Slide 1 - CIFPs Building a strong profession today_ for tomorrow by derong123

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									               CIFPs
The Smith Manoeuvre as a New Business
 Prospecting Tool for Financial Planners
THE SMITH MANOEUVRE

 Is your mortgage tax deductible?
 Tonight you will learn how to:

1. Get FREE tax refunds from the CRA

2. Pay off your mortgage faster

3. Build an investment portfolio
Tonight you will learn how to:

1. Get FREE tax refunds from the CRA

2. Pay off your mortgage faster

3. Build an investment portfolio

           SIMULTANEOUSLY
The problem
The solution
History of The Smith Manoeuvre
What is The Smith Manoeuvre?
The Smith Manoeuvre is a financial
strategy designed to convert the non-
deductible interest debt of a house
mortgage to the deductible-interest debt
of an investment loan, which
simultaneously ensures the building of a
free and clear investment portfolio.
A picture’s worth a thousand words
Ten thousand words…
            THE SMITH MANOEUVRE
                     Is your mortgage tax deductible?

200,000                                            Appraised Value


150,000                                             75% Lending Value


100,000
                                                  25% Equity
                                                  75% Debt
 50,000
                                                  Reduce Bad Debt
                                                  Increase Good Debt
     0
          Bad Debt    Good Debt Total Debt



   The left bar chart will represent the fate of the bad debt,
   the middle chart will show good prevailing over evil, and
   the right chart will confirm that debt does not increase.
            THE SMITH MANOEUVRE
                     Is your mortgage tax deductible?

200,000                                            Appraised Value


150,000                                             75% Lending Value


100,000
                                                  25% Equity
                                                  Reduce Bad Debt
 50,000
                                                  75% Debt
                                                  Increase Good Debt
     0
          Bad Debt    Good Debt Total Debt


  You win $30,000 in the lottery and having read the book, you
  use it to pay down your mortgage by the same amount, so
  your total debt drops by the same amount.
            THE SMITH MANOEUVRE
                     Is your mortgage tax deductible?

200,000                                            Appraised Value


150,000                                             75% Lending Value


100,000
                                                  25% Equity
                                                  Reduce Bad Debt
 50,000
                                                  75% Debt
                                                  Increase Good Debt
     0
          Bad Debt    Good Debt Total Debt


  Having increased your equity in your house by $30,000 you
  are immediately able to borrow back $30,000 to purchase
  investments of your choice. Good debt rises by $30,000
  such that your total debt is back to $150,000.
            THE SMITH MANOEUVRE
                     Is your mortgage tax deductible?

200,000                                            Appraised Value


150,000                                             75% Lending Value


100,000
                                                  25% Equity
                                                  Reduce Bad Debt
 50,000
                                                  75% Debt
                                                  Increase Good Debt
     0
          Bad Debt    Good Debt Total Debt


  Let’s say you inherit $20,000 a few months later. You
  repeat the process again. You have paid down a total of
  $50,000 of bad debt, but you have immediately borrowed it
  back to invest it. Total debt is still $150,000.
            THE SMITH MANOEUVRE
                     Is your mortgage tax deductible?

200,000                                            Appraised Value


150,000                                             75% Lending Value


100,000
                                                  25% Equity
                                                  Reduce Bad Debt
 50,000
                                                  75% Debt
                                                  Increase Good Debt
     0
          Bad Debt    Good Debt Total Debt


  You pay down and immediately reborrow and invest
  another $20,000.
            THE SMITH MANOEUVRE
                     Is your mortgage tax deductible?

200,000                                            Appraised Value


150,000                                             75% Lending Value


100,000
                                                  25% Equity
                                                  Reduce Bad Debt
 50,000
                                                  75% Debt
                                                  Increase Good Debt
     0
          Bad Debt    Good Debt Total Debt


  We are winning.
            THE SMITH MANOEUVRE
                     Is your mortgage tax deductible?

200,000                                            Appraised Value


150,000                                             75% Lending Value


100,000
                                                  25% Equity
                                                  Reduce Bad Debt
 50,000
                                                  75% Debt
                                                  Increase Good Debt
     0
          Bad Debt    Good Debt Total Debt
            THE SMITH MANOEUVRE
                     Is your mortgage tax deductible?

200,000                                            Appraised Value


150,000                                             75% Lending Value


100,000
                                                  25% Equity
                                                  Reduce Bad Debt
 50,000
                                                  75% Debt
                                                  Increase Good Debt
     0
          Bad Debt    Good Debt Total Debt
            THE SMITH MANOEUVRE
                     Is your mortgage tax deductible?

200,000                                            Appraised Value


150,000                                             75% Lending Value


100,000
                                                  25% Equity
                                                  Reduce Bad Debt
 50,000
                                                  75% Debt
                                                  Increase Good Debt
     0
          Bad Debt    Good Debt Total Debt


  The end is in sight.
            THE SMITH MANOEUVRE
                     Is your mortgage tax deductible?

200,000                                            Appraised Value


150,000                                             75% Lending Value


100,000
                                                  25% Equity
                                                  Reduce Bad Debt
 50,000
                                                  75% Debt
                                                  Increase Good Debt
     0
          Bad Debt    Good Debt Total Debt


  The conversion is complete. The original bad debt is now all
  good debt. All of the interest is now deductible. Why not
  leave the loan in place for another 50 years and claim a tax
  deduction of $10,500 every year for the rest of our life?
I. Another thousand words…
                                                THE SMITH MANOEUVRE

                     $600



                     $500



                     $400
DOLLARS ($1,000'S)




                     $300



                     $200



                     $100



                       $0
                             0       5                 10                     15      20             25

                     -$100
                                                                  YEARS

                                 Original Mortgage          Portfolio Total        Deductible Loan
                                 SM Mortgage Paydown        Total Debt             Turner's Method
Tidbit – how much do you have to
earn to pay off a $200,000 loan?
Read it and weep…
Summary
  $700,402 - you need to earn this much
     40% - at this tax bracket
  $280,161 - to pay this much income tax
  $420,241 - to have this much left
  $220,241 - to pay this much bank interest
  $200,000 - to pay back the original loan
  $700,402 !!!!!!
Is this legal?
During the past 20 years, The Smith
Manoeuvre has not been challenged by
any tax authority, by any lawyer, by any
accountant, by any financial planner or by
any financial guru as regards the theory,
the strategy, the mechanics, the
arithmetic or the projected outcomes
Quantify the value of The Smith
Manoeuvre for the Blacks
The Blacks

• $200,000 at 7% for 25 years
• Both work, $100,000 per year
• 40% tax bracket
• $50,000 rainy day fund
• Adding $500 per month
• 40 years of age, 2 kids and a dog
Future value for the Black’s current
investment program?
$1,205,152
What if they did The Smith
Manoeuvre?
$1,962,770
Smith Manoeuvre way:   1,962,770

The Black’s way:       1,205,152

The difference:         757,618
For the Black’s, this is a decision
worth three quarters of a million
dollars.
The Smithman Calculator

Go to page 35 of your book
Who is doing the financing?
Who’s paying for this?
Let’s summarize
Your next step
Procrastination is the enemy of
     your financial success.
Thank you for your friendly
welcome, and thank you to Bick
Financial Security for hosting
me tonight.
   BICK FINANCIAL

Toll free   -   1 888 777-2425

   www.bickfinancial.com
    NEW BUSINESS IS THE
LIFEBLOOD OF ANY BUSINESS,
   INCLUDING YOUR OWN
Where do planners go for
  their new business?
Wealthy people
The Wealth Pyramid
Who’s looking after the
 not-wealthy people?
How many not–wealthy families
    are there in Canada?
        Approximately:

32.0 million Canadians
10.5 million families
 3.5 million in rented homes
 3.5 million in mortgaged homes
 3.5 million in free and clear homes
There are 7 million families that
 need your help starting today
How much investment
 needs to be done?
Half a trillion in mortgages

  $500,000,000,000 !!!
    That $500 billion in non-
 deductible interest mortgages
 needs to be converted to $500
  billion in deductible interest
investment loans, starting now.
A mortgage is not a drag
  for the client or the
  planner – it is a big
opportunity for you both.
How do most planners react to
finding a $200,000 mortgage in
   that new client’s net worth
           statement?
           PROSPECTING

1.   Existing clients
2.   Former prospects
3.   Friends and neighbours
4.   Former clients
5.   Mortgage lists
6.   Realtors
7.   Mortgage brokers
8.   Seminars
Which homeowners are prospects?


   1.   Zero equity?
   2.   25% equity?
   3.   50% equity?
   4.   100% equity?
Long or short?

1.   Milevsky
2.   HELOC’s
3.   Readvanceable mortgages
4.   Creditline mortgages
5.   Austrailian mortgages
Proposed legislation
Next step
Thank you for listening, thanks
to the folks at CIFPs, and
thanks to Lloyd Snyder, CFP
for his support.
The Smith Manoeuvre
   www.smithman.net

    (250) 652-0825

								
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