LF: New Financial Advisor

[nickyh]

We currently have a financial advisor, but he has been really slow in replying to emails, so hubby & I are looking for a new financial advisor.

(By no means are we looking to replace him b/c of a slow response, it's a build of events over time and this is the pretty much it for him now).



Anyway - if you could make some suggestions that would be appreciated.

[max_boost]

haha post up your questions and maybe some of us on here can help you out. Us Beyonders are online all day haha and honestly, some of these newbie FA's aren't that knowledgeable, unless you are looking for a Certified Financial Planner?

[nickyh]

Essentially we sold our house and after the morgage proceeds we will be left with some money (about $90K).

First Scenario:
We need that money to go into our new home that we are building - but possession is anywhere from 4 to 7 months away, so instead of having the money sitting in the bank doing nothing - we would like the money to earn something decent yet be accessible and the principle secured (obviously I don't want to gamble with my downpayment).


I'll post the second question second as I don't want them to be confused.

[Chandler_Racing]

Originally posted by nickyh
Essentially we sold our house and after the morgage proceeds we will be left with some money (about $90K).

First Scenario:
We need that money to go into our new home that we are building - but possession is anywhere from 4 to 7 months away, so instead of having the money sitting in the bank doing nothing - we would like the money to earn something decent yet be accessible and the principle secured (obviously I don't want to gamble with my downpayment).


I'll post the second question second as I don't want them to be confused.

High interest savings account would be a good start.

[nickyh]

Scenario 2:

We are living with the in-laws and have cheap rent, we should save about $4K per month after rent, car payments / insurance, and other miscellaneous expenses.

So based on the 4 - 7 months of cheap living and paying for storage on our stuff we will have extra cash.

Now - do we throw as much extra money onto the downpayment and reduce our monthly payment but thereby reducing a safety cushion in the bank... (for every $10,000 extra it makes about a $50 difference per month on the mortgage payment)

What i would like to do, is keep the monthly mortgage as is - we can afford it and still save money, but I plan to make anniversary payments on the mortgage.
I'd like something that I can earn a decent interest on but again, I'd need $10K every year (5 year term right now) accessible to me for the anniversary payment.

..... this is where typing down sucks as I have so many thoughts...

Essentially, I want my money to work better for me to help me pay down my mortgage faster. I'm not sure if a TFSA is the way to go or if there are better options out there.

[quazimoto]

My fiance does this for a living with td canada trust.

I think it's always important that people realize mortgage interest is typically the lowest interest you'll ever pay and that most proper investments the interest gained will usually be higher than interest paid into a mortgage.

Essentially by giving a lower down payment and investing more money into good mutual funds your net worth would grow faster. The only down side being your mortgage payments are higher.

A decent mutual fund company excluding the last crappy year or so will annually yield around 10% compare that to the 4-5% of the mortgage.

Essentially there is no real benefit to paying your house down faster as opposed to investing the additional monies.

[bwling]

^ Good strategy. That's what we have been doing the past 5 years. Too bad the markets have not worked in our favour during that time, but things will recover.

[7thgenvic]

Your best bet is to simply head to your branch and seek a new financial advisor. You'll probably receive a decent rate for your holdings until your house is built. Beyond is a good place to start though :)

[max_boost]

First scenario:

If you want guaranteed, your only real option is a high interest savings account but it's an oxymoron 'high interest' because prime is at 2.25% so what are the going rates for high interest right now? 1.5%? and that's over 1 year! LOL

To give you an idea, the TSX index today alone returned 2%. So instead of waiting 1 year to get that 1.5%, you can get it in one day.

Is it a guarantee that the stock market is going to go up? No. Nothing in life is guaranteed as there are risks.

The reason why I brought up the TSX is, peak was 15,000, low was 7500 and right now we are at 10,100. More room to go up? YES as the economy recovers. More room to go down also? YES. Ask any analyst and they'll tell you the index is going to be a lot higher sometime down the road but it's impossible to predict its movement so given your time frame of 4-7 months, it can get iffy.

If you bought XIU.TO (tracks the top 60 large caps in Canada) 3 months ago, you would be up 38% right now. If you buy it now, hard to say where it's going to be. So it IS a gamble if you get into the stock market, it always is. Because you need the money, a high interest savings account is your best bet, even if it's only 1.5% or whatever it is.

[max_boost]

Second scenario:

Because the stock market index is so low right now, 10,200 and I believe it has a lot of room to move over the upcoming years (target 15,000=50% gain) I've basically stopped paying down my mortgage and maxed out my HELOC. Every dollar I make right now goes towards XIU.TO

http://ca.ishares.com/product_info/fund_overview.do?ticker=XIU

It pays an $0.11 dividend every quarter and yields 3%. My HELOC is at 2.25% so the dividends alone can pay off the interest I borrow. Not to mention the loan I'm taking for this investment is tax deductible! Similar to the Smith Manoeuvre? Yeah same idea except I'm not really into this for 15-25 years, I'm only into it for as long as the next bull run lasts because inevitably the bubble will burst again.

[Celica TVS3]

You and I are in very similar positions. You don't need the advice of a financial planner, you're rolling the cash proceeds from one home to the other. Principal protection is your highest priority. The easiest way to ensure your principal is 100% protected (<$100k is covered by CIDC), is to place it into a high interest savings account (as stated above). You won't shoot your lights out with the interest rate, but it will be greater than zero. Also, keep in mind that the interest earned will be taxed as income (unless you break it up between two accounts, one high interest savings account and one, or two if you're married, TFSA, as only the interest in the non-TFSA will be taxed as income).

As far as how much to place on the next mortgage, I had the same debate. This is what i chose: of the $200k cash proceeds from the sale of house #1, we are putting $150k as a down-payment on the next mortgage $25k has been set aside for an emergency account and $25k was invested in an illiquid private company. Sure I could have chosen to save interest payments by placing the entire amount against the new mortgage; however, I'm essentially funding my own insurance policy should something unexpected happen (i.e., lose my job). If the worst should happen, I know my home will not be foreclosed on and i'll be able to survive without having to turn to others (i.e. mom & dad). Also, there are always unexpected expenses, and its nice to have cash to cover them when they arrive. When i bought my first home, 100% of savings went to its down-payment and if anything were to arise (major breakdown, job loss...), we would have been in trouble. Finally, having a cash reserve is somewhat liberating, as it may provide you with flexibility to take chances with your career that you may not otherwise feel comfortable doing.

My 2 cents.

P.S. The average Canadian mutual fund does not have a pre-tax (never-mind post-tax) return of 10%.

[quazimoto]

You never consider taxes on a mutual fund since they can be rolled into an RRSP. Many mutual funds clear 10% annually. For a while there were some in the 15-20% range.

[nickyh]

Thanks everyone - you given me more to think about. I appreciate the responses.

I think scenario 1, I'll end up doing the high interest savings account - after all, this is my next home I'll be gambling with.


Still have to make some decisions about #2. I work in O&G and I think I am pretty stable with my job, but I definately want a decent safety cushion - especially since we will have to do the whole deck, fence, landscaping, and blind thing again. But hubby and I usually save up for those and pay cash...

[91_Integz]

Originally posted by quazimoto
You never consider taxes on a mutual fund since they can be rolled into an RRSP. Many mutual funds clear 10% annually. For a while there weresome in the 15-20% range.

^^
That doesn't make sense? MAJORITY of mutual funds do NOT clear 10% annually afters fees and taxes, over the LONG term.

[BananaFob]

Originally posted by 91_Integz


^^
That doesn't make sense? MAJORITY of mutual funds do NOT clear 10% annually afters fees and taxes, over the LONG term.

He just said that he's rolling it into a RRSP. It grows tax deferred.

[quazimoto]

Yes that is correct. Most mutual funds to easily clear 10% plus. Some of the more agressive ones were doing 15%-20% until the last couple years. The last two years a 15% to 20% loss was considered good. Granted its probably the first time in 10-15 years were there have been substantial losses.

[rumeo]

.

[Celica TVS3]

Originally posted by quazimoto
Yes that is correct. Most mutual funds to easily clear 10% plus.

This is not a fact...not even close. For the 7-year period ending December 31, 2008, the S&P TSX Composite Index averaged annualized returns of 4.5%. By saying most mutual fund managers can beat the TSX Composite Index is equivalent to saying that most students in a class are above the class-average. Its simply not possible.

Sure its true that some funds have had a history of above-average returns; however, this is the exception not the norm.

[max_boost]

Originally posted by Celica TVS3


This is not a fact...not even close. For the 7-year period ending December 31, 2008, the S&amp;P TSX Composite Index averaged annualized returns of 4.5%. By saying most mutual fund managers can beat the TSX Composite Index is equivalent to saying that most students in a class are above the class-average. Its simply not possible.

Sure its true that some funds have had a history of above-average returns; however, this is the exception not the norm.

Yep. This past year has been brutal. On the bright side, right now you get a chance to buy the index at 05/06 prices. :devil:

[syeve]

Originally posted by quazimoto
My fiance does this for a living with td canada trust.

I think it's always important that people realize mortgage interest is typically the lowest interest you'll ever pay and that most proper investments the interest gained will usually be higher than interest paid into a mortgage.

Essentially by giving a lower down payment and investing more money into good mutual funds your net worth would grow faster. The only down side being your mortgage payments are higher.

A decent mutual fund company excluding the last crappy year or so will annually yield around 10% compare that to the 4-5% of the mortgage.

Essentially there is no real benefit to paying your house down faster as opposed to investing the additional monies.

THIS. 5 year fixed at 3.5%, I would put a low DP on the new house and invest the rest in index funds. Thats just me though.


:devil:

[91_Integz]

Originally posted by quazimoto
Yes that is correct. Most mutual funds to easily clear 10% plus. Some of the more agressive ones were doing 15%-20% until the last couple years. The last two years a 15% to 20% loss was considered good. Granted its probably the first time in 10-15 years were there have been substantial losses.

You are mistaken. Like Celica TVS3 indicated, there are MANY studies that prove that the majority of fund managers do not outperform the index. The "stats" you are posting are misleading to those with limited knowledge in finance

[quazimoto]

So going on what you are saying people are investing for the last decade to theoretically lose money since that 4.5% is just slightly above inflation. You realize you seriously require a return of 8%+ for your investments to do any good whatsoever for you.

[Celica TVS3]

Yes, the real rate of return of the average Canadian equity portfolio isn't stellar. The 4.5% I quoted was brought down by a rough YE-2008, although its still sub 8%. You'll have to curb your expectations if you're going to be investing in the market, or you'll be disappointed.

When you say " seriously require a return of 8%+ for your investments to do any good whatsoever for you.".... I guess this depends on your goals. In this OP's case, no(low) risk at 2% is probably better than higher risk at 8%.

As for 91_Integz, he is absolutely right, its very tough for PMs to consistently beat the Index after deducting the MER (since, in most cases, managed portfolios essentially mirror the index).

[quazimoto]

Mleh there are still many many many mutual funds that were clearing the 10% range. Seriously this is required in order to build the kind of equity required to retire properly otherwise your retirement savings are a joke.

Prior to my divorce with my ex-wife the funds we were getting were doing 11% to 13% returns annually. I am able to google like crazy to find mutual funds from 2000-2005 that were doing 15% to 20% annually. Some of the funds show growth from $100,000 to $240,000 in a 5 year period of time.

My funds took a beating last year though at roughly -21% which I was told was good since some funds were losing 40%+.

But if your only getting 4% return seriously just stick your money in a mattress.

[91_Integz]

Originally posted by quazimoto
Mleh there are still many many many mutual funds that were clearing the 10% range. Seriously this is required in order to build the kind of equity required to retire properly otherwise your retirement savings are a joke.

Prior to my divorce with my ex-wife the funds we were getting were doing 11% to 13% returns annually. I am able to google like crazy to find mutual funds from 2000-2005 that were doing 15% to 20% annually. Some of the funds show growth from $100,000 to $240,000 in a 5 year period of time.

My funds took a beating last year though at roughly -21% which I was told was good since some funds were losing 40%+.

But if your only getting 4% return seriously just stick your money in a mattress.

True, there were lots of mutual funds posting returns in excess of 10% during 2000-2005, but that's because the latter part of that time frame was during the middle of a bull market - the point I'm trying to make is that your statement - "there are many funds which easily clear 10%" is misleading beacuse these returns cannot be expected year over year in the LONG term.

[quazimoto]

Yes they can actually. There are funds going back to the early 90's the show an average annual return in that 10% range. Its only in the past couple years where the funds have taken a severe beating and with good reason.

Many intelligent fund managers like to use banks and energy companies for a good portion of their funds. Nobody really could have anticipated the energy markets doing what they have. When it comes to the banks they all took a beating even though for some it wasn't deserved. I mean TD share prices should not have dropped by more than 50% when they hadn't lost a single dime in that sub prime market.

But if your saying fund managers are barely able to beat the market than I suggest looking into different funds. Fund managers that can barely beat interest rates should be ashamed as high school students can get better returns.

[whodiman]

Originally posted by quazimoto
When it comes to the banks they all took a beating even though for some it wasn't deserved. I mean TD share prices should not have dropped by more than 50% when they hadn't lost a single dime in that sub prime market.


So what caused them to lose all that money in both Canada and USA and triple their loan losses if they didn't lose a single dime in that sub prime market?

[Sugarphreak]

...

[max_boost]

Timing is everything. Just pay attention to the indexes and buy in accordingly. Don't just blindly invest your money into funds when you have no idea what their price levels are.

The thing with these funds is, if you bought in near the high i.e. 14,000+, you must average down when the opportunity presents itself. Look at the crash as opportunity. I know most people don't set a stop loss so dollar cost averaging is your only choice. By the time it goes from 14,000----->7,000----->14,000, while many have profited at least 50%, you have only broken even! Make sense?


Originally posted by Warren Buffet



Be fearful when others are greedy and greedy when others are fearful

The TSX is trading just above 10,000 right now, I would throw my money in there instead of watching it sit in an account earning 1.5% LOL

[quazimoto]

GICs are for idiots who don't like money, I kid you not. Yes dollar cost averaging is the first sensible thing a person should learn. You'll notice historically most GICS dont even beat inflation rates unless your doing crazy long terms in which case you are still losing money.

This means you take 200 a month and constantly invest it into the same mutual to gain the units. I don't know what you are calling major crashes but the last year was the first time since the 80's where it was really bad. This does not mean single day losses. We are talking year over end gains and losses which is all that matters in long term investments.

From everything I know TD Canada Trust was the only Canadian Bank that didn't get screwd into the sub prime fiasco in the US. CIBC was hit by far the hardest. I think if anything there was a TD subsidiary company that's not really part of TD that had losses. There were many stocks that plummited when the reasons really weren't warranted. Just morons selling off shares like absolute idiots who were stuck in panic mode!

[nickyh]

Interesting reading - thanks everyone.

Anyway, does anyone have a name of a professional Financial Planner?

I'd lke to have our current investment mix looked over and set a plan in action for the next few years.

[quazimoto]

What bank are you with right now and are you looking to say with same said bank?

[Mys73ri0]

Wow so many people going off topic here. You guys should be taking the argument of mutual fund returns to the investment thread.

The question was what to do with money in the next 4-7 months while they wait for possession of their new home. Mutual funds, stock index funds and whatever random investment scheme mentioned are a little risky if you don't want to risk your principle (as the OP stated he does not wish to do). RRSP are irrelevant in the OP's case since he's not talking about long term investment, he's talking about the next 4-7 months. High interest savings account are about your only option for such a short period of time. Even then, unless its in a TSFA (max 10k between you and your wife) it will be taxed. However it is still worth the time to do it since $90k is fairly large sum.

His second question is what to do with an extra $28k (7 months * $4k in savings). He also states he needs $10k every 5 years for anniversary mortgage payments. That will limit him in terms of the investment options he can make. What he should do depends a lot on his situation no generic advice can be given without knowing more. If he's older it makes a lot more sense to pay his mortgage down quickly as possible instead of worrying about the great 20% returns on mutual funds.

For your first question I would suggest a high interest savings account and would try to put part of that money into a TSFA account to avoid taxes.

For the second part, I would suggest filling up your RRSP's (both you and your wife's) first if you have left over contribution room from previous years. The windfall in tax return can be used in to invest in your TSFA. Over the next 5 years, you will have enough TSFA room to invest the $28k minus RRSP contribution amount tax free.

At the end of the day, you should still go see a real financial adviser, lots of good info on beyond but do you really want to trust a faceless person on a car forum? If you're uncomfortable talking to a young just out of school financial adviser you can always request to speak to a more experienced one. If you are with a large institution, you can always go to a different branch and look for someone. Based on what little info you have stated, your portfolio size should be large enough to gain the attention of a financial adviser that wants your business.

[Amysicle]

^^^ Mys73rio made some very, very good points and suggestions that I would seriously consider. Especially the faceless person on a car forum comment.

You've just given us the minimum details needed to understand your concerns and your situation, but without knowing more details about your life, no one on here should be pushing any one investment product on you with some generalized statement about "there are many funds which easily clear 10%" and ignoring what you've stated is important to you in this situation. Good luck with what you and your husband decide Nicky!

[bluerush]

In response to your question on a financial planner, I would recommend a fee-based planner. Planners found at local banks, institutions etc. are biased in that they want to sell you something that provides them a large commission, rather than something that is right for you.

The main advantage of hiring a fee-only planner is that the payment system is more transparent than other systems. This means that you will always know how much you’re paying for financial advice, and your planner is less likely to have a conflict of interest.

The main drawback with hiring a fee-only planner is that many are not licensed to sell you investments directly, so they provide you with a general plan and you have to put it into action yourself.

you can search canadianbusiness.com for a list of fee-based planners if this is a route you choose to take.

[Jlude]

buy 90k in lululemon stock and thank me later! :rofl: