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Odette Morin

Odette Morin

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Highlights to the 2017 Liberal Government 2nd federal budget

Finance Minister Bill Morneau delivered the Liberal Government’s 2nd annual budget today called the “Innovation Budget”. Here are the key budget highlights:
 
  • The biggest and most welcome news for investors is that no changes were made to the capital gains tax, stock options or dividends inclusion. There were fears that the Liberal government was going to increase the taxation of capital investment gains but they decided to hold off on any tax hikes for now.
  • No major new taxes.
  • 2% tax increase on alcohol and tobacco.
  • Public transit tax credit is cancelled. Instead, the government will invest $20 billion over 11 years – to improve transit systems and encourage usage across Canada.
  • Cancellation of Canada Savings Bonds.
 New programs introduced
 
  • The budget follows through on promises to let parents take their Employment Insurance parental leave benefits over 18 months rather than 12, giving them the choice of taking the existing 55 per cent benefit rate over a year or 33 per cent over a year and a half. They also propose letting women start their maternity leave 12 weeks before their due dates rather than eight weeks prior.
  • On assistance for families, the government will be pledging $7 billion for affordable child care over 10 years to create up to 40,000 more spaces.
  • The government also plans to devote $6 billion over 10 years for home care and $5 billion over 10 years for mental health initiatives through individual deals with the provinces and territories.
  • $691.3 milions will be spent over five years to expand the caregiver benefit for Canadians supporting critically ill and injured family members.
  • Military spending will also be bumped at a cost of $8.5 billion in capital spending for nearly two decades down the road.
  • $395.5 millions over three years to expand the youth employment strategy.
  • $279.8 million over five years for the Temporary Foreign Workers Program.
  • $57.8 million for mental health for federal inmates.
  • $50 million over two years for teaching initiatives to help children learn to code.
  • $27.5 million for programs to help newcomers get foreign credentials.
  • The government is committing money for skills, innovation and jobs, with $594 million set aside for this year, rising to $1.4 billion by 2021-22.
  • The most expensive item of this budget is spending on infrastructure and social programs, including $20.1 billion promised over 11 years for public transit.
  • $3.6 million over three years to create an LGBTQ secretariat at the Privy Council Office to advance human rights
  • $523.9 million over five years to prevent tax evasion and improve compliance. The budget forecasts the government will make an additional $2.5 billion over five years from those measures to catch fraud and tax evaders.
The federal deficit is projected to be $28.5 billion for the 2017-18 year, compared to $23 billion this year – both higher than projected in the fall. The budget offers no timeframe of when the government will balance the books. The budget predicts the economy will grow slightly this year, keeping the ratio of federal debt to GDP fairly flat, at 31.6 per cent in this year compared to 31.5 per cent last year.
 
Sources: CTV News, BNN, CBC & Globe & Mail.

Fee Disclosure & The Value Of Advice

by Odette & Terry

 The other day, we opened our investment statement and it showed us how much of an investment fee we paid.   Though we know that we always paid for investment management and advice, it was still a change to see the dollar figure versus the previously reported percentage of assets.  It’s the same fee that had always applied to our accounts in the past, but now we see it as a dollar figure rather than a percentage that was simply deducted.

This full disclosure of the actual fees is part of the evolution of the mutual fund industry. Whether a fee is imbedded in a percentage or outlined in a separate dollar figure, the key question is, am I getting value for my money.  A lower fee does not necessarily mean a bigger return and a higher fee does not necessarily mean a lower return.

A recent research study shows that households with financial advisors have more than 4 times the assets of households without a financial advisor and as well, households with advisors save at twice the rate of non-advised households (source: “New Evidence On The Value of Financial Advice 2012” by Dr. John Cockerline, PH.D., Investment Funds Institute of Canada and former Director of Research at the Toronto Stock Exchange).

A few months ago, we wrote a detailed Infokit on the subject of fees.  In a nut shell, there are two sets of fees that Canadian Investors pay in investment funds; the management fee paid to the investment company which is typically 0.80% to 1.5%, and the advisory fee you pay to us and FundEX for advice and service.  This fee ranges from 0.50% to 1%.  The more money invested you have, the lesser the fee. Read the two information bulletin here.

FundEX bulletin “Understanding Mutual Fund Fees” and

Our detailed infokit About Investment Fees & Disclosure 

So, what do you get for these two fees?

The investment company fee is used to pay the investment managers, analysts, traders, statements, tax slips and client services.  The advisory fee is used to pay for investment mix selection, asset allocation, investment trades, financial planning which includes tax, retirement and estate planning.

Please remember that we are very sensitive to MERs. Frank and Anthony are very much on the look out to find ways to reduces fees. We are paid on your account value. So the less management fees you pay, the better it is for us as well.

We welcome the new fee transparency because it puts pressure on investment companies to reduce their MERs. You can expect to see a downward trend going forward. The infokit also shows that at You First/FundEX, we tend to charge less and do a lot more with regards to planning and advice.

We feel that our job is to make sure that your retirement cash flow analysis is on target. We want to make sure that your money will last until age 90. We try to get the highest possible rate of return of course and lower fees but want to make sure that your retirement assets are safe and you can enjoy a stress-free retirement.

Please contact us if you have any questions or concerns about this subject or any other aspect of your plan.

(i) Ontario Securities Commission Investor Advisory Panel 2013

(ii) Canadian Investors Perception of Mutual funds and the Mutual Fund Industry, Pollara, 2014.

Fear Not, You Too Can Live The Dream

Most of us dream one day of having a leisure life and kissing goodbye to the grueling 5 days a week work schedule.  How nice will it feel to be able to sleep in, go for long walks, travel and live the good life.  This dream however is very costly.  You need a lot of money to fund retirement for 30-40 years. A 2016 study by RBC, shows that 56% of non-retired Canadians were worried that they would not be able to enjoy the lifestyle to which they were currently accustomed.

What’s the solution?  Face reality, get the facts on your situation and fear not.

A new Leger poll for Mackenzie Investments finds that 42% of Canadians currently have a financial advisor, while 57% do not. Older Canadians are significantly more likely to have an advisor, Leger says, which may account for their more positive sentiment towards RRSP season than those who are younger. Leger also found most Canadians (68%) say their mood for the approaching RRSP deadline is “indifferent.”
About a quarter of Canadians (26%) say they feel “confident” or “excited” heading into RRSP season. For Canadian respondents who use a financial advisor, that figure jumps to 40%. Leger surveyed 1,522 Canadians online between January 2 to 5, 2017.

So, get help to gain clarity on the future and save as much as you can to ensure a comfortable, stress free retirement!

BC Government 2017 Budget Highlights

The BC Government delivered its 2017 budget this week. The biggest change is the Medical Service Premiums which will be reduced by half for families with annual income below $120k.
For your convenience, here are the key measures that may be of interest to your investors:
  • Medical Services Plan premiums will be reduced by 50% for households with an annual net income of up to $120,000. A typical family is expected to save $900 per year;
  • The small business corporate income tax rate will be reduced to 2 per cent from 2.5 percent, and accordingly the dividend tax credit for ineligible dividends decreased. This has a knock-on effect on the combined tax rate for investment income earned by Canadian-controlled private companies and paid out to shareholders;
  • The threshold for first time home buyer’s program exemption from property transfer tax will be increased from $475,000 to $500,000; and
  • A number of tax credits will be introduced or extended, including tax credits for volunteer firefighters and search and rescue volunteers and individuals with school-aged children for back-to-school expenses.
For more on budget highlights, please refer to the BC government’s summary at this link, or the detailed materials here.

 

Using Public Transit? The monthly passes are tax deductible.

Here is where to get your tax receipt for the BC transit passes and how to get your tax credit on your tax return.

***PLEASE REMEMBER*** that only certain passes count. Unfortunately the BC compass website calculates all the trips you have done and not just the trips you are eligible to claim. You still need to manually go through and subtract all non-eligible trips before using that number on your tax return.

The CRA website list the eligible passes:

These passes must allow unlimited travel within Canada on:

local buses;
streetcars;
subways;
commuter trains;
commuter buses;
local ferries.

You can also claim the cost of Short-term passes if:

Each pass entitles you to unlimited travel for at least 5 consecutive days; and you buy enough of these passes for unlimited travel for at least 20 days in any 28-day period.

Electronic payment cards if the card is used to make at least 32 one-way trips over a maximum of 31 consecutive days; and the card is issued by a public transit authority that records and provides a receipt for the cost and usage of the card.

We will be happy to do your tax return of course.  Here are our tax checklists to get organized and our tax preparation fees.