Their Situation
Bruce is a 48 year old executive. Taylor 44, is a lawyer with a large downtown firm. Bruce earns $150,000 and Taylor earns $250,000 per year. They have two children.
They have the following:
• Bruce has RRSPs of $250,000 with one bank, one mutual fund company and an online discount brokerage
Taylor has RRSPs of $325,000 with 2 advisors and an online discount brokerage
Each have TFSAs worth approx $20,000 with the bank
• joint non registered account with a balance of approx. $450,000, comprised of an inheritance from Taylor’s family, invested through yet another advisor and some through an online discount brokerage
Their only debt is:
• $150,000 on a secured line of credit.
Goals
- Simplify their financial complexity, reduce the amount of paper and statements coming in and get a better handle on how they are doing.
- Get independent holistic financial advice and reduce the after tax cost of advisory fees.
- Felt after years of investing that they were no further ahead.
Our Solution
We performed a detailed portfolio analysis where we determined that even through their diworseification (too many holdings!) that they still had the same holdings in virtually every investment portfolio. As well they had too much in Canadian equity positions and not enough in fixed income or cash to potentially reduce market volatility. Lastly as many of the gains these days are coming from dividends, they had virtually no portfolios that paid out regular dividends.
We then consolidated their holdings, added in passive investments like ETFs and index based portfolios and some individual stocks.
We then did a macro correlation analysis to ensure that there was not too much overlap in their holdings, but there was enough diversification amongst holdings and asset classes.
We also recommended that they use some of their non registered portfolio to pay off their mortgage and top up the kid’s Registered Education Savings Plans and review and add to their current Life and Critical Illness insurance.
Benefits
After implementing our recommendation, Bruce and Taylor paid off their mortgage increasing their monthly cash flow.
With a regular consolidated quarterly statement and online access, they find it much easier to follow how they are doing and they feel much calmer and more in control of their financial situation,
We also significantly reduced their advisory fees as they no longer pay sales commission on every purchase or sale and their accountant advised them that the advisory fees on their non registered portfolio may be tax deductible, allowing them a deduction of approx $4,000 per year.
Imran Syed BA, CFP, CFSB, TEP is a Certified Financial Planner and the President of Brandenburg Capital Strategies. For these clients, various assumptions were used and a comprehensive financial plan was prepared and reviewed prior to implementation.
