Their Situation
David is a 45 year old business owner. Tara 41, works for a small consulting firm. They have the following in their portfolio:
$152,000 with TD Bank
$187,000 with a bank owned brokerage firm
$75,000 with CI Mutual Funds
Tara has a small pension plan at work and RRSPs of $30,000 with TD Bank. They have $350,000 in a non-registered account.
Concerns
- Unsure of how they are doing and whether they are on track for their retirement goals
- Would like one point of contact for their investments and proactive advice
- Tried to do it themselves, but now would like to hire someone to help them manage their money.
Our Solution
We started with a detailed retirement plan in which we defined their optimum asset allocation, factored in their current holdings projected a rate of return, inflation, frequency of deposits and reliance on CPP and OAS. The results of our Portfolio Analysis determined that despite dealing with several financial institutions, there was surprisingly little diversification. As well, they had not optimally structured their portfolio allocations. Perhaps most noticeably, they were not in a fee based portfolio and were paying high commission rates and were not able to deduct any invest advisory fees.
We arranged to consolidate their holdings into a well balanced portfolio consistent with their financial goals.
We also recommended that David make his future RRSP contributions to a Spousal RRSP, set up Tax free savings accounts (TFSA) and switched their investments to a fee based portfolio.
They feel much more in control of their investments after implementing our recommendations. They have greater piece of mind, knowing that they will be able to retire with their desired income level and now receive regular reports and have a detailed retirement plan to refer to. They can quickly tell how they are doing without going through mountains of paperwork.
Benefits
Our analysis determined that they will save thousands of dollars in tax by having more of their retirement income taxed in Tara’s hands. The TFSA allows them to not pay any tax on the growth or withdrawal of funds within this plan and the fee based portfolio, waives all commissions and may allow them to deduct a portion of their investment advisory fees, providing approx $3875 per year in tax deductions.
In addition to reducing the volatility of their holdings, the financial plan allowed us to implement a strategy that will allow them to retire earlier.
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.
