Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

Apply this 7-point checkup to your portfolio

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We keep regular tabs on many factors throughout our lifetime. I submit that a best practice is to apply the same principle to the family nest egg: whether it is the starting portfolio or your retirement fund.

A new year often prompts investors to consider making changes to portfolios. Hopefully, well thought out changes that improve your desired outcomes.

I’ve designed a simple checkup tool and I invite you to adopt it. If you desire to manage family wealth, you should be conversant with each point. I suggest making it high priority.

The 7-point tool is a small bundle of steps that assesses your precious nest egg. A big picture check of family wealth typically delivers more simplicity alongside value.

However, it’s easy to get swamped. Too many investors latch onto walls of worry that cloud decisions. Fears of low returns, rising health care and running short of money come to mind.

My checkup tool helps seal the cracks found in a variety of financial foundations. Particularly for investors who make high demands on the nest egg.

Vital Issues


You need to first identify the cracks, as opposed to the minutia. Then initiate swift, corrective actions for the long run. The resulting analysis is a simple grouping of your “Yes/No” answers.

Let’s probe your portfolio on these vital issues:

Vital Portfolio Issues

Your Replies
1. ▶Are your goals achievable with the current action plan?

Yes: ___ No: ___
2. ▶Are you saving enough to fund the retirement targets?

Yes: ___ No: ___
3. ▶Are your retirement assumptions realistic for today?

Yes: ___ No: ___
4. ▶Are you investing within a comfortable asset mix?

Yes: ___ No: ___
5. ▶Are you aware how the advisor is paid?

Yes: ___ No: ___
6. ▶Are you happy with the direction of the portfolio?

Yes: ___ No: ___
7. ▶Are you receiving objective and unbiased advice?

Yes: ___ No: ___

A fitting portfolio starts at five “Yes” replies. Now to assess your portfolio health:

Number of “Yes” Replies

Your Portfolio Health

6 to 7

Robust nest egg

4 to 5

Needs some tweaks

2 to 3

Urgent attention required

0 to 1

Design new action plan

Apply my concise suite of nest egg checks to establish a sense of your direction. They are also early warnings that highlight portfolio weakness.

Any one of the issues can impact your family’s progress. For some, two or more “No” replies can inflict undesirable outcomes.

These remedies provide you added values:

  • Make certain your game plan is logical and sensible.
  • Revisit your asset mix targets every three to five years.
  • Prune some investments if you own too many.
  • Reduce excess complexity in your nest egg.

Ensure that your family nest egg delivers on expectations. Actions that turn “No” into “Yes” replies improve your portfolio pillars. Continue Reading…

Is using Inverse ETFs akin to Market Timing?

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By John De Goey, CFP, CIM

Special to the Financial Independence Hub

Early in 2020, I re-positioned a meaningful portion of my clients’ equity positions into inverse products (they go up when the market goes down and down when the market goes up).  Critics, colleagues, suppliers and friends have seized the opportunity to call me a “market timer.” I beg to differ.

What I am doing is putting something that might be generally described as a form of insurance in place: expressly in light of high valuations.  The Shiller CAPE (a widely accepted benchmark for market valuations) for the S&P 500 is currently over 31 and has hovered between 28 and 33 for about three years now.  The historical average is under 17.

Think of buying a ten-year life insurance policy when you take on a mortgage.  Is that an example of “death timing?  Are you buying insurance because you EXPECT to die in the ensuing decade – or simply to protect against the consequences of something terrible happening?

If you don’t die in the decade, but still have a mortgage, are you ‘stubbornly doubling down’ after having made the ‘wrong call’?  If a decade were to pass and you were still breathing, was the money spent on premiums over the previous decade ‘wasted’?  To hear my critics … and to extend their logic based on what they are telling me, the answers would all be an accusatory “yes” to all these questions.

Here’s my thinking as explained via metaphor:

What I’m saying/ doing                    The Insurance Equivalent

Inverse sleeve                                   Term life insurance

Temporarily high valuations                Temporary unfunded liability on death

Renew if still high                               Renew if unfunded liability persists

Cancel if no longer high                      Cancel if unfunded liability is paid off

Offer relief if markets tumble               Offer relief if premature death

Everyone dies eventually.  Markets always have major pullbacks eventually.  No one knows when either is likely to happen.  See the parallel? Despite all this, people are generally portrayed as being “prudent” when they buy life insurance, but “market timers” when they incorporate an inverse sleeve.  I simply don’t buy it.  Perhaps I should start challenging my critics, colleagues, suppliers and friends for their “reckless disregard for the substantial risk they are taking while doing nothing to manage that risk.”  See what I did there?

John De Goey, CIM, CFP, FP Canada™ Fellow, is a Portfolio Manager with Toronto-based Wellington-Altus Private Wealth Inc. This blog originally appeared on the firm’s “Newswire” site on Feb. 5, 2020 and is republished on the Hub with permission.

Think you’re the only one without a retirement plan? Don’t press the panic button

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By Jordan Damiani, CFP, TEP, RRC 

Special to the Financial Independence Hub

Like many Canadians with retirement on the short-to-midterm horizon, you may have spent more than one sleepness night worrying that you’re not prepared.

In fact, at least half of Canadians over the age of 50 think they’re not on track with their retirement planning and about the same number of non-retirees don’t have a financial plan.

Experience suggests that people may be afraid that they won’t have enough money to retire, but in reality, they may not even know the true answer. I take the view that not having a formal plan in place doesn’t necessarily equate to not being on track to retire. There are many steps you can take in the critical count-down years to retirement that will reframe your planning and investment approach and alleviate anxiety and stress.

Take inventory of present Financial Situation

I recommend assessing your last six months of credit, debit and cash spending: grouping your expenses into categories. To project for the future it’s important to understand where your money is being spent today. This activity will help to identify where better savings could be achieved. Completing a net-worth statement is also important to determine what you own vs what you owe.

Understanding your pension entitlements is also a key stress reliever. Pension plans will typically offer retirement projections. At 65, CPP has a maximum benefit of $1175.83 monthly and $613.53 for Old Age Security. It’s important to call Service Canada to get an accurate CPP projection to find out what you are eligible to receive. Similarly, OAS is tied to Canadian residency, with 40 years being a requirement for the maximum eligible payout.

Goal Setting and Strategic Planning

After taking inventory, the next step would be determining what income you actually need in order to retire. Completing a pre-and post-retirement budget is an exercise that will help determine the after-tax figure to target. Likely the targeted income would be tiered with a higher spend being projected for the first 10-15 years of retirement ($5000-$10,000 a year for travel) and lower lifestyle costs thereafter, with some planning as a buffer against long-term care costs. Continue Reading…

Articles 2 & 3 in my MoneySense mutual fund series: Best Mutual Fund Companies you never heard of; Fixed-Income Funds

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MoneySense.ca: Photo created by freepik – www.freepik.com

MoneySense magazine has now published the entire package of three mutual fund articles they commissioned me to write. You can find the first article by clicking on the highlighted headline: DSC mutual funds and the future of investment advice. It ran on January 16th. The second ran last weekend, around Jan. 25th, while I was away in Cuba for a week.

You can find the second article here: The best Mutual Funds you’ve never heard of.

The first article looked specifically at the gradual decline of the once-ubiquitous DSC sales structure, or Deferred Sales Charge. It recaps recent regularatory developments surrounding DSC, and addresses the related issue of embedded compensation for financial advisors, or so-called Trailer Commissions. These are gradually being eliminated in various Western nations (notably the UK and Australia/NZ) and they are also being phased out in all Canadian provinces, with the conspicuous exception of Ontario.

The lesser-known “Direct-to-Consumer” mutual fund families

The second article looks at two particular “camps” of mutual fund providers: the big-name Embedded Compensation firms you may have heard from (because they can afford to advertise) and a lesser known camp of Direct-to-Consumer managers whose names may be less familiar because they don’t generally have embedded compensation and whose fees are lower and typically mean they don’t have as much money to throw around on big marketing and advertising budgets. The article focusses on four firms in particular you may not have heard of, except through family referrals and word of mouth: Beutel Goodman, Leith Wheeler, Mawer, Steadyhand.

Space precludes mentioning that in the good old days of mutual fund mania (the 90s) there were several other direct-to-consumer firms that either were acquired or are now a shadow of their former selves: the list includes Altamira, Saxon, Sceptre and a few others. We also look at two deep value firms that are still around but get so much publicity about their performance that they can hardly be dubbed as “firms you’ve never heard of.” They are Irwin Michael’s ABC Funds and Francis Chou’s Chou & Associates.

Actively managed mutual funds may also work for Fixed Income space

MoneySense.ca: Photo created by pressfoto – www.freepik.com

The third article, which ran January 30th, looks at the related topic of whether mutual funds can make sense in the fixed-income space, given today’s minuscule interest rates and the relatively higher impact investment management costs can have on active management of fixed-income investments. You can find it by clicking on the highlighted headline: Can Active Management pay for itself in Fixed Income Funds?

Arguably, GICs, direct investments in government and corporate bonds (or strip bonds) is more cost-effective, and if you prefer the “basket” approach that mutual funds provide, fixed-income ETFs. But the article links to some surprising research that even in fixed income, actively managed mutual funds may be able to recoup their fees and “add value” to investment returns.

Those vice presidents’ allegiance is to the bank, not you! The case for DIY investing

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By Ian Duncan MacDonald

Special to the Financial Independence Hub

The most productive new business salesman I ever employed is now a “Vice President” with the investment division of one of Canada’s largest banks. His special skill was in belittling prospects who did not see the benefit of his sales pitch.

Frequently, I got told by his new sales that they would buy but they never wanted to see him again. Not understanding the role of investment advisors employed by a bank, I was surprised when I learned that this strong “closer” could have risen to the “executive” ranks.

With a better understanding of bank investment advisors, I now understand why he has been successful. I learned that the title of Vice President is often given to financial advisors who are great closers. It impresses the naïve. The illusion of trust and knowledge is further enhanced with several impressive designations on their business cards.

Much to my surprise, I learned that investment advisors are hired off the street the same as any sales representative is hired. If they can show they are successful closers, they are well along the way to being hired. With little internal training, they are then set loose on a public full of meek sheep who know even less about investing than this newly hired investment “expert.”

Banks already know if you’re a prime prospect

It is almost impossible to function in our society without being a bank customer. The bank does not have to guess at your net worth and whether you are a prime prospect for their full-service investment advisors. They know.

You will be contacted by phone or during a visit to your bank branch with a seductive pitch that goes like this, “Surely you would appreciate some free advice on how best to manage that great sum of money you have on deposit. It is earning next to nothing. Don’t you want to be rich? Let us make your money work for you. Our fees are so small you won’t even notice them. When can we set up an appointment for you with our vice president? Here is his very impressive business card.” Continue Reading…