mail, Tom Bradley

Just as the baby boomers brought us free love and rock ‘n’ roll, they’re also leading the way into pension-less retirement. Those who are near or just into retirement are in a tough spot. They have a long time horizon and need investment returns that are well in excess of inflation. And yet, low-risk investments provide minimal return (negative after inflation), and owning higher risk securities has been harrowing and less-than-rewarding over the last five years.

While most people entering retirement feel some level of anxiety, it is those who don’t have a defined benefit pension plan and don’t know if they’ll have enough to fund their retirement who experience the most stress. What they want more than anything is certainty, but that’s hard to come by in today’s low interest rate environment.

There are no easy answers to the no-DB dilemma, although any solution should start with a financial plan. Rather than wondering and worrying, some work up front with an adviser or fee-for-service planner will bring clarity to the issues, if not peace of mind. And as devoted followers of the column below this one know, a proper plan will likely recommend a combination of strategies.

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Retirement savings: Couple, 70, wonders how to make them last

The Star, James Daw

Carl and Donna are ready for some fun. So, at age 70, they are planning a $9,000 trip.

This is a luxury they can certainly afford. They have more pension income than their $29,000 of basic living expenses, plus $619,000 in savings and a $350,000 Toronto home.

They have obviously managed their finances well to achieve such a high level of savings. Only part of the money came from a recent inheritance, and the sale of a second property. More significantly, they have not spent lavishly on their family home. They raised only one child and delayed drawing on savings.

Now they wonder how fast to spend their savings, yet not run out.

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TFSAs still underused – sorry, Mr. Flaherty

The Globe and Mail, Chris Atchison

When Finance Minister Jim Flaherty introduced the Tax-Free Savings Account (TFSA) to Canadians in his 2008 budget speech, he hailed the tool as “the single most important personal savings vehicle since the introduction of the RRSP.

Nearly five years later, it hasn’t quite worked out that way.

A CIBC-Harris Decima poll conducted last year found that 47 per cent of Canadians reported having a TFSA, but among those who did, only 47 per cent had contributed to the vehicle that year. Fully 41 per cent reported that they lack plans for their TFSA-invested funds.

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Is it time to take advantage of the lull in gold prices?

Globe and Mail, Dale Jackson

More recently gold has taken a step back from its advance by 8 per cent since last fall. While some see it as the beginning of the end for this gold wave, Paul de Sousa, executive vice-president at Bullion Management Group, considers the sell-off a small pause in a continuing meteoric rise.

“I’m expecting a thirteenth consecutive year of positive returns.”

Bullion Management Group is Canada’s first investment company to offer physical bullion for average investors to store in their registered retirement savings plans (RRSP) and tax free savings accounts (TFSA) — well, not exactly. The roughly $650-million in bullion is stored in an insured Bank of Nova Scotia vault in downtown Toronto for safe keeping.

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Four keys to retiring well without a pension

Globe Advisor, Tom Bradley

Just as the baby boomers brought us free love and rock ‘n’ roll, they’re also leading the way into pension-less retirement. Those who are near or just into retirement are in a tough spot. They have a long time horizon and need investment returns that are well in excess of inflation. And yet, low-risk investments provide minimal return (negative after inflation), and owning higher risk securities has been harrowing and less-than-rewarding over the last five years.

While most people entering retirement feel some level of anxiety, it is those who don’t have a defined benefit (DB) pension plan and don’t know if they’ll have enough to fund their retirement who experience the most stress. What they want more than anything is certainty, but that’s hard to come by in today’s low interest rate environment.

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Tenants help pay for a first home, James Daw

Sean Cooper has graduated from renter to homeowner, at the age of 27, in one of Canada’s most expensive housing markets.

To do so, he will live in a basement apartment while the tenants upstairs pay much of his mortgage and ownership costs, at least until he is out of debt. “I got the idea from Scott McGillivray, host of Income Property on HGTV Canada,” he admits.

Cooper insists he is prepared to make sacrifices to reach his goal. “Some people prioritize different things in life,” says the young graduate with a Bachelor of Commerce degree. “Owning a car and going on vacation are more important to them.”

Cynthia Kett, a Certified Financial Planner, was impressed by Cooper’s determination: “We wish everyone took as much pride and responsibility for their financial well-being as you,” she commented.

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How to give and keep on giving, Deanne Gage

When most of us give money to charity, we do so by opening our pocketbooks or writing cheques. But if you have at least $10,000 in cash, publicly traded securities or other investments that you wish to donate, donor-advised funds are worth a look.

Donor-advised funds are similar to private foundations but without the hefty administrative costs and million-dollar price tag to get one started. “I describe them as a more flexible form of charitable giving. Someone makes an upfront contribution and allocates the income from their contribution to their charities of choice for a longer period of time,” says Brad Offman, vice-president of strategic philanthropy for Mackenzie Financial Corp.

Donor-advised funds are mainly about leaving a legacy, says Cynthia Kett, a chartered accountant and certified financial planner with Stewart & Kett Financial Advisors Inc. in Toronto. She established one for her family five years ago. “I wanted to do something that would have a lasting impact in the area of charitable giving,” she explains.

How do you set up a donor-advised fund? First, you would fill out an application from an organization that manages such a fund. Some financial institutions offer donor-advised funds but the price tends to be lower if you set one up directly through one of Canada’s 180 community foundations.

In the latter case, a portion of your donation would benefit the foundation while the rest would be allocated to other charities of your choice. Community foundations usually require $10,000 to start. The Mackenzie Charitable Giving Fund, in comparison, is offered only through financial advisors and there’s an entry point of $25,000. “Once you make that initial upfront donation, there’s no obligation to contribute any more money, although many people continue to contribute on an annual basis,” says Offman.

Once your fund is set up, you would then make your upfront donation. You then name your fund. It could be as simple as your name (i.e. the Jane Johnson Family Fund), named after a loved one in memory (i.e. the Bill Johnson Memorial Fund) or something else entirely that has no individual reference (e.g. Charities R Us).

Your donations are placed in investment products of your choice, which are managed by professional money managers hired directly by the financial institution or community foundation. Administration fees for donor-advised funds generally start at 1% of the fund’s assets.

Since your money is invested, you have the potential to grow the amount you give to charity over time. You then grant an amount to your favourite registered Canadian charities each year.

“Not all funds will have the same annual granting rates but generally speaking, it’s about 5%,” notes Offman. Some people may just pick one charity while others may want to divide the donation between a few different beneficiaries or alternate each year. Donated amounts are irrevocable once they are in the fund.

Kett appreciates the control and flexibility a donor-advised fund provides with her overall charitable giving strategy. “I like being able to benefit multiple organizations through my donor-advised fund, both now and in the future. I can have family involvement with how the annual income is distributed and create a family culture of wanting to give back,” she says. “It’s a great strategy for those who wish to make gifts during their lifetime and who want to see them in action.”

The actual tax benefits of a donor-advised fund are often misunderstood. Some believe you get tax receipts from the outset and then every time a charity receives a donation through the fund. Not true, notes Frank Di Pietro, director of tax and estate planning for Mackenzie Financial.

In reality, tax receipts are issued only when you initially make your contribution to your fund as well as any subsequent donations, he says. You will also not receive a tax receipt for any earned investment income in the fund.

Donor-advised funds make provisions for estate planning. For example, you can name a successor to manage your fund if you die or become incapacitated, or simply make standing orders to various charities in the event of your passing. You can also name your fund as the beneficiary of your RRSP, life insurance or any other investments.

Financial literacy may decline with age, Bryan Borzykowski

It takes years of hard work and dedication to build up a retirement nest egg, so it stands to reason that by the time someone retires they’d have some confidence in their ability to handle their own financial affairs. Unfortunately, a recent study suggests that seniors’ capacity to make smart financial choices declines with age.

Last August, University of Texas’ Michael Finke and Sandra Huston and the University of Missouri’s John Howe, published a study that found financial literacy significantly declines after age 60. According to their research investment literacy falls by 3.4% per year, insurance literacy slips by about 2% a year while basic financial literacy declines annually by 2.4%.

Interestingly, while the researchers recorded a drop in financial literacy amongst seniors, they found seniors’ investing confidence either remained constant or increased. “Increasing confidence and reduced abilities can explain poor credit and investment choices by older respondents,” note the study’s authors. It’s a bad combination. But the study’s authors say seniors have nothing to worry about if they prepare for a drop in their financial know-how.

Cynthia Kett, a principal with Toronto-based Stewart & Kett Financial Advisors, says she’s seen evidence of this in her own practice. In her experience, though, the drop in knowledge happens well after people turn 60 and it’s not just related to cognitive changes as the study suggests.

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Wasting Money: 17 Things We’re Mindlessly Spending Money On, Arti Patel

If your weekend outings include last-minute city parking spots, overpriced drinks at bars or a few dollars wasted on ATM transactions, just remember, every little dime adds up.

“The typical Canadian has no idea how much money they spend,” says Geoffrey Morgan, spokesperson for online money management website “Our users tell us they spend a lot of money eating out. [When users track expenses] at least 90 per cent of people change their financial habits and the biggest chunk, 50 per cent, spend less money eating out,” he says.

So all those morning bagels and $10 sandwich combos are definitely taking their toll. Spending $10 a day on lunch can add up to $2,600 a year, while spending $2.75 on your favourite coffee can cost you $1,300 a year. When you look at the bigger number, your coffee probably doesn’t taste as good.

And if you’re worried about overspending, you should be. Since last year, the average Canadian household had $11 less spending power per month in February 2012, according to a recent study by Walmart Canada. The study, however, also found that Atlantic provinces, Alberta, Saskatchewan and British Columbia saw an increase in spending power.

Breaking bad spending habits can be difficult but not impossible, says Cynthia J. Kett, chartered accountant and certified financial planner of Stewart & Kett Financial Advisors Inc. in Toronto.

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Advice for newlyweds: How to manage your money, Christa Connell

Now that the wedding has come and gone and you’re settling into newlywed life, it’s time to discuss your finances. If you haven’t already had this conversation, it can be intimidating. But despite any discomfort, now is the time to set goals and assess where you stand financially — as a unit, as well as individually — so you can look forward to a happier, more secure future.

By being proactive and prepared when it comes to their financial futures, couples can avoid conflicts that put undue stress on their relationships. To get in-depth advice on how to make the money talk happen, we spoke with Cynthia Kett, a chartered accountant and certified financial planner with the firm Stewart and Kett Financial Advisors. She shared some of the biggest financial pitfalls to avoid once you tie the knot.

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Cynthia awarded Fellow of FPSC(TM) distinction

Financial Planning Standards Council

The Financial Planning Standards Council proudly announces the first recipients of the FELLOW OF FPSC™ distinction. These individuals are recognized for their outstanding contribution to furthering
FPSC’s vision and for advancing the financial planning profession.

Cynthia Kett is one of only 33 recipients across Canada.

Fellow of FPSC

Don’t let financial planning myths hinder you

Randall Anthony Communications Inc.

Has one of these myths been keeping you from taking control of your financial future and achieving your dreams?

Myth 1: It’s too late to start now

“You often hear people saying it’s too late to start planning,” says Al Nagy, CFP, senior executive, financial consultant with Investors Group, Edmonton, “But I often find that the real reason they aren’t saving is that they’ve been procrastinating.”

To which the obvious response is: if not now, when?

“The sooner you break the procrastination logjam, the sooner you can develop good financial planning habits and start saving for your retirement,” he says.

Individuals approaching retirement have a unique and critical set of financial planning needs that should be addressed to ensure that they don’t outlast their income or pay more tax than they have to.

Conversely, younger individuals may fall into the trap of believing they have lots of time to get started, but it’s important to remember that, at any age, time is an asset: the sooner you start, the harder time works for you.

Myth 2: I don’t have any spare cash to stash

Mr. Nagy says cash-flow analyses invariably unearth “hidden money” that can redirected into savings.

It’s all about priorities, adds Cynthia Kett, CFP, of Stewart & Kett Financial Advisors Inc. in Toronto.

“Take a hard look at where the money is going,” she says. “Most of us tend to over-consume, buying things we don’t need instead of investing in our future. How would you like to be able to take off one year for every four years you work? That’s exactly what you can do by investing 18 per cent of your gross income.”

Myth 3: I already have a pension from work

As for relying on a work-based pension, don’t do it — there are too many “if’s,” says Ms. Kett. What if the company fails, benefits are cut, the plan changes from defined benefits to defined contributions, you leave the employer or you get a divorce and have to split the proceeds with your ex? Having a pension is nice, but it’s a bet worth hedging.

Myth 4: Good financial planning advice is too expensive

Whatever your income level or life stage, there are many different advice offerings that could fit into your budget. The reality is good advice from a qualified professional will often pay for itself over the long term.

Myth 5: I can do it myself

Looking after your finances effectively requires a great deal of knowledge about a wide variety of financial topics, as well as a lot of time and attention to detail — all things that, in today’s fast-paced world, most people don’t have. But this is something that you can easily get help with. “You can walk off the street into most banks and receive financial advice at no charge,” says Scott Ellison, CFP, portfolio manager and investment advisor, TD Waterhouse in Halifax.

Whether faced with a big decision about your mortgage, making changes to your will, or converting your RRSPs to RRIFs, it is good to have someone on your side to discuss implications with. “An advisor can also help eliminate emotional reactions to the market and rebalance portfolios when necessary,” he says. “We’re the place of sober second thought.”

So … if not now, when?

As boomers sell will stock markets sag?, Francine Kopun

Teresa Vasilopoulos, 51, is still buying stocks through mutual funds – but not for much longer.

David Stewart, of Stewart and Kett Financial Advisors Inc., says some of his boomer clients are stepping back from the markets.

“There’s been some loss of faith in the concept that the stock market will always go up,” Stewart says.

But he and fellow advisers tell clients to keep some investments in the market, especially in safer investments like blue-chip companies with strong balance sheets, such as Canadian banks, which pay attractive annual dividends.

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D&S: Dividing your time, Leigh Doyle

Could how much you manage as an advisor dictate what you need to talk to your clients about? It seems there might be a connection, according to this year’s Dollars & Sense survey.

The survey revealed that what advisors spend the most time talking to their clients about often depends on the value of their assets under management (AUM). The five most mentioned areas of discussion were: investment portfolio planning/asset allocation; investment research and selection; life, health or disability insurance needs; post-retirement income needs; and trusts and wills.

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Building a portfolio: Life lessons

Toronto Star, Bryan Borzykowski

“The overriding themes are balance and diversification,” says Cynthia Kett, a CFP with Stewart & Kett Financial Advisors.

How those two objectives are achieved will depend on risk tolerance, your time to retirement and financial needs. Someone nearing retirement will likely have a much safer portfolio than newlyweds in their 30s; a 40-year-old couple with two kids would invest differently than a single 20-something.

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5 smart money moves to make you richer, Jessica Padykula

A moment of near (or total) panic at the thought of barely making mortgage payments, adding to another over-taxed credit card: It’s easy to feel powerless about personal money matters.

But you can get richer sooner if you use some common sense and follow some simple steps to saving, spending wisely and investing as much as you can — even if it’s only a small amount.

Cynthia Kett, a chartered accountant (CA) and certified financial planner (CFP) with advice-only firm Stewart & Kett Financial Advisors Inc. in Toronto shares ideas on how make your money tree grow.

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Growing while protecting, Bryan Borzykowski

In a perfect world clients would see their returns skyrocket without putting their capital at risk. But life’s not perfect.

Protecting capital while maintaining and growing investor returns is a challenge all advisors face, especially as the client is entering retirement. Clients want more money in their accounts but that’s difficult to do without taking on risk. While advisors can invest in low yielding fixed-income products, they may have to get creative if they want better returns and safeguard capital too.

David Stewart, principal at Toronto-based Stewart & Kett Financial Advisors, believes a balanced mandate is the best way to achieve growth and protection. “That tries to give you the best of both worlds,” he says.

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Working Together

Wedding Bells, Roseanne Dela Rosa

When it comes to wedding planning, choosing the flavour of your cake and finding the perfect dress aren’t the only details that cross your mind. Budgeting with your significant other–and not just for the wedding day alone–is also of importance. Technically your life and the way you plan/think alters when you go from one person to two. So, how do you suddenly deal with the change? Here are five tips to help you budget as a couple.

1. Manage Your Finances. If you haven’t already done so, taking a good look at your day-to-day and monthly expenses is important. It’ll be easier to examine your financial situation as a whole if you have an estimated figure (i.e. how much you spend on bills, food, debts, leisure activities, etc.). Once you’ve got a firm grasp on your expenditures, the next step is to take a look at your expenses together. This is where communication is key–if you’re about to move in together make a breakdown list of who should pay for what–like your utilities. “You should have a good understanding of each other’s expenditures,” advises Evgeniya Pollock, certified financial planner at Stewart & Kett Financial Advisors Inc. ( . “Discuss with each other certain amounts and limits you may have.”

2. Consolidate. Combining your utilities or expenses, once you’ve broken them down into sections, can make it easier to organize payments and cut down on costs. “It’s advisable to put together any expenses you can, such as car insurance or cell phone plans. There are plenty of family plans out there,” says Pollock.

3. Cut Down. “In order to figure out how much you need to cut down, you need to figure out what your net income as a couple is, after tax, and subtract the fixed expenses, like your mortgage payments, debts, student loans, contributions to RRSPs and vacation funds,” says Pollock. “Look at the high priority expenses first, and then look at your discretionary expenses and compromise on what’s important and what’s not.” Breaking down your expenses will streamline your finances and make it easier to manage together.

4. Goals & Savings. Ideally, both of you should share your financial goals. Are you saving for a huge trip, a car or a house? It’s important that you’re both on the same wavelength and that you support each other’s goals–especially if you’re dealing with a huge sum. This will help you manage your money and spending habits, particularly if there are big-ticket items on your wish list.

5. Open An Account…Together. It’s not a must (and you can still keep you independent accounts open), but having a joint savings account is highly recommended, as it can help you save and provides a buffer in case of a financial emergency (i.e. health issues, loss of job, etc.). It is also beneficial as it makes it easier to track your bills and can reduce transaction and banking fees.

Be debt free in 10 easy steps

Homemakers, Jessica Padykula

Owing money can be overwhelming and paying it back can be challenging but you can loosen the grip of financial burden. Check out the best ways to be debt free and put them to the test now.

Getting into debt can be surprisingly easy. One too many purchases made on credit, coupled with job loss or financial surprises (i.e.: your roof caving in or car breaking down) can make for a drained bank account and a daunting amount of debt. Trying to get out of debt, however, can be a bigger challenge.

Be debt free faster with wise solutions from Cynthia Kett, a chartered accountant and certified financial planner with advice-only firm Stewart & Kett Financial Advisors Inc.

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Some clients are changing retirement plan, Philip Porado

When the credit crisis swelled a year ago, the first phrase on a lot of clients’ lips was, “What will this mean for my retirement?”

A year later, investors have reached something resembling acceptance, with many advisors being told clients plan to remain in the workforce an extra year or two, or will be adjust their spending projections for retirement. And, in some cases, clients who already had retired have told advisors they’ll be returning to work.

“There is a lot of Internet software that can give someone who’s 10 years away from retirement an idea as to whether they’re on track,” Cynthia Kett, CA, CGA, RFP, CFP, Stewart & Kett Financial Advisors Inc., Toronto, told our annual Dollars & Sense roundtable. “But for somebody on the threshold of retirement, I do believe they need to take a hard look at their personal situations and understand how that might unfold for them.”

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Additional services bring advisors more business, Kanupriya Vashisht

Advisors must do a better job of making clients aware of ancillary services they can provide – especially tax planning and preparation – either within their own offices or through affiliates, say participants at our 2009 Dollars & Sense roundtable discussion.

James R. Taylor, CLU, Financial Health Management, Toronto, noted 47% of advisors responding they didn’t receive any additional services from an advisor or other professional was an indication of “weakness in making sure information is put in front of clients.”

Cynthia Kett, CA, CGA, RFP, CFP, Stewart & Kett Financial Advisors Inc., Toronto, had a slightly different take. “If I were a client, I’d realize one advisor may not be able to do everything for me,” she says. “And that’s all right. If everybody does what they do well, maybe the client will be better served in the end.”

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Get used to busybody clients, Philip Porado

As the economy recovers, one challenge will be to keep client greed under control, and work through the process of how best to collaborate on investment decisions.

Cynthia Kett, CA, CGA, RFP, CFP, Stewart & Kett Financial Advisors Inc., has seen some clients who may have been disenchanted with their investment advice come in and say they can do better, or announce they’re going to shift to ETFs and do their own investing. “Then we point out, ‘Even if you do that, you still have to decide which markets to participate in. How are you going to make those decisions?’ ” she says.

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Client needs dictate investment choices, Philip Porado, Kanupriya Vashisht

It’s different for every client. Respondents at our 2009 Dollars & Sense roundtable discussion say client response to investment products is all over the map, although there’s still some favour shown to capital preservation — at least for now.

In such environments, notes Cynthia Kett, CA, CGA, RFP, CFP, Stewart & Kett Financial Advisors Inc., Toronto, being an advise-only operation has its advantages. "We don’t make any investment recommendations," she says, "but we do look at asset-mix and have a good idea as to what their cash flow needs are."

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Put a few RESP dollars under the tree

It’s more tempting to buy another colourful toy or adorable outfit , but saving for a child’s education is a wiser choice

The Globe and Mail, Catherine McLean

It’s never too late to start saving for a child’s education, and there’s no better time than amid the annual holiday-spending spree.

“The best thing to do is start early and build some education savings into your living-expense budget,” says financial planner and chartered accountant Cynthia Kett. a principal at Stewart & Kett Financial Advisers Inc. “Do what you can.”

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Salvaging your savings

With the worst apparently behind us, now is a good time to regroup and choose investment vehicles that can rebuild your portfolio

The Globe and Mail, Chris Atchison

Before the disastrous economic events of the past 18 months unfolded, Arlene Jackson was on track to retire at 65. With a solid superannuated pension, relatively well-funded RRSP and a small investment nest egg approaching $100,000, the career provincial civil servant from Vancouver intended to draw a retirement income that roughly matched the salary of her last few years in the workplace.

But like so many Canadians, Ms. Jackson’s retirement plan was dealt a nasty blow by the recession, a painful reminder that market volatility can derail even seemingly solid savings strategies.

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A fine balance: Getting the risk right in RRIFs

The first boomers are entering retirement, leading to more requests for advice on RRIFs

Investment Executive, Rosemary McCracken

Counselling clients on their RRIFs is likely to become a larger part of virtually every financial advi-sor’s practice. Canadians are living longer in general, and with the front end of the baby boomers – typically, an affluent lot –– entering retirement over the next few years, there are likely to be many more people with lots of questions about their RRIFS.

Issues range from the types of assets to hold in RRIFs, how and when to receive payouts, how to minimize taxes on mandatory payouts and how to make RRIFs last over those ever-increasing lifespans.

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Helping retired clients balance dreams and needs

Advancing age and the challenges it brings can allow you to assist older clients with major life events, such as illness and loss

Investment Executive, Megan Harman

Aging and retirement is a dramatic period; even the most cursory list of major events ranges from declining health, to the loss of friends and spouses, to key lifestyle decisions about the final decades of life. All of these events involve money – and this is a phase during which financial advisors can become particularly helpful to their clients.

In fact, addressing the economic changes associated with aging is an inevitable part of financial planning, retirement experts say. “I don’t think you can avoid it,” says Cynthia Kett, a chartered accountant and certified financial planner with advice-only firm Stewart & Kett Financial Advisors Inc. in Toronto. “I really believe that an up-front look has to be done to anticipate some of these things that are going to happen.”

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‘Homemade savings’ the new RRSP

Financial Post, Garry Marr

Who needs to save for retirement when your home is the new RRSP?

“I wouldn’t advocate it,” says Benjamin Tal, senior economist with CIBC World Markets, about considering your home a big part of your nest egg.

But that’s exactly what Canadians are doing. Mr. Tal says that as of the second quarter, 38.5% of Canadian wealth is tied up in home ownership, a huge percentage when one considers it in a historical context. Just 20 years ago, the percentage of wealth in home ownership was about 16.3%.

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How families can play the higher loonie

Cross-border deals abound but beware of the pitfalls, says our personal finance blogger Chaya Cooperberg

The Globe and Mail, Chaya Cooperberg

In August, when the Canadian dollar was trading at around 93 cents (U.S.), I wrote in this blog about the lure of shopping on American retailers’ websites. There was an instant backlash. Many readers were upset to see cross-border shopping promoted at the expense of Canadian retailers.

But, I must confess, the loonie’s flirtation with parity has me thinking once again about how families can get the most for their hard-earned wages. After all, maybe now a family can afford to book that Disney vacation or put a down payment on that Sunbelt retirement property.

“It’s like having more discretionary income,” says Cynthia Kett, a chartered accountant and certified financial planner with advice-only firm Stewart & Kett Financial Advisors Inc.

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Tax-Free Savings Accounts

David Stewart, MBA, RFP, CFP

The letters “TFSA” may not lend themselves to becoming an easy acronym, but the Tax-Free Savings Account should soon be a familiar part of anyone’s banking or investment accounts.

While there are already a number of savings or investment vehicles that allow for tax reduction or tax deferral, the TFSA actually allows for no tax to ever be paid on whatever growth is earned in the account. There is every reason to use these accounts to the maximum allowable.

Here are the facts about TFSAs:

Contribution Limits: Up to $5,000 can be contributed each year by anyone aged 18 or over. After 2009, the dollar limit will be inflation adjusted and increases will be rounded to the nearest $500. This means that adjustments will not take place each year but will instead step-up in increments of $500 every few years depending on the inflation rate.

Timing: It would always be better to make the maximum annual contribution as early in the year as possible to benefit from the most tax sheltering. However, if your cash flow does not allow for the maximum to be contributed in any one year, any unused room can be carried forward to a future year and added to the normal maximum for that year.

Flexibility: You can withdraw funds from a TFSA at any time and for any purpose. Also, when cash flow permits, you can re-contribute the amount of any withdrawal back into your TFSA in the next or subsequent years without affecting your normal contribution limit of $5,000 per year. As an example, say you contribute an initial $5,000 in one year and it grows to a value of $7,500. If you need funds for spending, you can withdraw the $7,500 any time. If you then have extra funds available at a future date, you can re-contribute the full $7,500 back into your TFSA in addition to the usual annual limits.

The Catch: You cannot re-contribute a withdrawal in the same calendar year without incurring a 1% per month penalty for the remainder of the year. You can re-contribute in any following year. This would affect anyone who might want to use their TFSA balance to fund some temporary expense. For example, if a withdrawal were made in the month of January, then you would need to wait until the following January to re-contribute. On the other hand, if the withdrawal were made in the month of December, then you could re-contribute the following month.

Taxation: There is no deduction on your tax return for contributions made to a TFSA and there is no income added to your tax return on any withdrawals. All withdrawals are tax-free whether or not the withdrawals represent earnings growth or a return of your contributions. Withdrawals from a TFSA do not affect any income-tested government benefits. Any fees charged to a TFSA and any interest on a loan to invest in a TFSA is not tax deductible.

Keeping Track: You can monitor your own contribution room each year by taking into account the annual limit, any unused room from earlier years as well as any amounts previously withdrawn that can be re-contributed. CRA will calculate your contribution limit each year on your Notice of Assessment from the information they receive from financial institutions. Any contributions to a TFSA that exceed your contribution room will incur a penalty of 1% per month on the excess.

Family Members: TFSAs are a legitimate form of income splitting as contributions can be made on behalf of a spouse, common-law partner or adult children without any income attribution consequences.

Investments: You can open a TFSA through any participating financial institution; however, you may want to base your choice of institution on the type of investments you will want to hold within your TFSA and the amount of professional advice you may want in managing the funds.

You generally have the same wide choice of investments within a TFSA as you would for an RRSP or RRIF account. As you might anyway, you will want to match the type of investments you hold, such as cash, bonds or stocks, to the expected timing of your cash needs.

Those with a longer time horizon may want to invest in stocks in order to protect high potential growth from taxation. However, a loss of capital in your TFSA will reduce the amount of principal that can benefit from tax-free investment growth in future years. If you lose your $5,000 annual contributions to investment losses there is no opportunity to replace previous contributions. Any capital losses realized inside your TFSA cannot be used to offset any taxable capital gains realized outside your TFSA. It should also be remembered that capital gains and dividends are already taxed at a reduced rate in taxable accounts.

A TFSA might best be used for safer investments earning interest income in order to preserve the tax-protected capital and because interest income is otherwise the most highly taxed form of income in taxable accounts.

Income from foreign investments may be subject to withholding tax in the foreign country and may therefore be better held outside of a TFSA so that you can benefit from a foreign tax credit.

Existing investments can be transferred in kind at fair market value to a TFSA but it will trigger a disposition that may result in a taxable capital gain. Any capital loss triggered by a transfer will be denied. If you sell an investment at a loss and then transfer the cash, then the loss will be allowed. However, if you then repurchase the identical investment within 30 days, the loss will be denied under the superficial loss rules.

Non-residents: Anyone becoming a non-resident can continue to keep their TFSA intact and it will remain non-taxable within Canada. Any contributions made to a TFSA while a non-resident will be subject to a 1% per month penalty. The foreign tax jurisdiction that you live in may consider income earned in a TFSA to be taxable.

Odds and Ends:

  • TFSAs cannot be held in joint name or in the name of a business.
  • You can have multiple accounts in your own name but consideration should be given to any minimum fees being charged by institutions relative to the account size.
  • A TFSA can be used to secure a loan.
  • You can designate a spouse or common-law partner as beneficiary for your TFSA so that on death it will pass directly and will not be subject to probate fees.

Our recommendation: Everyone 18 and over should consider having a TFSA. While a $5,000 maximum may seem like a small amount at the moment to some, the cumulative contributions of $5,000 each year will soon become sizeable. This will be even more so for a family if contributions are made for both spouses, or common-law partners, and any adult children.

Caveat: Information about TFSAs is based on what is currently available from the Canadian government and could be subject to change.

The financial baton will pass to women, Kanupriya Vashisht

An inaugural event for female financial advisors, “Investing in You,” organized by the Advisor Group, reinforced the importance of women to the financial industry at a time when the very essence of their womanhood – empathy – is the new market mantra for attracting and retaining clients.

The keynote panel focused on how successful women advisors built their books while managing clients, family, firm and personal expectations.

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Take time deciding on retirement, buyout offers

Toronto Star, James Daw

Tens of thousands of Canadians will be wading into unfamiliar tax territory as jobs disappear and companies try to nudge older workers out of the workplace.

They may have to make fast decisions while under stress. “A job loss or retirement is a significant life event,” warns Toronto financial planner and chartered accountant Cynthia Kett of Stewart & Kett Financial Advisors Inc.

She advises anyone in this situation to start by looking at their expenses, obligations and sources of income before making decisions that have tax implications.

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Top up RRSPs with investment loans

Canadian Business, Bryan Borzykowski

With the March 2 RRSP deadline quickly approaching, it’s likely some Canadians are trying to find a way to maximize their 2008 contribution. One way to top up the account – and secure a 46% tax credit – is through leveraged investing .

It’s a risky practice, but borrowing to invest in an RRSP is one way investors can get the most out of their registered plan. And with low interest rates, and stock prices that have plummeted 13% on average since the beginning of the year, now might be the best time to take out an investment loan.

“This could make sense for someone if 2008 was a high income year for them and they expect their future income will come down,” says Cynthia Kett , a principal at Toronto-based financial planning firm Stewart & Kett. “That allows them to maximize the tax savings and shelter the high income.”

Jamie Golombek , managing director of tax and estate planning at CIBC Private Wealth Management, agrees that in certain situations this strategy could work. He points out that leveraged investing and RRSPs go hand in hand only in a short-term situation for someone in a high tax bracket.

“If they’re able to pay off that loan in a short period of time, while the money is in the RRSP for many years and growing at a tax deferred basis, it can be a good strategy,” he says. “But it’s very short-lived. Say someone was in a high tax bracket for 2008 and their income in 2009 would be lower because they lost their job. They could use the loan to generate a 46% tax refund. If they could pay off that loan in a short period of time it could provide an enormous benefit to someone.”

It’s important for investors to know that the interest on this type of loan is not deductible like it is when used in non-registered accounts, so there’s no extra tax benefit.

The biggest risk with leveraged investing is that the value of an investment could continue to slide and your loan will suddenly become extremely difficult to pay back.

“It’s all well and good if everything goes up,” says Kett. “If you borrow $100,000 at 3% to invest for a year and it increases by 20%, you make $20,000 in gains and pay $3,000 in interest, for a net of $17,000 or a 17% return. If it goes down 20%, you’ll have 23% net negative return so you have to make 25% just to get back to starting point. Sometimes people forget to think about that part of it.”

“With any leveraged investing, you have to look at the markets now,” adds Golombek. “They’re down, but it doesn’t mean they can’t go lower. If someone would have told me a year ago to take out an RSP loan, my loan would still be outstanding and my RRSP could be down 45%. Was that a good strategy a year ago? It depends on the risk tolerance of the investor.”

While the market uncertainty should be a deciding factor whether or not someone tops up their RRSP with borrowed cash, ultimately it comes down to rate of return. Can an investor earn a return greater than the cost of borrowing?

“It’s hard to say,” says Kett. “If prime is 3%, can we be reasonably certain of achieving more? Historically, market gains have been made one to two years following a decline. But, is it different this time? With this downturn being global, it might be.”

Types of Charitable Gifts During your Lifetime

Canadian Moneysaver, Evgeniya Samartseva

Cash gifts

Cash gifts are the most common way to donate to charity. The donor receives a tax credit, rather than a tax deduction on the donated amount. The tax credit on the first $200 donated is calculated using the lowest federal marginal tax rate (15%). The tax credit on donations in excess of $200 is calculated using the highest federal marginal tax rate (29%). Provincial tax credits vary between provinces and territories.

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Spousal RRSPs still a valuable tax tool, say experts News, Parminder Parmar

In 2007, Ottawa introduced new rules that allow couples over the age of 65 to split some of their income for tax purposes. It’s a move that could help lower a senior couple’s overall tax payments.

But RRSP experts say the new “income splitting” legislation isn’t the only way — or may not be even the best way — for married or common-law couples to share and lower their tax burden for maximum benefit during retirement.

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Pregnant Pause: Gearing up — Every glossy gadget…

Toronto Star, Michele Henry

Bugaboo Chameleon stroller: $995. Stokke Oval Crib, which converts conveniently to a bassinet: $1,329. Graco Sweet Peace Newborn Soothing Center with iPod port for baby’s easy listening pleasure: $279.

Having the hottest accessories, creating the chicest nursery and being the coolest mom on the block: priceless. Spending so much money before the baby arrives that I no longer have two pennies to rub together: just plain dumb.

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Equities rout prompts a closer look at bonds

Financial Post, Garry Marr

It’s RRSP season and I’m sitting here looking at my statement, which is now below book value after 20-plus years of investing.

Granted, the larger investments were in the last decade and so the plan has not fully benefitted from the rapid rise of the S&P/TSX Composite Index and other indices around the world. That is, before their spectacular fall.

But the question for me, still 20-plus years from retirement, is whether I should continue to buy into equities or get more conservative by purchasing fixed income products like government bonds.

Certified financial planner Cynthia Kett of Stewart & Kett Financial Advisors Inc. in Toronto, says every investor needs to have a certain amount of money in safe fixed-income products. This was the case even before this severe market correction.

"I’m a financial planner so I always take a financial-planner perspective. Regardless of age, investors should always have a mix of investment assets in their portfolio. The degree of risk should be based on their goals," says Ms. Kett.

She says the 2008 market declines were a good test of whether or not investors had their assets appropriately allocated. Unhappy investors who are accepting of the loss probably had the right asset mix, says Ms. Kett.

The problem is many portfolios are now out of whack because the equity portion has fallen so much. The temptation is to get more conservative.

I would be lying if I said I haven’t cast some glances at Government of Canada bonds and their paltry returns – stuff I wouldn’t have touched six months ago.

"Our rule of thumb is you should have five to seven years of cash flow available in earnings or fixed income, interest income or dividends, so that in times of downturn like this your lifestyle isn’t impacted," says Ms. Kett.

She says it’s not the end of the world for someone who is self-employed to use his or her RRSP as an emergency fund, so having some fixed income products in your plan to draw on is a good idea. You wouldn’t want to sell equities at the bottom of the market to fund your lifestyle.

"It doesn’t matter what your age, you have to have some sort of balance and everybody should have some fixed income, some equities and maybe some cash," says Ms. Kett.

Of course, that raises that question of what counts as fixed income. Corporate bonds? Government savings bonds?

"Maybe your first question should be whether I will be retiring in 30 years instead of 20," laughs Rick Robertson, a professor at the Ivey School of Business at the University of Western Ontario in London.

He says people have changed some of their habits and are now putting cash into tax-free savings accounts for a rainy day. "Maybe it’s something we should have done before," says the professor.

But, he adds, there is a danger in knee-jerk reactions. "People have been saying, ‘I lost a lot of money, I feel sick.’ We’ve had periods where the market hasn’t done much, but you really need some type of long-term strategy," he says.

Prof. Robertson says regardless of whether it’s an RRSP or the new TFSA, conservatism is taking over the investing market.

"If you are all in equities right now, I think you are crazy. You need to go back and look at your portfolio. I remember a colleague who every January would go back and rebalance his pension portfolio. He wanted 40% in equities, 40% in long-term bonds and 20% in short-term bonds," he says.

That sounds like a plan – one a few of us should have thought of before the market fallout.

Individual versus Corporate Donations

Canadian Moneysaver, Cynthia Kett

Individuals who own shares in a private company should consider whether they will realize greater tax benefits by donating to charity personally versus through their corporation. I’ve assumed that income needn’t be flowed out of the corporation as a taxable bonus or dividends to enable the shareholder to make a personal donation. That is, there are sufficient funds on hand both personally and corporately to fund the contribution.

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A new piggy bank – How to make the most of your TFSA

Moneysense, Rob Gerlsbeck

The new Tax-Free Savings Accounts introduced by the federal government are a welcome piece of good news. But most of us are still trying to figure out how to make the best use of them.

Here are the basics: Anyone over 18 can invest up to $5,000 a year in a TFSA. You can put your money into a savings account, GIC, stocks, bonds or mutual funds. No, you don’t get a tax break for contributing money, as you do with an RRSP, but your money grows tax free inside the TFSA–and, unlike an RRSP, when you withdraw your money, you don’t pay a penny of tax. This can have very nice effects. If you contribute $200 a month to a TFSA for 20 years at an average annual return of 5.5%, you’ll amass $11,045 more than you would in a taxable account. That makes for one fat piggy bank.

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The price of advice, Rob Gerlsbeck

Why don’t more of us use fee-only planners? It’s the shock of seeing a bill for $500 to $1,000, says David Stewart, a fee-only planner at Stewart & Kett in Toronto. We’re so conditioned to the notion that financial advice should be free that we faint at the notion of paying upfront for it. What we don’t realize is that we’re already paying traditional advisers for the supposedly free advice that they deliver. We pay for their advice in the form of hidden fees and skewed recommendations. An hourly paid adviser is free of those conflicts.

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Forget the office for a minute

Financial Post Magazine, Jenny Wagler

Entrepreneurs are self-starters. It’s a requirement for their jobs. But too many forget to take the initiative when it comes to organizing their personal finances. That can be a big mistake. “If business owners don’t look out for their financial future, no one else will,” says Cynthia Kett, a chartered accountant and certified financial planner with Stewart & Kett Financial Advisors in Toronto. Here, Kett offers five tips to help business owners get their personal financial houses in order.

> Watch your cash flow Unlike employees with regular salaries, business owners face greater uncertainty in knowing where their next paycheque is coming from. Plan your business and personal cash flow needs at least one year in advance to ensure that your revenue and financing sources are sufficient to meet your requirements. Better yet, do long-term projections to anticipate future cash flows and expenditures, especially for retirement.

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Mortgaging your future

Investment Executive’s Money Planner 2009, Monica Townson

When newlyweds and new homebuyers Mark Cohen and Daniela Ferri went shopping for a mortgage recently, they chose a mortgage with the traditional 25-year amortization period. Although long-term mortgages – think: 40 years – offer low monthly payments, Cohen, 29, and Ferri, 28, were more concerned about the total amount of interest they’ll pay over the life of their mortgage than keeping payments low now.

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Get Certified-CFP Accreditation offers Advisors a seal of Professionalism

Advisors’ Edge, Cynthia Kett

While I commend the Investment Industry Regulatory Organization of Canada’s efforts to introduce a rule that will govern how member firms supervise financial planning activities, the rule is too vague to be helpful. A better approach would be for those of us within the financial industry to view it from the public’s perspective.

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Defensive investing back in vogue

CBC News, Philip Demont

In hockey terms, playing defensively often means pushing opponents from in front of your net, clearing the puck and absorbing some body checks as you wait for a premium time to go on the attack.

It might be a bit of a boring style for the armchair athlete, but it’s one way you can get a victory – or at least prevent a loss.

Investing in these turbulent markets is like playing defensive hockey – a lot of grinding is needed to get a tie.

“In this market, you have to take a deep breath … and don’t forget to exhale,” said Andrew Rice, senior adviser with Toronto’s Stewart & Kett Financial Advisors Inc.

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Majority of retirees feel good about financial health, Bryan Borzykowski

For years, the general consensus around retirement has been that people haven’t saved enough money, don’t have enough to live on and are scared about their golden years. Well, a new survey by Russell Investments and Harris/Decima says retirees are doing just fine.

The survey, which was released Tuesday, says 88% of retirees consider their financial health to be good, very good or excellent. “Conventional wisdom says there would be all these challenges, but when you look around into your own families, you don’t see the struggles that you think are going to happen,” says Irshaad Ahmad, Russell’s president and managing director. “When you do some research, you find a remarkable difference than what people are expecting – in a really positive way.”

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Ask an expert: RRSP contributions versus mortgage payments

Chatelaine Money Mavens Club, Caroline Cakebread

Every week, financial expert Caroline Cakebread answers your money questions.

Q: For a household where both partners are earning/contributing towards a guaranteed benefit pension, what is the recommendation between making RRSP contributions versus paying off a large mortgage faster? Which should we choose or weigh more heavily? A guaranteed benefit pension will put us into the highest marginal tax bracket upon retirement, so RRSP drawdowns will be taxed at the same marginal tax rate that we’re being taxed at today.

A: If you’re lucky enough to have extra cash to save at the end of the year, it’s tough to know where to put it — especially when you’re up against a daunting mortgage balance! Cynthia Kett, CA, CFP with Stewart & Kett Financial Advisors in Toronto says she usually advises clients to pay off their mortgages as soon as possible because the interest isn’t deductible. But she also recommends taking a balanced approach. Since the average mortgage contract lets you make an annual payment of up to 15 percent towards your principal, she recommends that you start by doing that — but be careful of making payments over that amount because your lender will probably impose a penalty.

If you have money leftover after doing this, then make an RRSP contribution, says Kett. As she explains, "While a taxpayer may have access to future registered pension plan benefits, they may not be enough to provide for the individual’s desired retirement lifestyle. Withdrawals from RRSPs/RRIFs can be used to supplement the cash flows from the pension."

Keep in mind that as a taxpayer who is also a pension plan member you’re limited in the amount you can contribute to RRSPs by the Pension Adjustment that is reported on your annual T4, notes Kett. But that doesn’t mean you shouldn’t contribute to your RRSP, though, she explains: "At a minimum, RRSP contributions provide a current tax deduction and a deferral of tax until the funds are withdrawn from the RRSP/RRIF. If the taxpayers are in a higher marginal tax bracket during their working years than they will be during their retirement years, actual tax savings will be realized."

Hope that helps!

End Game – Turning New Money into Old, Heidi Staseson

Whether they weekend in Whistler or let go in Lake of the Woods, nibbling Yukon frites or Cobb salad–no matter the mould, either New Money or Old– one thing is likely: your wealthy clients want to see that it lasts. As their advisor, the complexity of your job will depend on their goals; strategic paths won’t always be parallel, but the end game is usually the same–rich people want the cash to flow to the future.

“They want the money to be there four, five, six generations down the road,” says Tim Cestnick, managing director of WaterStreet Family Wealth Counsel in Burlington, Ont. Moreover, he adds, they’re willing to do what it takes to make sure that happens.

Laypersons often use the stereotypes of “New” or “Old” Money to tag the affluent. Even those with scads of cash might toss about the colloquialism in High Society to distinguish those who build from those who inherit. But advisors don’t necessarily break it down that way. Unlike our southern sister where oodles of Old-Guard family names roll off the tongue, Canada doesn’t present the same heritable padding with which to line your books.

That said, in her new book, Who Owns Canada Now: Old Money, New Money and the Future of Canadian Business [Harper- Collins Publishers Ltd., 2008], author, journalist and National Post Editor-at-Large Diane Francis says today’s family fortunes are controlled by 75 Canadian billionaires. And while their names may not all resonate, these business proprietors “are also comfortable internationally and network as much outside Canada’s borders as within them,” Francis writes. “They are sought out–and pursued–by brokers and investors from around the world. Their companies and markets are prey to foreign competitors or acquisitors. Their assets are located everywhere, as are their customers, and their stocks are listed on foreign exchanges. They think globally, not just locally.”

For most advisors dealing with the ultra-high-net-worth, every form of wealth is invaluable. To manage it requires surefooted financial finesse to preserve the capital, and prime it for posterity. But some clients will need more shepherding than others, depending on their goals.

To keep things straight, we’ll still use the terms new and old wealth to help highlight some of the subtle differences that exist between high-net-worth clients particularly concerning variances in values. The main distinction, says Beat Meier, director and senior client advisor with UBS Wealth Management in Calgary, is that old money is wealth held by families who created it many generations ago (at least three), while new money is entrepreneurially derived and typically comprises fortunes held by individuals who amassed wealth within their own or their parents’ lifetimes.

Most experts who deal with the former will attest continued growth and passage of that wealth to future generations is key. Patricia Lovett-Reid, senior vice-president, TD Waterhouse, says new-wealth entrepreneurs tend to view their capital as a stream–the source of which can be replenished. By contrast, old-wealth individuals think of money “like a pool that could be depleted.”

Risk tolerance is the main differentiator. Old-wealth people tend to be more conservative, notes Cynthia Kett, a CFP and principal of Toronto-based, adviceonly firm Stewart & Kett Financial Advisors Inc. “Either they choose not to work or want to preserve capital for the next generation, so they tend to take fewer risks.”

Liquid Drain-o

Owners of new wealth sport higher risk appetites. Many of Meier’s Calgary clients generated their capital in the oil and gas markets, minerals, or other resourcerelated businesses. “They’re mostly entrepreneurs and executives who know how to manage through periods of high volatility. They have been through troughs and peaks,” says Meier.

Senior financial planner Frank Danielson, with Assante Wealth Management, serves two wealth segments in the Vancouver market: medical professionals and entrepreneurs. Though both groups tend to be legacy-oriented, the difference between the niches, he explains, is in the mass liquidity events that happen when they sell their businesses.

While the professional surgeon tends to be a high-income earner, accumulating, saving and becoming affluent over time, the entrepreneur builds until he’s ready to cash in the crop. Such a selloff can easily catapult them to spending heights yet unseen–the sudden impact of which may also lead to indifference toward the future of their capital, so long as they have it through their lifetimes.

After all, the assets came from their own ingenuity, so they come to believe that if they dip in, no problem; the formula can easily be repeated. Meier says many of his new-wealth western clients simply start over after draining the initial swill. They may build a company to half its potential before selling out to a bigger company, and then move on to the next build. Or they may be determined to go all the way–“till the company’s a multibillion-dollar company.”

“With oil and gas, all you have to do is get management together, go out and buy some potential, or land, and start it all over again. That’s how it happens here,” Meier explains.

And with such intrepidity, “why shouldn’t they go hog wild” is often the accompanying attitude.


Such business-building acumen doesn’t mean these new-wealth entrepreneurs will follow through with equal spendingand- saving prowess. True, says Lovett- Reid: “Millionaire business owners who’ve sold [their businesses] may not be as savvy in personal finance, investments, trusts and tax. What they are really savvy at is making money.”

But they need help keeping it. Some of Danielson’s business-owner clients may be used to living an average lifestyle, having never before experienced this type of windfall. If all of a sudden they have the financial means to live large, they may not have developed the appropriate values around money to make good financial decisions. It’s when they’re uncomfortable around cash that subconscious self-sabotage can hit in the form of wayward cash depletion.

Danielson has a client who, after selling off his shares in his built-from scratch technology business, suddenly found himself euphoric with a $15-million cash injection. The feeling, however, risked becoming more of a quick fix than a permanent panacea, after the client purchased $9 million in Vancouver real estate. A lavish waterfront home, as well as a lakeside recreational property, left him with just $6 million in liquid financial assets. The result? His cash-flow needs were totally unsustainable.

Such “lifestyle-oriented, spontaneous extroverts,” as Danielson categorizes this client, require a lot more coaching around their long-term financial plans, including working with the clients’ other bankers, helping to arrange their mortgages, buying their cars for them, and making cash-flow deposits every quarter to keep them on track.

In the case of this prime-property client, the trick to aligning the finances with his livelihood was to develop a prioritized action plan that would meet both short- and long-term targets. After some heavy-duty coaching in terms of the impact of various financial decisions, the advisor and the client set an independence objective of $10.5 million that would need to be reached by 2013. Basically, the client had three options: sustain another liquidity event, incur growth elsewhere, or downsize the house. They agreed on door number three “to get their financial plan back within the goalposts.”

Even Meier’s O&G clients with average net worths of $50 million-plus need help aligning assets–especially if they’re under the influence of a liquid shot and their risk-taking tendencies run rampant. Meier is often flummoxed to see client statements from other providers that show highly concentrated positions of junior stocks within their portfolios–for example, with a market cap between $10 million and $50 million.

He says that sometimes these clients are overly concentrated in certain asset classes without even realizing it. “That’s what their life was all the time–they invested in companies, sold them again, bought other ones, sold, and so forth … the concept of diversification is not yet 100% out there,” Meier explains.

So what’s his trick for this new investment breed? Say a client has assets relegated to a single concentrated position in his or her own private or public stock; he doesn’t want to sell the stock today, yet he needs some liquidity now. Meier offers add-on services such as monetization strategies whereby a loan facility stands against a single, liquid, highly traded stock position, and pays out cash for it. The arrangements can be used to provide cash (e.g. for a vacation property) or for reinvestment purposes.

Kett also develops plans to help clients curb out-of-the-ballpark spending. Whether dealing with new or old wealth, when doing cash-flow or retirement planning, she sets annual benchmarks to what the value of both investable assets and sustainable spending should be. Says Kett: “When we compare it on an annual basis, and see it’s out of line, we bring it to the client’s attention and say, ‘We’ve got some issues here and they need to be addressed.’ ”

Danielson notes you have to be comfortable working in that type of structural environment, ensuring you create plans that reflect appropriate client benchmarks while asking the right questions. Above all, make sure the client implements your plan. Danielson remarks: “[Clients] are quite time-starved and they want [advisors] to be action-oriented and proactive in making sure that all the moving parts land in the right place and in the right order.”

Generation Gap

Scott Hayman, CA, CFP, and executive vice-president of Northwood Stephens Private Counsel Inc. in Toronto, says it’s critical to understand a client’s precise goals, values, and generational makeup. He doesn’t segment his ultra-high-net-worth clients into new or old categories, but rather focuses on aligning differing family visions among the generations. “It’s no different if it’s old or new money; when I get down to managing it, once I’ve got through to ‘what do you want to do with it?’ the specifics will change because of the different sets of goals and objectives.”

Quite simply, both new- and old-money clients need guidance. And not only will values differ among generations, but they can also vary between the same generations within the sub-setors of new or old wealth. For example, Kett says a common trait among some of her new-money clients is the attitude: If we can do it, they can do it. “They think, ‘If we were able to create our own wealth and we’ve given our child the [educational] tools to do the same, we don’t have the need to pass along the money,’ ” says Kett. Once they’ve helped kids out with down payments on homes and the education’s done, children are expected to stand on their own two feet.

Old-wealth clients, rather, are more likely to pass down their inherited wealth to the next generation. “They feel they’ve been given the advantage by inheriting the wealth, and it’s their job to pass it on to their children,” says Kett. These folks can fall under one of two subsets of old wealth: Either they’re very knowledgeable about finance matters or they have enough wealth and they don’t need to take undue risk to live their chosen lifestyle. Others who inherit wealth may not have received the same financial education within their families; the wealth has always been there and they’ve never had to understand investments or risks. They look for easy solutions to money management, as a result.

But such solutions aren’t always a breeze. Kett notes the wealthier the client, the more opportunities and flexibility await for structuring portfolios, and things can become more complicated. Most wealthy clients don’t necessarily want to maximize their money but they do want to have reasonable returns for reasonable risk. How they define those terms is based on the individual. “We help to determine what types of asset classes would suit their conservative nature for investing. The old-money clients will usually have a discretionary money manager who’s handling that portfolio and they rely on us to monitor the performance for them,” says Kett.

Driving Decisions

Cestnick concurs setting governance models are especially important when dealing with old-money clients. “How does the family deal with conflict if they can’t agree on things? Much like a corporation, families need a very similar model with a board of directors and a management team.” Such a model outlines who’s going to make the crucial investment decisions; how much is to be distributed to each family member annually; how much is to be spent or saved; and determines the family’s basic approach to wealth.

He suggests advisors think of managing the wealth of an ultra-high-net-worth family as though it is a business. “These families are like institutions, that’s how big the wealth is. When you have a father and a mother who created the wealth, and they’re still alive, decision-making is easy. But what happens when they’re gone? Someone has to make the decisions around how this wealth is to be managed.”

Hayman’s family-governance approach to old money aims to dictate how that wealth is to be managed over a period of time–whether it’s to be handled in perpetuity or just for the duration of clients’ lives. Family meetings are conducted where ideals of values and vision are discussed among patriarchs, matriarchs, their children, grandchildren, even in-laws.

Sometimes, he says, it’s difficult to get people in the same boat to row in one direction. He fears one of his old-money clients will run out of capital before it hits the fourth generation. Part of the problem has to do with competing interests among family members.

Say a Generation X-er at the governance table has never worked a day in his life, yet the family treasure has essentially gone to support his lifestyle. His parents, however, work very hard to keep the legacy flowing. Without a governance model in place, to plan spending, saving, and generally smooth out family differences, that legacy won’t get anywhere. Says Cestnick: “When you have old wealth–third and fourth generations– if you haven’t by that time established a good governance model for the family, you’re dead in the water.”

Like Hayman, Cestnick looks at clients’ generational makeup. “When it comes to advising clients, we look at Generation One as being different than Generation Two, and onward. And it’s largely because of the values and the attitudes around money that those generations have,” Cestnick explains.

Indeed, it’s tough to force the Old Guard to stand erect in perpetuity if the family values aren’t in sync. “Shirtsleeves to shirtsleeves in three generations– it’s remarkable how true that really is,” says Cestnick. “Generation One makes it; Generation Two spends it; and Generation Three finishes it off.”

Old Hat

It’s sewing these sleeves together that will enable a legacy of success. “If the wealth makes it past Generation Three so that Generation Four has significant wealth to speak of, then that’s truly old money,” says Cestnick.

Danielson doesn’t see too much old money within his client base of Vancouver entrepreneurs and professionals. “When I think of old money, I think of places like Montreal where you’ve got 20 or 30 families where the wealth has transcended five generations, and they still have some money left,” he says. Old-money clients tend to be more private than their showier new-money counterparts–but Danielson believes that all depends on their “Financial DNA”.

From a cultural perspective, he has observed a few of his old-wealth clients who recently moved to the Vancouver area after several generations of living in Eastern Canada. They gravitated toward the Shaughnessy residential area of the city, with its “majestic tree-lined streets and classic architecture.” Same goes for one of his clients who decided to emigrate to Vancouver from London, England. Coming from Old Money, Danielson says this client circumvented the more popular areas of wealth, say, in and around West Vancouver or Point Grey, opting for the old-world charm of South Vancouver with its large mature lots, 100-year-old trees, and opulent 1920s-style homes. “Definitely more heritage-like and traditional in terms of the look and the feel; you’re not going to see a post-modern classic of steel and concrete with all window glass in Shaughnessy,” he says.

Cestnick suggests the greatest distinction when it comes to old-money values is that first-generation wealth owners never forget the value of a dollar: “They remember what it was like when they had little; they understand how hard it is to make it, they don’t want to lose it.”

It’s getting the subsequent generations to buy in to the same mindset that can pose a challenge. “As much as first-generation parents don’t want it to change, it’s really hard to keep a second generation with the same outlook and view of wealth as their parents who created it,” says Cestnick.

That’s where good parenting skills come in. Cestnick says that attitudes toward wealth and money often change, and will be different from Generation One, Two and onward. Trying to get parents in Generation One to engrain healthy money values in their children can also present a moral money conundrum–especially if that message is belied by the parents’ own behaviour.

If the former can easily afford to buy a private jet, or a home in Italy, what does that say to their offspring about spending? “They grew up with the silver spoon,” says Cestnick. “It’s hard for them to imagine life without those things. So it’s hard for those generations to place the same value, or recognize the difficulty of acquiring those things as the first generation did.”

Lovett-Reid says she hopes that the second generation is taught some of the same financial discipline and values. “As generational lines get longer, the financial discipline could wane–unless the families develop ways that are unique to their family to reinforce it,” she explains, noting it’s also critical for advisors to help foster that financial communication between those generations.

What’s Their DNA?

Unlike Hayman and Cestnick who demarcate money values based on generation, Danielson looks at what he calls their Financial DNA. Prior to their first meeting, he gets clients to fill out a profile that will highlight chief indicators of their money attitudes, their life purposes and goals. By looking at the types of cars they drive and whether they have club memberships, for example, Danielson says he can more easily provide advice. “When you understand someone’s financial DNA and their values it’s easy to project that out [in a plan]. It’s a huge part of our practice and it’s incredibly valuable to help accelerate your understanding of clients,” he explains.

Further, he says, it’s surprisingly accurate. For example, one client has $20 million and a modest lifestyle. He lives on about $6,000 a month, and a recent liquidity event hasn’t changed his lifestyle one iota. Based on his Financial DNA theory, Danielson would label this client as introverted and structured, as opposed to, say, his other client who had to forfeit the waterfront. “He’s a strategic thinker; cautious. He has a seven or eight-year-old car–‘The Millionaire Next Door,’ ” he says.

Hayman would simplify it as, “You either have it in you or you don’t.” And though he tries not to overlay his values and money morals onto the client’s, sometimes it can be a challenge when a client’s values differ sharply from his own. What he doesn’t understand is when people inherit older money, they didn’t have a hand in making it, they have no qualms about spending it, yet they contest the vision tied to it.

“It’s no different than people who don’t vote but are the first in line to complain,” says Hayman. “You’re sharing in the fruits of someone else’s labour simply because you guys have the same name; there’s a reason that things were done a certain way.”

He feels younger generations should be allowed a place at the table to discuss how the wealth is dealt with, but at the end of the day, they need to fall in line with the governance model that’s been decided on. “[As an advisor] you do have to talk to the differing generations, and it’s a give-and-take mentality, where we say, ‘If we want this wealth to last through the generations, then we need to find a system for talking about this money that’s going to work. Or else it will disappear.’ ”

How to Grow “Old”

Cestnick says that while most of his entrepreneurial clients tend to want to leave a legacy, there will be more of a challenge turning that new money into old. After all, with only a few families in Canada that could be considered truly old wealth, it’s obviously a tough thing to amass. Even Cestnick has just a handful of them. “There are probably 30 to 50 families in Canada with old wealth that has gone for four or five generations in any significant way,” he says.

But he sees the figure doubling in another 20 or 30 years, simply “because we’ve created more millionaires in the last 20 years than in the last 50 years prior to that.”–a factor he says that is largely attributable to the technology and oil industries in Canada.

But if you only have a measly $20 million, good luck becoming another Thompson or Richardson. “In my mind, if you don’t have close to $100 million or more, the new money’s not likely to become old money in any significant way,” says Cestnick.

“If you only have $20 million, you’re probably doing what most Canadians do, and that is when you pass away you’re leaving an equal share to all your kids, and they can do whatever they want with it because it’s not going to go on for four or five generations.”

The only exception to that is if those millionaire parents happened to have really entrepreneurial kids who turned that seed money into generation-transcending wealth. But Cestnick says such things are rare.

Looking ahead, he acknowledges there will be a growing number of new-wealth people who will become concerned about leaving legacies because they’ve learned wealth comes at a cost. Some of those are psychological costs, such as not wanting to work or not knowing who true friends are, and the general challenges that come with having money. As a result, many of the wealthiest families have decided to cap how much they’re going to give to their kids or grandkids. “That’s not uncommon at all,” he explains.

“They want to leave them enough that they can do what they want, but they don’t want to leave them so much that they choose to do nothing.”

Guidance from the Gurus

More, Margaret Nearing

If women can de-clutter, re-organize and update floor-to-ceiling closets, then why shouldn’t we take control of our investment files?  Four Canadian money experts answer questions about how to make sure you’ve got what best suits you hanging in your investment closet, and the smartest ways to ensure your financial house is in order.

(View rest of story in PDF)

Wealthy Retirees Hit Harder

Advisor’s Edge Report, Bryan Borzykowski

Your wealthy clients might have more money now, but expect their income to decline significantly — at least compared to that of low-income earners — during their retirement years.

A new Statistics Canada report says that, on average, 75-year-old Canadians had “family disposable incomes” that were 80% of what they earned when they were 55.

(View rest of story in PDF )

Cynthia Kett: Following a sense of adventure

Women’s Post, Justine Connelly

An accountant by training, Cynthia saw it as a foundation: “If I could put financial statements together, I could certainly dissect them.” She worked at Deloitte & Touche, then Chubb Insurance, before taking a three-month sabbatical to “see the world.” While scuba diving in the South Pacific, Cynthia realized that she wanted to use her knowledge to do something fun.

Cynthia has found her professional love in her firm, Stewart & Kett Financial Advisors Inc., an advice-only financial planning, accounting, and tax services firm, where she is one of two principals. Her job allows Cynthia to use her analytical, technical mind, and also gives her the opportunity to interact with people. And when you’re talking about people’s life savings, you end up getting into emotional situations. Cynthia calls herself “a good listener.

The sense of adventure she realized on that first South Pacific dive hasn’t gone away. “The broad perspective that one obtains by travelling is a wonderful way to obtain an education about the world and other people.” This year she and her 13-year old daughter are headed to Ireland, to discover “a different kind of English-speaking culture.”
Cynthia has found success through the technicalities of accounting, the curiosities of travel, the positivity of boundless optimism, and the patience of knowing when to listen.

Wealthy take biggest hit in retirement: StatsCan, Bryan Borzykowski

Your wealthy clients might have more money now, but expect their income to decline significantly – at least compared to that of low-income earners – during their retirement years.

A new Statistics Canada report says that, on average, 75-year-old Canadians had “family disposable incomes” that were 80% of what they earned when they were 55.

High earners, which Statistics Canada defines as workers in the top 20% of income distribution at age 55, replaced 70% of their income in their 70s, while lower earners saw almost no change between their pre-retirement income and the money they have at age 75.

Read the full article

2008 Wealth Guide: Better ways to retire rich

Profit Magazine, Camilla Cornell

After years of plowing earnings back into their companies, many entrepreneurs find themselves sailing toward retirement with too little tucked away in RRSPs and other retirement-planning vehicles.

If that scenario sounds familiar, take heart – setting up an individual pension plan (IPP) or retirement compensation arrangement (RCA) could be the answer. These specialized retirement vehicles, which are set up through your company, accelerate savings, allowing entrepreneurs to catch up on reprobate retirement plans. Choosing which one is right for you depends on your age, circumstances, how much money you want to retire on and when you want access to it.

Read the full article

Budget 2008: Retirees benefit from tax-free savings account, Bryan Borzykowski It may not have been a spending budget, but there was much for savers, particularly seniors.

Cynthia Kett, a CFP at Stewart & Kett Financial Advisors, applauds the introduction of the new tax-free savings account. "It helps everybody," she says. "I think they were smart to do that for the dollar value that’s involved."

In particular, the new account helps wealthier retirees who are withdrawing money from their RRSPs. "They can reinvest into this registered tax-free savings account and continue to tax shelter that investment income."

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Boomers in the dark about their retirement needs, Bryan Borzykowski

Besides what TV program is on at noon, the big question for soon-to-be retirees is how much money they will need to survive in their golden years.

Sun Life Financial attempted to find out what Canadians think they need for retirement, and the results were surprising. About 9% of the 1,530 Canadians surveyed thought that they’d need to save just $25,000 for retirement, while an equal amount thought $1 million to $5 million would be sufficient to get them through their post-work years. Forty percent responded that they have no idea what they’ll need for retirement.

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Getting finances in order a good resolution

Inside Toronto, Izabela Jaroszynski

Looking to shape up in this new year? Try a fitness regime that’s sure to get your business into shape – financial shape, that is.Jeanette Brox, a certified financial planner with Investors Group, said the start of a new year is a good time for business owners to think about their financial future.

“It is so critical to review finances and this is the ideal time for it,” she said. “Business owners put so much energy into running the business that they often neglect themselves.”

Read the full article

Pension income split can cut family’s tax

Retirees, seniors showing great interest in new rule that allows couples to save thousands of dollars

Toronto Star, Talbot Boggs

Pension income splitting rules originally introduced in October 2006 are quickly becoming an important part of the retirement planning process for Canadian retirees and seniors.

“We are certainly factoring them into the retirement planning process for our clients,” says Cynthia Kett, a chartered accountant and certified financial planner with Stewart and Kett Financial Advisors Inc.

“This was a huge gift from the government that more and more senior Canadians are taking into consideration in their financial and retirement planning.”

Read the full article

Tax tip: Give and you will receive

If you’ve donated to charity this year, remember to claim the tax credits when you file your return.

Here are some tips from Chartered Accountant Cynthia Kett, Principal, Stewart & Kett Financial Advisors Inc., an advice-only financial planning, accounting and tax services firm in Toronto.

– Donations have to be made by Dec. 31st to claim them for that year. If you choose not to claim them, they can be carried forward for up to five years.

– Total donations in excess of $200 are eligible for a 29 per cent federal tax credit and an 11.16 per cent Ontario tax credit. These credit rates are equivalent to the highest (marginal) tax rates for Ontario taxpayers.

– To maximize your tax credit, have one spouse, or common-law partner, claim all the donations and/or accumulate your donation credits for more than one year to exceed the $200 super-credit threshold.

– Donations can be made ‘in kind’ rather than in cash.

– A proposed amendment to the Income Tax Act, effective December 5, 2003, limits the value of a donated asset to the donor’s cost of property if it was donated within 3 years of the date of acquisition.

– Capital gains triggered by donating publicly traded securities to charitable organizations other than a private foundation are eligible for a reduced income inclusion rate of 25 per cent versus the usual 50 per cent. Thus, only one quarter of the gross capital gain is taxed at the marginal rate.

– The annual donation limit of 75 per cent of net income is increased by 25 per cent of any taxable capital gain realized on a donated asset.

– In the year of death, or the preceding year, the donation limit is 100 per cent of net income.”

For further information about taxes, contact a Chartered Accountant.

Brought to you by the Institute of Chartered Accountants of Ontario.