All posts by Jonathan Chevreau

What Your Life Insurance Broker May Not Be Telling You

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chantal-marr-findependence-hub
Chantal Marr

By Chantal Marr

Special to the Financial Independence Hub

Before you make an appointment with a life insurance broker you may want to educate yourself about how the system works, particularly with regard to the commissions brokers can get. Although extra incentives and bonuses for insurance brokers are getting talked about more in Canada, there is a lot the general public still doesn’t know. You may be interested in finding out exactly what your life insurance broker may not be telling you.

Most Canadians aren’t even aware of insurance kickbacks for brokers; and if they are, they don’t fully understand what they are, or where and when they take place.

The reason for this is because life insurance companies don’t advertise it, and neither do the brokers themselves. In fact, you’ll see that it could be said that the brokers appear to be more in control of the situation than the actual insurance companies.

Bonuses and Incentives for Life Insurance Brokers

The reason for giving kickbacks to life insurance brokers is that the insurance companies give them these extras so they will only promote their policies to their clients. So most brokers end up only offering consumers policies from a couple of insurance companies, not a selection.

Which of course, doesn’t benefit consumers – who in essence are helping to pay for these extra benefits.

Examples of Incentives for Brokers Continue Reading…

TSX celebrates 25th anniversary of the birth of ETFs

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TSX marks 25th anniversary of 1st ETF. L to R: Atul Tiwari, TSX’s Ungad Chadda, Pat Chiefalo, Mark Yamada. Photo by Jonathan Chevreau

By Jonathan Chevreau

Canada is home to the first ever ETF and today (Monday, March 9th) Exchange Traded Funds celebrated their 25th anniversary at their birthplace — in Toronto, Canada.

TIPs — Toronto 35 Index Participation Units — were the first ETFs in the world and were launched in 1990 by the Toronto Stock Exchange.

To celebrate the occasion, members of the Canadian ETF Association (CETFA) and some media and analysts (including myself) were on hand this morning to ring the bell to open the TSX. Other events are planned in 2015 to further celebrate this 25th anniversary of the ETF.

The ETF industry continues to grow in Canada and reached an all-time high of $86.1 billion in assets at the end of February, with inflows of approximately $2 billion in the first two months of 2015, according to CETFA. It says investors and advisors have embraced ETFs and their benefits, which include low cost and a range of investment options.

Nine providers offer 425 ETFs in domestic market

ETF-25Y-medallion-ROUND-ENNine providers in Canada currently offer almost 425 ETFs. “It’s been incredibly exciting to see the trajectory of ETFs, and their continued adoption in Canada, and globally,” said Atul Tiwari, managing director of Vanguard Investments Canada Inc. in a release.

He is also the incoming Chair of the CETFA (pictured on the far left of above photo.) “ETFs are a powerful tool that give investors low-cost, transparent access to markets with precision, the ETF is arguably the most disruptive innovation the fund industry has seen in decades. Whether its investors, advisors or large institutions, ETFs have really put everyone on the same playing field. ETFs have empowered us all to build portfolios that can truly reflect the unique goals and objectives of each investor.” Continue Reading…

Reflections From The Early Days Of Spending In Retirement, Part 3 — Taxes! 

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patgass
Patricia Gass

By Patricia Gass, CPA

Special to the Financial Independence Hub

This week’s skill-testing question:

What’s The One Expense In Retirement That Most People Get The Least Satisfaction Out Of Spending?

Hint:

fireplaceI love a warm fire on a cold, snowy day. But that same fire, if not properly contained, can do  damage to anything in it’s way. Kind of like taxes.

Perhaps extreme to compare a roaring fire to taxes, but hear me out. Whatever goes into the fireplace (or to the government), you will never see (or spend) again.

Fortunately, much can be done with a little knowledge and planning. It’s useful to think of taxes as yet another, substantial retirement expense that needs to be managed.

Revisit/Understand Your Overall Financial Situation

At least 10 years before retirement, do some critical thinking about your finances.

Where will your retirement income and (cash flow) come from and when? What is the breakdown between “tax-paid” and “tax-deferred” money? Will your retirement cash flow be enough to meet your needs (or too much … a nice problem to have!)? How likely are you to receive an inheritance (or other money) that could push you into a higher tax bracket? Would it make sense to retire early and withdraw some funds sooner at a lower tax rate?

Know (And Plan For) Your Tax Rate Continue Reading…

Let’s give the word Retirement an early Retirement

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Here’s a piece I did recently for Money Magazine, entitled Let’s retire the word Retirement. For the convenience of one-stop shopping and archival purposes, I’ve also reproduced the piece below, with a few changes and links added since it was originally published in the current issue of the magazine.

By Jonathan Chevreau

This magazine, like its sister web site and its competitors, is devoted to the topic of money. That’s an obvious statement but stay with me.

We all need money to live, both in the present and the future. This basic fact has created the entire financial industry, dedicated to the notion of saving for a rainy day so we’ll have enough money both for today’s needs as well as tomorrow’s. And the week after, the year after that and so on, bringing us ultimately to the concept of Retirement.

Retirement is the greatest marketing bonanza ever conceived for the financial industry. If a mutual fund company, bank, insurance firm or ETF maker runs an ad, what is the major concept behind its marketing?

senior couple of old man and woman sitting on the beach watching
How Advertising portrays Retirement

Typically, it features a mature couple frolicking on a beach or golf course, care-free, active, smiling, still in love and doing nothing that resembles work.

I don’t know when work acquired such a bad reputation but I’d venture  to say that in Canada, this phenomenon started to gather steam when London Life popularized its Freedom 55 campaign. Continue Reading…

Weekly wrap: Social Security a House of Cards?, under-saving Americans & workaholic Boomers

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at the Netflix "House of Cards" Season 2 Special Screening, DGA, Los Angeles, CA 02-13-14
President Underwood wants to take away your Social Security

By Jonathan Chevreau

If you’ve been binge-watching the new third season of House of Cards on Netflix, you’ll know that the nefarious Frank Underwood — now the fictional president of the United States — has decided Social Security is a luxury the nation can no longer afford, as is Medicare and Medicaid.

Instead, a new program dubbed AmWorks (for America Works) aims to provide a job for anyone who wants one. The Washington Post poses the question Could the House of Cards America Works program actually work?

Probably not, but there’s been a lot of online commentary on the very notion of killing the 80-year old Social Security program, given how many Americans have little retirement savings resources other than it. One is this piece from the Independent Women’s Forum, entitled House of Cards gets Social Security policy right, but messaging wrong.

If the prospect of losing Social Security doesn’t frighten you, maybe this will:  New York Times reports that many Americans will run out of money in retirement unless at least two things happen: one, they need to save more, and two, what money they do need to save needs to be invested more wisely, which means avoiding high-fee mutual funds. It blames mutual fund expense ratios of 1.12% of assets and that’s in the United States. Canadian mutual fund MERs are roughly twice that high.

So the solution is to just keep working, perhaps in an Underwoodian variation of AmWorks? Not so fast! Personal finance author and columnist Helaine Olen writes an insightful piece in Slate on what she calls the “Semi-Retirement Myth.” As the online site puts it, “Don’t buy the tales of meaningful work into your 70s. Your retirement is inevitable — and bleaker than the last generation’s.”

Better hope for “Freedom Six Feet Under.” Unfortunately, as the Hub’s Longevity & Aging section continually reminds us, odds are we’re all going to be living longer and healthier than we once may have imagined. Perhaps the canary in the coal mine is Irving Kahn, who passed away last week at age 109. One of the world’s oldest active investors, Kahn was around to experience the crash of 1929. Here’s the obituary from the Telegraph.

On the same subject, sadly comes news of the death of Thomas Stanley, co-author of the groundbreaking bible of personal finance, The Millionaire Next Door. Here’s a good tribute on him from the New York Times.

Globe & Mail on Reforming Retirement

North of the border, the Globe & Mail has been running a series on reforming retirement. Last week it weighed in to the TFSA debate. Continue Reading…