Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

The Era of Offshore Bank Secrecy is Dead

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David Rotfleisch. Photo by Brian Kilgore

By David Rotfleisch

Rotfleisch & Samulovitch Professional Corporation

Special to the Financial Independence Hub 

Imagine dad dies. The widow and children miss him terribly, but he made good money and they’ll be taken care of financially. What they don’t realize is that dad left them “black money.” He kept most of his money in a secret offshore bank account — black money  —unreported to Canada Revenue Agency (CRA). He also left his heirs a big problem.

Governments and tax collectors around the world have come down hard on the banks that harbour secret accounts. The crackdown came after the terrorist attacks of September 11, 2001, as terrorist cells need financing and want to remain under the radar. That got the ball rolling worldwide. As well, governments began cracking down on money laundering from the proceeds of crime (drugs, guns, human trafficking, exotic animal parts smuggling, and so on).

A True Story

This is a true story, with the details changed a bit to protect the heirs from embarrassment. The widow called my firm, distraught and I was able to provide some comfort. It’s good news that the money is not lost forever. But it will take a while to get it back to Canada, and the family will have a Canada Revenue Agency tax bill to pay.

The best news is mom and the kids have no fear of going to jail for tax evasion. They can sleep at night.

Offshore Banking and Tax Havens ConceptAt my firm, 2015 started with a call from a Canadian businessman who spends part of his time outside Canada.  He was given bad advice years ago by his Canadian stock broker to set up an offshore account. Now the offshore broker is getting out of business, has sold the portfolio and wired funds back to the businessman.  But the offshore portfolio was never reported to CRA. The businessman recognizes his obligations, and we are doing voluntary disclosure to bring him onside, once again ending fear of criminal charges. Continue Reading…

How the falling loonie affects U.S. equity ETFs

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Depositphotos_40901151_xsAfter the loonie plummeted 2 cents to 81 cents US after yesterday’s surprise interest-rate cut, it seems an apt time to address a common misunderstanding about how the falling Canadian dollar affects US equity ETFs denominated in either country’s currency.

This was nicely tackled a year ago by Dan Bortolotti in his Canadian Couch Potato blog here.

Dan — who is both a consulting editor with MoneySense Magazine as well as an investment adviser with PWL Capital — had been chatting with me about the upcoming MoneySense ETF All-Stars feature in general and about the much-misunderstood topic of currency hedging in particular.

Personally, I believe international securities exposure provides diversification both for stocks or bonds but also currencies. I agree with Certified Financial Planner Fred Kirby (see Getting Help section)  that the first 20% or 30% of foreign currency exposure doesn’t need to be hedged back into your home country (loonie if you’re Canadian, greenback if you’re American). Of course, American investors who bought US stocks then are laughing. Similarly, if a Canadian invested much of their RRSP directly into US stocks or US equity funds denominated in US$ soon after the 2008 financial crisis and didn’t hedge currencies,  they’re probably a happy camper today. Continue Reading…

What do you seek in online financial content? A good night’s sleep, a rude awakening, challenging content?

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Andrew Teasdale (photo: Bruce Redstone)

By Andrew Teasdale, CFA

Special to the Financial Independence Hub

What do people look for in online financial content, especially a site dedicated to Findependence?   Are they looking for technical information on pensions, investments, private equity, complex products, opinion pieces, confirmation of their own decisions or their advisors/advisers, reassurance in times of financial crisis, or something else?

Personally I find basic technical information, beyond a point, boring. You can find basic information anywhere:  just type in the key words into your browser and bam!  Likewise, there are now books galore on every facet of personal finance, so much so that I fear we have long ago overloaded on dry rudimentary comment. Continue Reading…

“Robo Advisers” — Rise of the machines

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Doug Dahmer

By Doug Dahmer, Emeritus Retirement Income Specialists

Special to the Financial Independence Hub 

I know Isaac Asimov’s Three Laws of Robotics, I read Arthur C. Clarke’s 2001: A Space Odyssey and I love the Terminator movies (I’ll be back!).

From all this I know three things: Robots are very smart. Robots always start off to help you. Robots have a tendency to turn on you.

One of the newest crazes and buzzwords in personal finance is: “Robo-Adviser.” If you’re not familiar with the term, it refers to investment management by algorithm in the absence of human input.

With a “Robo” you are asked to complete an on-line risk assessment questionnaire. Your responses determines the prescribed portfolio of ETFs (Exchange-Traded Funds) with a built-in asset allocation best suited to your needs. Once a year the portfolio is rebalanced to this prescribed asset allocation recipe.

Dynamics change as shift from Saving to Spending

Continue Reading…

7 things you may not know about TFSAs

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Canadian Tax-Free Savings Account concept word cloudFrom the latest issue of MoneySense comes this list of 7 things you don’t know about Tax Free Savings Accounts. Note to any American readers: Canada’s TFSA is similar to Roth IRAs.

Here are senior writer Julie Cazzin’s seven facts. Click through above link for more complete explanation.

1.) Whatever amount you withdraw from a TFSA is added to your contribution room in the following calendar year.

2.)  Interest, dividends and capital gains in your TFSA are not considered income, even when you withdraw the money. Continue Reading…