Cindy Nagassar

The internet offers no lack of information on personal financial management, or finances in general. In fact the opposite is true, the amount of information is a daily deluge of facts, opinions, and some fiction.

Your conduit to the financial world is me as your financial planner. When you hire me I am there to sort through the information and present to you only what is true AND relevant to your situation.

As a financial planner I have access to the world of investments and those professionals who execute them. I often take my clients’ reflections, concerns, and questions to presentations, which creates opportunities to start a dialogue with fund managers. I have therefore, information not available to the general public. Clients will not find this knowledge from surfing the internet or talking to family, friends, or colleagues.

What am I hoping to get from the professionals? First, I want to be able to assess that the managers are careful investors. They must add value beyond following their particular index. If they are a bit contrarian or think creatively that is helpful. He or she must value integrity and speak honestly.

Here are some questions I might ask although they do vary from year to year. How do you preserve capital and protect investors’ money from risk? What takeaways do you have from 2008? Do you have a target sell price(how do they plan to take profits). Can you elaborate on your investment mandate?

What is a day in the life of an investment manager like? They are first and foremost decision makers. Each day they must be certain that the stocks, bonds and other investments they own are the best and will earn a return for their investors. Their team of researchers and analysts enable them to analyse data both at the broad economic level and the company level. They travel to visit and personally interview management of the companies they own or plan to buy. All managers have a serious responsibility both to their company and you and I. They usually invest their own money in the funds they manage.

The investment world is a part of financial planning because it is the vehicle where you can achieve your future financial goals.

Financial planning is a highly regulated profession. One common policy of the 3 licenses I hold is that I must only advise on topics that are covered by my licenses.
For example, I have a life insurance license. I therefore cannot advise on topics covered by an accident and sickness license, except in general terms. Before I successfully studied for the exempt market license, I could not advise on flow through shares, for example.
Some of my clients have alerted me to a disturbing trend. They have come to me to ask about ‘advice’ offered to them by their peers. “Is it true that RRSPs are bad?” “Do you have to take $2000/month out of your RRSPs when you retire?” They are correct to bring me those questions.
These statements are offered by non-licensed and therefore unqualified people. And many times these individuals have negative things to say but no solution as an alternative.
There is no lack of information on personal finances. The best question to ask is: How will I know what is relevant to my own personal situation? The opinions or ‘facts’ offered by the media and peers are generic generalizations. Some of the information may even be untrue.
Your best line of defence when unqualified people want to offer you advice, or you read articles in the media, is to say or think: I am glad I have an experienced, objective financial professional who can evaluate all the information, and together we can decide the relevant options for my future financial success.

Vandalizing money is a crime under Canadian law. Therefore you cannot draw a mustache on the Queen’s picture or set fire to a shiny new bill.

If I were to hand you a $20 bill and ask you to throw it in the trash with the baby’s dirty diapers and meat bones would you do it? How about for a $5 bill or a toonie?

Of course you would say no. Yet every day in my financial planning practice I see money being wasted, lost, or flying out of the client’s wallet.

Here is another question. When I say the words financial planning what comes to mind? The right investment? The newest financial product? Rate of return?

Those might be a part of financial planning but it is first and foremost about people. Then it is about communication. This was driven home to me again by a true situation.

Over 10 years ago a young couple wisely took out life insurance, because they were newly married, planning to start a family, and had financial obligations. They were both smokers so the premium was high.

Fast forward 10 years and time for renewal. At renewal the already high premium quadrupled. That is when they decided to contact their financial planner.

What makes this story important? 1 year after taking out the policy they quit smoking. That meant for 8 or more years they could have saved at least half of the life insurance premium, which was thousands of dollars. But their financial planner didn’t ask and they never told him.

My role in your financial life is to use my experience and expertise to further your financial success. It is a partnership, where communication is essential to your progress.

Some people don’t like the word budget, equating it to shackles on their desire to spend and enjoy life.

In my experience as a financial planner, I have observed that perspective may stem from being unable to fulfill an unrealistic budget objective.

There are 2 better paths to success:
1. Instead of restricting yourself to an arbitrary amount of monthly spending, it is more important to find out how and where you spend every month. Almost everyone would soon discover they spend more than they believed. Plastic money and advertising are the enemies of wise spending. Once you know how and where you spend it is easier to be wiser, especially if you have a financial goal you want to achieve.
2. Separate fixed expenses from discretionary expenses. Some expenses are the same amount every month such as mortgage or rent, insurances, cell phone or internet bills. Others you have more control over. If your discretionary expenses are bigger than your fixed expenses that could be cause for concern.

A simple budget with fewer categories will increase the chances of success. Creating an emergency fund should be part of any budget. If you cannot save for an emergency fund every month then save your tax refund or bonus for those large unexpected expenses.

Bottom line: How much do you want your future financial goal versus the pleasures of today?

CRM2: Sounds mysterious but it simply stands for Client Relationship Model 2. CRM2 was the regulatory organizations’ response to the 2008 financial crisis.

CRMII has mandated clear disclosure to investors. The process of CRM2 has already begun, and if it stays on schedule will be complete in mid 2016. The first stage is reporting on the cost to invest. Every purchase or switch in funds must disclose whether there is a cost involved on the investment statement.

The first stage of CRM2 also saw the introduction of the fund fact document, which replaced the tree unfriendly, unwieldy prospectus. The fund fact document is written in non technical language and helps investors compare costs and performance. Investors must receive the fund facts document within 2 days of a new purchase or switch into a fund.

Part of the cost of investing will also include details on how financial advisors get paid.

CRMII will also include clearer information on the rate of return of your investment. As your partner in your financial success, I will explain each new disclosure so at the end you are well informed of each aspect of the investment process. The premise of CRM2 is that an informed educated investor will be an investor that makes wise choices.

The title of this post was a recent client question. It is a timely question, and what follows will expand on the diagram.

The Canadian Securities Administrators(CSA) create policies which govern the investment industry in Canada. These policies are called National Instruments.(NI)

All provincial securities commissions belong to the CSA. In Alberta the Alberta Securities Commision(ASC) enforce the NI and oversees investment activity in Alberta.

The ASC delegates some responsibility to the Mutual Fund Dealers’ Association.(MFDA) The MFDA’s mandate is investor protection.

My dealer, Portfolio Stategies Corporation (PSC) ensures their advisors are compliant through the documentation that accompanies investment activity. This documentation ensures advisors make suitable recommendations that will increase clients’ opportunity for financial success.  PSC has  2 compliance officers who help advisors follow investment policy.

These 3 regulatory organizations, as well as the Alberta Insurance Council, and the Financial Planners Standards Council oversee my professional business.

This is a detailed answer to a relevant question.

The Tax Free Savings Account(TFSA) may have been deliberately misnamed.

The point of a TFSA is to invest as opposed to save. Do you know the crucial difference?

Growth within a TFSA is not taxed. Nor will you pay tax on any withdrawals from a TFSA. This is unlike a nonregistered or open account, where the growth and withdrawals are taxed.

Yet where do the majority of TFSA holders open an account? In bank savings accounts! In those accounts at today’s abnormally low interest rates you will not even make peanuts, You might make half a peanut as I told my niece. Putting your money in a TFSA that makes a marginal return is totally defeating the purpose of investing instead of saving.

I recently had a rather spirited discussion about how the Bank of Canada’s recent rate decrease would affect my clients. The  other party to the discussion was adamant that what was good for the macro economy would be good for the participants in that economy, namely you and I. But is that true?

When central banks tinker with interest rates their actions have been likened to a party host and the host’s punch bowl. If interest rates increase, it is as if the host says party over and takes away the punch bowl. But the Bank of Canada has in effect said party on! Have some more punch!

Canadians’ average debt to income ratio is HIGHER than US citizens’ were pre 2008. This is not sustainable. There are 2 ways that unsustainability can end: In a painful or pain free manner. Recall what happened to many US citizens after the financial crisis.

Taking on more debt should only be considered in the context of an individual or family’s long term plan. I am not sure if the Bank of Canada cares if you get tipsy but I do!