FINANCIAL PLANNING - KentCoulter.com

Financial Planning

Investment Planning

The four main risks associated with building a portfolio include:

Market Fluctuations and Default Risk
Taxation
Inflation
Currency Risk

Constructing a portfolio to guard against all four major risks will protect and increase the purchasing power of your overall portfolio. The best way to guard against all of the above risk factors is diversification using the different asset classes:

Cash	Short-term savings
Government Guaranteed	Federal/Provincial Bonds & GIC's
High Income	Equity based income securities
Canadian Equity	Ownership in Canadian companies
Global Equity	Ownership in International companies
Alternative Investments	Investments which look to achieve reasonable returns regardless to what direction the stock or bond markets are heading

By purchasing securities of different issuers within each asset class we can minimize the impact of an adverse move or default.
Click here to view our Risk Chart and see the relationship between risk and return for various types of investments.

There are three types of income available to an investor:

1.     Interest
2.     Dividends
3.     Capital Gains

Dividends of Canadian corporations and capital gains are taxed at lower levels than interest income. Therefore, in taxable accounts, investments that provide dividend income and capital gains instead of interest income represent the most tax efficient option. Ex. 2006 Marginal Tax Rates in Alberta for:

Salary & Interest 39%
Dividends 17%
Capital Gains 19.5%

(This is for the highest tax bracket, over $118,285)

An increase in the cost of goods and services over time is referred to as inflation. Certain investments, like real estate or gold, are considered to be hedges against inflation. Equity investments offer the potential to increase the purchasing power of a portfolio since they are expected to grow at a rate faster than inflation.

Currency risk is important because a drop in the value of the Canadian dollar means that the amount of foreign goods that may be purchased for that same Canadian dollar have also dropped. The best hedge against this risk is to own securities that are denominated in other currencies. In addition to providing a hedge against currency risk, foreign investments also provide a portfolio with more growth potential since the Canadian markets make up less than 3% of total global markets.

Taxation Planning

Private Health Services Plan (PHSP) is a tax-free benefit for employees of any small - medium sized business in Canada. Any business may deduct private health services plan (PHSP) payments made on behalf of employees and their dependents. To learn more please refer to: http://www.taxtips.ca/smallbusiness/phsp.htm

Donating Securities is now the most tax efficient way to make a charitable donation and a great way for donors to make a greater impact with their gift. Your donation must be of securities that are traded on a public market in Canada or the United States. This includes stocks, bonds, and mutual funds, but excludes shares in a private corporations and stock options. You will receive your tax receipt after your securities have been received in the chairity of your choice's brokerage account, and then subsequently valued based on closing bid price. Please note: according to the guidelines of the Canada Revenue Agency (CRA), the actual value of your donation for tax receipt purposes will be determined on the day that your donation is received in the charities brokerage account.

Flow-through share limited partnerships are something unique to Canadian investors. They consist of diversified holdings in Canadian resource companies that permit the tax advantages associated with Canadian exploration activity to be passed through to shareholders. Investors can then use the tax credits and deductions to shelter income earned from other sources.

The leading advantages offered by limited partnerships are:

Reducing taxable income
Taking advantage of capital losses and carry-forwards
Improving tax-efficiency of charitable donations and RSP contributions
Avoiding OAS claw-backs
Using the capital gain towards a capital loss in a corporation

To see how Flow-through Share Limited Partnerships can be used in tax planning, click here.

Information Provided by:

Tim Cestnick enjoys a reputation as one of Canada’s most respected experts and public speakers in the area of tax and personal finance. Widely recognized for his in-depth knowledge, dynamic speaking style, common sense approach and extensive national media exposure, Tim successfully combines business experience, professional credentials and a unique sense of humor to entertain and inform his many audiences.

To access Tim’s articles on Tax Planning and Personal Finance click here.

For a wealth of Canadian taxation and financial information, including effective tax planning advice, check out TaxTips.

Tax Free Savings Accounts are a new way to save and invest for the future. Introduced by the Federal Government and beginning in January of 2009, the TFSA allows your savings and investments to grow tax free.

To see how Tax Free Savings Accounts can benefit you, click here.

For additional information on the TFSA including details in regards to eligibility, benefits, contributions, administration, and how to open an account click on Frequently Asked Questions.

Note: Tax Free Savings Accounts can be now be opened at Canaccord, however contributions and other transactions will only be permitted by the Canada Revenue Agency on or after January 2, 2009.

TFSA vs. RRSP: How should you save?

Retirement Planning

Individual Pension Plans are quickly becoming the retirement savings plan of choice for executives, business owners and incorporated professionals. An Individual Pension Plan or IPP is a defined benefit registered pension plan established for the benefit of a single person - you. The IPP can be funded by employer and employee contributions or fully funded by the employer.
The most significant advantage of an IPP is the allowable contribution limit, which is generally higher than the contribution limits available under an RRSP. This enables the plan beneficiary to accumulate a significantly larger pool of retirement savings than would otherwise be accumulated using an RRSP. If you are over the age of 40, have an annual income of $100,000 or more and anticipate retiring with your current employer, contact us to see if the IPP option is right for you.

To access a Canccord's IPP brochure click here.

Planning Ahead: Retirement Income Alternatives

Accessing your Assets: RSP Maturity Options

If you would like to receive a RRSP projection, please click here.

Education Planning

Information on Registered Education Savings Plans (RESP's)

National Post article on the Goals of a RESP

If you would like to receive a RESP projection, please click here.

Wealth Management: The Big Picture

Where does an investment advisor fit into your financial plan? Click here to find out.

Does your investment strategy match your goals?
Click here to access a comprehensive questionnaire so you can make sure!