Managed Money Reporter Newsletter — Issue 284, March/April 2015


Editors: Carl Spiess & Allan McGlade


Featured Articles



2014 Tax Wrap Up

Carl Spiess

By Carl Spiess, CFP, CIM, FMA, FCSI, MBA

Many clients will have already completed and filed their taxes, but just in case, here's a reminder that the deadline to file your taxes is April 30th. In this issue of our newsletter we share some of our tax tips and tools. Please contact us if you have any tax related questions about your investment accounts.

Spiess McGlade quick reference personal tax guide

Please see our quick reference guide - but be careful, you may want to move to Alberta! Clients have recently been commenting that this marginal tax rate chart is an easy way to help decide if an RRSP contribution is a good idea. It all depends on your overall income while working, and in retirement - especially with the OAS clawback (or recovery tax, as it is now called).

Also of interest this time of year are:

CRA tells us that almost 80% of Canadians file their taxes electronically these days so rest assured that if you are missing a slip, we can easily email you a copy right up until the deadline.

Also, please note we are receiving more questions about the T1135 form for Canadians with over $100,000 in foreign assets. Here is CRA's page on the subject:

We are also getting more questions about US estate taxes - which can even apply on US stocks held in a Canadian brokerage account. Contact us or your tax accountant if you have questions about foreign income. The good news is that Canadian mutual funds and ETFs make owning international investments easy, and the tax reporting for Canadians is then kept simple while still offering the benefits of international growth opportunities.

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"Fee Based" accounts and taxes

We are seeing more clients choosing our fee based account options. Please see the attached fee based engagement summary for an outline of the account management process and fee schedule for this sophisticated wealth management option.

Greater fee clarity is one of the many benefits of these programs. In a fee based account, specifically regarding mutual funds, fees based on the value of the assets under management are charged separately on all F-Class mutual funds or ETFs. There is no "trailer fee" on F-Class funds. This makes it easier to see how much the advice component of fund management is costing in the account.

One of the commonly mentioned benefits of fee based accounts is that the fees are tax deductible. This somehow suggests that the fees on traditional A-Class mutual funds are not tax deductible, when in fact fund MERs are also removed from your taxes, just in an simpler way for A-Class funds - see these two articles for examples:

Even more technically speaking, this deductibility really only applies to non-registered accounts: investment management fees on securities in registered accounts (RRSP, TFSA, etc.) are generally not deductible. But in non-RRSP accounts the fee deductibility does wind up being the same in a single year analysis like the examples above. The fee based account does indeed present "bird-in-the-hand" advantage as the deductibility happens every year vs. one potential capital gain tax saving years down the road.

We can say that our clients who have moved assets into our fee based and discretionary programs have done so for more tangible reasons than tax deductibility; rather for the services we provide in those programs. Contact us if you have any questions about your account management options.

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8 out of 10 Canadians on track for retirement

It is easy for politicians to use the sound bite about "Canada's pension problem" and thus, the attempts of the Federal Government to launch PRPPs and the Ontario government whose ORPP is currently finishing consultation. Most Canadians are concerned they won't have enough money in retirement, hence the political response.

So it was interesting to read about an actual survey of Canadians and their retirement readiness. Apparently, Canadians are more ready than they think. Since the article mentions that "75% of people with some sort of defined contribution plan or group RRSP are doing just fine", this advisor asks, "Wouldn't it seem to make sense to just give employer RRSP payroll deductions the same payroll tax break that pension plans get, rather than set up new kinds of pension plans?"

Especially now that we have TFSAs, there will come a time when using Statistics Canada "taxable income" to judge whether seniors have enough actual income to live on (including tax free income from reverse mortgages) will not paint a true picture of retirement life. "Non-taxable" income will become a larger part of post-retirement income streams for Canadians. We are pleased to help map out your retirement income options and prepare a detailed financial plan so that you can be confident that you are on track. Contact us for a review of your retirement financial plan.

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What to do in this low rate environment?

With 5 year GICs now at 2.15%, it is getting even harder to decide on what to do for fixed income investors. Should we wait for higher rates or lock in now in case rates keep falling? Our related firm Dynamic publishes terrific economic analysis. Here is their latest update on the economy and thoughts about where interest rates are going.

In general, we continue to recommend a ladder of GIC maturities for our conservative clients' fixed income exposure. Adding some higher yield bond or preferred share exposure can help though. Please contact us if you have questions about alternative investment options based on your risk tolerance and time horizon.

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Kids these days...

I read this article a while ago:

But then I reflected on the fact that the week before, I had given a presentation to a group of grade 11 students invited to be part of the Young Investors Program hosted at the Schulich School of Business. This group of students were so interested in finances and business that they took their Saturday afternoon to listen to my presentation on:

  1. Why ScotiaMcLeod is a great place to work,
  2. Spiess McGlade Team history, and
  3. A current Group RRSP presentation.

We were pleased to be their title program sponsor. See:

Now these kids are an admittedly enthusiastic and motivated group who make the effort to come out to an investment club. How about your average class of grade 8 students who are a captive audience - i.e. their teacher is making them sit through financial literacy training? Well, the attendees of the grade 8 Junior Achievement "Dollars with sense" classes I teach at annually, certainly start off less than enthusiastic. However, you might be surprised by how they really warm up very nicely to the topic - especially as they begin to realise how important financial literacy is going to be in their future success.

Bottom line: All kids are deserving of good information on personal money management. We are pleased to be able to help out where we can.

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Recommended Link of the Month

Here is a great site whose name pretty much tells you everything you need to know:

It is run by a retired husband and wife couple from BC. The quality of the information is what keeps it at the top of Google searches.

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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

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