Boost Your Retirement Savings with an RRSP

By iA Private Wealth, October 1, 2024 Building wealth is essential when trying to reach important financial goals, be it funding a child’s education, buying a home or enjoying a comfortable and meaningful retirement. Working with an investment advisor is often a good way to save more money, achieve greater tax efficiency and grow long-term wealth through investing. However, investing for the future can be highly complex and typically requires specialized skills, experience and discipline to succeed. The same applies to retirement and estate planning, which is why many people seek out professional advice. If you’re working with an investment advisor (or considering it), you should understand how advisors are compensated. The topic of fees can be complicated, but we’ll stick to the basics. There are three main forms of advisor compensation: a commission-based model, a fee-based model or by salary. Commission-based. Advisors working in this structure receive compensation when their clients buy or sell an investment (e.g., mutual funds, exchange-traded funds or stocks). The commission they earn may depend on the investment type, the dollar value of a trade or other variables. Advisors may also receive ongoing compensation from fund companies in relation to the funds their clients hold (more on that later). Fee-based. Advisors working in this structure earn a fee that’s based on the value of assets they manage on a client’s behalf. Even if a client makes many trades and frequently uses certain advisory services, the fee charged remains a prearranged percentage (e.g., 1%) of the value of assets being managed. Sometimes the fee percentage declines as a client’s assets increase. Salary. An advisor working for a bank or credit union will often earn an annual salary plus a performance-based bonus. Salaried advisors provide value to clients but may not hold the same industry licencing as commission- or fee-based advisors, which may narrow the range of services they can offer. Management expense ratio (MER) If you invest in mutual funds, segregated funds or exchange-traded funds, you’ve likely heard about MERs. They’re calculated as a percentage (e.g., 2%) of fund assets and are deducted from the value of your investment. MERs are used to compensate fund managers and dealers, and to pay related taxes. Fund manager. This is the firm that operates the fund you invest in. They set the fund’s strategy and objectives, and employ portfolio managers who decide what (and when) to buy and sell, in order to help enhance fund returns and manage risk. They also handle administrative duties like recordkeeping, as well as legal, accounting, audit and custodial services. For these important duties, fund managers earn a portion of the MER. Dealer. This is the firm where your advisor is registered. Dealers maintain account records, produce and deliver account statements, and provide the technology for online account access. Dealers also ensure their investment advisors meet all regulatory requirements. Part of a dealer’s MER allocation (also called a “trailer fee”) typically goes to the advisors responsible for client-oriented tasks like planning, portfolio construction and monitoring, and trade execution. Taxes. A portion of the MER is used to cover federal and provincial taxes charged on fees and services related to the fund manager and dealer. Client Relationship Model 2 (CRM2) In 2009, CRM1 was introduced as a way to standardize written disclosure requirements for dealers industrywide, to help clients understand key relationship issues like the way dealers determine product suitability, how they address compensation matters and potential conflicts of interest, what dispute resolution process they follow, etc. Building upon CRM1 and implemented in 2017, CRM2 obliges dealers to provide clients with a personalized annual report that summarizes charges and compensation related to a client’s account. This report is designed to be transparent and is written in straightforward language. For a better understanding of fees (e.g., what you pay and where the fees go), check your personalized annual report. In the years to come, CRM3 will take effect and provide even fuller investment fund disclosure. For instance, annual total-cost reporting requirements will disclose all embedded costs of owning funds, including MERs and TERs (i.e., trading expense ratios), to offer investors greater clarity regarding the expenses incurred as part of the investing process. Good advisors earn their compensation by providing significant value to clients. To learn more about the costs of investing and the benefits of professional advice, speak with an iA Private Wealth Investment Advisor.

By iA Private Wealth, September 10, 2024 People who are getting married will typically create a wedding checklist to ensure everything’s taken care of. Venue and catering? Check. Invitations sent? Check. Outfits and decor selected? Check. Prenuptial agreement – wait, how did that get on the list? Leading up to the exciting day, it’s easy to overlook the reality that marriages could end in divorce. Without a prenuptial agreement (also called a prenup or marriage agreement) in place, it could lead to disputes over financial and other assets. A prenup is a written, legally binding document that a couple signs before they marry. In the event of divorce, a prenup determines the rights of entitlement (e.g., how assets are divided). Understandably, people often hesitate to sign a prenup. They feel it assumes the relationship is headed for divorce or treats marriage as nothing more than a business arrangement. That’s not necessarily the case. Think of it as a form of insurance. When you buy home insurance, you’re not assuming your house will burn down. When you buy disability insurance, you’re not assuming you’ll suffer a major accident. You just want peace of mind knowing that you’re protected if something bad happens. Benefits of a prenup A prenup encourages open communication before marriage regarding important life issues. You will disclose financial circumstances (good and bad), major goals, approach to childrearing, etc. You’ll also learn what’s important to your partner and what needs and concerns they may have. Here are 10 compelling reasons to sign a prenup: You want to protect your existing assets (e.g., a home, investments, insurance policies, jewelry or other possessions with monetary/sentimental value) and future inheritances. There’s a significant imbalance in the value of assets each person brings to the marriage. Without a prenup, the combined assets could end up being split evenly (more or less), failing to reflect the notable financial imbalance. You own or have an ownership stake in a business (especially a family business) or real estate holdings. You expect to receive a large inheritance or financial gift from a family member, and you want to stipulate how that money will be used. One partner plans to be a stay-at-home parent who deserves financial recognition for their childrearing commitments, even if they might not be earning income during those years. One partner (or both) is carrying a large amount of debt into the relationship. You want to uphold an existing estate plan so your assets are distributed according to your wishes when you die. One partner (or both) is already divorced and/or has children who may be receiving financial support. A prenup can make divorce less contentious, facilitate a smoother settlement (which may mean lower legal fees) and ensure a fair distribution of assets. Divorce is a common cause of financial hardship and bankruptcy, potentially jeopardizing long-term financial health and stability. In Canada, the laws regarding prenuptial agreements vary by region, so be aware of the parameters and limitations that apply to your province or territory of residence. Postnuptial (postnup) and cohabitation agreements Like a prenup, a postnup agreement is legally binding and stipulates how a couple’s assets are distributed in the event of divorce. But as its name suggests, a postnup is signed after getting married. Courts often consider a postnup carefully to ensure validity of the reasons why the couple made this arrangement after they had exchanged vows. Cohabitation agreements differ slightly. Without a prenup, a divorcing couple typically splits their assets equitably. This default action doesn’t apply to common-law couples with no cohabitation agreement. For example, you’re not automatically entitled to 50% of the shared home, even if you’ve been making 50% of the mortgage payments and covering 50% of home maintenance costs. Keep all receipts and other documentation regarding home-related expenses, and ensure your name also appears on the title of the home. Alternatively, a cohabitation agreement may clearly (and legally) articulate how you deal with financial issues when together, and what happens to your assets should the relationship end. If you’re engaged or thinking about living with your partner, or if you’re already married, contact an iA Private Wealth Investment Advisor who can work with your legal counsel to create a prenup or postnup that’s fair and protects your assets.

By iA Private Wealth, June 17, 2024 Be Wary of Free Advice These days, many people are focusing more on their finances, and with good reason. Rising costs, increased job insecurity and the prospect of funding decades of retirement living are just some of the factors that might keep you up at night. How can you make ends meet while also saving for the future? If ever there was a time for financial advice, this is it. However, the challenge is knowing where to turn for such advice. Who’s credible? Who can you trust? Let’s face it, free advice isn’t hard to find. Thanks to the internet, you have immediate access to a world of information on a litany of financial topics. There’s also the media, both traditional and social, inundating you with articles, blog posts and videos. Add to that your friends, family and maybe even your hairdresser, and it’s clear that anybody and everybody can have an opinion on what you should do with your money. Free financial advice is everywhere. But what about its quality? As the saying goes, you get what you pay for. There’s a lot of questionable advice floating through cyberspace. Some of it is well intentioned but misguided or non-specific, while other times scammers are actually trying to lure unsuspecting people and exploit them for financial gain. You might also encounter breezy narratives and vague rules of thumb, like “own gold” or “buy and hold.” On their surface, simple stories offer certainty in an uncertain world. Despite their innate appeal, these simplified perspectives can prove dangerous to your financial health. Follow them blindly at your own risk. Whether inaccurate, oversimplified or too generic to apply to individual circumstances, this type of “advice” positions money management as being easy. Of course, if it were easy to succeed financially, everyone would be wealthy, right? In reality, financial decision-making is complex. What you do (or don’t do) as it relates to your finances can hugely impact your present and future well being. If you have a family or own a business, the complexity increases. Good wealth planning isn’t about churning out sound bites or video clips. It involves looking closely at your whole financial picture and how all the pieces connect, then developing coordinated, personalized strategies that fulfill your unique needs. It’s also about having a trusted coach by your side to help you get through the inevitable bad days when you’re liable to succumb to emotion and make poor decisions about your money. That’s why so many people choose to work with an investment advisor. Advisors have the education, ongoing training and real-world experience to address your current financial goals and prepare you for the unexpected, while also building your wealth for the future. Although their advice isn’t free, you will get your money’s worth. According to a November 2022 report published by the Investment Funds Institute of Canada, advised investors have significantly more assets after 15 years than their non-advised counterparts.1 The report also noted the 2022 Canadian Pollara Investor Survey that found 92% of mutual fund and ETF investors were satisfied with their advisor.2 Contact us to explore the potential benefits of working with a professional advisor. Together, we can create a wealth plan that’s designed to meet your specific circumstances and objectives – now and for years to come.  1 https://www.ific.ca/wp-content/uploads/2022/11/Financial-Advice-in-Canada-Whitepaper-November-2022.pdf?id=27821&lang=en_CA 2 https://www.pollara.com/wp-content/uploads/2022/10/IFIC_2022_MF_ETF_Investor_Study.pdf

By iA Private Wealth, November 23, 2023 As we approach year-end, it’s a great time to assess your expenses with the goal of setting yourself up to be financially stronger. New year, fresh start. When expenses are under control and you’re in a position to build wealth instead of spiralling deeper into debt, it helps you work toward reaching your short-term and longer-term financial goals. So, how can you resolve to manage expenses at year-end? Here are a few tips to get you on your way. Create a wealth plan. If you don’t already have an advisor, here’s the first New Year’s resolution to make. Everybody has specific objectives to achieve, and a comprehensive plan can give you a head start on next year’s finances. A professionally developed wealth plan will account for your unique circumstances, objectives, time horizon and risk tolerance. It helps you save and invest wisely, manage debt obligations and be more tax efficient. Also, it can adapt to changing circumstances so your plan stays relevant at any life stage. Since it requires significant training, skill and experience to create and maintain a personalized wealth plan, it’s best to work with a qualified advisor. Maintain a budget. A key aspect of wealth planning is setting a budget. Basically, a budget tracks your sources of income and expenses over a given time period (e.g., monthly). It provides an ongoing snapshot of how well you’re managing money and where improvements might be possible. With holiday season in full swing, an increase in social outings and gift buying can quickly send your expenses into overdrive. This year-end, be mindful of expenses and mounting debt by setting a reasonable holiday budget and sticking to it. Consolidate debt. The amount you spend over the holidays is largely discretionary, but sometimes carrying debt is unavoidable. Many people have mortgage payments, car loans, home-related expenses, etc. An advisor can review your various debt obligations, working with you and your financial institution(s) to see if it’s advantageous to consolidate debt into one relatively lower-rate loan or line of credit. Consolidating debt is often a practical way to lower your overall expenses. Commit to saving. While reducing debt is important, the flipside is to increase your savings. A proven strategy is to “pay yourself first” by putting a set amount (e.g., 10%) of each paycheque into a savings and/or investment account. It’ll build long-term wealth while helping you avoid the temptation to overspend. Also, year-end is a great time to devote money to registered plans for the following calendar year. For instance, on January 1 you can begin making that year’s contributions to your RRSP and TFSA. Not only will it help curb expenses by “forcing” you to save, but you’ll also begin enjoying tax benefits sooner in the year. Another aspect of saving is putting away money for emergencies like job loss, major home/vehicle repairs, serious illness, etc. You never know when you’ll need immediate access to cash, so an emergency fund – many experts recommend a minimum three months of household expenses – is essential for financial preparedness and peace of mind. Although any time is a good time to get a handle on your expenses, the year-end period often sparks motivation for people to focus on their finances and make improvements for the year to come.

By iA Private Wealth, October 11, 2023 When thinking about family gatherings, you might focus on special occasions like holiday meals, birthday parties and anniversary celebrations. These are all good reasons to bring generations together, but there’s another gathering that’s equally important: the family financial meeting. Granted, discussing your health care needs and estate plans can be difficult and uncomfortable, but it benefits the entire family when everyone’s on the same page regarding your intentions. Financial matters can be emotional and contentious, so a transparent discussion may reduce misunderstandings, disagreements and conflict. In turn, you’ll gain peace of mind knowing your legacy wishes have been fully and effectively shared. Topics to discuss You know best how your family dynamics tend to play out, so take them into consideration when deciding who should attend the meeting. It makes sense to include all the children, but whether their spouses/partners and children are invited is your decision based on best judgement. The frequency of financial meetings depends on the circumstances, but it’s often valuable to hold one whenever there’s a significant change, such as retirement, death in the family or a notable monetary event like a business sale or recent inheritance. Below are seven topics commonly broached at family financial meetings – they might not all apply to your situation, and you may have others not listed here: Living arrangements (e.g., aging in place; downsizing; staying with family; moving to another city, province or country; residing in a seniors community/nursing home) What to do with the family cottage or other properties Your choices for executor and power of attorney, along with the reasons why Intention and directions for potential incapacitation, end-of-life care and funeral proceedings Wealth distribution as part of your estate plan (e.g., how you want to divide your assets and special possessions, whether grandchildren are included, your philanthropic goals); provide a rationale for these decisions so your loved ones understand the “why” If you own a business, what’s your succession plan? Will family members be involved? Will you sell? If you have insurance coverage, inform your loved ones about policy details The family meeting is also an opportunity to discuss the “softer side” of finances, such as your views on money, the struggles you may have faced when building wealth, and how you envision loved ones managing their own finances. Imparting wisdom you’ve gained over the years is a great way for family to learn from you and engage in meaningful dialogue about money and financial responsibility. What makes a successful family meeting? Emphasize that this isn’t a typical gathering, although a social component could be added once the formalities conclude. Try to strike a balanced tone: it’s a serious financial meeting with weighty or emotional topics, but it doesn’t need to be sombre. Investment Advisors, lawyers and accountants usually don’t attend, but they can be involved in meeting preparation, especially helping to explain technical terms or complex concepts you may need to address. Give people enough time to digest all the information. Since you might not resolve everything in one go, book a follow-up meeting if needed. In-person conversations are ideal because it’s easier to “read the room” and communicate effectively, but if some people can’t attend, a virtual or hybrid meeting may work. You could hold the meeting at your home for familiarity’s sake, but anywhere that’s comfortable, reasonably free of distractions and conducive to open discussion will suffice. Create and distribute an agenda in advance so participants are aware of the subject matter and can prepare questions or comments. Also adhere to basic “rules of engagement,” such as not interrupting speakers and not making personal attacks, so the meeting proceeds smoothly and the conversation stays respectful – even when objections are being voiced. When your meeting ends, summarize the discussion, share next steps and assign required roles and responsibilities. Be sure to keep your advisor and related professionals abreast of decisions emanating from your family meeting, so they may continue advising you in the best way possible. <!-- We can help you with a wealth plan that addresses tax efficiency, so contact us today. -->