Monthly Archives: August 2015

Terry Broaders

Weekly Update August 25 2015

“During An Election The Air Is Full of Speeches – And Vice Versa” -Anonymous


Markets Endure A Rough Week

World stock markets tumbled and commodity prices slid on Friday after new data provided further evidence of slowing economic growth in China. Crude oil prices fell again, posting their longest weekly losing streak in nearly 30 years, and emerging market stocks, bonds and currencies were all lower, with slowing Chinese growth reducing demand for commodities from developing countries. Canada’s main stock index fell almost 2 per cent, capping a woeful week as investors exited heavyweight financial and resource stocks, while telecoms was the only sector to escape the rout. The Toronto Stock Exchange’s S&P/TSX composite index ended down 263.33 points, or 1.92 per cent, at 13,473.67. It lost 5.6 per cent in the week, its worst weekly slump since September 2011.  The Dow Jones industrial average fell 530.81 points, or 3.12 per cent, to 16,459.88, the S&P 500 lost 64.7 points, or 3.18 per cent, to 1,971.03 and the Nasdaq Composite dropped 171.45 points, or 3.52 per cent, to 4,706.04.
“People are using China as the main thing as an excuse for selling,” said Keith Bliss, senior vice-president at brokerage firm Cuttone & Co in New York.  ”A lot of people know this is way overdone. They are just waiting and they are going to step back in next week.”


RCMP Warns of Fraudulent Scheme

The Royal Canadian Mounted Police is warning the public of fraudulent phone calls in which the caller claims to be an RCMP officer and informs individuals that they owe fines or income taxes. The scammer then threatens to arrest those individuals within 24 hours if they do not pay immediately. “Be aware: the RCMP does not contact individuals for the purpose of collecting fines or taxes,” the RCMP’s announcement states. “These types of telephone scams are designed to create such shock and anxiety that victims respond by sending money quickly in order to fix the problem.” What likely confuses victims of the scam is that a number for the RCMP will appear on victims’ call displays in most cases. Anyone who has received these phone calls or knows of someone who has is being asked to contact his or her local police force as well as the Canadian Anti-Fraud Centre at 1-888-495-8501.
Members of the public are also being directed to Canadian Anti-Fraud Centre’s website ( to learn how to protect themselves against various fraudulent activities.


Blog Links

Should You Incorporate or Remain a Sole Proprietor ?

New Lower RRIF Income Payment Rules   


Sources: Bloomberg; Investment Executive;

Odette Morin

Stocks end painful day with biggest drop in 4 years. Should you be worried?

market crash


Market volatility has continued today, with markets opening in correction territory, only to rebound somewhat as of midday. Global equity markets have been under significant selling pressure over the past week. The volatility catalyst is tied to the recent moves China made to let their currency depreciate.

Within the span of the past several months we have seen three major global capital market regime changes: the breakdown of the 40-year old OPEC oil cartel and a downward spiral in crude prices; a generational shift in the Chinese economy from fixed asset spending to a consumer driven model; and Lastly, on the horizon we face the change from the US Federal Reserve’s zero interest rate policy to a tightening bias not seen in seven years.

That said, outside the energy sector earnings for the S&P 500 companies grew approximately 4% for the most recent quarter on a year-over-year basis.  Not stellar, but hardly recessionary.

What are the reasons to believe this is more likely a temporary pause in the current bull market?

In the United States the consumer remains healthy.  The labour market continues to improve and wages are growing.  US housing starts rose in July, a seven year high yet still 20% below the long term average.  Housing has lagged household formation and there is catching up to do.

While it is difficult to assess the magnitude of any period of panic selling in equity markets given that the performance variance of these events is so wide through time, the duration for this bout of weakness is likely to be measured in days or weeks…not in quarters or years. The near 15% sell-off in 2010 and close to 18% sell-off in 2011 were incredibly uncomfortable, but they did not mark the beginning of the end of the bull market. Keep in mind that the S&P 500 has experienced, on average, an intra-year drop of 14.2% over the past 35-40 years and we have had many positive longer-term outcomes.

The deepest, longest and thus most destructive equity market sell-offs have typically been associated with economic contraction. Currently, we believe the odds of a global recession remains rather low. European, Japanese and American leading economic data continue to point to either healthy or accelerating activity over the next 9-12 months. This should ultimately translate into a better tone to earnings and help to place a higher floor under share prices. It is times just like these when it becomes incredibly important not to give into emotion, but to follow your well thought out and pre-defined investment program.

­­­­­­­­­­­­­­­­­­­Like I wrote to a client today. Please do not worry.  In our investing years we will go through a lot of volatility.  Unfortunately, reacting would be a mistake. We could sell now and markets could recover more quickly than we thought and you would be left with the lower valuation.  It is safer to stay the course and ignore market swings.  For every stock sold, there is a buyer at the other end which thinks it is a good time to buy.  For the patient investor, it will have proven an excellent investment.   The market value of our account is less important that the dividends it generates.

Here is my investing 101 word of wisdom.

Always remember that equity investment returns are closely tied to corporate earnings growth and the price you pay for those earnings. Historically, over the long term corporate earnings have been fairly stable and have grown along with productivity gains and inflation. Stock valuations though are more volatile than earnings since they are influenced by investor sentiment, which swings between optimism and pessimism.

To summarize, be prepared for a period of volatility in the month ahead.  Europe is slowing, the Feds will start raising rates and the price of oil is set to stay low for a while.  But this should not change anything about the way you invest.  Use this period as a time of buying opportunity if you can and enjoy the stability offered through dividends.

Please feel free to call me, Terry or Anthony anytime to review your account or to book a meeting.
Some of the key market highlights outlined above were obtained from RBC, TD, Manulife and Dynamic funds market commentaries.

Odette Morin

Should you incorporate or remain a sole proprietor?

Inc or not

Setting up a professional corporation can be easy and financially beneficial, but before you decide to incorporate, it helps to consider the pros and cons and make sure that your profession allows it.

There are many advantages to being incorporated which I will list below but it may not be needed just yet unless there is a potential liability. For many self-employed individuals, there is rarely a need to be incorporated unless they make an income greater than what is needed to live. For most very successful self-employed, it is not a matter of if they should be incorporated, it is a matter of when they should do it. Here are the details.

There are two main reasons to incorporate:

1.Liability potential: Can you be held legally responsible for the work you do? Could you be sued and potentially lose a significant part of your personal assets? If the answer is yes, you need to incorporate now to protect these assets regardless of the tax situation. This just makes sense.
2.Tax saving: The rule of thumb regarding the tax aspect of incorporation is that you need to keep in the corporation about $50k. The resulting tax saved by keeping that $50k in the corporation will offset the annual costs of accounting and bookkeeping. In other words, if you need all of the money you make to pay bills and pay for your lifestyle and nothing gets saved in the corporation, there is no tax advantage to incorporating. If you only need to draw a portion of the self-employment income and at least $50k can stay within the corporation, the personal and corporate combined tax owing will be less. Please remember that you would also be able to direct funds from the corporation to your RRSP tax-free effectively transferring money from the corporation to you personally without immediate tax. Therefore, the $50k is after the RRSP contribution. If you do make enough to draw the salary you need, maximize your RRSP and still have $50k left in the corporation, you should incorporate. The funds left in the corporation not required in the short-term can be invested for retirement as well.

If you are just starting out, I would wait at least a year before incorporating unless there is a large liability potential. You will know by then whether you like being self-employed and how much money you will be making. Incorporating will cost you anywhere from $2500 to $5000. This is a one-time up-front cost. The accounting fees are generally about $2500 to $3000 per year.

Here are more details on how a professional corporation can help with your tax planning.

1. Tax deferral on corporately retained earnings:

·As long as the money earned by shareholder in his corporation, stays in the business, personal tax won’t be due on the amount until it’s paid out to shareholders (you, your kids or spouse). Your money doesn’t need to be paid out; it can stay in the business for years.

·It’s best to leave at least $50,000 a year in the business to justify the cost of incorporating.

2. Income splitting:

·Some professions allow family members to hold non-voting shares. In these cases a spouse or child (over 18) who is not active in the business can share a part of the professional corporation’s after-tax income by receiving dividends on shares they own directly or indirectly.

·If your children are 18 or older and earning income that puts them in a low tax bracket, the family will pay less tax overall than if the professional personally earns all the income.

·Accumulation of equity: With more after-tax income inside the business, you can accrue assets faster than if you used your money on personal expenses.

·Dividend-sprinkling shares: This is a cost effective alternative to trusts involves issuing various classes of common shares to each family member, permitting the corporation to pay dividends on one class of shares to the exclusion of others. Paying family members dividends instead of a salary should be considered in some cases because salaries paid are subject to reasonableness tests. Dividend payments are not subject to the same test.

3. Tax savings with cheaper non-deductibility

·Consider having the corporation incur non-deductible expenses such as life insurance premiums. Since a professional corporation pays tax at a lower rate than an unincorporated professional, the cost of non-deductibility is less.

The benefits of incorporating don’t end there. Setting up a professional corporation can help professionals in their retirement years as well.

Dividends after retirement

·It’s not imperative that a person closes their professional corporation when they retire; funds can be left in the professional corporation to grow. The company can retain the earnings and pay them out as dividends.

Individual pension plans (IPP)

·An incorporated professional can have a pension plan established by the corporation for their benefit. Contributions are made to this plan instead of an RRSP.

Probate tax

·In some provinces, creating a corporation can significantly reduce probate taxes at death, using a secondary will to address the transfer of shares after death.

While there are some great benefits to incorporating, there are a few drawbacks as well.

·Start-up and annual costs are high
·A lawyer is needed to set up a professional corporation. In some situations this can cost upwards of $3,500.
·The cost of moving existing assets into a corporation can run between $5,000 and $7,500.
·Additional tax returns are needed
·Your client will be required to fill out a T2 for corporate returns. They’ll also need to file an annual corporate financial statement, which can cost $1,500 – $3500.

Please contact us to further discuss your situation. You can reach us at 604-878-0702 for Anthony, Odette or Terry.

Please note remember that we are not accountants. This is only a very general summary of the advantages and disadvantages of incorporating. It is provided in a financial planning perspective. Only a qualified accountant can give you professional advice.

Odette Morin

NEW lower RRIF minimum payment rules effective now: consider your options


We are writing to advise all annuitants of Registered Retirement Income Fund (RRIF) held with us of changes to the required minimum annual withdrawal amounts as a result of regulations introduced in the Federal Budget released April 21, 2015.

Specifically, the budget introduced a reduction to the prescribed required minimum annual withdrawal factors for RRIF annuitants 71 to 94 years of age. Starting in 2016, this reduction will result in decreasing the amount that RRIF annuitants will be required to withdraw as a minimum amount during those age years.

This applies to RRIF accountholders who are setup to receive the minimum payment only. If you are setup to receive a fixed amount (ex. $500 a month), you will not be affected.

The table below provides a comparison of the new and old RRIF factors.


All RRIFs 2015+ Post-1992 RRIFs
prior to 2015
71 0.0528 0.0738
72 0.0540 0.0748
73 0.0553 0.0759
74 0.0567 0.0771
75 0.0582 0.0785
76 0.0598 0.0799
77 0.0617 0.0815
78 0.0636 0.0833
79 0.0658 0.0853
80 0.0682 0.0875
81 0.0708 0.0899
82 0.0738 0.0927
83 0.0771 0.0958
84 0.0808 0.0993
85 0.0851 0.1033
86 0.0899 0.1079
87 0.0955 0.1133
88 0.1021 0.1196
89 0.1099 0.1271
90 0.1192 0.1362
91 0.1306 0.1473
92 0.1449 0.1612
93 0.1634 0.1792
94 0.1879 0.2000
95+ 0.2000 0.2000

Generally speaking there is about a 2% decrease in required minimum withdrawals. For example, if you are 75 years old and you have a RRIF with a $100,000 balance, the old minimum amount $7,850 and the new minimum

is $5,820. In this example, you have $2,030 less in taxable income.

Since this change was introduced well after the start of the year but is effective for 2015, you have a few options for 2015:

  1. Minimum Amount – You can choose to take this year’s minimum payment based on the old calculations, in which case you do not need to do anything further (recommended action).
  2. Re-contribute – If you have already, or by the end of the year will have received the required minimum annual withdrawal amount based upon the old factors, you have the option of re-contributing the excess amount to your RRIF. The deadline to make a re-contribution is March 1st, 2016. You will be issued a T4 for the amount withdrawn and an offsetting contribution slip for the re-contribution for your 2015 tax filing (we do not recommended this action, enjoy the extra money for 2015!)
  3. Adjust Payments – You can choose to adjust any minimum payment(s) not yet paid to reflect the new lower calculation. In this case we will require formal updated instructions from you.

No action is required on your part unless your payment(s) are based upon the minimum required withdrawal and you wish to take advantage of the lower required minimum withdrawal for 2015, or wish to re-contribute the excess withdrawals for 2015.

Most RRIF accountholders who are setup to receive the minimum will likely welcome the decrease in payments.

Terry Broaders

Weekly Update August 11 2015


“Somewhere, Something Incredible Waits To Be Known” -Carl Sagan


North American Markets Down On Positive Jobs Data

Weaker oil prices continued to weigh on the Toronto Stock Exchange Friday and even some stronger showing from the gold miners failed to stop the drop. North American markets closed lower Friday as positive jobs data from the U.S. suggested that the U.S. Federal Reserve is likely to raise interest rates in the fall. The S&P/TSX composite index was down 103.21 points at 14,302.70. In New York, the Dow Jones industrial average was down 46.37 points at 17,373.38, the Nasdaq index fell 12.90 points to 5,043.54, and the S&P 500 declined 5.99 points to 2,077.57.  The loonie lost 0.15 of a U.S. cent to 76.14 cents U.S. On the commodity markets, the December gold contract rose $4.00 to US$1,094.10 an ounce, the September crude oil contract lost 79 cents at US$43.87 a barrel and the September contract for natural gas was down 1.5 cents at $2.798.


Boomers Visions of Retirement Off The Mark ?

Baby boomers approaching retirement may be surprised at the realities they will face regarding the timing of their retirement and how they will actually spend their retirement, according to a study conducted for RBC. The 2015 RBC Retirement Myths and Realities poll surveyed pre-retirement baby boomers and retired boomers to see if the expectations of those pre-retirees are consistent with the experience of actual retirees. The results indicate that expectations are often not in line with reality. A striking difference exists, for example, in the issue of choosing when to retire. Eighty per-cent of pre-retirees say they expect to choose their retirement date themselves. But 43% of retirees say they did not make that choice. The reasons they gave include health, the need to be a caregiver to someone else and an employer’s request.

As well, when pre-retirees were asked how they believe they will spend their time in retirement, the most popular answer, from 70% of respondents, is “travel”; 64% say they will take time for themselves. However, the reverse is true for retirees: 72% say they are taking time for themselves and 62% say they are travelling. Respondents were also asked about what they would miss about their working days. Forty-nine per-cent of pre-retirees feel they will miss their paycheque the most. But that is a concern for only 26% of those already in retirement. The most popular response to this question for retirees (51%) was “socializing/interacting with colleagues.”

Ipsos Reid conducted the sixth annual RBC Retirement Myths and Realities poll through online interviews between Mar. 16 and Mar. 24. The survey used a national sample of 2,223 adults aged 50 or older who have household assets of at least $100,000.


Market Update as of August 7 2015

North America

The TSX closed at 14303, down -166 points or -1.15% over the past week. YTD the TSX is down -3.06%.

The DOW closed at 17373, down -317 points or -1.79% over the past week. YTD the DOW is down -2.58%.
The S&P closed at 2078, down -26 points or -1.24% over the past week. YTD the S&P is up 0.97%.
The Nasdaq closed at 5044, down -84 points or -1.64% over the past week. YTD the Nasdaq is up 6.71%.
Gold closed at 1091, down -7.00 points or -0.64% over the past week. YTD gold is down -6.91%.
Oil closed at 44.31, down -2.81 points or -5.96% over the past week. YTD oil is down -15.90%.
The USD/CAD closed at 1.313227, up 0.0086 points or 0.66% over the past week. YTD the USD/CAD is up 11.90%.



The MSCI World closed at 1753, down 7.00 Points or -0.40% over the past week.  YTD the MSCI World is up 2.52%.
The Euro Stoxx 50 closed at 3638, up 37.00 points or 1.03% over the past week.  YTD the Euro Stoxx 50 is up 15.62%.
The FTSE closed at 6719, up 22.00 points or 0.33% over the past week.  YTD the FTSE is up 2.32%.
The CAC closed at 5155, up 72.00 points or 1.42% over the past week.  YTD the CAC is up 20.64%.
The DAX closed at 11491, up 182.00 points or 1.61% over the past week.  YTD the DAX is up 17.19%.
The Shanghai closed at 3744, up 80.00 points or 2.20% over the past week.  YTD the Shanghai is up 15.75%.
The Nikkei closed at 20725, up 177.00 points or 0.68% over the past week.  YTD the Nikkei is up 18.76%.


Sources: Bloomberg; Investment Executive; RBC;