Key planning steps for prospective snowbirds

Health insurance. Another must-do is securing adequate supplementary health insurance. In Ontario, for example, the government will pay $200/day if you are hospitalized.1 But if you end up in a U.S. hospital, you can expect to pay more than $4,200/day.2

If you’re going to be away for an extended time, please remember to make an appointment with us before you go. We can make sure your insurance coverage is in order, that you have left us with instructions for any investments that will be maturing or policies that will be due for renewal in your absence, and that we know how to get in touch with you (or who to contact on your behalf), in the event of an emergency. n

1 Ministry of Ontario, “Travelling Outside Canada” fact sheet, September 2012

2 International Federation of Health Plans 2012 Comparative Price Report

If you are dreaming of living the snow-bird lifestyle or even taking an extended

holiday this winter, getting your finances in order before you leave home will go a long way toward a relaxing, worry-free trip. Here are some practical steps we can take in preparation for your get-away.

Income planning. Let’s start by determining whether we will need to redirect payments from any existing payout annuities or draw income from any segregated funds you hold. We can set up a systematic withdrawal schedule so you receive your payments while the balance of your portfolio remains intact.

Beneficiary designations. Ensure the beneficiary designations on your insurance policies and investment contracts are up-to-date. If you pass away outside of Canada (or even out of your home province) your heirs could experience delays gaining access to assets they might need in a time of crisis.

FoCus on InsurAnCe

AAAApexpexpexpex Financial Consulting Financial Consulting Financial Consulting Financial Consulting

November/December 2013

David Williams, CFP, CPCA

APEX Financial Consulting

FundEX Investments Inc.

1106 Edmonton Trail NE

Calgary, AB T2E 3K4

Telephone: (403) 243-2390

Toll-Free: 1-888-544-5227

Fax: (403) 243-3486

E-mail: david@apexfc.com

For many people, autumn is the time of fresh starts, new projects, pulling up your socks and sharpening your pencils. Are you thinking of taking on a new financial goal?

Perhaps making a resolution to live below your means, or plan to simplify and reprioritize? Or perhaps you’re delightedly relieved just to get back to the regular routine that September brings. While you walk through the cooler crisper evenings this

month, consider any issues you’d like to discuss with me with regard to your goals, financial lifestyle, or priorities. Once again, I’m always pleased to be a sounding board to your questions and ideas, and am happy to help you out with your investments and financial plan.

From an investing perspective, Canada is kind of like that famous photo of our

star-filled Milky Way with the arrow saying, “You are here.”

Of the top 500 companies in the world, only nine are Canadian, and none ranks higher than 276th.1 All told, Canadian investment opportunities represent just 5%2 of the global marketplace. In other words, we are a very small fish in a very big pond.

And while we should definitely support the domestic economy with our investment dollars, “home country bias” (having too much of your portfolio invested in the local economy) can seriously dampen your long-term prospects. This is especially true in Canada, where some 75% of our equity market is concentrated in just three sectors: materials, resources, and financials.3

There’s a whole world of opportunity beyond our borders, and global balanced

funds can offer a one-stop solution to explore it.

The best of all worldsGlobal balanced funds give you a prudent way to broaden your portfolio’s horizons, create a foundation for other, more tactical international investments, and enhance your portfolio’s growth potential.

They achieve this using a number of different strategies. First, they can cherry-pick their holdings from the world’s most potential-rich economies.

Access to such a broad investment universe is one of the benchmarks of successful long-term investing. Consider that over the 30 years from 1983 to 2012, there were 14 different countries that took a turn as the investment world’s top performer (see Table). Canada’s all-time best showing was 1987, when it finished second to Japan.4

Diversified on many levelsIn addition to geographic diversification, global balanced funds are diversified by asset class (they can hold both equities and fixed income), sector, and currency. Not only that, but fund managers may have the flexibility (depending on the fund’s mandate and objectives) to significantly alter fund weightings to take advantage of different sectors, currencies, and asset classes.

Here’s a statistic that may surprise you: Since 1980, global bonds have actually delivered slightly higher returns than global equities.5 While past returns cannot be presumed to indicate future returns, that’s still an impressive 33-year track record.

Along with the potential for capital appreciation, international bonds provide important diversification across domestic interest rates. The reality is that high-grade domestic bonds tend to move in tandem with domestic equities because they are influenced by many of the same factors (monetary policy, economic climate, inflation, etc.). So even a good mix of domestic bonds and equities isn’t as diversified as it might appear.

Choosing funds for your portfolioA given fund’s specific balance between bonds and equities will depend on its mandate. Some take a very strategic approach and are weighted more heavily toward equities while others are more neutrally balanced.

Whatever your preference, these funds give investors of almost every stripe the opportunity to participate in the global economy. As always, we would be pleased to help you choose the global balanced fund that best reflects your needs and objectives and complements the existing funds in your portfolio. n

1 Fortune, “Global 500,” 20132 MSCI (Developed) World Index as at December 31, 20123 Rob Carrick, The Globe and Mail, “Beware the limitations of

buying the index,” May 11, 20124 Bloomberg data5 Credit Suisse Research Institute, Global Investment Returns

Yearbook, 2013

A world of potentialInternational balanced funds are a great way to participate in markets that are doing well, and to be insulated from ones that are underperforming. As this table shows, countries, like asset classes, have good years and not-so good years and no single economy stays on the top (or the bottom) for long.

Investment strAtegy

A balanced approach to global opportunities

top performing country, calendar-year basis

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

Belgium Ireland Denmark Singapore Israel Hong Kong Singapore Japan Austria Israel

2002 2001 2000 1999 1998 1997 1996 1995 1994 1993

Austria New Zealand Israel Finland Finland Portugal Spain Italy Norway Hong Kong

1992 1991 1990 1989 1988 1987 1986 1985 1984 1983

Hong Kong Hong Kong Hong Kong Norway Denmark Japan New Zealand New Zealand Hong Kong New Zealand

Source: Bloomberg data, top-performing countries on a calendar year basis.

The MONEY fileT I P S A N D T A C T I C S T O H E L P Y O U G E T A H E A DYour year-end tax-planning checklist

Tis the season to take care of some year-end tax planning. A little effort before the New Year could save you a bundle when April rolls around.

Let’s get together soon to discuss whether any of the following year-end activities might be beneficial to your tax situation.

• Tax-loss selling. If you have realized capital gains in 2013, we should review your non-registered portfolio and take a closer look at any holdings that are in a loss position. Selling before the end of the year would generate a loss that you could use to reduce the tax on your gains. To be eligible for the 2013 tax year, your trade order would have to take place no later than December 24 for Canadian-listed securities and December 26 for securities listed on a U.S. exchange.

• RESP contributions. To get the maximum Canada Education Savings Grant for 2013, contribute at least $2,500 per beneficiary to a Registered Education Savings Plan (RESP) by December 31.

• Contributions to charity. If you want to claim a charitable donation tax credit for 2013, make your donation on or before December 31.

New for 2013: the First-Time Donor’s Super Credit (FDSC). If you and your spouse haven’t claimed a charitable donation tax credit since 2007, you may qualify for the FDSC. It adds 25% to the existing

federal tax credits on donations up to $1,000. The FDSC is available only for cash donations made after March 20, 2013.

• Deductible expenses. Be sure to make payments for tax-deductible spousal support, child support, and childcare by the end of the year. Businesss owners may be able to benefit from the year-end purchase of capital assets (such as computer equipment or furniture). You can deduct a year’s worth of depreciation even if you’ve had the item for only a few days or weeks.

Before implementing any tax strategy, remember to review it with your tax advisor first to make sure it’s appropriate for you. n

All in the family? Key differences between family and individual RESPs

Tax planning

education planning

type of resP Individual Family

Beneficiaries • One named beneficiary• No age limit• Beneficiary does not have to be

related to you

• Can have more than one beneficiary as long as they are related to you (children, grandchildren, siblings)

• Beneficiary must be under 21 when named

Contribution limit $50,000 per beneficiary over the life of the plan

$50,000 per beneficiary over the life of the plan

Cesg Maximum $7,200 lifetime per beneficiary

Maximum $7,200 lifetime per beneficiary

What happens if the beneficiary chooses not to attend post-secondary school?

• New beneficiary can be named, but if not related to the original beneficiary, the CESG will have to be repaid

Plan earnings and CESG contributions (max. $7,200 per beneficiary) can be used for remaining beneficiaries

• May be able to transfer up to $50,000 to your RRSP if you have sufficient contribution room

• May be able to transfer up to $50,000 to your RRSP if you have sufficient contribution room

If you have more than one child, you have the option of opening a family Registered Education Savings Plan (RESP) or having individual plans for each of the kids. While both types offer core benefits (such as eligibility for the Canada Education Savings Grant), there are some fundamental differences. This overview may help you decide which one is better for your family.

If you’re having trouble deciding which type of plan is better for you, give us a call. We can go over the advantages of each and help you make the decision that’s best for your family. n

ContIngenCy PlAnnIng

suddenly single?In 2008, the median age of divorce was 44.5 for men and 41.9 for women, an increase of 5.3 years from 1988.1 Statistics Canada’s most recent report showed that people over 50 were the only segment of the population with an increasing divorce rate. There’s even a name for the phenomenon: Silver Singles.

If you’re separating or divorcing, your life insurance policies and beneficiary designations may not be top of mind, but they should be. Policies that are owned individually (as opposed to jointly) can be cancelled or changed by the owner of the policy without disclosure to the former partner. In other words, your ex could decide to stop paying the premiums or remove you or your children as beneficiaries.

To protect yourself, use your divorce agreement to ensure your spouse keeps your policies in force and maintains the beneficiary designations.

This is also an ideal time to review the beneficiary designations on your own insurance policies. They don’t automatically change as a result of divorce, widowhood, or remarriage. At the same time, we can look at the designations on your investment contracts, Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA), and pension plans.

You may want to consider taking out supplemental individual life, disability, and critical illness insurance to protect yourself and your children. Rest assured that we can help determine the amount and type of coverage appropriate for you. n

1 Human Resources and Skills Development Canada, Indica-tors of Well-being in Canada, “Family Life — Divorce”

BusIness oWners

Enhance your business, affordably, with a Health and Welfare Trust

Awell-funded employee benefit plan makes your company a better place

to work. It can strengthen the overall compensation package of key team members, greatly enhance employee retention, and provide your business with a number of compelling tax benefits. But there’s a common misconception that these plans are too cumbersome and too costly for most small- and medium-sized businesses.

In fact, small companies and even sole proprietorships can afford to offer healthcare benefits to their employees when they use a Health and Welfare Trust (HWT).

How it worksHWTs don’t provide benefits, per se. Rather, you set aside funds within a specialized trust for the purpose of paying out benefits to your employees. The trust is administered by a trustee, so there is no time commitment on your part to managing it, apart from the initial setup and funding.

Both the cost of the benefits and the trust’s administration fees are 100% tax-deductible for your company. Benefits paid out to your employees are also usually tax-free. (There may be exceptions for certain benefits such as disability insurance. In this case, employees typically want to pay premiums so that any benefits they may receive from the policy will be tax-free.)

What’s covered?An HWT can dispense an impressive

variety of services including medical, dental, and optical benefits as well as life, accident, disability, and critical illness insurance. In addition, HWTs typically provide more generous coverage amounts for eligible expenses than traditional benefit plans and there is no deductible required on the part of the employee.

The limit on how much the HWT can pay out depends, in part, on whether your business is incorporated. If it is, there’s no ceiling and your HWT can cover virtually any non-cosmetic medical or dental service, including alternative therapies and pre-scribed nutritional supplements. The limits are less generous for unincorporated businesses and sole proprietorships, but an HWT can still deliver good coverage and attractive tax benefits.

Attract and retain talentGiven all its features, an HWT can be a valuable incentive to help you recruit and retain top-notch people. It can also be a very cost-effective way to boost compensation for your key employees. For example, instead of giving your VP a raise, which would be taxable, you can deposit an amount equivalent to a raise into an HWT for your VP’s benefit. The amount would be tax-deductible for your company and the benefits, when paid out, would have no tax implications for your VP.

As with all trusts, the rules governing HWTs can be complex. We would welcome the opportunity to help you determine if they would be a good fit for your business. n