Managed Money Reporter Newsletter — Issue 298, March/April 2017
Editors: Carl Spiess & Allan McGlade
By Carl Spiess, CFP, CIM, FMA, FCSI, MBA
The Spiess McGlade team has helped hundreds of clients through their retirement transition. While there are usually a lot of questions during the process, we have anecdotally noted that our clients seem happier after they retire. Which is what one would hope of course!
Now we have statistical evidence of what I've observed over 26 years in this industry. Vanguard has done a survey of 5,000 investors in 4 countries and found that post retirees are happier than pre retirees!
Not surprisingly, the survey also finds that using an advisor (who has helped many other clients successfully retire) contributes to financial satisfaction. We are pleased to help with detailed pre and post retirement plans to help ensure your satisfaction. Please contact us if you would like an update to your financial plan.
We are pleased to provide our firm's analysis of the 2017 budget. Fortunately for investors and despite the rumours, there were no increases to capital gains inclusion rates. The elimination of the Canada Savings Bond (CSB) program is a bit sad to see - the CSB program has been around since 1946. However, the announcement is not surprising given the little interest (pun intended) that clients have had in CSBs in recent years. See the complete analysis and other details at the direct link:
And Scotia Wealth Management regularly provides interesting "thought leadership" including on this budget at:
One interesting matter that isn't related specifically to the budget but was announced earlier this year. It affects our taxes through the coming change to CPP in 2019. New and higher contributions to CPP will allow for the first time a tax credit on those new contributions "in order to avoid increasing the after-tax cost of saving for Canadians". The following article shows the difference between RRSP and CPP contributions for higher income earners.
Dalbar recently released a report comparing actual investor returns in various active and passive investment funds (press release).
We have received details of their findings and our copy of their report is linked, below. The conclusion is that in the long term eg. 15 years, investors in active funds outperform. Over 10 years returns are equal, and over shorter terms (during the recent bull market) investors in index funds outperform. The second link is to an observation on the matter from an investment industry publication:
Similar to the Dalbar survey, a great article from a US Blog awealthofcommonsense.com looked at what kind of funds investors actually achieved the best performance in. They used Morningstar data for their analysis. As it turns out, there is one type of investment that had the best investor outcome. Low fee index funds? No. Active funds with star managers? No.
According to empirical research on investor returns, the best funds for investors are target/retirement date (lifecycle) funds. It makes sense really. The biggest challenge for investors is staying invested during periods of volatility. When one picks a 2035 target date fund because retirement is 15+ years away, investors are most likely to remain invested. We are pleased to have a variety of target date funds available and are among the largest TDF/RDF fund users in Canada.
With the roll out of CRM2 performance and fee statements earlier this year, all of our clients now have complete 4 year rate of return calculations and clear information on how much ScotiaMcLeod services cost. We used to do those calculations manually to show trailer or other fees so the automated reports are most welcome.
One area where costs are still a bit opaque is on Exchange Traded Fund trading, specifically the bid ask spread on ETFs. Scotia has produced a report that outlines what those costs could be. We promote a buy and hold strategy when using ETFs in client portfolios, and thus help to minimize those ETF costs. See the full report attached.
We were already noting questions about ETF bid ask spreads in 2009. We will continue to use a mix of active and passive investments, within mutual fund or ETF structures in our client portfolios, considering the exact factors that Dalbar points out in their survey referenced, above. And in many cases a simple target date fund can be the easiest and best solution.
Please let us know if you have any questions about the investments in your account or your account performance or costs.
Our most recent issue of has general articles on:
Also, our firm's "Portfolio Compass" has replaced the long running "Investment Portfolio Quarterly". Here's the last issue – and look for the next update in early April.
My CRA is the easiest place to go to confirm your RRSP, TFSA room. You can also find the tax slips from investment fund companies. The Sign-In Partner feature means you do not need to set up a new password to access your information, you can use the same sign in information you use for ScotiaOnline!
ScotiaMcLeod is a division of Scotia Capital Inc., member of CIPF.
® Registered trademark of The Bank of Nova Scotia, used under licence. ™ Trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management™ consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank®); The Bank of Nova Scotia Trust Company (Scotiatrust®); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod®, a division of Scotia Capital Inc. ("SCI"). Wealth advisory and brokerage services are provided by ScotiaMcLeod, a division of SCI. Insurance services are provided by Scotia Wealth Insurance Services Inc., the insurance subsidiary of SCI. When discussing life insurance products, ScotiaMcLeod advisors are acting as Life Underwriters (Financial Security Advisors in Québec) representing Scotia Wealth Insurance Services Inc. SCI is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.
The Spiess McGlade Team is a personal trade name of Carl Spiess and Allan McGlade.