Creating a Financial Plan

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Transcript Creating a Financial Plan

How the Rich
Manage Their Finances
Presented by:
Kurt Rosentreter
Chartered Accountant
Senior Financial Advisor, Manulife Securities Incorporated
Certified Financial Planner, Manulife Securities Insurance Inc.
About Kurt Rosentreter
• Chartered Accountant
• Twenty years of experience in personal finance.
• Past co-founder of the national wealth management practice at one
of Canada’s big four accounting firms.
• National best selling personal finance author; six published books in
• More than 500 published articles and interviews for The Globe and
Mail, National Post, CBC, Canada AM, Canadian Business and
• Personal Finance Course Instructor, Ontario Institute of Chartered
• Senior Financial Advisor, Manulife Securities Incorporated* in
Toronto (*Member CIPF)
• Certified Financial Planner, Manulife Securities Insurance Inc.
Complete a Draw Ballot!
• Draw for four books at the end of this 30
minute presentation
• Draw ballots available at front of room
• Drop in basket at front of room
• Only completely filled out ballots will be
What is Wealth Management?
• Definition of Wealth Management
– Process not a product
– Many definitions in the marketplace…
– What services are included?
– What fees are typical?
• Conclusion: no standard in Canada yet.
Who are the Wealthy?
• Definition of a Wealthy person
– Define by income
– Define by total assets
• Or family assets
– Define by future potential
– Define by portfolio securities
• Conflict
– Define by state of mind
Wealth Management Services
• Primary
Investment Management
Cash management
Tax Planning
Legal advice
Tax return preparation
Bill payment
Business services
Charitable giving and legacy planning
Estate planning
Children’s financial planning
Real estate
Concierge services
• Secondary
Wealth Management Advisors
Wealthy Friends
Company CFO
Tax accountant with int’l tax expertise
Lawyer (estate, business, divorce, int’l law)
Book keeper
Money Manager (broker, agent, counsellor,
portfolio manager) Private Banker
Insurance Agent
Real estate agent
Wealth Management Fees
• Four types:
Hourly rate or flat fee
Investment advisory fees
Investment commissions
Investment custody
Insurance commissions
Fewer: petty administration fees (e.g. cheque
charges, RRSP trustee fees, etc.)
• Options: one fee for all or unbundled pay as you
go fee approach.
Do Wealthy People
Need A Financial Plan?
• Definition of a financial plan
• Reasons they don’t…
• Reasons they do:
– Better financial decisions through integrated
– Less time on finances
– Lower fees through synergies
– Better overall control / management of the
big picture
– Better coordinated advisor team
Elements of a Financial Plan
Financial Plan
Compensation &
Benefits Planning
and Legacy
Financial Planning
One integrated plan.
More effective results.
Time savings.
Cost savings.
Real Estate
Tax Return
Preparation &
Tax Planning
Estate Planning &
Estate Wind-up
Use of
Elder Care
Income Design
Legal Risk
High Net Worth
Financial Strategies
Which are not
High Net Worth Investment Solutions?
• Purchasing mutual funds and GICs at the bank counter
• Purchasing mutual funds with a mutual fund agent
• Trading your own stocks in a discount brokerage
account (depends on the person)
Purchasing segregated funds with an insurance agent
Purchasing hybrid products with a financial planner
(income plus, PPN’s, closed end products, labour funds)
Purchasing a mutual fund wrap program with a mutual
fund agent.
These are retail, mass market products.
Once you reach $500,000 of savings, the door opens to
new solutions suited to high net worth.
Investment Wealth and
• Below $200,000 of savings
• Products: Mutual funds purchased no load; Exchange traded
funds (ETFs); Stock dabbler only
• How to buy: On your own; Stock broker, bank counter staff.
• $200,000 to $1 Million
• Products: Blended solution of mutual funds (F series only),
ETFs, individual stocks and bonds
• How to buy: IMA wrap program; Stock broker, Portfolio
Manager, on your own
• $ 2 Million or more
• Products: Individual stocks and bonds; occasional F series
fund for global equity or specialized mandates, ETFs
• How to buy: IMA wrap program; Portfolio Manager directly
(2 at least); Stock broker; on your own.
Investing Planning Strategies
Of The Rich
• Six Dimensions of Tax Smart Investing:
– Relevant for Taxable Savings (not rrsps)
• Taxation of people matters
• Taxation of assets matters
• Taxation of income matters
• Holding period of the asset matters
• Domestic or a foreign asset matters
• Legal ownership of the asset matters.
Tax Planning Strategies
Of The Rich
Focus on tax planning – see beyond your tax return
Sophisticated accountants as advisors
Using good debt and eliminating bad debt
Holding companies for U.S. assets & and to avoid
Canadian probate fees on death
Pay investment Fees, not investment commissions
Income splitting with family
• Business Owners not employees
Maximizing tax writeoffs
• Business owners not employees
Tax shelters
Offshore business ventures and investing
Estate Planning Strategies
Of The Rich
• Usually get advance planning done properly
• Two Wills
– No do-it-yourself Wills
• Family Trusts
• Intervivos
• Testamentary
• Family are not used as Executors or
Foundations to leave a legacy
Career Choices
Of The Rich
• Business Owners
• Not employees working for someone else
• Own one business through generations and through thick and
– E.g. Warren Buffett approach
• Growth industry and growth company
• They own the business but don’t work in it
• Senior executives of public companies
– Company stock and stock options
• Some careers: dentists, lawyers
How The Rich
Select Their Financial Advisors
• Professionals, not sales people
• Specialists in high net worth issues and solutions
• International expertise, not just local
• Arms length business relationship not clouded by
personalities and friendships
• Relationship free of limited product choice, hidden
fees and poor service / communication
• Asset based fees, not commissions
Financial Planning:
• Four key documents from the advisor: engagement
letter, written financial plan, written investment
plan, written annual investment portfolio analysis.
Key: evolution of advisors as you evolve / grow.
• No standard rule about what wealth
management is.
• Comparison shopping is best way to find
out what you want.
• Industry continues to evolve fast –
products, services and people are
• Your life long advisors may no longer be
suitable to help the wealthier you.
Thank You.
Kurt Rosentreter,
Senior Financial Advisor & Certified Financial Planner
Manulife Securities Incorporated;
Manulife Securities Insurance Inc.,
Phone 416-628-5770 Ext 238
[email protected]
Kurt’s books are available in bookstores across Canada.
Manulife Securities Incorporated is registered as an Investment Dealer, or its equivalent,
with the provincial securities commissions and as such our Advisors are entitled to
sell mutual funds, stocks, bonds and other securities as permitted under our
registration. They may also be able to provide other services or products to you
through their own business. As a member of the Investment Industry Regulatory
Organization of Canada ("IIROC"), Manulife Securities Incorporated is obligated to
disclose to you that you may be dealing with companies other than Manulife
Securities Incorporated when purchasing services or products from your Associate
(remuneration to your Associate may also come from various sources depending on
the services or products purchased). For example, your Associate may offer any one
or more of the following through a separate business, which would not be the
responsibility of Manulife Securities Incorporated: * Income Tax Preparation; *
Insurance: Life, Accident, Sickness, Disability, General. Please be sure that you have
a clear understanding of which company you are dealing with for each of your
services and products. Your Associate would be happy to provide any clarification you
Insurance products and services are offered through Manulife Securities Insurance Inc.
(a licensed life insurance agency and affiliate of Manulife Securities) by Manulife
Securities Advisors licensed as life agents.
The opinions expressed are those of the author and may not necessarily reflect those of
Manulife Securities Incorporated and/or Manulife Securities Insurance Inc.