All posts by Jonathan Chevreau

Canadian Financial Summit 2022 (Virtual)

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This week a veritable who’s who of Canadian financial personalities and personal finance bloggers will be featured at the 2022 (and virtual) edition of the Canadian Financial Summit, starting this Wednesday. Hub readers will recognize several guest bloggers, including (pictured above) Robb Engen of Boomer & Echo; Bob Lai of Tawcan; Kyle Prevost of Million Dollar Journey and MoneySense; myself; as well as well-known media commentators like Robb Carrick of the Globe & Mail, Peter Hodgson of the Financial Post, Fred Vettese of the G&M, financial planner Ed Rempel and many more. There will also be MoneySense colleagues Dale Roberts (of Cutthecrapinvesting) and MoneySense executive editor Lisa Hannam

The online summit runs from Wed., Oct. 12 to Saturday, Oct. 15th, 2022.

To register, click on the home page here.

Here are just some of the topics that will be covered:

  • How to plan your own retirement at any age
  • How to save money on taxes by optimizing your RRSP to RRIF transition
  • What cryptocurrencies like Bitcoin actually are – and if you should be investing in them
  • How to maximize your Canadian Child Benefit (CCB)
  • How to efficiently transition your investing nest egg to a steady stream of retirement income
  • What Canadian real estate investments looks like in 2022
  • How to deal with inflation on your bills and in your investment portfolio
  • How to avoid crippling fees and terrible advice
  • When to take your OAS and CPP
  • How to buy your own pension – income for life!
  • Why Canadian dividend stocks might be the right fit for you
  • How to use your housing equity to maximize your retirement lifestyle

Here’s what MillionDollarJourney had to say about the conference:

I’m proud to say that MDJ’s own Kyle Prevost is co-hosting the event alongside MDJ writers Kornel Szrejber and Dale Roberts – so I can speak firsthand to the quality of the product!

One thing I always appreciate about this Summit each fall is that it is produced by Canadians – for Canadians.  Too much of the money-related content we see is American-based in nature – but you won’t have to translate any talk about 401Ks or American private health insurance at this event!

Together, the roster of All Star Speakers have authored more than 100 personal finance books, hosted 1,000+ podcast episodes, written 20,000+ blog posts and newspaper columns, and have been featured in thousands of media articles and interviews from every news and financial publication in Canada.  

Needless to say – you will not find this elite group in one place anywhere else!

And it’s free!

Here’s a sampling of the event’s FAQ:

Is the Canadian Financial Summit really free?

Yes. The videos are completely free to view for 48 hours. After that you need the any-time, anywhere All Access Pass.

What’s the catch?

There. Is. No. Catch.  We believe you’ll think the information presented by our 35+ Canadian experts is so solid, so actionable, so lacking in fluff and sales jargon – that we think you’ll pay for it after already seeing it for free.

How do I watch The Summit?
Simply click here to claim your free ticket. You should immediately get an email confirming your registration – just follow the directions in that email and you will get a link sent to you 24 hours before The Summit goes live. You can view The Summit on any phone, tablet, or computer.
I signed up for the 2017,2018, 2019, and 2020 All Access passes, but am not sure how to access those membership pages.

Click here, and simply fill in your info.  You will be be taken to a page that allows you access the 2017, 2018, 2019, and 2020 content. If you have forgot your Canadian Financial Summit password, simply click here to re-set it.

A sampling of the sessions

Rob Carrick

Where is Housing Headed?

In a drastic change from past years, we’re seeing some major pull backs in the Canadian housing market. Join Rob and I as we break down how this is affecting Canadians’ net worth, who is getting hit the hardest, and where we go from here. We also discuss if renting is still an option that we’re recommending and what we think could happen in regards to the long-term trends of immigration and housing stock within Canada now that the pandemic is in the rearview mirror.

Ellen Roseman

Addressing Canadians’ Inflating Sense of Worry

Longtime Canadian consumer advocate Ellen Roseman is back and wants to help Canadians weather the recent storm of inflation and rising costs of living.  Her personal experience with Canada’s last bout of quickly rising prices have given her some hard-won wisdom in practical ways to deal with modern inflation issues.  We talk about what to pay attention to, watch out for, and some top tips in this high-price environment.  We wrap by speculating on what all of this will mean for Canadians’ investment portfolios. Continue Reading…

Defined Benefit pensions lagged in third quarter but continue to withstand volatile markets and historic inflation: Mercer

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Unlike the first half of 2022, the financial position of most defined benefit (DB) pension plans “decreased slightly” in the third quarter, as they were buffeted by inflation and volatile stock markets. Investment returns were mostly negative in the quarter, and yields on long-term bonds were lower at the end of the quarter than they were at the beginning, according to The Mercer Pension Health Pulse (MPHP), released on Monday.

The MPHP tracks the median solvency ratio of the DB pension plans in Mercer’s pension database, which decreased from 109% as at June 30, 2022, to 108% as at September 30, 2022.

Of the plans in Mercer’s pension database, at the end of Q3:

  • 72% of plans were estimated to be in a surplus position on a solvency basis,(vs. 73% at the end of Q2)
  • 17% of plans were estimated to have solvency ratios between 90% and 100%,(vs. 16% at the end of Q2)
  • 5% have solvency ratios between 80% and 90% (unchanged from Q2), and
  • 6% have solvency ratios less than 80%. (also unchanged from Q2).

In a press release, the Calgary-based Principal and leader of Mercer’s Wealth business, Ben Ukonga,  said that “In spite of the significant market volatility, the financial health of most DB plans would have experienced only a slight decline in the third quarter of 2022. As for what can be expected for the remainder of the year, plan sponsors should continue to expect significant volatility.”

Mercer says experts “urge caution and encourage plan sponsors to be prepared for anything, with more volatility on the horizon. Markets will most likely remain volatile in the short to medium term due to numerous risks such as the continued war in Ukraine, the upcoming US midterm elections, the potential confrontation between the US and China over the status of Taiwan, risks of a global energy supply shortfall, and of course, the ongoing inflationary environment.”

Continued short- and medium- term volatility

Markets will most likely continue to remain volatile in the short to medium term due to numerous global risks, including the war in Ukraine (and the Russian Government’s actions in response to Ukraine’s recent successes on the battlefront, such as the recent annexation of parts of Ukraine in violation of International Law, and the geo-political fallouts from these actions). Mercer is also cautious about the upcoming US mid-term elections, the increasing political gridlock and polarization in the US, and the potential for a confrontation between the US and China over the status of Taiwan. The recent volatility in the UK currency and bond markets and the risk of contagion to other markets.

Mercer also sees risks from a global energy supply shortfall, and the effect such a shortfall would have on the global economy: “… plan sponsors should pay attention to the risks associated with energy insecurity in Europe – such as the risk of the Russian Government using Russian gas supplies against Europe in retaliation to sanctions on Russia, and the effects on European economies if their energy supplies are curtailed.”

Inflation at levels not seen in 30 years

With inflation running at levels not seen in over 30 years, central banks globally are “on an aggressive monetary tightening mission in order to get inflation under control. Will they succeed without triggering a hard-landing global recession? Will higher interest rates make governments, corporations and households unable to meet the interest payments on debts they accumulated during the very long period of low interest rates? This could lead to an increase in bankruptcies and crowding out spending and investments, further exacerbating the risks of a hard landing global recession.”

As workers see a decline in the purchasing power of their wages, there will be increased pressures on employers for higher wages, Mercer says. “Sponsors of indexed DB plans will see increases in the cost of these arrangements, and sponsors of non-indexed DB plans may face pressure from their pensioner groups to provide ad hoc cost of living adjustments. Coupled with labour shortages, some employers may have no choice but to increase their labour costs. And companies that are unable to pass these increased costs to their customers will face profit margin pressures and reduced profitability, hurting their future economic outlook.”

Covid still poses macro risk

The global health landscape also poses a macro risk, Mercer says. “As the western hemisphere is entering the winter months, will a new vaccine-resistant strain of the COVID-19 virus appear? And how will governments and citizens deal with such a resurgence? Will the Chinese government continue with its zero-COVID policy? And how much of a negative impact will this policy, along with what some would call draconian lock down measures, have on the Chinese economy? And how deep will the negative knock-on effects be on China’s trading partners?” Continue Reading…

MoneySense Retired Money feature on Canada’s new “Tontine” Retirement solutions

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My latest MoneySense Retired Money column looks at the revolutionary “Tontine” type Retire Solution announced by Guardian Capital and finance professor Moshe Milevsky earlier this month. My initial take was here on the Hub and the more in-depth MoneySense feature story can be viewed by clicking on this highlighted headline: Tontines in Canada — Moving from Theory to Practice as a solution to our Retirement Crisis.

We’ve illustrated this blog with financial projections of one of the three new Guardian Capital Retirement solutions developed in partnership with Milevsky. Some of the ideas were adapted from Milevsky’s latest book: How to Build a Modern Tontine. The theory behind this book is a driving force for Guardian Capital’s efforts to commercize these concepts and put them in the hands of retirees and would-be retirees worried about outliving their money. Nobel Laureate Economist William Sharpe has described this as “the nastiest, hardest problem in finance.”

Milvesky’s book is certainly aimed at industry practitioners and sophisticated financial advisors and investors, and contains a lot of mathematics that may beyond the reach of average investors or retirees. So rather than attempt to review it, we’ll move on to the efforts to bring these ideas to the market. What Milevsky calls “tontine thinking” is belatedly showing up in the marketplace in Canada, starting last year with Purpose Investments’ and now with three different solutions from Guardian Capital. Hub readers also can read an excerpt of the book which ran earlier Wednesday: Longevity Insurance vs Credits — a Primer.

All this has been a long time coming. MoneySense readers may recall two of my Retired Money columns about Milevsky and the future of tontines published in 2015: Part one is here and part two here. Also see my 2018 column that explains tontines in detail: Why Ottawa needs to push for tontine-like annuities.

Last June (2021), Purpose got the tontine ball rolling in Canada with its Purpose Longevity Fund. Here’s my MoneySense take on that one: Is the Longevity Pension Fund a cure for Retirement Income Worries? 

As the MoneySense feature explains, Milevsky is Guardian Capital’s Chief Retirement Architect. It sums up the original 2021 launch of Purpose Longevity Fund, and how it compares to Guardian’s three solutions.

Think of Purpose’s product as a lower-case tontine, and Guardian Capital’s as a Tontine with a capital T.

Guardian Capital’s Modern Tontine  

Guardian Capital’s September 7th press release uses the term “Modern Tontine.” There, Guardian Capital Managing Director and Head of Canadian Retail Asset Management Barry Gordon said “With our modern tontine, investors concerned about outliving their nest egg pool their assets and are entitled to their share of the pool as it winds up 20 years from now … Over that 20-year period, we seek to grow the invested capital as much as possible to maximize the longevity payout.”

 Along the way, investors who redeem early or pass away leave a portion of their assets in the pool to the benefit of surviving unitholders, boosting the rate of return. “All surviving unitholders in 20 years will participate in any growth in the tontine’s assets, generated from compound growth and the pooling of survivorship credits. This payout can be used to fund their later years of life as they see fit, and aims to ensure that investors don’t outlive their investment portfolio.” Continue Reading…

Moshe Milevsky and Guardian Capital unveil a Modern Tontine in new Retirement solution

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Moshe Milevsky

A revolutionary new approach to preserving portfolio longevity through a modern “Tontine” structure was unveiled Wednesday by Guardian Capital LP and famed author and finance professor Moshe Milevsky.

GuardPath™ Longevity Solutions, created in partnership between Guardian and Schulich School of Business finance professor Milevsky, is designed to address what Nobel Laureate Economist William Sharpe has described as the “nastiest, hardest problem in finance” 1

Announced in Toronto on September 7, a press release declares that the “ground-breaking step” aims to “solve the misalignment between human and portfolio longevity.” See also this story in Wednesday’s Globe & Mail.

Over the years, I have often interviewed Dr. Milevsky about Retirement, Longevity, Annuities and his unique take on how the ancient “Tontine” structure can help long-lived investors in their quest not to outlive their money. Milevsky has written 17 books, including his most recent one on this exact topic: How to Build a Modern Tontine. [See cover photo below.]

Back in 2015, I wrote two MoneySense Retired Money columns on tontines and Milevsky’s hopes that they would one day be incorporated by the financial industry. Part one is here and part two here. See also my 2021 column on another pioneering Canadian initiative in longevity insurance: Purpose Investment Inc.’s Longevity Pension Fund.

Addressing the biggest risks faced by Retirees

In the release, Milevsky describes the new offering as a “made-in-Canada” solution that addresses “the biggest risks facing retirees and are among the first of their kind globally. Based on hundreds of years of research and improvement and backed by Guardian Capital’s 60-year reputation for doing what’s right for Canadian investors, I am confident these solutions will revolutionize the retirement space.”

Milevsky’s latest book is on Modern Tontines

In an email to me Milevsky said: “You and I have talked (many times) about tontines as a possible solution for retirement income decumulation versus annuities. Until now it’s all been academic theory and published books, but I finally managed to convince a (Canadian) company to get behind the idea.”

In the news release, Guardian Capital Managing Director and Head of Canadian Retail Asset Management Barry Gordon said that “for too many years, Canadian retirees have feared outliving the nest egg they have worked so hard to create.” It has answered that concern by creating three solutions that aim to alleviate retirees’ greatest financial fears: The three solutions are described at the bottom of this blog.

With the number of persons aged 85 and older having doubled since 2001, and projections suggesting this number could triple by 2046,2 Guardian Capital says it “set out to create innovative solutions that this demographic could utilize when seeking a greater sense of financial security.”

Tontines leap from Pop Culture to 21st Century reality

Tontines were one of the most popular financial products for hundreds of years for individuals willing to trade off legacy for more income, Guardian says. Once in a  while the tontine shows up in popular culture, notably in the film The Wrong Box, where the plot revolves around a group of people hoping to be the last survivor in a tontine and therefore the recipient of a large payout.

“With our modern tontine, investors concerned about outliving their nest egg pool their assets and are entitled to their share of the pool as it winds up 20 years from now,” Gordon says, “Over that 20-year period, we seek to grow the invested capital as much as possible to maximize the longevity payout. Along the way, investors that redeem early or pass away leave a portion of their assets in the pool to the benefit of surviving unitholders, boosting the rate of return. All surviving unitholders in 20 years will participate in any growth in the tontine’s assets, generated from compound growth and the pooling of survivorship credits. This payout can be used to fund their later years of life as they see fit, and aims to ensure that investors don’t outlive their investment portfolio.” Continue Reading…

Canadians’ Debt grew to all-time high in second quarter: TransUnion

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Source: TransUnion Canada consumer credit database.

The double whammy of Inflation and rising interest rates are starting to be reflected in higher debt levels for Canadians, according to data released by TransUnion on Tuesday.

The  Q2 2022 Credit Industry Insights Report reveals that Canadians are vulnerable to payment shock as a result of high interest rates and inflation challenges: “While there have still been gains in GDP growth and low unemployment, they are being offset by higher interest rates and cost of living. This lead to higher credit balances and increased costs of mortgages and loans.”

The report shows total debt grew to an all-time high at $2.24 trillion, up 9.2% year-over-year (YoY) and up 16.4% from pre-pandemic levels observed at the end of 2019. The number of consumers with a credit balance has increased by 2.1% YoY to 27.6 million and is up 2.5% from pre-pandemic levels (Q4 2019).

You can find the full press release here.

Among the highlights:

  • Household finances were worse than planned for 41% of consumers, with 48% reporting they had cut back on discretionary spending. A startling 26% of consumers expect to be unable to repay their bills and loans.
  • Total debt grew to an all-time high at $2.24 trillion, up 9.2% from the same time in 2021 and up 16.4% from pre-pandemic levels at the end of 2019.
  • Consumer delinquency on personal loans has returned to pre-pandemic levels, up 19 base points (bps) YoY to 0.93%. Credit card delinquency is also up six bps from the prior year same quarter.
  • Increased balance growth was observed across all risk tiers, with super prime consumers continuing to build overall outstanding balances (+5.1% YoY).

In the release, TransUnion director of financial services research and consulting Matt Fabian says: “With the combination of higher cost of living and higher spend driving up credit balances, along with the recent surge in mortgages and auto loans, many Canadian consumers are under pressure from higher debt service obligations … We’ve seen an increase in miminum payment amounts of up to 10% in the first half of 2022, depending on the combination of products consumers hold, along with a slight deterioration in payment behaviours.”

As shown in the chart below, all major credit products saw an increase in average balance per borrower, which TransUnion says indicates the consumer need to leverage credit.

Fabian added that “During the pandemic we saw a decline in credit participation among below prime consumers, so this marks a re-engagement of this segment as potentially the effects of inflation and interest rates have driven demand, while lenders have increased their risk appetite in this space.”

The report shows that overall, consumer-level delinquencies (borrowers more than 90 days past due on any account) increased by four basis points (bps) over the prior year same quarter, but still remain below pre-pandemic levels. “Consumer delinquency on personal loans has returned to pre-pandemic levels, up 19 bps YoY, to 0.93%.” Credit card delinquency (90 days or more past due) is higher by six bps from the prior year same quarter.

TransUnion says the increase in consumer delinquencies is partially explained by accelerated lender origination activity, especially in the below-prime space: “The YoY rises in delinquencies are generally small and not a major concern, given the increased credit activity observed post pandemic. As credit activity recovers and grows further, consumer credit performance is expected to return to near pre-pandemic levels.”