Monthly Archives: April 2016

How to decide which Canadian bank is best to invest in

Patrick McKeough,

By Patrick McKeough,

Special to the Financial Independence Hub

When you want to decide which Canadian bank is best to invest in, there are a few things to consider.

We’ve long recommended that all Canadian investors own two or more of the big five Canadian bank stocks. That’s mainly because of their importance to Canada’s economy. These are key safe investments for a portfolio. The big five Canadian bank stocks also have long histories of annual dividend increases.

If you’ve decided to start by investing in just one Canadian bank, the question remains: which Canadian bank is best to invest in today? How can you tell which bank will give you the best long-term performance? There are a few performance clues you can look out for.

When deciding which Canadian bank is best to invest in, you want to start with the same criteria you would use in any investment:

We believe Canada’s big banks are still well positioned to weather any downturn in the Canadian economy, contrary to pessimistic forecasts on the banks’ prospects from some in the business media. They trade at attractive multiples to earnings and continue to raise their dividends.

Bank of Nova Scotia remains one of our top picks among Canada’s big five banks due to its wide international exposure. Here’s why:

Bank of Nova Scotia remains our top choice Canadian bank

BANK OF NOVA SCOTIA (Toronto symbol BNS; Finance sector; TSINetwork Rating: Above Average; is Canada’s third-largest bank. It remains our top pick for anyone who asks which Canadian bank is best to invest in. That’s mainly because it continues to expand in regions like Latin America, South America and Asia.

Acquisitions have played a large role in Bank of Nova Scotia’s recent growth. One of its most prominent acquisitions has been ING Direct, the specialist in no-fee banking services. Early in 2014, Bank of Nova Scotia changed ING’s name to Tangerine, which let this business keep using the orange colour associated with ING Direct—and continues to give the bank’s customers access to a no-fee banking service.

There’s still room for the bank to expand throughout Latin America and Asia, especially as their growing middle classes look for stable deposit and consumer-lending services.

Bank of Nova Scotia is a buy in TSI and CWA.

Don’t limit your investing to bank stocks

Simply put, a well-constructed stock portfolio will make your life easier and maximize your gains.

Early in their investing careers, many investors have only a vague idea of the value of a planned portfolio when investing in the stock market.

When you try to pick a handful of stocks that will all beat the market, you are asking a lot of yourself. No one, not even people that devote their entire lives to it, has ever been able to consistently pick stock-market winners over long periods.

On the other hand, it’s relatively easy to acquire a balanced, diversified portfolio of mainly high-quality dividend paying stocks, spread out across the five main economic sectors: Resources & Commodities, Finance, Manufacturing & Industry, Utilities and Consumer.

If you diversify, you improve your chances of making money over long periods, no matter what happens in the market.

For example, Manufacturing stocks may suffer if raw-material prices rise, but in that case your Resources stocks will gain. Rising wages can put pressure on manufacturers, but your Consumer stocks should do better as workers spend more.

If borrowers can’t pay back their loans, your Finance stocks will suffer. But high default rates usually lead to lower interest rates, which push up the value of your Utilities stocks.

Spreading your holdings out across the five sectors helps you avoid overloading yourself with stocks that are about to slump because of industry conditions or a change in investor fashion. By diversifying across the sectors, you increase your chances of stumbling upon a market superstar – a stock that does two to three or more times better than the market average.

These stocks come along every year. By nature, their appearance is unpredictable: if you could routinely spot them ahead of time, you’d quickly acquire a large proportion of all the money in the world, and nobody ever does that.

Pat McKeough has been one of Canada’s most respected investment advisors for over three decades. He is the founder and senior editor of TSI Network and the founder of Successful Investor Wealth Management. He is also the author of several acclaimed investment books.



Get ready for POS3 and CRM2 deadlines

Photo.Anthony Boright
Anthony Boright

By Anthony A. Boright

Special to the Financial Independence Hub

In my last guest posting for the Financial Independence Hub I talked about the financial services industry going digital even though there are some growing pains.

I also mentioned the coming May 30 Point of Sale Stage 3 (POS3) regulatory deadline for pre-sale delivery of disclosure documents to mutual fund investors. On that day, dealers and advisors will have to send investors Fund Facts disclosure documents before the investor decides to buy a fund. Until May 30, dealers and advisors still will be able to abide by the previous industry regulation (i.e. POS Stage 2), which gave them two days to provide the Fund Facts document to their clients after the mutual fund purchase. Not so beginning May 30.

Stage 1 was four-pager in 2011

This is part of the industry satisfying the call by regulators to move ahead with POS (Point of Sale) delivery requirements for Fund Facts. Stage 1 of the POS regulation was introduced in 2011 with the creation of the short, four-page Fund Facts document that was in plain English and easily understood. It has since replaced the lengthy, jargon-filled legal prospectus document.

The introduction of Fund Facts at or prior to the Point of Sale means an electronic transaction will take place in most disclosure cases. After all, electronic is instantaneous. We first launched our Fund Facts delivery solution,, in 2011. Since then approximately 96% of these transactions have been electronic while only 4% have been going through our printed mail stream.

The document repository contains the universe of most recently filed Fund Facts documents from every mutual fund and ETF manager in Canada, so dealers and their advisors can access these disclosure documents from a single source. These new regulations will result in cost savings for the industry that can be passed on to investors. One of our bank clients requested and received a regulatory exception, and implemented our POS solution well in advance of the regulation date because they could see the cost advantage – both for them and their clients.

CRM2 deadline is July 15

Another date to watch is the CRM (Client Relationship Model) 2 deadline of July 15. The idea behind CRM2 is to provide investors with clear information about the securities fees and commissions they are paying. The idea behind this is to make investment dealers, brokers and portfolio managers more accountable.

In a nutshell, CRM2 means all dealers must provide statements with detailed information about what fees are being charged to the client in actual dollar amounts. This will also include sales incentives and embedded fees. No longer will statements present fees as a simple percentage. Now customers will know exactly how much they are paying for the service, and also how those investments are performing.

There is definitely growing support around the world to eliminate embedded commissions from mutual funds; this has already happened in the United Kingdom and elsewhere. Likewise, there is no doubt that the move to greater disclosure, transparency and focus on the overall cost of investments will only increase in future. The financial crisis of 2008 was the catalyst behind this, and recent market softness has renewed the commitment of those who are intent on educating investors about their portfolios.

Some people may be in for a surprise when they learn they haven’t been paying 1% or 2% as they had thought, and may turn to low-cost discount brokers or ETFs. On the other hand, they may see the value, and feel more comfortable knowing exactly how and what their advisor makes, and in that sense this could improve the advisor-client relationship.

Industry will be more accountable to its customers

Either way, the purpose behind CRM2 and POS3 is to make the industry more accountable to its clientele, and to make that clientele more knowledgeable about their own investments. However, while CRM2 hangs on the July 15 deadline, investors’ statements may continue to appear just as they have for some time yet. Dealers will have up to one year from that date before they have to send investment performance and compensation reports. Thus, most people will likely not receive this data until the first quarter of next year.

The Canadian Securities Administrators (CSA) says these changes bring Canada in line with regulatory standards around the world. And having an easy-to-understand breakdown of fees with CRM2 only leads to a better informed and better educated investor.

Anthony Boright is President and co-founder of InvestorCOM (, which leverages technology to address the evolving regulatory disclosure and communications needs of the financial services industry. InvestorCOM helps its clients create and distribute their communications online, as well as through traditional print/mail channels. Clients include banks, asset managers, life insurance companies, large and small IIROC (Investment Industry Regulatory Organization of Canada), and MFDA (Mutual Fund Dealers Association of Canada) dealers and advisors serving investors.

What every woman needs to know about Retirement

Akaisha Kaderli

By Akaisha Kaderli

Special to the Financial Independence Hub

The other day I read an article about women and retirement. In this piece, the number one premise for motivation was that we should be afraid. Very afraid. It said that for the most part, men did the planning for retirement and that we as women rely on them blindly.

I dislike reading articles such as this, first, because it is fear-based but second, it doesn’t take into consideration the talents women contribute to the mix of partnership and planning. While it might be true that men are “wired to provide for the household,” women have moved into professions which pay grandly. Many marriages today are a different blend of partnership than what our own parents or grandparents enjoyed. Along with their jobs, many women still run the household, so why not get involved in retirement planning in a proactive manner?

Retirement is a boring word

The word “retirement” conjures up images of old people on pensions or perhaps pictures of those who no longer contribute powerfully to society with their expertise and knowledge. I prefer the description “financially independent” for the freedom, influence and self-reliance it implies.

One can choose financial independence at any stage of life and it’s an exciting and worthy goal. The younger a person begins on this path, the more you have in your favor.

Women, listen up

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SPIVA Scorecard: Canada comeback?

Graham Bodel

By Graham Bodel, Chalten Advisors

Special to the Financial Independence Hub

“Not to fear, we have found a manager based in our very own Canada that is able to consistently beat the pack.”

Standard & Poor’s has done a brilliant job over the last few years of shining the light on the fund management industry by publishing its SPIVA (S&P Indices Versus Active Funds) Scorecards,  which report on the performance of actively managed mutual funds relative to their benchmark indices.

We’re not spoiling anything by telling you the results don’t usually come out favourably for active managers:  the performance data has been fairly consistent and compelling for years.

The latest SPIVA Canada Scorecard for the year ended December 31, 2015 came out on Monday and at first glance there may be reason to cheer, especially for those fund managers focused on domestic stocks.

SPIVA Canada Scorecard 2

While 57% might not seem very convincing, it’s certainly a better result than US domestic equity managers, only 25% of whom managed to beat the benchmark last year (Source: SPIVA US Scorecard).

Of course, 2015 was a year where the Canadian stock market performed worse than any other developed market globally in USD terms and was only able to squeak past Russia and Brazil.   If you’d been one of the few lucky Canadians to properly diversify outside of Canada last year, you would have been disappointed with active fund management as only 21% of Canadian funds managing International Equities (outside North America) were able to outperform their benchmark.

The longer the time period, the worse the results

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Advisors now more likely to recommend ETFs for clients than mutual funds

Dave Nadig

Here’s my latest MoneySense blog, which recaps the two-day  Exchange Traded Forum 2016 in Toronto this week.

You can find the full blog by clicking on this headline: Are ETFs beating out mutual funds in popularity?

Pictured to the left is Dave Nadig, ETF director for FactSet Research Systems Inc. of Norwalk, CT,  who in his keynote address said that since the financial crisis,  net mutual fund inflows were US$61 billion, compared to a whopping US$1.2 trillion for ETFs.

Hockey stick curve

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