Understanding Tax Credits and Tax Deductions

Posted on May 1, 2013 by Rick Sutherland

Most of us have now completed our 2012 tax returns. Have you ever wondered why certain line items on your tax return are tax credits and others are tax deductions? There is a big difference between credits and deductions and how these tax reducers really work.

Since 1986 the tax credit system replaced many line items on your tax return that were formerly tax deductions. This was an attempt by the government to make the tax system fair for all taxpayers. Tax credits reduce tax payable, whereas tax deductions reduce taxable income.

You may be asking, “What’s the difference?” Most tax credits are calculated at the lowest marginal tax bracket. Therefore, as long as your taxable income places you in the lowest marginal tax bracket, there is no difference between tax credits and tax deductions. Tax credits provide the same tax relief for all taxpayers regardless of their taxable income.

Deductions, however, do provide a greater tax benefit to those whose income tax bracket is above the minimum. The more tax deductions you have, the lower your taxable income. One of the more popular tax reduction strategies has been the Registered Retirement Savings Plan, or RRSP. Contributions to your RRSP are considered tax deductible. Every $1,000 you contribute to your RRSP will reduce your taxable income by $1,000.

For the year 2013, taxable income at or below $43,561 will be taxable at the lowest marginal tax bracket in Ontario. That is the point where tax deductions become more advantageous than tax credits. If your taxable income is slightly above this threshold then it may be worthwhile to consider RRSP contributions and reduce your taxable income below $43,561. The same logic applies if your taxable income is above the next level of $87,123. It may be to your advantage to contribute to your RRSP and reduce your taxable income below $87,123.

Most tax credits are non-refundable. This means that once you have reduced your tax payable to zero, you cannot receive any further benefits from your remaining tax credits. There are certain tax credits that are transferrable to your spouse, parent and/or grandparent, depending on the credit and circumstances. Examples would be medical expenses, transit passes, and education credits.

Other tax credits are refundable and generate a refund even when the taxpayer does not owe any tax for the year. This is why it is important to file a tax return even if you don’t owe anything. Refundable tax credits are usually paid throughout the year to assist Canadians with ongoing living expenses. Examples include the HST/GST tax credit.

As we mentioned earlier, most tax credits are calculated at the lowest marginal tax bracket. One exception is charitable donations. Only the first $200 of donations is calculated at the lowest bracket. Donations above $200 receive a benefit at the highest tax bracket. This is designed as an incentive for Canadians to give more to charities.

Tax planning should be done year round, not at the last minute, and certainly not as you prepare your tax return. As you begin your year-long journey toward preparing your 2013 tax return you can consider these ideas to help you make better decisions about tax credits and tax deductions.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

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Do Bonds Still have a Place in Your Investment Portfolio?

Posted on March 28, 2013 by Rick Sutherland

Over the past few years, billions of investment dollars have poured into government and corporate bonds and bond-based mutual funds. The mutual fund industry has recorded that the bond market has absorbed more money than equities did at the height of the dot-com bubble in the year 2000. The bond market could be the next bubble.

Why did this happen? Bonds were perceived as a perfect safe haven against dreaded and volatile equities. In addition to the interest rate paid on bonds, you also received a significant capital gain as interest rates declined. Bonds were safe, secure, and they made money. What more could one ask for?

With interest rates stalled at historic lows, the risk of holding bonds has increased considerably. Bonds are currently paying interest rates that have not been seen since the 1940s. And bonds will not appreciate in value the same way they did during the declining interest rate environment that we saw over the past thirty years. In fact, the reverse is true. Bonds will decline in value when interest rates begin to rise.

There are two guarantees that can be made with absolute certainty for those of you who have participated in this bond-buying mania. The first is that you are guaranteed to lock in historic low rates of return on your bond investment. At the time of writing, the 10-year government of Canada bond was paying 1.82%. For the next ten years, this will be the return paid on this investment. Will this return be adequate to fund your retirement?

The second guarantee is that your bond values will decline when interest rates begin to rise. This is just the opposite of what occurred when rates were declining and you watched your bond values increase. This happens because bonds generate a fixed-income payment. So when market interest rates change, the market value of your bond with a fixed payment will change as well.

Here’s how it works from a simplistic point of view. As interest rates fall bond values rise. And conversely, as interest rates begin to rise bond values will fall. This is the risk and current danger of being over exposed to fixed income securities.

It doesn’t matter whether you are talking about individual bonds or bond-based mutual funds; the result is the same. You can no longer think of bonds as being your safety net. Rising interest rates will decrease the value of bonds. There is now great risk investing in bonds. The wise investor will be aware of these risks and adjust their investment plan accordingly.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

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Changing Needs During Retirement

Posted on March 14, 2013 by Rick Sutherland

For those of you who are older than age 50, we ask that you think about how your life and lifestyle changed in the thirty years between your 20s and 50s. If you’re in your 20s, you will have to take our word for it. But if you are in your 30s or 40s, then you can probably imagine what we are talking about. Your life and lifestyle has or will change quite dramatically between your 20s and your 50s.

Doesn’t it make sense then, that your lifestyle and needs will also change quite considerably between your 60s and your 90s? It is quite conceivable that a 55 year old couple, planning for their retirement, should have a thirty to thirty-five year time horizon. Statistics predict that at least one of them will live to be age 90.

Your retirement plan must be flexible enough to cover your evolving needs over this time. For most people there are four needs during retirement: basic living needs, lifestyle needs, health care needs, and finally your legacy. Properly funding these expenses is the answer to a successful retirement plan.

Your basic living needs include items such as food, utilities, shelter and personal care. Funding these basic living needs well will create a solid foundation for your retirement plan. These costs may be relatively stable and predictable, although they will be subject to moderate increases due to inflation. Remember that a $100 basket of groceries today will cost $324 in 30 years using a 4% inflation rate.

Most new retirees have big plans for their new life of leisure. Life can be exciting as you discover new experiences, take on new hobbies, make new friends, spend more time travelling, or just live your own personal retirement dream. Proper funding for your lifestyle desires is vital for a happy retirement.

Later in your retirement years, your health may begin to affect your lifestyle. You may not be able to travel as much or do the things that you could when you first retired. However, the need for income does not always change. You may need to divert money that you were spending on lifestyle needs to cover the extra costs health care that are not covered by government plans.

Regardless of the actual size of your estate, most retirees have a desire to leave a financial legacy, either to family members or charitable organizations. The success of your retirement plan to fund the cost of your basic needs, lifestyle needs and health care needs will determine your ultimate legacy.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

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Is Debt Settlement Right For Me?

Posted on February 19, 2013 by Guest

Debt settlement is a practice through which a person owing creditors a good deal of money enlists the services of a debt relief company to negotiate with these creditors. The purpose of debt settlement is to have a portion of the debt forgiven entirely while the remainder is paid back in installments. The debt relief company works with an individual to establish an agreed upon settlement amount, which is paid into an account rather than through monthly bills. When you undergo debt settlement, your credit score is negatively impacted, but you have the opportunity to start over financially without the worry of owing creditors payments with interest.

Good Candidates for Debt Settlement

Some people are better candidates for debt settlement than processes such as self-payment initiatives, debt consolidation or bankruptcy. If you meet the criteria for at least several of the following factors, debt settlement is likely a viable option for you:

  • Your income is too high for you to qualify for chapter 7 bankruptcy. People who earn enough money that they are unable to file bankruptcy but are still significantly behind in payments can be helped through debt settlement.
  • You are struggling or unable to make payments on unsecured debt. If you owe back payments on unsecured debts such as medical bills, credit cards or personal loans, debt settlement is an easy way to relieve these financial burdens before you fall even further behind.
  • You are presently dealing with a severe financial hardship. If your finances have suddenly taken a major turn for the worse due to medical circumstances, loss of employment, divorce or bereavement, debt relief companies are in a good position to negotiate with creditors on your behalf.
  • You have a steady income. Because you still need to pay back a portion of your debts on a regular basis, a steady income is important to have if you are considering debt settlement. Budget a certain amount of this income so that you can be debt free within a few years.
  • You have a non-suspicious credit history in regard to purchases. Both debt relief companies and creditors may not be willing to work with you in regard to debt settlement if they see that you have recently spent large amounts of money on frivolous items.
  • You owe more than a certain amount in unsecured debt. This amount can vary according to the policies of various debt relief companies. Some consider you a good candidate for debt settlement if you owe at least $5,000, while others prefer that you owe at least $7,500 or $10,000.
  • You have a lump sum of money that can be applied toward debts. As is the case with your income, a lump sum in savings can go a long way when used for debt settlement purposes.
  • You are firmly committed to getting out of debt. The debt settlement process can benefit you greatly if you are committed to staying in a program for the agreed upon length of time and learning new strategies for managing money in the future.

Is debt settlement right for me? You can answer that question for yourself by taking a close look at your financial situation and contacting debt settlement companies for advice and guidance. For additional information on the debt settlement process, visit websites such as NationalDebtRelief.com, which offers numerous tips and articles on seeking professional assistance and negotiating with creditors.

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What happens after bankruptcy?

Posted on February 18, 2013 by Lisa

Though several options exist for people who undergo the process of clearing their personal debts, sometimes bankruptcy is the best course of action in regard to repairing poor financial circumstances. When you file for personal bankruptcy, you legally declare that you are unable to repay your creditors and need to be released from all of your debts. The bankruptcy process involves both short-term and long-term financial implications, which may vary according to the type of bankruptcy that you petition for.

Types of Personal Bankruptcy

The two types of bankruptcy under which individuals can file are known as Chapter 7 and Chapter 13. The differences between these personal bankruptcy chapters are defined as follows:

Chapter 7 bankruptcy is a process that results in creditors no longer having the right to collect on your debt. When you file Chapter 7, you are asking that all of your debts be discharged as you do not have the means to repay them. If you have any liquid assets, such as savings accounts, these may be awarded to your creditors as a partial debt repayment.

Chapter 13 bankruptcy allows you to establish a long-term repayment plan. If you file Chapter 13, you are responsible for making payments to the court over a three-year to five-year period. In turn, the court repays your creditors and you are released from any outstanding debts when the payment plan ends.

Short-Term Implications of Filing for Bankruptcy

These are some immediate effects of filing for Chapter 7 or Chapter 13 bankruptcy:

  • Calls from creditors will cease. One bright spot in having to file for bankruptcy is that you will no longer have to communicate with creditors. Under the law, they are no longer allowed to attempt contact through the telephone or other means.
  • Qualifying for loans may be difficult. A recent bankruptcy filing can significantly impact your likelihood of securing a home or car loan with an affordable interest rate.
  • Re-establishing credit will be a complicated process. Though you may see improvements in your credit score within several years of filing for bankruptcy, you are likely to struggle with obtaining credit and paying high interest rates in the meantime.
  • You may have some expenses to settle. While you are no longer responsible for your previous debts, you may have to pay trustee and attorney fees as a result of declaring bankruptcy.

Long-Term Implications of Filing for Bankruptcy

These are some potential long-range consequences of a Chapter 7 or Chapter 13 bankruptcy:

  • Your bankruptcy filing will be listed on your credit report. If you file for a Chapter 7 bankruptcy, this information can be accessed on your credit report for ten years afterward. In the case of a Chapter 13 bankruptcy, this information is only available for a period of seven years after the filing.
  • Your bankruptcy status may come to light as you seek employment. Keep in mind that potential employers may ask if you have ever filed for bankruptcy even if your credit has recovered over the years.
  • Life insurance policy applications may be affected by your bankruptcy history. Some life insurance companies ask that you divulge any history of bankruptcy throughout your lifetime and determine your policy eligibility accordingly.

Though the process and aftermath of filing for bankruptcy are often stressful in an emotional sense as well as a financial sense, many helpful online resources are available to guide you in the proper direction. For instance, bankruptcyadvice.co.uk is a comprehensive website that can answer any questions that you may have about bankruptcy and its ramifications.

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Are You Ready for Retirement?

Posted on February 12, 2013 by Rick Sutherland

So you’re thinking about retirement. It may sound good; however, it can also be an emotional and stressful time of life. You begin to dream of playing golf every day, travelling the world, or just sitting back and relaxing. But there are other forces that will come into play.

You must be prepared for retirement both financially as well as emotionally. This is a process that takes time and planning. You don’t want to be making important financial decisions when you are stressed out or emotional. That is why planning and preparation are vitally important when getting ready for this new stage of life.

Close your eyes for a moment and try to imagine what your retirement will look like. Visualize a typical day in retirement. What will you do, where will you be doing it, and who will you be doing it with? The answers to these questions will begin to put a framework around your desired retirement income needs.

Retirement today is quite different from years gone by. Before, when one retired at age 65, the planning horizon was for 5 or so years. Today, with modern medicine, healthy lifestyles, and early retirement options, we may be preparing for up to 30 years in retirement. This is an enormous financial planning task.

Consider the sources of income that you will have to meet your retirement income needs. The main sources of income at retirement include government and private pensions and savings. If you come up short, you can always return to work. Many retirees are forced to work to make ends meet. Others choose to work to keep busy, and the extra money is a bonus. The idea is that if you plan your affairs accordingly you will have the option to work, which is always a much better situation, than being forced to work to keep food on the table.

Anxiety tends to build as one approaches retirement. Questions such as, “How should I invest my money?”, or “Do I really have enough money to retire?”, may come up. These doubts have the propensity to build stress. Other stressors may include the loss of identity. Many of us are defined by the work we do. Losing that identity can be an emotional, as well as stressful experience.

In the old days, the way to deal with the stress of making investment decisions was to convert all assets into guaranteed investments. Today, with retirement stretching over a potentially much longer period of time, this approach is no longer appropriate. If you need 4 to 5% of your capital to live and the guaranteed investment only pays 2%, you are guaranteed to deplete your capital each and every year. And we haven’t factored in inflation or other unexpected expenses that can further drain your capital.

With proper planning and sound decision making, you will cruise with confidence into your retirement lifestyle. Much of the stress will be removed because you have planned your savings to meet your income needs. The key is to establish your plan, commit to it, and monitor your progress.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

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Tax Planning – A Year Round Event

Posted on February 11, 2013 by Rick Sutherland

You are no doubt being inundated with all the virtues of the Registered Retirement Savings Plan (RRSP) and the tax saving benefits that come along with this program. The problem is that many Canadians only do their tax planning at this time of the year, when there is a contribution deadline and there are tax benefits to be realized in a few short weeks.

How often have you said to yourself, “I must buy my RRSP before the deadline to get the tax break”, or something similar? Is this really a good financial and tax planning strategy?

After all, unless you have an employer-sponsored pension plan, your RRSP may be your main source of income at retirement. It’s your personal pension plan. And if you do have an employer plan, your RRSP will be an excellent retirement income supplement.

Tax and retirement planning is not something to be rushed into at the end of every February. It takes time to review your situation, determine your goals, analyse your options and make proper decisions that are suitable to meet your long-term objectives.

So what are the appropriate steps you should be taking to prepare a well-drafted retirement and tax planning strategy? The first things you need to establish are your retirement date or age you would like to retire, how much income you would like to receive and for how long you will receive this retirement income. Given today’s healthy lifestyle and modern medicine, you may be planning for thirty to thirty-five years depending on your retirement age. And finally, you may wish to consider leaving an inheritance to your loved ones. Oh yes, and don’t forget to factor in inflation. To buy the same $100 of groceries today in twenty-five years it will cost you $164 with inflation at 2%, $266 with inflation at 4% and $429 with inflation at 6%.

Now that you know your lump sum retirement objective, you can work backwards to estimate how much you will need to save on a regular basis to achieve your goal. You can set up your savings program on an annual, monthly or weekly basis. The factors that will determine your regular savings objective will include your disposable income, your time horizon and rate of return. Given today’s low interest rates associated with guaranteed investments you may have to look at an equity-based investment plan to achieve a higher rate of return. This then involves an element of risk. You will want to ensure that you have the fortitude to be able to withstand market volatility and not panic at inappropriate times.

Once you have gone through all these steps and implemented your plan, it doesn’t end there. You will want to monitor your progress on a regular basis, at least annually. You want to ensure that you are on track to achieving your goals. If you fall behind, you will want to consider how to adjust. Will you extend your retirement date, save more, or seek higher returns?

As you can see there is a lot more to tax and retirement planning than just plunking down a few bucks at the end of February. You won’t hear much in the media about this subject other than at this time of the year. It’s up to you to ensure that you plan accordingly to meet your retirement goals and use the government programs to save tax at the same time.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

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The Speed Limit of Equity Investing

Posted on February 11, 2013 by Rick Sutherland

Many families rely heavily on a car in their daily lives. Visiting family, getting to and from school or work, and then on to sports events or lessons – the car and the roads we take it on are a major part of our lives. In our short essay today, we want to let car travel and traffic conditions be a metaphor to illustrate the long-term trend line of equities.

First, let’s look at history. The long-term trend line of equity investing rises up from the lower left to the upper right. The average return for equities after inflation is about 6.5 to 7% depending on which market you look at. Let’s call this trend line, or percentage return, the speed limit of equities. It’s the normal average return one has achieved by investing in equities over the long term.

Now I’d like you to think of the cars on a highway as individual stocks. We know that when we drive down the highway, where the speed limit is 100 KPH; there will be some cars that exceed the speed limit by a significant margin. Others stick close to the speed limit. The speeders are aggressive, take chances and tend to be more risky. The others take fewer chances, are less aggressive and tend to be less risky.

Speeders will get to their destination in less time. The others will take a little longer to get there. The speeder however also faces additional hazards. There is a risk of being stopped by the police. Then all the cars pass the speeder while he waits for a speeding ticket. This could likened to a corporate set back. It will take the company and the speeder some time to recover. However, this setback only affects the speeder. All other cars continue on their way following the trend line, or speed limit.

There may be other more serious hazards like construction, a snow storm, or a traffic accident that will slow down all cars on the highway. These obstacles can occur at any time. They are unavoidable and you must be mentally prepared in case they occur. A recession, terrorist attack or financial crisis could be considered examples of more serious hazards that affect all equities. Drivers as well as investors must be prepared at all times as these obstacles are unpredictable.

The equity market has seen a few serious hazards over the past decade and a half. Back in the late nineties we had a tremendous run up in equities. Most stocks were exceeding the trend line, or speed limit, to continue with our example. Then the Tech bubble burst in 2000 and all cars had to slow down. That hazard lasted about two years until the highway was safe for equities to again resume their long-term trend line. Then in 2007 the U.S. financial crisis hit. Once again the equity market was slowed down. Another two-year clean up was required.

All hazards eventually come to an end and traffic resumes its normal speed limit or trend line. Today many equities are travelling significantly below the long-term trend line, yet their products are in demand, they are well managed companies, and they are very profitable.

The goal of all drivers is to get to their destination safely and on time. Typically you don’t turn around and go back home when you encounter a hazard. You stick with your travel plans and continue. This is similar to a retirement goal. Stick to your plan, stay on the highway, and hazards will eventually be cleared for a smooth ride toward achieving your goal.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

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No Medical Life Insurance

Posted on February 11, 2013 by Rick Sutherland

Life insurance is an ideal solution to provide a tax-free benefit to your loved ones upon your death. The money can be used to pay debts, funeral expenses, and estate costs or provide a lump sum of cash to your survivors.

But if you’ve applied for insurance lately you know it may not be easy to be approved. You may have to go through medicals, get stuck with needles to provide a blood sample and have your doctor fill out medical reports. Even after going through all this you may still have a hard time obtaining coverage. Your health or lifestyle may require you to pay an extra premium or in the worst case you may be declined coverage. Or maybe you feel you are just “too old” or the premiums too expensive to be considering life insurance.

There is a solution. It’s called non-medical life insurance. You may have seen the ads on television. It’s true; you can apply for life insurance without going through the hassle of divulging your complete medical history. Just answer a few simple qualifying “yes” or “no” questions and that’s it. But you should be aware, there are a few catches.

First of all the cost is higher than traditional life insurance that requires you to go through the medicals. To some, that extra cost may be worth the convenience. But remember, the higher cost does not go away. You will pay a higher premium forever while your policy is in force.

There is an upper limit to the amount of coverage that is offered by no-medical insurance. Typically the coverage limit can be between $75,000 and $225,000 depending on the type of coverage and the company selected. That limit may not be enough coverage to fully protect your family. If not, then you are back to medicals and a traditional life insurance application. However you can select coverage amounts as low as $25,000 to cover very specific needs, such as funeral expenses.

Full coverage can take two to three years to take effect. Some plans will only refund the premiums with interest if death occurs by other than accidental means within the first two years. If death occurs by accidental means within the first two years the face amount is paid instead of a refund of premiums. Some plans will only pay 50% of the face amount if death occurs in the third year.

Depending on your answers to the qualifying questions you may be eligible for permanent coverage with a savings component that can be used by you later in life or used to pay premiums if needed. Term coverage with no cash savings component is the second option.

Non-medical life insurance may be an option for you if you have applied for life insurance and been declined, or your premium was rated or modified, or if you just don’t want to go through the medicals. As with all consumer choices, make sure you know what you are buying and understand the terms and conditions of your selected policy.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

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Help Your Financial Planner Help You

Posted on October 6, 2012 by Rick Sutherland

How strong is your relationship with your financial planner? There is no doubt that the past few years have been difficult for both clients and planners alike. It’s been a tough environment to make money. It’s situations like this that can put a strain on a client-planner relationship.

What is the solution? After all, a good financial planner is hard to find and the good ones have a limited capacity to take on new clients. When you are fortunate to find a planner with whom you “click” – someone you can understand and trust – you really want to solidify this relationship for years to come. You want to be the kind of client that any planner would love to work with over the long-term.

Be as open and candid as possible. You want a planner who really understands your situation and circumstances. Express your concerns and expectations about performance; however, understand that markets go through cycles. Recent events could not have been predicted and it’s not your planner’s fault.

Most planners specialize in working with a certain type of client: wealth builders; small-business owners; retirees. Find a planner who specializes in helping clients with your kind of needs. Make sure you are playing in the right league. The advice you get will likely be more thoughtful and appropriate.

Some people spread their investments across several financial institutions. However, giving an advisor a portion of your portfolio without telling what else you have invested is a bit like asking a doctor to treat you for a pain and not telling where it hurts. Consolidating your investments may have other advantages. Some companies offer clients with larger portfolios a break on fees.

The most important aspect of this relationship is trust. Your planner will take the time to explain the rationale behind his or her strategies, ensure that the recommendations are appropriate and that you are comfortable with your decisions. However, if you consistently resist taking advice, insist on actions that are opposite from the recommended strategy, or ask them to explain the same strategy over and over without ever making up your mind, pretty soon either you or your planner (or both) will wonder why you are paying them in the first place.

A planner-client relationship can be very rewarding experience over time. Like all quality relationships it requires patience and work. A great relationship can make the difference between a portfolio of generic investments that you don’t know much about and a portfolio that you are confident is meeting your goals and will help you finance your dreams. In the end, it’s your risk and your reward, so do what you can to help your advisor…help you.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.

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