Investment Planning Counsel - Halton Hills 4 th Quarter 2011 Conference Call

Investment Planning Counsel

- Halton Hills 4th Quarter 2011 Conference Call

IPC 2012 Conference Call

• Financial Planning Highlights for 2012• 2011 Dalbar Study Results on Investor Behaviour• Review of Investments• Retirement Income and Planning• Q&A – Review

Financial Planning Highlights for 2012

• RRSP Contribution limits for 2011 - $22,450 or 18% of 2010 qualified income whichever is less

• RRSP Contribution limits for 2012 - $22,970 or 18% of 2011 qualified income whichever is less

• RESP Contribution limits for 2012 – $2500 receives a 20% CESG grant. Catch up grant maximum in any given year is $1000 or a max contribution of $5000. Contributions can be made to age 18 but no credit is paid beyond age 17

• Tax Free Saving Account Limits – for 2012 the maximum is up to $20,000

• Marginal Tax Rates for 2011 taxable income:

• $45,000 rate 31.15%

• $68,000 rate 33%

• $76,000 rate 35.4%

• $80,000 rate 39.4%

• $84,000 rate 43.4%

• $129,000 + rate 46.4%

About DALBAR, Inc.

• DALBAR, Inc. is the financial community’s leading independent expert for evaluating, auditing and rating business practices, customer performance, product quality and service. Launched in 1976, DALBAR has earned the recognition for consistent and unbiased evaluations of investment companies, registered investment advisers, insurance companies, broker/dealers, retirement plan providers and financial professionals. DALBAR awards are recognized as marks of excellence in the financial common

• Since 1994, DALBAR’s QAIB has been measuring the effects of investor decisions to buy, sell and switch into and out of mutual funds over both short- and long-term time frames. The results consistently show that the average investor earns less – in many cases, much less – than mutual fund performance reports would suggest.

• The goal of QAIB is to continue to improve the performance of independent investors on the one hand and of professional financial advisors on the other hand by incorporating the factors that influence behaviour that determines the outcome of investment or savings strategies. QAIB offers guidance on how and where investor behaviours can be improved.

• QAIB 2011 examines real investor returns in equity, fixed income and asset allocation funds. The analysis covers the 20-year period ended December 31, 2010, encompassing both the drop at the turn of the millennium and the crash of 2008, plus the recovery periods of 2009 and 2010. This year’s report discusses the goal of “investor alpha”.

• The report explains how investors and advisors adapt to changing market conditions and produce investor alpha using investor behaviours, the psychological factors that drive them and the knowledge of how investment classes have acted in the past.

Investor Behaviours Continue to Fall Prey to Market Forces

• The following charts illustrate that investors continue to react to market movements and the news. One of the most startling and ongoing facts is that at no point in time have average investors remained invested for sufficiently long enough periods to derive the benefits of a long-term investment strategy.

• While we still see that investors will react to market corrections over the 20 years since 1991, since 2003 the reaction has been more muted. These charts show that recommendations by many mutual fund companies to remain invested have had little effect on what investors actually do.

• The result is that the alpha created by portfolio management is lost to the average investor, who generally abandons investments at inopportune times, often in response to bad news.

Source: “Quantitative Analysis of Investor Behavior, 2011,” DALBAR, Inc. www.dalbar.com



Investors are Often Temptedto Buy High and Sell Low

(60%)

(40%)

(20%)

0%

20%

40%

60%

80%

Jan

-95

Jul-9

5

Jan

-96

Jul-9

6

Jan

-97

Jul-9

7

Jan

-98

Jul-9

8

Jan

-99

Jul-9

9

Jan

-00

Jul-0

0

Jan

-01

Jul-0

1

Jan

-02

Jul-0

2

Jan

-03

Jul-0

3

Jan

-04

Jul-0

4

Jan

-05

Jul-0

5

Jan

-06

Jul-0

6

Jan

-07

Jul-0

7

Jan

-08

Jul-0

8

(8)

(6)

(4)

(2)

0

2

4

6

8

($ B

illion

)

Net Sales of Equity Funds S&P/TSX Composite Index 1 Year Rolling Return

Source: RBC Asset Management





Quoting the Oracle of Omaha

“To invest successfully over a lifetime does not require stratospheric IQ, unusual business insight, or inside information. What’s needed is a sound intellectual framework for decisions and the ability to keep emotions from corroding that framework.”

Warren Buffett

Cross Section of Investment Results for 2011

• Asset Class Number # in 1 & 2 # in 3 & 4th Best and Worst % index %

• Canadian Equity 11 funds 6 5 -0.6 -23.3 S&P TSX TR -8.7%

• Cdn Dividend7 funds 3 4 9.6 -12.3 S&P TSX 60 TR -9.1%

• Global Equity13 funds 10 3 6.3% -23.3 MSCI World GR CAD -2.7%

• US Equity 6 funds 2 4 5.6% -8.3% S&P 500 CAD 4.4%

• Balanced (Neutral) 12 funds 4 12 6.7% -13.7%

• Balanced (Equity) 7 Funds 5 2 1.5% -12.1%

• Bonds 3 Funds 0 3 7.1% 6%

• High Yield Bonds 4 Funds 2 2 4.1% 0.5% BofA Glb HY 5.7%

Results and Indexes from Morningstar Paltrak Dec 31st, 2011Results as indicated from Morningstar, See addendum page 1,2&3 for full performance data

Double Dip Recession?

Recession – To be or not to be…

Recessions tend to occur when certain indicators are at their respective peaks:

1 Job growth – US unemployment has declined slightly from a high of over 10.1% to 8.5%http://www.tradingeconomics.com/united-states/unemployment-rate

2 Inflation growth – US CPI increased to 3.0% annualized to December http://www.tradingeconomics.com/united-states/inflation-cpi

3 Capacity utilization expansion – Dec 2011 increased year over year to 78.1% average 1972-2010 80.4%

http://www.federalreserve.gov/releases/g17/Current/default.htm

4 Wage growth – US 3rd Quarter National wage growth was up 0.1%http://www.bea.gov/newsreleases/regional/spi/sqpi_newsrelease.htm

5. Interest rate yield curve is inverted – Current curve is normal - http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/

None of these factors are at high levels prompting belief that any recession would be short lived, and would not resemble those that were witnessed in 1991 or 2001. The recession of 2008 was a perfect storm of crumbling consumer confidence, a debt meltdown and a precedent setting liquidity crisis.

Pension Plans in 2011

Pension Plan’s cont...

Only about 4.5 million Canadians now have guaranteed benefits, most in the public sector. Many

companies in the private sector have found the cost of guaranteeing benefits under defined

benefit plans too expensive and, in some cases, a threat to their survival.

Defined Benefit plans are dying• There is clear shift world wide from Defined Benefit (DB) plans to Defined Contribution )DC)

plans. In 2000, 65% of pensions were Defined Benefit plans but by 2010 only 56% of all pensions were Defined Benefit. In the US, DB plans were about 51% of all pensions in 2000. Ten years later, than number dropped to 43%. The most dramatic change comes in the UK where they started with Defined Benefit plans making up 97% of all pensions. In 2010 that number fell to 60%.

• CPP and OAS are designed to replace approximately 25% of gross income ( depending on previous income ) The higher the income was the lesser the percentage replacement. Maximum 2012 CPP payment is $986.67 and maximum OAS ( not including GIS) is $540.12 totalling $1526.79 per month. This equates to 25% of a $73,285 gross employment income.

• If someone needs making $73,285 needs a replacement retirement income of 70% or $51,300 the government benefit only covers $18,321 the annual gap in the first year is $32,798

Source Stats Canada.

We’ll be there - IPC Georgetown

• Who is responsible for the “gap”? You• Who is responsible for pension investment

selection? You• Who is responsible to minimize tax on income? You

“We’ll be there” to work for You• Financial Planning• Tax Planning • Estate Planning

In Closing

• Just a remainder send all service requests to [email protected]

• Jane Blanchard is available to address all service requests and enquiries

• Thank you for taking the time to join us.

• Check www.ipchh.ca for details of April 2012 call

2012 Conference call

Questions and Answers

Disclaimer

Trademarks owned by Investment Planning Counsel Inc. and licensed to its subsidiary corporations. Investment Planning Counsel is a fully integrated Wealth Management Company. Mortgage Broker services provided by IPC Save Inc. (ON Lic. #10227). Mutual Funds available through IPC Investment Corporation and IPC Securities Corporation. Securities available through IPC Securities Corporation, a Member of the Canadian Investor Protection Fund. Insurance products available through IPC Estate Services Inc.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all dividends or distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

Dalbar Disclosure Information

Equity benchmark performance and systematic equity investing examples are represented by the Standard & Poor’s 500 Composite Index, an unmanaged index of 500 common stocks generally considered representative of the U.S. stock market. Indexes do not take into account the fees and expenses associated with investing, and individuals cannot invest directly in any index. Past performance cannot guarantee future results.

Bond benchmark performance and systematic bond investing examples are represented by the Barclays Aggregate Bond Index, an unmanaged index of bonds generally considered representative of the bond market. Indexes do not take into account the fees and expenses associated with investing, and individuals cannot invest directly in any index. Past performance cannot guarantee future results.

Average stock investor, average bond investor and average asset allocation investor performance results are based on a DALBAR study, “Quantitative Analysis of Investor Behavior (QAIB), 2011.” DALBAR is an independent, Boston-based financial research firm. Using monthly fund data supplied by the Investment Company Institute, QAIB calculates investor returns as the change in assets after excluding sales, redemptions and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses and any other costs. After calculating investor returns in dollar terms, two percentages are calculated for the period examined: Total investor return rate and annualized investor return rate. Total return rate is determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions, and exchanges for the period.

Systematic investing examples are hypothetical and for illustrative purposes only. Systematic investing

involves continuous investments regardless of security price levels. It cannot assure a profit or protect against

loss in declining markets.

Addendum

Documents

Investment Planning Counsel - Halton Hills 4 th Quarter 2011 Conference Call