Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

Corporate class mutual fund structure still strong despite changes in Budget

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Som Seif

By Som Seif,  Purpose Investments

Special to the Financial Independence Hub

As many of you have already heard, in its most recent budget, the federal government announced plans to alter the structure of the corporate class model.

Starting in September, switching between corporate class series funds will become a taxable event: just like that of a traditional mutual fund trust.

While this decision will affect retail investors’ ability to compound wealth over the long term and will likely result in some mutual fund manufacturers electing to abandon the corporate class structure, it has very little impact on the true benefit of the structure.

Structure still has tax-efficient distribution yields

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Will fin-tech disrupt the asset-based model for dispensing financial advice?

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Cute RobotMy latest Financial Post blog reports on the Radius Exchange Traded Forum 2016 conference that began on Tuesday and continues Wednesday at the Design Exchange in Toronto.

You can find the full blog by clicking on this highlighted headline: Robo Advisers and ETFs prove it’s time for a new financial advice fee structure. 

That model, described before here at the Hub, consists of taking advantage of the scaling possibilities of so-called “fin tech” (financial technology) like robo advisers and the underlying ETF structures, and moving from an asset-based model based on a percentage of client wealth, and moving to a Netflix-like monthly subscription model.

Needless to say, not everyone in the established financial industry is thrilled by that prospect. To quote one of the experts cited, “Index funds are like garlic to vampires for Wall Street.”

How to liberate your RRSP losers

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Retro poster with the slogan Every Cloud has a Silver Lining, on crumpled paper background with sunburst effect. EPS10 vector formatMy latest Financial Post column looks at how to find a silver lining in the losing stocks in your RRSP. See If you’ve got losing stocks in your RRSP, now may be the time to set them free. It’s also in the Wednesday paper.

I have to admit this is a controversial topic and had I not been introduced to it by the unidentified advisor in the piece, it would never have occurred to me. (the firm’s compliance department didn’t want him identified)

Nonetheless, depending on your tax bracket and your desire to start “melting down” your RRSP or RRIF, it could make sense. See also last weekend’s Hub blog by Doug Dahmer, which provides further context to this particular strategy: Debt is more than a four-letter word during your drawdown years.

Bottom line is, and as Dahmer often says, one of the biggest expenses in retirement is tax. By paying a little more tax now than you have to — if you’re in a lower tax bracket — you may be able to avoid paying a lot more tax down the road, which can happen once you reach age 71 and are subject to annual forced RRIF withdrawals that are fully taxable.

Not intuitive, I realize, but as the Fram Filter folk say, “You can pay me now or you can pay me later. “

Review: The Procrastinator’s Guide to Retirement

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TPGTRI have to hand it to financial author David Trahair. He and his publishers have come up with a catchy title that’s bound to sell a few copies of his latest (sixth) book. It’s titled The Procrastinator’s Guide to Retirement and sports an equally alluring subtitle: How YOU can retire in 10 years or less.

You can find a Q&A I conducted with Trahair about the book here at MoneySense.ca.

When I perused the book initially, my first impression was that there seemed to be relatively little about procrastination and the critical last ten years of Retirement. The book doesn’t have an index but my initial perception was that the book is a standard-issue retirement guide covering all the good things you should do throughout your working career, not just the final ten years.

Which came first, the book or the title?

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Debt is more than a four-letter word during your drawdown years

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Doug Dahmer

By Doug Dahmer, Emeritus Financial Strategies

Special to the Financial Independence Hub

 The month of April is always a particularly busy time for Retirement Income Specialists. One of our key roles is to provide each of our clients with a year-by-year draw-down recipe: outlining how much and where to source their annual cash flow needs.

The ultimate goal is not to minimize the amount of income tax they pay on any given year, but instead to minimize the amount of tax they pay over the balance of their lives. (Please note these two goals are frequently confused, and seldom accomplished simultaneously as often you will need to pay more tax sooner in order to pay significantly more later.)

One of our many sources of insight for the guidance we provide is found within our clients’ annual tax returns. At the same time our clients’ previous year’s tax returns act much like a report card, keeping them informed as to how well we performed our role over the previous year, as we endeavor to accomplish this important long term goal.

Debt can more than offset taxes

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