All posts by Jonathan Chevreau

Franklin Templeton extends Canadian ETF family with Emerging Markets, Global Dividends

As my latest Financial Post blog this morning explains, mutual fund giant Franklin Templeton Investments Canada has expanded its ETF lineup with a pair of new “Smart Beta” ETFs and an actively managed balanced ETF. Click on the highlighted text for full story: Franklin Templeton boosts Canadian ETF offerings with Emerging Markets play.

As I note in the piece, Franklin Templeton has long had an Emerging Markets mutual fund, famously managed until last year by globetrotting fund manager Mark Mobius, who retires on January 31st after a 30-year career with the company. Franklin Templeton once had a closed end version of the fund but it was closed down in September of 2001, a company spokesman said.

The new Franklin LibertyQT Emerging Markets Index ETF (CAD) bears the memorable ticker symbol FLEM on the TSX, allowing Franklin Templeton to play catch-up to long-established Emerging Markets ETFs from rivals BlackRock Canada (iShares) and Vanguard Canada. You can find more about the new ETF family here.

FLEM is a four-factor “Smart Beta” ETF: the single biggest “factor” at 50% is a quality screen, along with 30% value, 10% momentum and 10% low volatility. Its largest single geographic weighting is South Korea at 15.4%, followed by 13.9% in China, 13% in India, 12.8% in Taiwan and 10.8% in Russia, according to Franklin Templeton vice president of ETF business development Amed Farooq.

The expected Management Expense Ratio (MER) for FLEM is 0.55%. The two other ETFs are The Franklin LibertyQT Global Dividend index ETF (FLGD/TSX, MER 0.45%) and an actively managed balanced ETF, Franklin Liberty Core Balanced ETF (FLBA/TSX), with an MER of 0.45%.

Time to “rebalance” from US equities to Emerging Markets?

Both the two new smart-beta ETFs provide a rebalancing opportunity for investors who feel US stocks have run up sufficiently to start taking profits. Earlier this month, famed investor Jeremy Grantham warned of one last market “meltup” for US stocks before another correction, and said his firm was rebalancing into Emerging Markets. You can find the full January 3rd article here: Bracing yourself for a possible near-term melt-up.

You can also find his comments made in a recent interview with Consuelo Mack’s WealthTrack show here.

I asked about this at the ceremonial opening of the TSX Monday morning, which focused on the ETF launches. Financial advisor John De Goey said he was doing just such a rebalancing for his clients and in an interview, Franklin Templeton senior vice president Dennis Tew said he knew of at least one advisor with a large book of business who likewise has been rebalancing from US income funds to Emerging Markets equities.

Balanced ETF managed by Franklin Bissett

Continue Reading…

Retired Money: Finally, a “Tontine” proposal for true Longevity Insurance

Even if they’ve saved a million dollars, retiring baby boomers lacking Defined Benefit plans and their inherent longevity insurance justly fear outliving their money. It’s been said some fear this more than death itself.

The latest instalment of my MoneySense Retired Money column looks at an intriguing proposal made this week by the CD Howe Institute. Click on this highlighted text for the full link: An annuity that pays off — if you live long enough.

CD Howe has proposed the creation of a “pooled risk insurance” scheme called LIFE, which has all the hallmarks of a 17th century concept known as the tontine.

Moshe Milevsky has long suggested tontines as one remedy for outliving our money

Annuity expert Moshe Milevsky — also a finance professor at the Schulich School of Business and author of books like Pensionize Your Nest Egg — says LIFE is a “great idea.” He actually made the case for the resurrection of “tontine thinking” three years ago in a book I reviewed at the time also at MoneySense: Tontine: Retirement Plan of the Future? 

The CD Howe paper (Headed for the Poor House) authored by Bonnie-Jeanne MacDonald doesn’t actually come out and call LIFE a tontine scheme but it certainly appears to contain the DNA of one.

LIFE stands for Living Income for the Elderly. The idea is that by sharing mortality risk, those who make it to age 85 start to receive monthly payouts for as long as they live, funded in part by the less fortunate members who die between 65 and 84. Apart from normal investment returns, the lucky survivors would enjoy the “added return” of the mortality premium.

Continue Reading…

Here are a million reasons to ignore 5 popular RRSP myths

A lot of Canadians seem to be harbouring misconceptions about the value of RRSPs (Registered Retirement Savings Plans) but I can give you a million reasons why it’s dangerous to believe the  five popular RRSP myths.  My latest two blogs in the Financial Post this week explain why.

In Thursday’s Post, also published in some regional dailies, I described how young people can easily save a million dollars as long as they start early enough. Click on the highlighted text for the online link: How to build a million-dollar RRSP: it isn’t as hard to get there as you think.

Yes, it’s the old story of disciplined saving year in and year out, and the magic of compounding, all aided by the lure of an upfront tax refund and a multi-decade deferment of taxes. Of course, eventually it will be time to draw an income and pay some tax on the RRIF but that’s a story for another day.

Whether a million is enough is open to debate but with today’s paltry interest rates and rising expectations for long lives, the need for annuities or some form of longevity insurance has become urgent. More on that shortly.

Exploding 5 RRSP myths

This morning, Friday,  the FP also ran a blog by me commenting on tax guru Jamie Golombek’s debunking of five common myths average investors harbour about RRSPs. You can find Golombek’s column here: The 5 biggest RRSP myths Canadians can’t stop repeating.

My take on it and a CIBC poll that accompanied the report, can be found here: Almost 40% of Canadians see ‘no point’ in investing in RRSPs — Here’s why they’re wrong.

In short, Golombek and I agree that the RRSP makes a lot more sense than investing only in taxable (non-registered or “open”) accounts. And while the TFSA is a compelling alternative to RRSPs for young people in low tax brackets, or for low-income seniors counting on living on Old Age Security, for the vast majority of middle- and upper-middle-income private sector workers lacking a Defined Benefit plan, the RRSP remains an essential tool for building wealth.

And as I also point out, if you’re in a high tax bracket, you don’t have to choose between an RRSP and a TFSA: you should maximize both!

Blue Monday: Here’s what gives us the financial blues on this saddest day of the year

Feeling the financial blues a bit today? Little wonder because today, Monday, Jan. 15th, is Blue Monday, dubbed the saddest (most depressing?) day of the year.
 Call me a masochist but I also decided this was the day to download the 2017 online version of TurboTax and at least confront the looming reality of preparing another year’s tax returns. The program said it can be used to print and file your 2017 tax return by mid-January, and that NetFile will be available as of 6 am on February  26th. How depressing is that a mere two weeks after the holidays?

But if the thought of filing your taxes doesn’t make you blue, or even the snow that’s falling as I write this, maybe the thought of credit-card bills from the holidays will do the trick. Credit Canada and the Financial Planning Standards Council today released the results of  a Blue Monday themed Financial Blues survey that revealed that 53% of Canadians are “already feeling financially blue, with the younger generations struggling.”

The Financial Blues Survey was based on a Leger poll that asked Canadians “when it comes to your finances, what makes you blue this time of year?”

Well, bowl me over with a feather: the start of another tax season didn’t make the cut in the poll, or at least the top five “standout” findings. Here’s the top candidates for feeling blue in January:

  • 20% of us have a credit-card balance larger than our savings accounts
  • Younger adults aged 18 to 44 are especially blue about finances right now: 68% of them versus just 41% for adults aged 45 or older
  • 25% of us lack the funds to take a winter vacation in the sun
  • 6% have already broken their financial new year’s resolutions
  • 21% over-spent during the Holidays

Credit Canada CEO Laurie Campbell  says that while “we are seeing a good deal of Canadians stressed out about their financial situation … the takeaway message is that there is hope. Develop a plan, tackle debt, and realize your financial potential. There are professional resources available to you, so don’t feel you need to go it alone.” Continue Reading…

Strapped for cash after holidays? How to make the RRSP deadline with no new money

How to beat the March 1st RRSP deadline without having to come up with new money is the subject of my latest MoneySense Retired Money column. You can access it by clicking on the highlighted headline: How to ‘find’ cash for your RRSP contribution.

As with the previous column involving doing the same thing for TFSAs, this involves a tricky procedure known as “transfers-in-kind,” which means you need some investments in your non-registered portfolio to pull it off. There can be tax pitfalls so you need to find investments that haven’t greatly appreciated in value, or find offsetting losers without falling afoul of the CRA’s superficial loss rules.

Seniors in particular likely have a good amount of money sitting in “open” or non-registered investment accounts, which means any securities can be “transferred in kind” to your RRSP, thereby generating the required receipt to generate a tax refund come tax filing time in April.

You don’t have to be a senior of course: any Canadian of any age can transfer-in-kind securities from their open accounts to their RRSPs; it’s just that many younger folks may not have a lot of money housed in non-registered accounts. Most tend to maximize the RRSP first and since 2009, the TFSA.

But beware the RRSP that gets “too big”

Of course, the kind of pre-retirees who read this column may want to consider whether their RRSP might become “too big” and eventually put you in a higher tax bracket once you start to RRIF after age 71. I looked at this “nice problem to have” in an FP column last May.

Continue Reading…