Ques­tions and An­swers

How to solve your most press­ing fi­nan­cial is­sues

ZOOMER Magazine - - CONTENTS - By Gor­don Pape


IT COMES TO fi­nances, there are all kinds of ques­tions that leave peo­ple scratch­ing their heads and then send­ing off an email to me ask­ing for help. Here are the two most com­mon queries I re­ceive.


Most peo­ple re­al­ize that they need some help man­ag­ing their money. The prob­lem is find­ing some­one they trust at a rea­son­able cost. There are a lot of fi­nan­cial ad­vis­ers out there, some un­scrupu­lous, but most of those I have met are ded­i­cated pro­fes­sion­als who have the best in­ter­ests of their clients at heart.

But just be­cause they are good doesn’t mean they are right for you. Here’s my seven-step so­lu­tion to find­ing a good fi­nan­cial ad­viser.

1 The start­ing point is your per­sonal pri­or­i­ties.

You want some­one with ex­per­tise in the ar­eas that are most im­por­tant to you. For ex­am­ple, an ad­viser may be an ex­pert stock picker, but you pre­fer to in­vest in mu­tual funds. Or she may be a top es­tate plan­ner, but your lawyer has han­dled that to your sat­is­fac­tion.

2 So be­fore you in­ter­view any­one, de­fine ex­actly what skills you are look­ing for.

An over­all fi­nan­cial plan? Tax prepa­ra­tion help? Port­fo­lio man­age­ment? Re­tire­ment plan­ning? Once you have your pa­ram­e­ters in place you’ll know what ques­tions to ask.

3 The next step is to iden­tify three or four ad­vis­ers to talk to.

I strongly rec­om­mend get­ting per­sonal rec­om­men­da­tions from fam­ily and friends. If they re­port good ex­pe­ri­ences, that per­son is likely worth your time.

4 When you go for an in­ter­view, have a list of ques­tions ready.

Ask the ad­viser about his train­ing and qual­i­fi­ca­tions. Dis­cuss her in­vest­ing psy­chol­ogy – if you’re a con­ser­va­tive per­son, you don’t want an ad­viser that is fo­cused on cap­i­tal gains. Ask ex­actly what ser­vices he will pro­vide and check them against your own pri­or­ity list. Give her a list of your cur­rent holdings and ask what she would do dif­fer­ently.

5 Be pre­pared to dis­close your full fi­nan­cial pic­ture

– no ad­viser can op­er­ate ef­fec­tively know­ing only part of your story.

6 Be up­front about costs.

Ad­vis­ers don’t work for free. Find out who pays the ad­viser, whether a bank, in­sur­ance com­pany or mu­tual fund, and how much. Per­son­ally, I pre­fer a fee-based ac­count where the costs are trans­par­ent. The charge is based on the

as­sets un­der man­age­ment, and the per­cent­age de­clines with the amount of money you en­trust to the ad­viser. A fee of 0.75 per cent to 1.5 per cent an­nu­ally is com­mon.

7 Fi­nally, don’t sign on with any­one who over-prom­ises.

If the ad­viser spends the en­tire in­ter­view boast­ing about how good he or she is at beat­ing the mar­ket, that should send alarm bells ring­ing.


Some peo­ple will tell you it’s easy. Just in­struct your RRSP provider to make the change, sign some pa­pers and that’s it. On the sur­face, that’s true. But if you stop there, you risk end­ing up in deep trou­ble be­fore long.

The first is­sue to de­cide is tim­ing. The law says you have to collapse your RRSP by Dec. 31 of the year in which you turn 71. I sug­gest you wait un­til that dead­line to act with one ex­cep­tion, which I will get to in a mo­ment.

The rea­son for hold­ing off un­til the last minute is sim­ple: an RRSP is much more flex­i­ble than a RRIF. Once you have con­verted, you can­not make any more con­tri­bu­tions to a RRIF, plus you are legally obli­gat- ed to with­draw a min­i­mum amount of money each year (and be taxed on it) whether you need it or not. As long as you re­tain your RRSP, you can with­draw what­ever you need, or noth­ing. You are in full con­trol.

When you con­vert to a RRIF, you should re­view and prob­a­bly change the com­po­si­tion and as­set mix of your port­fo­lio. An RRSP should be in­vested for growth – you want to build as large a nest egg as you can for your re­tire­ment years. A RRIF, on the other hand, should fo­cus on in­come and se­cu­rity. You want to own as­sets that gen­er­ate the cash flow needed to meet your with­drawal re­quire­ments, with­out tak­ing on un­due risk.

Now for the ex­cep­tion to the “wait un­til age 71” rule. When you are 65, con­vert enough of your RRSP to a RRIF (par­tial con­ver­sions are al­lowed) to gen­er­ate $2,000 of in­come each year. That is the max­i­mum amount that qual­i­fies for the pen­sion in­come tax credit (line 314 of the tax re­turn). Of course, if you are draw­ing pen­sion in­come from some other source, you don’t have to worry about this.

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