Monthly Archives: July 2009

Odette Morin

Quick update before we go on Vacation

Terry and I are on our way to two restful weeks vacation at the cottage.  We could not feel better to go now after such a year of stressfull market news . The consensus is clear.  The recession is ending at last.  This is music to my ears and I feel like having a party to celebrate it but going on vacation will do it.  Here is why we feel more and more confident by the day:

The Bank of Canada has brightened its outlook for the Canadian economy, saying Tuesday it now thinks this year’s downturn won’t be as deep as previously forecast and 2010 growth will be stronger. The bank did as expected in keeping its key policy rate at the historic 0.25-per-cent low and repeating a pledge to keep it there until the spring of 2010.

US housing starts unexpectedly rose by 3.6% in June. Building permits rose the most in a year.  The housing market is stabilizing.

Better outlook for the US also. The Federal Reserve Board expects the economy to shrink between 1% and 1.5% revised down from previous forecast 1.3% to 2%.

US retail sales were positive in June

China, Japan and Brazil are all showing recovery signs also.

Bank of Canada close to declaring recession over

Recession is ending

Back from vacation on Aug 10. The office remains open.  The team will be there to help if you need anything!

Wishing you all a fun and safe summer with family and friends!

Terry Broaders

Buying Real Estate – The not so Hidden Costs

Elements of buying a property are somewhat akin to taking a stroll through the less prosperous part of town. You suddenly find yourself surrounded by people whom you have never seen before, all with their hands out looking for money. You quickly develop writer’s cramp from having to write so many cheques.

Anybody who has bought property knows exactly what we are talking about. With the summer time and real etate activity picking up there may be many would-be purchasers who find themselves entering the market. It is important when undertaking such a major purchase that you remember to leave some “cushion” to absorb all these extra costs and fees.

That property that you buy for $400,000 is actually going to cost you more than $400,000.  These additional costs may include among other things legal fees, property survey costs, inspection costs, property tax adjustments, transfer tax, home insurance, moving costs, repairs and renovations, utility hook ups and new furnishing, appliances and tools.

For an easy-to-remember “rule of thumb,” estimate between 1.5% and 4% of the selling price of the residence. So in other words, if you are buying a $400,000 property you will want to allow for an extra $6,000 to $16,000 in additional costs. You can have quite a nasty surprise if you have not allowed for these expenses!

Odette Morin

How to protect yourself from the Earl Jones and Bernie Madoff of the world

I had a client call in yesterday and ask to speak with me.  He said that he wanted to hear my voice to make sure that I was not gone to the Bahamas with all his money.  He was joking of course but in this world, it can be more than scary to hear stories of scammers like Madoff and more recently, Earl Jones.  It appears that, just like Bernard Madoff, Earl Jones, a financial advisor from Montreal, orchestrated a Ponzi scheme and allegedly defrauded a total of about $50 million dollars.

How can this happen and more importantly how can you protect yourself from scams like these?  Here are a few basic things to be aware of in dealings with people who

Be aware that not everyone is trustworthy: Terry says all the time, never trust anyone, if your mother says it is her birthday, ask to see her birth certificate!  Well that is a bit extreme but the point is that crooks are often very nice people.  They are usually very personable and charming.  First and foremost, just be aware and avoid trusting everyone before they have earned your trust.

Check your behaviour: A con man on a CBC W5 episode said that he looks for three things in a victim: “ Greed, Gullibility and a Willingness to be controlled by others”.  How would you fit in this description?

Do some basic checks: The first thing to do is to make sure that they are who they say they are.  In Canada, anyone representing themselves as a financial advisor investing funds for clients must be licensed and his/her activities must comply with securities commission regulations.  Earl Jones was not licensed.  A simple check at the province security commission would have raised the red flag.

Other basic checks: With the internet today you can find a whole lot about people.  By doing a simple “Google search”, you can see if the advisor has a legitimate website, how long they have been in business, and more importantly, you may be able to find out if some people have had issues in dealing with this person.  The Better Business Bureau is also a very good way to check if any complaints were made about this individual or the business you are thinking of using.

Are your returns unusually high and consistent?: Both Madoff and Earl Jones paid consistent high returns to their clients even in major market downturns.  No one can consistently achieve positive returns investing in stocks and bonds. If it is too good to be true, it probably is. 

Are you getting third party statements: Many of you,our clients, complain about the multiple statements you get.  When dealing with an advisor like us, you should be getting statements from the investment companies we place your money with, not just from the advisor’s office.  Like Madoff and Jones, we could print anything, but if you are also getting the regular investment companies statements and the investment dealer statement once a year (FundEX in our case) you now have three layers of safety.  If you are only getting a statement from the advisor’s office, something is not right and you should investigate further.

Who do you write the cheques to: If the advisor is asking you to write the cheques to him personally or his business, something is not right either.  Cheques should always be written to the investment dealer “In Trust”. 

Follow your gut instinct: If something does not quite add up and you wonder, don’t wait.  Ask questions and follow your gut feeling.  Change advisors if you are not quite certain of the integrity of the person you are dealing with. 

Unfortunately, not everyone is honest and you must learn to be aware.  Whenever in doubt, or when it sounds too good to be true, just stay away. In the end, better be safe than sorry.

Terry Broaders

Notice of Assessment: A Very Important Document

After filing your 2008 income tax return Canada Revenue Agency sends you a Notice of Assessment.  The Notice of Assessment is essentially a summary of the amounts entered on your tax return. Keep your Notice in a safe place and be sure to bring a us a copy next spring with your other income tax slips and documents.  The Notice contains a lot of additional information that your tax preparer requires in order to do the best job possible on your tax return. Failing to bring the Notice to your preparer can cost you some real dollars. So what is included in the valuable information??

The Notice outlines your RRSP contribution room which is the amount that you can contribute to an RRSP and obtain a tax deduction. This figure is important because if you undercontribute you can miss out on some valuable tax deductions. Conversely, should you overcontribute (in excess of your limit plus a $2,000 “overcontribution limit”) you will be subject to a harsh penalty tax of 1% per month. For example, if your limit is $10,000 and you contribute $20,000 then you are $8,000 overcontributed (your $10,000 limit plus the $2,000 “overcontribution limit”).  You will be subject to a monthly penalty of $80 or $960 per year!!

The Notice also outlines the amount of required payment for an RRSP Homebuyers Plan withdrawal or Life Long Learning Plan withdrawal. Should you fail to make a required repayment the amount is added back to your taxable income thus increasing your tax bill for the year.

If you have Capital Losses or Non Capital Losses available for future use this too will be outlined on the Notice. For example, if you have $5,000 in Capital Gains income in the current year and have $5,000 available losses from past years you will be able to apply those past losses against the current gains and therefore wipe out the tax otherwise payable on your current gain.  If you do not bring the Notice to your tax preparer, he or she will not be aware of these available losses unless they have prepared your tax returns in past years. So the Notice is particularly important if you are going to a new tax preparer for the first time.

Another extremely important piece of information on the Notice is the carryforward of federal and provincial unused tuition credits.  Most post secondary students have high tuition fees and very little income in their years of study. The result is that they carry forward unused tuition credits; sometimes in the thousands of dollars. These unused credits can save the client hundreds or thousands of dollars when they start entering their earning years and have some income against which they can apply these credits. If you have unused tuition credits and you do not bring in your Notice these credits and the valuable tax savings can be lost forever.

In future years the Notice will also contain information on the amount which you can put into a Tax Free Savings Account (TFSA). You will earn an amount limit of $5,000 per year.

So be sure to keep your Notice and bring along a copy at next year’s tax preparation time. Doing so can save you a lot of tax dollars!!