Managed Money Reporter Newsletter — Issue 255, January/February 2010


Editors: Carl Spiess & Allan McGlade


Featured Articles



Special (RRSP) Contribution Season Edition

Carl Spiess

By Carl Spiess, CFP, CIM, FMA, FCSI, MBA, Director, Wealth Management

We used to call January and February RRSP Season. Even my kids know that I'm not at home as much during "RRSP season", as we are busy meeting clients, updating financial plans and investing contributions. But this season is different. With the new Tax Free Savings Accounts, and more clients with children and grandchildren making RESP contributions, the beginning of the year is now just "contribution season".

Financial priorities

With so many accounts and options for your savings, even knowing what the biggest priority should be, can be a challenge. We have a stated investment philosophy that ranks the order of priorities for a typical investor.

  1. Pay off all credit card and other high interest debt
  2. Maximize annual RRSP contributions
  3. Save for children's education (RESPs)
  4. Contribute three months' income to a rainy day fund for emergencies (likely in a TFSA)
  5. Pay down the mortgage or car loan
  6. Maximize your contributions to a TFSA
  7. Begin a non-registered savings plan (or lastly, consider borrowing to invest)

While these priorities are right for most investors, your individual case may be slightly different. That is why it pays to keep us up-to-date on your financial goals. We can work together with you to ensure your money is working to achieve your personal objectives. If it has been a while since we have discussed this, take the opportunity to talk to us when you are making this year's contribution. Together, we can get you where you want to be.

Enter to Win A $10,000 RRSP Contribution From Scotia

And one more good reason to meet with us before February 28th about your retirement plan... we can then give you a unique contest PIN number that is your ticket to enter the Scotia $10,000 RRSP Giveaway. Once you have your PIN, fill out the online entry form up to February 28th, 2010 for your chance to win. The sooner you speak with us and enter to win, the more chances you will have of winning one of the two weekly $10,000 prizes that can help top up your RRSP contribution. There are 12 prizes in all to be won.

RRSP Contest

Contribution limits and deadline for this tax season

To help you with your contributions this year, here are some quick contribution amount reminders:

RRSP contributions
Deadline: March 1, 2010
Maximum for 2009 tax year: $21,000
Maximum for 2010 tax year: $22,000 (We recommend making that contribution in May, once you have your notice of assessment with your exact confirmed 2010 contribution room.)

TFSA contributions
Deadline: No deadline, but the earlier you contribute the longer money is sheltered from tax.
Maximum for 2010: $5,000 ($10,000, if you did not make a contribution last year. Unused room simply carries forward.)

RESP contributions
Deadline: December 31, 2010 Maximum for 2010: $2,500 receives a 20% CESG Grant. Up to $5,000 can be contributed and receive a $1,000 CESG if child is under 17 and you haven't made full contributions since 1998.

More on (RRSP) contribution season

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Make your Contributions Online

Scotiabank cardFor Scotiabank clients, you can easily contribute to RRSPs and TFSAs online from ScotiaOnline, and even arrange for a RRSP loan at prime + 1% for your RRSP. For RESP contributions, please contact us to review your room and contribution strategies to ensure you receive the CESG grant.

For our ScotiaMcLeod clients who bank elsewhere, contributing to your ScotiaMcLeod account can also be done online. Simply set up a new bill payment at your bank, and select 'ScotiaMcLeod Direct', 'ScotiaMc Invest', 'ScotiaMcLeod Dir Inv.' or similar. Then enter your full ScotiaMcLeod 10 digit account number (no hyphens) and the money will be in your account the next day. (Again, for RESP contributions, it may be best to transfer into your ScotiaMcLeod non-registered account, and have us make the contribution to get your CESG grant.)

More on ScotiaOnline

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Where to Invest in 2010

With the significant market recovery in 2009, we are actually recommending that clients become more conservative this year. While it is tempting to jump on the equities band wagon after a year of good stock market returns, this is exactly the time for balanced investors to take a bit off the table. Of course we are all a year older, so rebalancing to our "age as a percentage in bonds" can be a good starting point. (Note: by bonds we mean "fixed income" investments, i.e. bonds, GICs, corporate bond funds and bond ETFs.)

Investment programs like LifeCycle or Target Date funds, make this rebalancing process automatic, and become more conservative for you each year as you approach retirement. You will find lots of information on these funds on our lifecycle page.

Also, see our statement of investment philosophy for more details on what you should be investing in, based on your age and goals. We base our asset allocation recommendations on our underlying philosophy.

For all of your asset allocation classes, see our recommended list of investments. There have been some spectacular one year returns.

If you are still not sure, please call us and discuss your options with a member of our investment team.

More on where to invest

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Last Year For Labour Funds?

March 1st, 2010 represents the last opportunity for Ontarians to participate fully in the 30% tax-credits offered by LSIFs and apply those credits against 2009 income. After March 1st, the Ontario tax-credit will be reduced to 10% (5% in 2011, 0% there-after). Note this article refers to Ontario changes, other provinces' credits vary widely - contact us for details if you are in another province.

In last year's review, we highlighted several funds which had been frozen from redemptions or new purchases. Little has changed for those funds, though Growthworks did purchase the Canadian Medical Discoveries Fund last year, and Vengrowth I & II just paid its first cash distribution to unit-holders - though investors are still unable to sell from either fund.

The LSIF industry consolidation is a trend we have been tracking and reporting on for several years (see Managed Money Reporter, January 2006).

Industry insiders have been busy lobbying the Ontario Government to reverse the elimination of the tax credits decision with no success to date. The lack of support from the Ontario government to sponsor the venture capital sector in Canada is directly leading to the virtual extinction of this sector. LSIF funds will continue to face serious head-winds as raising new cash for acquisitions will become increasingly difficult as the tax-credit incentives dry up.

We are finding relatively little interest in the tax breaks of LSIFs, considering the hit and miss success of the sector in general. A quick review of the performance numbers, shows that there have however been a handful of winners, but many losers in the sector.

Of the LSIF funds that are still available for purchase, we feel that Venturelink Funds represent the purest opportunity to participate in the Venture Capital space in Ontario. Their portfolios contain only one publicly traded company, Dragonwave (TSX:DWI) which was added prior to their 2007 IPO as a venture name and has been a success story. Venturelink Funds have also been among the leaders among LSIF funds in raising new cash for the portfolio over the past several years. The Dynamic Venture Opportunities fund, and the Growthworks Balanced funds are a few others that have been able to keep their heads about them while many others have lost theirs.

For more information on these funds or other questions about your account, please contact our LSIF specialist Andrew McGoey by email or at 416.945.4107.

More on labour sponsored venture capital funds

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GIC Rates

ScotiaMcLeod offers GICs from 15 different issuers to ensure that we can place your investment with the institution with the highest rates. You don't need to shop around, transfer amounts for some special 2 month rate, only to find later that some other institution is offering a better rate. Whenever your GICs at ScotiaMcLeod mature, we will contact you to confirm the next term and best rate. We also have cashable, monthly pay and compound GICs. And with 15 issuers, each covered to $100,000 in deposit insurance, you can have $1,500,000 of CDIC insurance in your single ScotiaMcLeod account. See the table to review current rates. Please contact us for details.

GIC Rates

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Scotiabank Again One of Canada's Best 50 Employers

Top 50 Employers2010 marks the sixth consecutive year that Scotiabank has been named one of the 50 Best Employers in Canada by The Globe and Mail Report on Business Magazine. The annual 50 Best Employers list is one of the most prestigious employer recognition awards in Canada. Each year, Hewitt Associates, a global human resources firm, administers surveys to more than 100,000 employees and roughly 2,000 human resources professionals to determine the top companies to work for in Canada. It's no secret that engaged and satisfied employees create satisfied and loyal customers.

Your investment team at ScotiaMcLeod continues to be very stable, with very low employee turnover and a clear focus on consistent service to you, our valued clients.

More on 50 Best Employers

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Recommended Link of the Month


Since we seem to cheerleading for Scotia even more than normal this month, let's make it a full court press...

Scotia has launched a whole suite of web services called "Help me invest".

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Contact Us

T.  416.863.RRSP (7777)
     1.800.387.9273
F.  416.863.7479
E. carl.spiess@scotiawealth.com
    allan.mcglade@scotiawealth.com

ScotiaMcLeod is a division of Scotia Capital Inc., member of CIPF.

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® 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.