Cindy Nagassar

How many of us would consciously leave our front door unlocked when we leave home? Or not lock your car and leave valuables in plain sight? Of course none of us would deliberately do that. There is a fancy phrase to cover how careful we are with our actions to avoid loss. It is called risk mitigation.

When investors think of risk the first thing that comes to mind is the stock market’s volatility. However, there are other risks that exist but don’t make the headlines. That is until a major catastrophic event occurs, which is costly in terms of lives lost, damage to the planet, and monetary loss.

Remember the Deepwater Horizon explosion and oil spill in the Gulf of Mexico? And the fatal fire in a Bangladeshi clothing factory?

More and more institutional and individual investors are wanting to invest where their money will make a positive difference anywhere on the planet. In the past these motives were termed socially responsible investing or ethical investing. But somehow, especially in Western Canada that term has become a moldy pigeonhole. Mention socially responsible Investing to people and they immediately equate it with the green movement or as being anti fossil fuel, before their eyes glaze over and they say “Oh no not another tree hugger!”

The correct more accurate term would be sustainable or responsible investing. And sustainable investing has a very broad universe of companies to consider. It would only exclude tobacco and arms manufacturing.

Sustainable investing acknowledges that the world has a finite amount of non-renewable resources and that the world’s population continues to grow. By 2030 which is less than a generation away, 50% more food and energy and 30% more fresh water will be needed.(1)

Investment companies that participate in sustainable investing know that resource optimization will be a key factor in handling this increased need. Resource optimization has many facets and encompasses many industries. Maybe you wouldn’t think that food packaging and agriculture are part of responsible investing. What about potable water management or pollution control?

Responsible investment companies focus on governance and initiating dialogue with companies to influence their corporate policies. Here are 2 Canadian examples of a sustainable investment company’s shareholder engagement in action:
Working with CN Rail to improve their safety record after rail disasters in 2005. CN now includes safety measures in metrics for executive compensation and has a chief safety officer. Their environmental, social and governance(ESG) measures also influence executive pay.

Shareholder engagement with Goldcorp led to the company voluntarily increasing royalties at their mine in Guatemala and committing to respecting traditions of the indigenous people through their human rights policy.

In 2013 a major sustainable investment company had 47 dialogues with companies of which 33 had positive outcomes.(2)

Sustainable investing is risk mitigation in action. Just as you lock your front door or put your valuables In the trunk of your care, companies take similar risk mitigation actions.  Corporations are now realizing that good environmental and social governance positively affects their profit. Social media has helped the individual investor have greater influence though both their purchases at the retail level and through investing. Responsible or sustainable investing does not sacrifice rates of return, in fact it can add to returns.

The majority of citizens don’t want their purchases or consumption to be to the detrimentof others or the planet. Also our children will inherit the planet one day, we would want them to know we did our best to be good stewards of the earth they will inherit.

(1) www.populationinstitute.org/external/files/reports/The_Perfect_Storm_Scenario_for_2030.pdf
(2) ENG_NEI Ethical Funds SRI Brochure.pdf

There are 2 key components to achieve financial success. The first is delayed gratification. Do you remember the Stanford experiment where a child was left alone in a room with a marshmallow for 15 minutes? They were told that if they waited to eat it they would get another marshmallow when the adult returned. All the children who took part in the experiment were tracked into adulthood and the ones who waited for the 2nd treat were higher achievers in many areas.

However, I have blogged enough on self discipline. I would like to discuss the second factor in financial success which is control over your investments.
This blog post was prompted by recent discussion in the media about pension plans but the final kicker was when a prospective client showed me his latest pension statement.

In the past the 3 pillars of retirement planning were personal savings(RRSP etc.), pension plans, and government benefits. Not only do fewer citizens belong to a pension plan, governments are seeing the looming amount of retirees on the horizon and wondering if they will be able to cope.

A person only has full control over his or her personal savings. With financial circumstances of the past 9 years pension plans are declining from their previous gold untouchable standard. I have blogged about this in the past. Low interest rates are one factor that is negatively impacting pension plan returns. Low interest rates may mean that pension managers need to re-evaluate their investments in order to make the return needed to provide monthly benefits. Yet at the same time the plan’s mandate is conservative. An unfunded liability in a pension plan is the amount that the plan would fall short in being able to pay the benefits for their members. The plan that the prospective client showed me had an unfunded liability of 62.88% and clearly stated that they would fall short of meeting their obligations to their members. As a retiree how would you feel if you were told that your benefits would be lowered or eliminated?

A healthy pension plan would have an unfunded liability in the 10% range. In other words, the plan can meet at least 90% of its obligations. A smaller shortfall can be made up with special payments or asking plan members to pay more. I have clients whose payments are around 10% of their paycheque, which impacts their ability to meet monthly expenses. Keep in mind, as a member of a pension plan your contributions are not just for your future benefits but help the plan pay present and future retirees.

The status quo thinking that we must rethink is that defined benefit pension plans are disappearing, defined benefits plans are not guaranteed, and the risk of NOT commuting a plan when you leave a job is high especially if you are under 40 years old.

Contrast that with your personal savings which in our financial professional relationship can be rebalanced, with advice relevant to your particular financial goals.

I have also been asked if buying back pensionable time is a good idea. I would say a good rule of thumb is that the younger you are the less that is a good idea. But there are calculations that would prove that as every situation is different. The amount of money needed to buy back pensionable time could be better used to pay off debt or increase your own personal investments, because in the end a pension plan is only a promise, a contract that can be changed and not a guarantee.

Late last week the weather finally gave me a chance to do a quick grocery run before meeting a client for lunch. On my list at the warehouse store were the big containers of cashews for my husband. I was astounded to see that the price had gone up again to one penny less than $25. I had started buying them at $19. I didn’t have a lot of time to ruminate, but I decided my husband will have to pick another favorite nut. (He hates spending money even on himself).

I then headed over to the nearby housewares and clothing store to find my favorite chips that are only sold there. I lucked in because the store also had the breadboard I had wanted for a while. Trouble is there was a very long line at the cash. I waited impatiently while they kept calling for more cashiers. No one showed up, and I was weighing how much I really wanted those 2 items, versus speeding over to my lunch date and being stressed out when I got there. In the end I decided they were not worth keeping my client waiting. With only a few regrets I abandoned the slow moving line.

Statistics Canada recently released the numbers for 2015 on how Canadians spend their money on goods and services.

The average for the country was $60,000 and change. More surprising was that Western Canadians spend more with Alberta leading the way at $76,535. This was reported in the news, and even my dad remarked upon that number. He was very surprised that spending could be so high. Of course the question is: How much does an individual or family have to EARN to SPEND that amount?

It is always a worthwhile exercise to see where you spend your money. And that exercise can be an eye opener. Statistics Canada noted that housing was 29% of that total with transportation costs next at 19% and then food at 14%. Again Albertans were the highest spenders in the food category.

Statistics Canada also reported on medical and communication costs. Not surprisingly seniors spent the most on health care.

When you add up the percentages of the categories that were reported on, it comes to approximately 70%. Therefore 30% of spending(like the breadboard and chips) does not fall into the above categories. Also spending on goods and services does not include taxes, pension contributions, life and EI premiums, and donations.

 
Some of my clients do very well at tracking their spending, for example by using spreadsheets. If you feel the task too be insurmountable consider the following:
Instead of tackling your budget as a whole why not focus on one category? For example one month you bring your lunch to work 90% of the days and eat out only 10%. Or stop buying a coffee on the way to work.

Other categories that could be examined are subscription costs such as Netflix, or the gym. Bank fees are another sore spot. All these are items that clients have mentioned to me.

Statistics Canada also reported that spending increased 2.5% in a year. That coupled with the increased medical costs for seniors tells you why you must strive for financial independence when you stop working.

Future blog posts will discuss risk mitigation and the definitions of ‘retirement’.

http://www.statcan.gc.ca/daily-quotidien/170127/dq170127a-eng.htm

I am going to depart from my informal rule of not commenting on the market. In part I have this rule because many other financial articles focus on that aspect of finances. Research has proven that investor behavior contributes more to long term financial success than this or that financial product.

Recent stock market activity and geopolitical events have caused me to feel my professional responsibility to you more acutely than before. It is my hope that the financial community has taken some lessons from the financial crisis of 2008, which for some seems a distant memory.

How the mainstream media reports hardly varies at all. When I read the headlines I think “Been there done that!’ At my age I am allowed to say that! We all know that the goal of mainstream media is to generate news that grabs the most eyes and clicks. For the last several months I have been diligently gathering information that does not get widely reported. After all, my responsibility to you is to give you the maximum amount of opportunities for your future success. What you do with those opportunities is up to you.

The last few years have produced a false sense of security among investors. First of all borrowing money is cheap. This cheap borrowing has caused people to take on too much debt. Even the government has noticed this trend and has taken recent measures to curb the housing market. I have said it before but it bears repeating: When the interest rates increase on your debts INCLUDING your mortgage will you still be able to make the monthly payments?

The stock market in the last few months has risen, and the reporting of that increase is very enthusiastic, such as when a certain milestone was reached. Much of this enthusiasm is based on assumptions of what will happen when the new administration in the US actually implements fiscal or monetary policy. So the increase in the stock market’s value being based on what may happen in the future is pure speculation, not founded on anything concrete such as profits, or earnings reports for example. And a few very brave investment professionals have stated that the path to more meaningful growth is to address income inequality. Millions of middle income earners having the ability to save and spend more will have a more positive effect on growth than other measures.

The excited headlines have made me very cautious and I have been evaluating your portfolios to see if it is time to rebalance. Your long term rate of return is more dependent on preservation of gains than chasing high returns.

The stock market is cyclical and will revert to its mean value at undetermined intervals. The current bull market (which is defined as a market that is increasing in value), is approaching senior citizen territory. Personally, I would rather give up the opportunity to have a higher gain and exercise prudence when others are too keen. May I stress that no one can predict the future movement of the stock market, either in months or years. But it does no good that hindsight is always 20/20, and that human nature is quite predictable.

Next blog post will discuss your financial particulars that you CAN control.

I have heard this sentence many times, which doesn’t vary much during client meetings. “I know that document you need to look at is in a box/pile/that room/somewhere.” If I have not prepared the client ahead of time off they will then go to find the required paperwork.

Financial planning involves looking at all aspects of your financial situation, because the interconnectedness impacts your ability to achieve your future goals. If while looking for that required document that helps clients own that truth then it is time well spent.

Organization of financial paperwork is the #1 pain point for clients. It is in part due to how busy we are in our lives and of course the not inevitable procrastination.

Believe me it is easy to procrastinate on the organization of documents and only deal with it at a specific time, such as when I show up, or tax time, or when the bank asks for it. But serious life events happen at unexpected times. You do not want to be hunting down your papers during a time of severe stress.

The only reason the task of organizing your financial documents is so gruesome is that people let it pile up! They have far too much paperwork!

So here is a short how to stay organized list which in turn will give you peace of mind.

First off storage: I recommend a 2 drawer filing cabinet. I can see the puzzled look on some of my younger clients’ faces. Somewhat akin to the chequebook, filing cabinets could be considered relics from the dinosaur era. An accordion file folder is a poor substitute, mainly because it can be misplaced. But choose one or the other.

I recommend a 3 ring binder for your tax returns. Binder? Is that even a thing anymore?

So here are the only documents you should be storing. And don’t forget in this digital age Evernote and Dropbox can be a big help.
1. 6 years’ worth of tax returns and 10 years of tax assessments.
2. 6 months to 1 year of bank statements. (Some banks are forcing you to go digital)
3. 1 year of investments statements for each account. RRSP TFSA RESP etc. Note I can always get documents from past years.
4. Insurance policies, life, car, house. Especially important when you need to make a claim (see above regarding unexpected life events.)
5. Benefit handbooks for your CURRENT employment, medical, dental, short term disability.
6. Receipts for tax filing, such as medical expenses, child care, or tuition.

Twice a year AMA has their FREE shredding event. After you have performed your purge take the unwanted documents to be securely shredded if you do not own a shredder already.

Also I know the beginning of this task can seem so dreadful that you put it off in favor of a more fun activity such as vacuuming or washing your car. Why not get started by saying you will start sorting and banishing for a half hour? And a half hour next week. Don’t be like someone I know well who leaves all his ironing for one day in a year and irons for 8 hours straight then complains he doesn’t like ironing. Get started but also be good to yourself!

January is the month when you are thinking about your financial situation more than any other time during the year. But,  as the same cousin who visited me mentioned, it is easy to procrastinate on doing even important financial tasks. Even items that have deadlines get put off.

Of course we feel guilty when we ignore the to do list. But that guilt is apparently not enough motivation to make progress.

The only way the cycle of procrastination will be broken is to take on a new perspective.

Here are concrete steps to help you overcome the fear of positive change.
First: Reflect on how you feel about procrastinating in the present, then think about how you will feel when the task is complete in the future. Ask yourself which is preferable?

Second: Write out a step by step action plan. More importantly focus on the first step. Ask yourself exactly how long it would take to do only the first step. This is where I find I can overcome my procrastination. For some reason, the dreaded task is like the monster in the closet, growing bigger and bigger in my mind, the more I dwell in inaction. However, if I think rationally, the task really would only take a half hour, which is a lot less time than I spent agonizing in procrastination. Organizing my expenses for my tax return is a good example.

Third set yourself a deadline so you won’t be ripping out your hair 2 minutes to midnight on the night before the official deadline.

Ok I know even these 3 steps might not help the most hardened procrastinator.

Four: If you truly cannot or will not start the task, tell yourself that you will do only step 1 for a set amount of time, say an hour. For me I find this works well for ironing because I detest ironing. So I tell myself I will iron for 15 minutes or at least get 3 items ironed. Contrast that with someone I know well who only irons once a year for 8 hours then complains how much he hates ironing.

Five: Reward yourself with each step completed, a glass of wine, bag of chips or tickets to the symphony. It is important to tell yourself ‘well done’ for each successful completion. You don’t need permission from me to be nice to yourself.

Next blog post will discuss the #1 pain moment for clients and how to manage it.

On a semi regular basis a few family members, a friend and I meet for art sessions. The others are skilled painters and artists, unfortunately for me painting is not my forte. I’d rather express my creativity by putting pieces together to make a sum bigger than its parts, be it wrapping paper photos etc. Plus I love fixing things. I enjoy getting broken parts with the glue, tape, pliers, or nails and getting it to work again or restoring it to the original condition. Hmmm do you detect a pattern here?

Over the Christmas holidays my cousin who lives in the US came to visit. She is part of a blended family. We spent a lot of enjoyable time catching up, and the conversation turned to financial topics. Her financial situation is more complex than most people. She is not one of my clients. She expressed concern because she didn’t want me to advise her for free.

This is not the first time I have encountered that same respect for my knowledge and I find it validating. But presently I would insist that no one pay me directly to be able to access my experience and knowledge. Should I have the same perspective of my time doctors or lawyers do?

Contrast this with a client I rarely see, in part because this person is very hard to contact, via any media. On the occasions this person does communicate or we meet, there is little acceptance of my guidance.

I know my advice and recommendations can be valuable for 2 reasons: First I have seen the results when a family or couple are engaged and accept my expertise. The peace of mind they gain is priceless. Secondly many clients tell me so! And believe me, that is more motivating than getting paid!

Do you know how a profession is different from other careers? Professions among other characteristics have specialized knowledge, a code of ethics and very importantly the profession’s actions must benefit society. The Financial Planning Standards Council which governs the Certified Financial Planning designation wants people to understand that CFPs are professionals. In 2001 when I passed the CFP exam the pass rate was 44%. And the learning is ongoing.

Managing your finances is not one of the most fun adult skills, as many people have told me. That is why when clients progress because of our professional relationship it is gratifying. It makes all the stress, continuing education, constantly increasing regulation, and refining of my communication skills worthwhile.

January is the beginning of a new year with unlimited potential. This blog post will both look forward and also reflect back on important milestones that may interest you.

First off, your 2016 year end statement will have a lot more information on it about your cost to invest and performance reporting. I look forward to discussing this at our next in person meeting. Of course you don’t have to wait, feel free to contact me anytime.

So what has changed in the 18 years since I got my first qualifications to work in the financial services profession? I thought it might be useful to take a look back.

 
My entry into the profession coincided with the dawn of the internet. When I first started the only modes of communication were landline phones, fax and regular mail. Cell phones and email were in their infancy. Fast forward to 2017 and there are 7 possible ways for you to reach me.

Has the proliferation of social media meant we have become more effective communicators? Sometimes I think not. A lot of people only have cell phones and never answer them when it rings. Some people do not check their voice mail. Apparently email is becoming old fashioned and easily ignored. The disappearance of landlines has created dilemmas for me such as if wife and husband only have cell phones who do I call?

The internet has created the democratization of specialized knowledge. The amount of information that is easily accessible has proliferated exponentially. And the speed of conveyance of this massive amount of data is incredible.

Has that meant that society’s citizens have become better informed? Or that we make better decisions? Unfortunately not. Sure there is a lot of information out there, but how much of it is relevant to you, unbiased, and most importantly TRUE?

Regulations and benefits in the tax and financial fields change rapidly. I don’t blame wage earners for feeling overwhelmed. I know that a lot of my value to you as your financial professional is to present to you the information that will help you reach your financial goals. I know that how I advise clients has changed over the years. One tenet holds true throughout all the changes. It is not the financial product that will get you to your goals, it is your own dedication, behavior, and habits that will help or hinder you. I am here as your objective third party accountability partner, that will walk with you on your life’s journey.

Hi everyone and welcome to 2017! Hope you all had both a restful and fun holiday time.

I am fortunate to live close to Symons Valley Ranch, where the farmer’s market is located. This year they had live reindeer on display, and a chance to get your picture taken with one. Don’t ask me how they chose which reindeer had to be patient enough to get his or her picture taken with a lineup of people.

Before I went I had decided the maximum price I would be willing to pay, as a reindeer photo definitely falls into the category of want not need. When I got there the photo price was at the top end of what I considered acceptable to spend. Plus there was a lineup. I decided I wouldn’t wait in line.

I did unexpectedly spend the photo money because there was Alberta produce for sale. Apparently there are 3 greenhouses in Alberta that are open in the winter. I left feeling satisfied that I got some fantastic fresh produce and that I supported a small business.

Along the same train of thought, my cell phone is 3 years old. It is slightly slower than when I first bought it and there is some wear and tear. But it works well. My son in law keeps telling me I should replace it with a new model. And for the last 3 months I have been receiving offers to buy a new unlocked phone at what I consider reasonable prices. To top it all off I did get to actually see the newest model of the phone I want to buy, because one of my clients owns one.

So have I bitten? Not yet. Believe me I am very tempted! Part of the reasoning being that when my phone dies I would not be able to go for more than a few days without one, despite people being able to reach me at least 5 other ways. But I cannot justify spending hundreds of dollars when I don’t absolutely need to.

I recount these 2 stories because it always pays to evaluate one’s spending and saving habits. Sure I might hold on to the purse strings a little too tightly. But self employment offers less security than being an employee.  Also advertising and marketing place a great emphasis on trying to get people to buy new and more STUFF, which is bad for both the planet and my wallet. Every wage earner needs to evaluate their financial goals and how their habits either positively or negatively influence their future financial independence. I am here to be your sounding board on those reflections. Remember those 2 words financial independence, as I will be discussing them in more detail in another blog post.

Canadians have been conditioned to believe that headlines in the media are the important news, but often that is untrue. Part of my value to you is to present the really impactful truths that are underreported.

If you remember in January 2014, I wrote about the potential problems with pension benefits, titled The Chocolate Santa, a Benefit with a Hollow Centre. Some jurisdictions in the US have had to choose between turning on the street lights or scaling back retirees’ benefits. Or seeing the company go bankrupt or reducing pension payments. Imagine being a senior citizen whose will lose a third to a half of your pension benefit. How would you feel?

Don’t look now but that scenario could play out in Canada.

Bill C 27 was introduced very quietly in Parliament. I had a read through it and was disturbed. I wish they would write plain English. It proposes to decrease the legal obligation of federally regulated employers to provide pension benefits, for future, present and past employees.

Defined benefit plans as I mentioned before are very expensive. This is the topic that led to the latest Canada Post threat of job action and lockout. Employers prefer defined contribution plans where the employee assumes the investment risk. Now further, target date plans are being proposed. Even worse for employees close to retirement, the legislation proposes that employers be allowed to substitute an annuity for the pension benefit. The employer has thus relieved themselves of the majority of the responsibility for the future of the retiree.

Canadians need to do more than hope this doesn’t become law. MPs, the Minister of Finance, and the Prime Minister need to know Canadians are displeased. There should be no complacency here, because already 1 province has taken steps to reduce pension obligations of employers. New Brunswick is experiencing class action lawsuits and constitutional challenges because of its legislation. Alberta and BC have started introducing target benefit pension plans.

I mentioned before that anyone under 45 should not assume if they have a pension plan that it will automatically be a part of their retirement plan. Even older workers who lose their job should seriously consider choosing the option of a Locked In Retirement Account(LIRA), as some of my clients have wisely done.Then it is YOUR money and not just a future promise on a piece of paper.

One very important factor in reaching financial success is control over your investments. As we work together you will achieve your goals. A piece of paper that makes a promise for the future might now become something you won’t be taking to the bank.