Odette Morin

Odette Morin

Recent Posts

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.

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.

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.

Enhanced Child Care Benefit starts today!


Many Canadians are about to receive the largest one-time benefit payment in federal history. The Harper government is sending out its enriched Universal Child Care Benefit (UCCB) starting today.

And since the payments are retroactive to January, families will receive cheques or direct deposits representing a total of  $3-billion payout.

The UCCB was increased to $160 per month for each child under the age of six.  The retroactive payment will be $360 per child.

The UCCB was expanded to children aged 6 through 17.  Formerly none were paid. Parents will receive a benefit of up to $60 per month for each child in their care aged 6 through 17.  The retroactive payment will be $360 per child.

How will you spent the enhanced Child Benefit?  or will you be saving some of it?  Let us know your plans!

Find out the details here

Are we in a recession? Who cares?

Read this great article from Andrew Coyne.  It is very well said. Here is an except:
“The media fascination with whether we are or are not in recession is age-old. It reflects our general preference for binary oppositions: up-down, right-left, in-out. We like trials (convicted-acquitted) and hockey games (win-lose: don’t even think of calling it a tie). So much so that where no such opposition exists, we make it up. What did we learn about the candidates in the televised debate? Who cares? Just tell me who won, and whether there were any knockout blows. We don’t like grey zones, or judgment calls. We desire rules, finality, seeming precision.”

The full article is here