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.

Our values about money are changing and millennials are leading the evolution

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Jay Acharya

By Jay Acharya,  Capital One Canada

Special to the Financial Independence Hub

When my wife and I bought our house, it felt like a massive achievement for us as we had diligently saved our money for the down payment.  When we told people about it, they were full of questions about the neighbourhood, the kitchen and how many bedrooms there were.

We were so proud of ourselves for accomplishing this milestone that we eagerly shared pictures and every detail about our new home.  The funny thing is, no one asks you to tell them the story about how you saved up to buy the house in the first place.  That is where the real drama and the value of the conversation is – then again, you can’t take pictures of the restaurant meal you skipped or the stay-at-home vacation you took and post them on social media.

New car, new house, new clothes – the idea that owning bigger, more expensive things has traditionally been valued by our society as a symbol of status and accomplishment.  Now enter the millennials: the demographic that is challenging the status quo in many areas, including what we value.

Capital One Canada recently hosted the C1NDX, a consumer index roundtable and study that included six of Canada’s leading journalists and industry experts. With a specific focus on the impact of the sharing economy, we dove deep into how the financial values and spending habits of consumers have changed and are continuing to evolve.

We discovered that when it comes to how and why consumers spend their money, the values of many Canadians, particularly millennials, are shifting.

Experiences Are the New Luxury

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Q&A with North America’s first subscription-based Robo Adviser service

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Randy Cass, NestWealth.com

Jon Chevreau: Most robo advisers in North America seem to use a model of charging a fee based on assets. As one of Canada’s original robo-adviser services, NestWealth.com uses a quite different model, based on subscriptions, correct? One, I might add, that you say is also unique in all of North America?

Randy Cass: Nest Wealth’s members pay a flat monthly price for access to a customized portfolio and a dedicated portfolio manager. Our subscription model doesn’t incentivize or commission sales people based on how much of a product they sell. We’re enabling Canadians to sidestep high fees and outdated banking practices that take a percentage of everything they invest throughout their lives.

Nest Wealth’s subscriber community understands that our subscription service fundamentally challenges the model banks, and even newer robo-advisors, have used to charge investors. Not only are we able to deliver a proven investment service capable of saving Canadians up to half of their potential wealth, but we’re continuously improving that service by listening and adapting to our members’ needs. This is a transformational advantage of the subscription model, and it’s one important reason why we see so many industries adopting it as a revenue model.

JC: Is this unique, both in Canada and the US and rest of world?

RC: Nest Wealth is the first and only subscription-based investing service that handles everything from end to end. Investors of all ages can subscribe to our service for $20 a month — less than the cost of a gym membership. And their subscription is capped at $80 no matter how much their assets grow overtime. We want to help Canadians do the math and recognize that our low, flat subscription payment can leave them with 100 per cent more savings than a traditional fee structure that charges based on assets.

The good news is we’re witnessing a clear shift in how Canadians want to pay for and access financial services. A new report by business consultancy EY says that the adoption of fintech services among Canadians will triple over the next 12 months. The report also shows that although consumers trust technology, they still lack awareness of its benefits. We are passionately committed to helping consumers understand and seek out a better way to build wealth. Broader awareness and education will lead to more informed choices about how families plan for their future. There’s quite a bit at stake here.

JC: Where did you get the idea in the first place?

RC: The ‘Aha’ moment came when I was watching Netflix with my youngest son and I recognized that the principles of subscription services like Netflix, Spotify, Salesforce and Zipcar were much more in line with how investors needed to be treated than the status quo.

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Tax Changes for 2016

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Aaron Schechter
Aaron Schechter

By Aaron Schechter, CPA, CA, TEP – Crowe Soberman LLP

Special to the Financial Independence Hub

In the Aesop fable of “The Ant and the Grasshopper,” a hungry grasshopper is refused food by the hard-working ant when the winter comes. The fable sums up the moral lessons about the virtues of hard work and planning for the future. As you get ready to file your 2015 personal income taxes, now is the time to look ahead and plan for 2016.

Reduction in the small business corporate income tax rate

Canadian-controlled private corporations (CCPCs) are entitled to claim a small business deduction on the first $500,000 of business income.  Commencing in 2016, the federal tax rate will decrease by 0.5% a year for four years, reducing the small business income tax rate in Ontario to 15.0% in 2016, 14.5% in 2017, 14.0% in 2018, and 13.5% in 2019.

Tax planning point: Defer the receipt or recognition of corporate income eligible for the small business deduction limit to future years.

Increase in the top personal federal tax rate

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Can RRSPs ever get too large?

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Canadian Registered Retirement Savings Plan concept word cloudCan a Registered Retirement Savings Plan (RRSP) ever get too large? From time to time, you’ll hear certain financial advisors say so and propose “melting down” RRSPs in a tax-effective manner.

The Financial Post just ran a piece by me on this topic, entitled The Pros and Perils of making early withdrawals from your RRSP. One of the sources cited is a familiar one to Hub readers: Doug Dahmer of Emeritus Financial Strategies often writes guest blogs in the Hub’s Decumulation section.

RRSP primer for millennials

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Financials, across our Life Course: Financial Gerontology Part 3

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fusionBy Marie Howes & Suzanne Cook, PlanetLongevity.com 

Special to the Financial Independence Hub

Financial planning. Financial security. Financial literacy. Financial gerontology. Is it any wonder there is confusion with all this terminology floating in our heads? Not to forget the fusion.
As we complete our current series on this subject, maybe it’s not a coincidence that we are now entering the annual income tax season in Canada.You can count on a barrage of advertising and news editorials to start any time now, reminding consumers about their retirement plan contributions and other related financial considerations. Turning our concern to personal financials however, should not be a once a year high anxiety moment; nor is it strictly a retirement discussion. Attention to financials issues cuts across our life course.
As a financial planning consultant, Marie says in part one of this series (Nov.30, 2015), personal financial planning is the process of helping individuals and families to use their income and assets to be meet their life goals now and in the future. In that same post, as the researcher and social gerontologist, Suzanne adds that economic and financial issues are important in people’s lives on the journey of aging, but they are also important as public policy issues.
Financial gerontology – public policy issue
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Marie Howes

Sticking with this term financial gerontology, Marie picks up here by saying that in the macro sense it is an urgent public policy issue.

Financial gerontology should become the study of aging and the implementation of measures that will meet the needs of Canadas’ aging demographic. For example, financial, psychological, and general health planning to encompass all citizens from native peoples to immigrant and ethnic communities. The risk is that it will become yet another means of marketing financial products.The problems associated with an aging demographic are not confined to governments to solve.
To be sure, there are roles for all levels of government, but there are also roles for dedicated private groups and for individuals and families. Older adults must also be part of finding their own solutions.Since we have scarce resources, what is the best use of public monies to meet the unique needs of an aging population?
Given the shift and size of aging demographics, it would be very easy to allocate too many scarce resources to satisfying the needs of the aged at the expense of younger people. For example, reducing education funding for younger taxpayers. In consideration of how to determine the best use of these public resources for everyone, would it not be more beneficial that we have a creative inter-generational dialogue?
If financial gerontology is a society-wide, broadly based approach to the costs of aging, then personal financial planning is the specifically focused approach to an individual’s finances – whether they are young or old.Improving public awareness of how these two professional fields work, (both separately and in fusion), is the challenge, and worth repeating, says Suzanne – financial and economic issues, such as low-income seniors, pension plans and retirement savings are gerontological issues, and they are important personal and public policy issues. Financial security is important for quality of life, and this cuts across our entire life course. However, quality of life goes beyond financial considerations. 

Financial & gerontological collaborations

So how do we square the circle around the potential good coming from financial & gerontological collaborations? Let’s go back to the American Institute for Financial Gerontology and their aim to educate a Registered Financial Gerontologist (RFG) on how to “deliver financial solutions in a comprehensive manner with increased knowledge of the older client’s broad based needs.”

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Suzanne Cook

There is one significant difference where we say, Suzanne suggests, develop innovative ways on how to better serve “unique needs”, as opposed to deliver solutions to “broad based needs”. Terminology again. When you serve, you determine needs and respond; it is person focused. When you deliver solutions, you provide a product.

So is it possible to effectively combine Financial + Gerontology for older adults; or is it better that two different specialists are required for older client’s broad based needs?
From Marie’s viewpoint as a financial planning consulting – good advisors keep themselves up to date on developments in the financial world, and on general issues of aging, from senior housing to risk prevention in public and private spaces.

But the financial advisor is not in a position to give comprehensive advice about such things as behavioural issues, or health impacts on communities. The gerontologist can offer good background information to the financial advisor, just as the financial planner can offer realistic advice on basic financial issues for the benefit of the gerontologist.

We live in a world of specialization – mainly because there is so much knowledge out there that we cannot be effective if we try to offer services beyond our competency. Keeping up with our own specialties is a full time job!

We are also in the world of collaboration! That is the joy of thinking and writing this series together.

Marie Howes, PRP is a financial planning consultant, writer and commentator. She has a special interest in the effects of public policies on seniors, particularly in healthcare funding and delivery, and in the regulation of financial and investment advisors which can best protect aging consumers. Marie is a panelist on Planet Longevity -“Forward Thinking on Aging Issues” www.planetlongevity.com

 Suzanne Cook, PhD, is a social gerontologist and researcher with a strong belief that longer life spans require a new vision of aging. Her business, Carpe Vitam, links lifelong learning with healthy aging to develop innovative programs and policies for organizations. Suzanne is a panelist on Planet Longevity -“Forward Thinking on Aging Issues” www.planetlongevity.com