Simon Fraser University April 24, 2012 Wayne Chappell Vice President and Director Odlum Brown Financial Services Limited* Agnes Douglas Portfolio Manager, Odlum Brown Limited *A wholly-owned subsidiary of Odlum Brown Limited Odlum Brown Limited is a Member-Canadian Investor Protection Fund Retirement Planning The Bare Facts Between 1992 and 2006, the percentage of Canada’s labour force with Defined Benefit Pension Plans dropped from 33 per cent to 26 per cent*. *Based on information provided by Statistics Canada (Insights Report, Fall 2008). Beyond Age 65 Longevity Risk Beyond Age 65 – Cont’d. Underestimated spending habits Unknown future tax and inflation rates What is Retirement Planning? Asset & Financial Management Risk Management Tax Planning Retirement Planning Estate Planning Terminology • Financial planning • Retirement planning • Estate planning • Gift planning • Tax planning Are You Ready? Three Question Approach • Where are we now? • Where do we want to be? • What do I have to reconcile? Are You Ready? Things You Can Do Now! Four Broad Categories •Income •Lifestyle - Housing •Risk Management - Obstacles to achieving my goals •Estate Issues - What happens to what’s left? Retirement Planning Income •Where are we now? •What will I need? •How do I reconcile the difference? Where Are We Now? Where will we be if we keep doing what we are doing right now? Salary Government Plans, Pension Plans Wage CPP, etc. Bonus Real Estate Daily Living Investment Plans RRSP Future Income Sources Could we live on that amount today? Why not? Where Do We Want To Be? BUDGETING?!?!?! Example of Semi-Budgeting (Cheque and Visa System) Step 1 Step 2 Add up everything for •Use Visa and pay off monthly which you write cheques: •Add up Visa and divide by 12 to equal monthly payments •Taxes •House Insurance •Car Insurance •Life Insurance •Yard Maintenance •Furniture, Windows, Roofing, etc. = Fixed Costs / 12 = Monthly payments Add 1 & 2 together and adjust for special items and Voila!!! Set Goals • Realistic • Wish lists vs. to-do lists • Income and lifestyle needs • Flexibility What Do We Have To Reconcile? Planning A daunting exercise made too complicated by the desire to “Get It Right.” Investing for Retirement: The Transition Begins Agnes Douglas, CFP, CIM, FCSI Portfolio Manager, Odlum Brown Limited Member-Canadian Investor Protection Fund Your Investments • Transition Into Retirement • Getting Advice The Transition “Creating your new paycheque.” • Income withdrawal plan • Security of income pay-outs • Continued investment growth • Tax efficiency Process for Investing • Goals & Needs • Risk Tolerance • Time Frame • Diversification Investment Goals Be specific and realistic 1. Growth 2. Income 3. Liquidity Risk vs. Return • Risk is defined as the potential for loss • Understand the relationship between risk and return Asset Allocation Diversifies assets into three classes: •Cash •Fixed Income •Equities Cash (i.e. Liquid Investments) • Canadian savings bonds • Treasury bills • Money market instruments Fixed Income • GICs • Bonds • Debentures Equities When you buy an equity (stock), you own a share of the company. Two types: •Common Shares •Preferred Shares Equity Products • Common or preferred shares – Large, medium and small cap – Domestic, foreign and emerging markets • Mutual funds • Real estate income trusts (REIT’s) • Exchange traded funds (ETF’s) • Income trust units • Options/hedge funds When Transition Begins • Critical point • Develop comprehensive income withdrawal plan • Time to delegate Getting Advice 1. Working with an advisor 2. Finding the right resources 3. Finding an advisor 4. Assessing your advisor Working With An Advisor WHY? What should you expect from an advisor? a. Clear and specific recommendations b. Explanation of risk c. Need permission for each transaction unless discretionary d. Send regular statements How is your advisor compensated? a. Salary d. Fee-only b. Sales fee/commission e. Fee-based Finding The Right Resources Sources of advice on financial matters: 1.Customer Service Representative i.e. Bank 2.Personal Banker 3.Mutual Fund Representative 4.Investment Advisor i.e. Investment Firm 5.Portfolio Manager 6.Financial Planner 7.Insurance Representative Choosing The Right Advisor Questions to Ask Yourself 1.What are your financial goals? 2.How much do you know about investing? 3.How much money do you plan to invest? 4.What type of products and services do you need? Choosing The Right Advisor Questions to Ask An Advisor 1.What are your qualifications? 2.Are you and your firm registered? 3.How much experience do you have? 4.What products and services do you offer? Choosing The Right Advisor Questions to Ask An Advisor 5.To which type of clients do you cater? 6.What is your investment philosophy? 7.How are you compensated? 8.How will you work with me? Finding An Advisor • Through referrals • Online or contact local security regulator Search for an advisor through industry sources: (See slide 44 for useful links) • IIROC: Investment Industry Regulatory Organization of Canada • MFDA: Mutual Fund Dealers Association of Canada • Advocis: The Financial Advisors Association of Canada • FPSC: Financial Planners Standards Council of Canada • BCSC: BC Securities Commission • OSC: Ontario Securities Commission Assessing Your Advisor 5 Steps: 1.Understand your total return over time 2.Calculate your total costs for each year 3.Compare your results with benchmarks 4.Assess the total value your advisor provides 5.Assess whether you are happy with your results Assessing Your Advisor Have a Complaint? 1.Talk to your advisor a letter to senior management 2.Write 3.Complain to the appropriate regulator 1. BCSC – File a complaint (http://www.investright.org/file_complaint.aspx) 2. IIROC - An Investor’s Guide to Making a Complaint (http://www.iiroc.ca/English/MemberResources/Brochures/Documents/Inves torProtectionBrochure_en.pdf) WE’RE ALMOST THERE! Now to... Brush up on your abilities to live life to the fullest in retirement. Food for Thought: “Keeping up with the Joneses in retirement – don’t even think of it... Keeping up with inflation – plan on it!” Quote from a Mackenzie Financial presentation: http://www.mackenziefinancial.com/eprise/main/MF/DocLib/Public/Retirement_U_201.pdf Agnes Douglas, CFP, CIM, FCSI Portfolio Manager | Odlum Brown Limited • Over 22 years of investment industry experience • With Odlum Brown Limited since 1999 Wayne Chappell, CFP, CLU, ChFC, CPCA . Vice President and Director, Odlum Brown Financial Services Limited • Over 40 years of financial industry experience • With Odlum Brown Financial Services Limited since 1990 Bibliography and Other Useful Links •Answers to Your Money Questions: Getting Advice. http://www.getsmarteraboutmoney.ca/ •BCSC: InvestRight. Tools for investors. http://www.investright.org/content.aspx?id=94 •IIROC: Investment Industry Regulatory Organization of Canada. http://iiroc.ca/ •MFDA: Mutual Fund Dealers Association of Canada. http://www.mfda.ca/ •Advocis: The Financial Advisors Association of Canada. http://www.advocis.ca/ •FPSC: Financial Planners Standards Council of Canada. https://www.fpsc.ca/ •OSC: Ontario Securities Commission. http://www.osc.gov.on.ca/en/home.htm Disclaimer The information contained herein is for general information purposes only and is not intended to provide financial, legal, accounting or tax advice and should not be relied upon in that regard. Many factors unknown to Odlum Brown Limited may affect the applicability of any matter discussed herein to your particular circumstances. You should consult directly with your financial advisor before acting on any matter discussed herein. No part of this publication may be reproduced without the express written consent of Odlum Brown Limited. Odlum Brown Limited is a Member of the Canadian Investor Protection Fund. Thank You!
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