McCreath Group - January 2017 Client Newsletter

James McCreath - Jan 16, 2017

Hello to all:

Happy New Year and welcome to 2017. We hope you had a chance to relax and reflect with family and friends during the holiday season. As we move into this new calendar year, we wanted to share with you our latest version of our client newsletter (PDF version attached), Semper Anticus, which means “always forward” in Latin. We continually strive to put clients in a better financial and personal situation and this newsletter is an extension of our efforts to communicate ideas, trends and investment market themes with clients.
Our mission statement is to provide clients with superior wealth planning on a timely basis while exceeding their expectations for service, portfolio management, trust and integrity. As Scott often likes to say, “Whether you’re a barber, dentist, teacher or lawyer, everyone needs assistance setting sail for retirement.
Should you ever have any concerns or questions about your investments we’re always here to help, so please email or call any time. And most importantly, we thank you for being clients … Alison, Ashley, Rob, Lila, Steve, Brendon, James and Scott  
Included in this edition is information on:

  • Registered account contribution limits and deadlines

  • Ten Financial Resolutions for 2017

  • Tax Slip Overview and Schedule

  • New Client Statements Starting in 2017

  • The McCreath Group Market Overview

Registered account contribution limits and deadlines:

Registered Retirement Savings Plan (RRSP) contribution details

  • The deadline for making your 2016 RRSP contribution is March 1, 2017.

  • Your 2016 RRSP contribution limit is based on any unused contribution room carried forward from 2015, plus your 2016 contribution amount (the lesser of $25,370 or 18% of your 2015 earned income less any applicable pension adjustments).

  • If you’ve already made your 2016 RRSP contribution, consider making your 2017 RRSP contribution early and benefit from the tax-deferred growth of your RRSP. The maximum RRSP contribution limit for 2017 is $26,010, again, less any pension adjustments.

Tax-Free Savings Account (TFSA) contribution details

  • The annual TFSA contribution limit for 2017 is $5,500. There is no deadline for when this contribution is required to be made.

  • Unused contribution room – dating back to 2009 when TFSAs were first introduced – carries forward and can be used in any future year. The lifetime contribution limit for TFSAs is $52,000.

  • You can gift funds to your spouse/common law partner or adult child to allow them to contribute to their own TFSA (subject to their personal TFSA contribution limit). Income earned within a spouse’s/partner’s or adult child’s TFSA will not be attributed back to you.

Registered Education Savings Plan (RESP) contribution details

  • There is no minimum annual contribution limit that you must make. However, there is a maximum lifetime contribution limit of $50,000 per beneficiary. The number of years over which contributions can be made to an RESP is 31 years.

  • The federal government’s Canada Education Savings Grant (CESG) helps ensure students have enough money to fund their higher education. The grant pays 20 per cent of annual contributions per beneficiary to an RESP, up to a maximum of $500 per beneficiary. The maximum lifetime CESG is $7,200 per beneficiary.

Ten Financial Resolutions for 2017
As you consider your financial priorities for the coming year, here are some financial resolutions that could help you save taxes, protect your portfolio, increase your net worth, and position you for financial success in 2017.

  1. Plan early for 2017 … The early bird gets the worm. When it comes to your personal finances for the year, think about what goals you wish to achieve such as investment contributions, increasing your mortgage payments, saving for vacations and investment cash flow (our favorite). Upon setting your goals, review them quarterly and celebrate when you reach milestones. Goals-based investing and financial planning is proven to be one of the best ways one can ultimately reach financial objectives. 

  2. Pay off holiday credit card debt  … If you’ve overspent during the holiday season, focus on paying off your credit card debt as quickly as possible; concentrate on paying off the highest interest rate credit cards first.

  3. Make your RRSP and TFSA contributions … Making regular RRSP and TFSA contributions are essential on the path to saving enough for your retirement.

  4. Contact your accountant … with many alterations to rates of taxation at the federal and provincial levels in the last couple of years, its important you leverage the expertise of an accountant to identify ways to mitigate taxation. For example, it may make sense to spread income among family members who are taxed at lower marginal rates in order to lower your family’s overall tax burden, subject to the income attribution rules.

  5. Complete your first will or update your existing will … A will is the cornerstone of any estate plan. It can help protect your family and facilitate the smooth transfer of your wealth to the next generation. People often avoid drawing up a will because they don’t like to think about death, or they don’t want to make decisions about beneficiaries. The consequences of dying without a will (called dying intestate) may result in assets being divided in a manner contrary to your wishes.

  6. Consider gifts to the youngest generations that will have the most impact … The instant gratification of toys or clothes are certainly appreciated by children and grandchildren; however a gift that goes toward post-secondary education will have the greatest long-term impact. Making contributions into an RESP allows the funds to grow on a tax-deferred basis. According to the Canadian University Survey Consortium, Canadian post-secondary students graduate with an average student debt of $27,000. With these costs in mind, education planning should be an important component of your overall family wealth management plan.

  7. Make your savings automatic … Using automated savings forces you to follow through, as the cash is drawn directly from your bank before you can get your hands on it. As we often like to remind clients, “savers win” on the path towards retirement and an automated process is the most effective way to save.

  8. Read a financial book or newspaper section … If you’re informed about finances and retirement planning, you can make better decisions with your money. Should you wish to read a retirement/finance related book, we have several recommendations. Among our all-time favorites are “Get Smarter” by Seymour Schulich and “A Random Walk Down Wall Street” by Burton Malkiel     

  9. Create a budget … It’s always prudent to know where your money is going if you want to have a handle on your finances. Budgeting and financial planning isn’t entirely about restricting where you spend money and cutting out all the fun … It’s really about understanding: 1) How much money you have, 2) Where it goes, 3) Planning how to best allocate your funds, and 4) Identifying goals and needs to set the stage for life’s milestones such as buying a home or preparing for retirement. Most banks have free budgeting tools embedded in their online banking sites and there are many budgeting apps available for your smartphone.

  10. Solidify financial relationships … It is important to develop relationships with professionals who can improve your financial well-being. A good accountant can help you save money. Insurance and estate professionals can ensure your assets are protected in life and when you pass away. A banker or lending specialist can help with loans when you really need them and a lawyer can make sure your personal affairs are in order. We can help you identify the necessary professionals if required.

Tax Slip Overview and Schedule
To help simplify your tax-preparation efforts, attached is a Tax Slip Overview and Schedule, which provides a brief overview of tax slips, supporting documents you may receive from BMO Nesbitt Burns and their expected mailing dates. Remember, it’s important to ensure you receive all required tax slips before preparing your tax return to prevent having to file an amendment (T1-ADJ form) to amend your tax return. As a reminder, the deadline for most people to file your 2016 personal tax return is May 1, 2017 (extended to May 1 since April 30 falls on a Sunday).
New client Statements Starting in 2017
Since 2013, the Canadian financial industry has been implementing a number of best practices that will, once completed at the end of 2016, provide investors with enhanced disclosure with respect to:

  • the fees they pay,

  • the investments they hold, and

  • the performance of their account(s).

These enhancements are a result of a regulatory program known as the Client Relationship Model (CRM). Modelled after the Ontario Securities Commission’s 2004 concept paper, Fair Dealing Model, CRM was officially put into practice as a response to the 2008 global financial crisis. The crisis highlighted the need for the industry to provide investors with additional disclosures and greater transparency with respect to their investments. As a result, when fully implemented, CRM provides the disclosure necessary to maintain and build trust among investors.
Your December 2016 statement, which you will receive in late January of 2017, will include a summary of fees, charges and commissions associated with your investment accounts. Should you have any questions about this information on your statement, contact us with any questions.
The McCreath Group Market Overview
As formulated from multiple sources including BMO Nesbitt Burns’ Portfolio Advisory Team
Looking out to the first half of 2017, we favor stocks and continue to believe that equities hold better relative value than fixed income. With most indices at or near record highs, stocks no longer have the margin of safety they did five years ago, yet we still see pockets of value. We believe pullbacks should be used as an opportunity to add to high-quality stocks that pay dividends. Perhaps our clients tire of the rhetoric; we believe your principle investment objective is to build a well-diversified portfolio of investments that pays enough income to replace the income one receives while working. 
We continue to rely on the immense work our research team provides us on a daily basis. Whether clients are aware or not, this group of BMO research experts plays a significant role helping us assist our clients. Among these professionals is Chief Investment Strategist Brian Belski (you may have seen him on BNN or CNBC).
From his most recent 2017 Market Outlook report, Brian and his team stated ``there is a very good chance that the year of surprises that 2016 represented will likely roll over into 2017. After all, investors have been climbing the wall of worry for eight years and counting. Doubt, fear, and rushes to judgement have been trying to diagnose the end of the bull market since it began. Sound familiar to something else? In other words, chances are the same type of wall of worry applies to President-elect Trump as well, perhaps figuratively and literally … the goal of Mr. Trump and the platform is to bring back confidence, restore growth, and get the engine of consumption going again.
Along this vein, in mid-December President-Elect Donald Trump nominated activist investor Carl Icahn as advisor on regulatory reform. “Under President Obama, America’s business owners have been crippled by over US$1 trillion in new regulations and over 750 billion hours dealing with paperwork," Icahn says. As time passes under the new American administration, we’ll be able to take full measure of their ability to underpin American confidence and perhaps unshackle GDP economic growth from its prolonged position hovering near 2%. We believe the United States is set to enjoy a more pro-growth, pro-business government agenda under President Trump. Tax cuts are ahead and the regulatory environment should improve. As always, our bias is optimism.
This same optimistic outlook that has perpetually allowed us to support our clients to reach their financial goals, but can our investment advice make a real and tangible difference in your financial future? It’s an important question for any investor to ask themselves. According to a survey completed for the Investment Funds Institute of Canadian in 2012, a household that has worked with a financial advisor for 15 or more years has 2.73 times more assets than households not using a financial advisor. The report provided new evidence that:

  1. Advice has a positive and significant impact on financial assets after factoring out the influence of close to 50 socio-economic, demographic and attitudinal variables that also affect individual financial assets

  2. The positive effect of advice on wealth accumulation cannot be explained by asset performance alone: the greater savings discipline acquired through advice plays an important role;

  3. Advice positively impacts retirement readiness, even after factoring out the impact of a myriad of other variables; and

  4. Having advice is an important contributor to levels of trust, satisfaction and confidence in financial advisors—a strong indicator of value.

Why do we share this information with you? Because we think advice matters – particularly informed, composed (it never pays to panic) and comprehensive advice. As Scott so often tells clients, to achieve one’s goals in life, “people need a good doctor, lawyer, accountant and investment advisor.” When do these professionals earn their keep? Most often, it’s when a crisis arises.
Thankfully, the most recent perceived crisis concerning a downdraft from US election results never materialized to the extent the media and pundits predicted. In speaking with clients, we kept our focus on retaining high-quality positons while avoiding attempts to time the market (our topic of discussion in our November client newsletter in advance of the election). We look forward to helping you as a new calendar year unfolds.
Thank you for being clients ... and please contact us any time with questions, concerns or feedback ... The McCreath Group … (403) 261-9552