Odette Morin

Odette Morin

Recent Posts

How will the new Trudeau government affect your pocket book?

Trudeau PM

History was made this week with the stronger than expected come back of the Liberals lead by the high value and enthusiastic Justin Trudeau. With a majority government in hand, he has all the political power he needs to implement his party platform unimpeded.

Trudeau and his Cabinet will be sworn in on November 4, and it will likely be months before the new government releases its budget or starts passing legislation.

Here’s what you can expect from the Liberals once Parliament gets into full swing:

How will personal tax rates change, if at all?

  • Middle class tax rate decrease: Rate for taxable income between $44,700 and $89,401 would drop from 22% to 20.5%, for tax savings worth up to $670 a year per person.
  • High income marginal tax rate increase: Marginal tax rate for income above $200,000 would increase from 29% to 33%. On a $250,000 income, this would mean paying up to $1,329.50 more.

Will any tax credits or deductions change?

The Liberals have promised the following changes:

  • TFSA: Return TFSA contribution rates to $5,500 from $10,000.
  • OAS at 65: The Liberals have said they would not go ahead with plans to gradually raise the eligibility age to 67. This will restore eligibility at age 65 for everyone born from 1958.
  • Child benefit: the Universal Child Care Benefit will be replaced with the Canada Child Benefit, a tax-free monthly benefit for the middle class. Families would receive up to $6,400 a year per child under six, and up to $5,400 a year per child aged six to 17. The amount would decrease as family income rises. Families with incomes of $200,000 or above wouldn’t get a benefit.
  • Employment Insurance: Eligibility will be enhanced and premiums reduced.
  • Create a Teachers School Supply Tax Benefit: teachers and educational assistants who buy their own classroom supplies will benefit from a refundable credit worth up to $150.
  • Home buying: Allow Canadians to put RRSP money toward buying a house more than once. The Home Buyers’ Plan currently focuses on first-time buyers; people would additionally be able to use it multiple times when moving for work, after the death of a spouse, after a marital split or to take in an elderly relative.
  • CPP Enhancement: The Liberals have talked about working with the provinces to bolster Canada Pension Plan benefits.
  • Student loans: Grads would not have to repay student loans until they have earned at least $25,000 a year, with interest paid by the federal government during that period; also, the maximum Canada Student Grant for low-income students would rise to $3,000 annually for people studying full time.

How about income splitting?

  • Pension income splitting will be kept.
  • Income splitting for families with children under 18 will be eliminated.

I own a small business. What happens to me?

  • The small business tax rate is expected to drop from 11% to 9% by 2019.

These were promises made. There is no way to know if and when these will be effective. We will continue to keep you up to date through these blog posts. Keep reading us regularly!

How is your account doing & Fall Market Outlook

world map

World Markets have been very volatile since the summer. The past week has been a welcome reprieve with 6 straight days of recovery but we are bound to see more ups and downs as global growth uncertainty continues.

Before I give you a brief fall Economic Outlook, I feel the need to remind you that your account results have been quite good compared to the markets. The North American markets have lost about 9% year to date. Most of you hold a combination of fixed income, cash and a healthy dose of International Equities, not just North American Equities. Your account will likely show a small gain or very small loss if any.

We do not anticipate any recessions or long-term downturn. Short-term volatility is a normal and healthy process of financial markets. You should not be alarmed at all.

Here is a quick fall 2015 economic outlook. We look forward to seeing you at your annual review meeting to further discuss these events as they pertain to your personal situation. In the meantime, never hesitate to contact us.

Please see the attached Economic Outlook – Fall 2015 from RBC GAM’s Chief Economist Eric Lascelles.

Key Highlights

– Oil Prices – Estimates indicate that West Texas oil prices can rise moderately, but probably not all the way back to US$60 a barrel in the near term;

– Financial-market weakness and volatility are naturally concerns at present, though we expect the former will fade. Commodity-oriented risks – mostly connected with resource-exporting countries and companies – may linger due to a fundamental supply-demand mismatch;

– Gazing into 2016, most regions should manage faster growth, though we have more conviction about this view for the developed world than emerging nations. In the developed world, North American growth prospects have been reduced, while the outlook for Europe and Japan is little changed. All appear on track for growth next year that is no worse than 2015, consistent with the economic-recovery narrative;

– The U.S. dollar continued to perform very well last quarter, but the greenback has been in a bull market for four years now and we feel confident declaring that the “easy money” has been made. To be clear, we’re still bullish on the U.S. dollar but are more tentative now, recognizing that the pace of the gains has been significant and that the currency is no longer undervalued.

– Global inflation remains very low and is likely to fall even more in the near term as the latest wave of oil-price weakness washes over the economy.

– In our view, the long-term case for stocks remains intact. Equity valuations were broadly fair before the downturn, but the decline has pushed equity markets below equilibrium, potentially providing an attractive entry point for investors. With stable earnings and the potential for rebounding valuations, total-return prospects for equities remain compelling.

Fall Investment Research (written by Anthony Sabti)

investment research

Each year Odette and I complete a thorough review of the investments we use for You First clients. We cover the entire Canadian mutual fund spectrum and eventually narrow it down to a list we are comfortable recommending. There is much more to a fund then merely its rate of return. Here are some of the metrics we look at when assessing a particular investment:

Manager: Who runs the fund? How long has he/she been in the industry? What is their investment style? Are they by themselves or part of a team? Do they have a repeatable process? Do they have long-term track record of above average returns? A fund’s portfolio manager is one of the most important considerations.

Quartile rankings: Every mutual fund is placed in a category based on the assets inside the fund (ex. Balanced Fund, Global Equity Fund, Canadian Dividend Fund). This allows for a comparison of the fund within its peer list. Each fund in a category is ranked according to return and is assigned in one of four quartiles. A fund with a 1st quartile 5-year return means it has achieved returns in the top 25% of all funds in its category over the past 5 years. We look for funds that consistently achieve top 2 quartile returns.

Standard Deviation: How volatile is a fund? Standard Deviation measures the variation in a mutual fund’s returns. Here are two very basic examples:

• Over three years Fund A has returns of 8%, 10%, 6%. The basic average (I won’t go into the timing of these returns) of these three returns is 8%. The standard deviation would be 1.63%.

• Over three years Fund B has returns of 16%, 0%, 8%. The basic average (ignoring timing) of these three returns is 8%. The standard deviation would be 6.53%.

Fund A and Fund B achieved the same rate of return, but fund B was much more volatile. All other things being equal, fund A has achieved a better risk-adjusted return. We look for funds with low volatility and high risk-adjusted returns.

Fees: All mutual funds have a Management Expense Ratio (MER) which bundles in both the management firm and advisor’s compensation. For an equity fund the MER averages around 2.3% although more expensive funds can near the 3% mark. Although a lower fee won’t guarantee a higher return, there is a correlation between the two and we strive to use funds with average or below average MERs.

Concentration: A mutual fund can hold as few as 10 stocks, but there are also funds that have hundreds of holdings. We generally look for concentrated funds that hold around 20-50 companies. This is usually the sign of an active manager with conviction and studies have shown that mutual funds with concentrated portfolios tend to outperform.

Upside/Downside capture: This metric compares how a fund performs relative to its benchmark index. If Canadian Equity Fund A has a 5-year upside capture of 100% relative to Toronto Stock Exchange (TSX), it means it increased as much as the benchmark in that period. If it has an 85% 5-year downside ratio, it only decreased 85% compared to the TSX. Naturally we look for funds to capture as much of the upside with as little of the downside. This is another way of assessing risk-adjusted return. Successful managers love highlighting a good upside/downside capture ratio during their presentations.

A lot of work goes into our fall analysis.  It is essential to do an in-depth review every year but ongoing monitoring is also part of our regular work. You will be updated at your annual review meeting and contacted should any urgent changes are required during the year.

About Investment Fees: Advisor’s accountability and full disclosure.

It’s finally time for full disclosure! Starting February 2017, advisors will be legally required to include their compensation and management fees on every statement you receive.

Typically, advisors are paid 1% of the market value on a client investment account. Investment companies are paid 1.5% for management.

This is pretty much industry standard. But what isn’t standard is the value they provide – or lack thereof, which is precisely why this new regulation is a game changer. Now you’ll know what you’re paying for.

What full disclosure reveals.
Did you know that banks charge the same fee as financial planners with little personal service (the “your call is important to us” message doesn’t cut it), let alone monitoring.
Full disclosure enables you to take a critical look at what you’re paying for in relation to what you’re earning. It protects you. It keeps you informed. It allows you to comparison shop.

It also spurs critical questions like this one: do financial planners earn their keep?

Are Advisors Worth it? According to research, we are.

YF About Investment Fees CHART1YF About Investment Fees CHART2

YF About Investment Fees CHART3

As you can see, those with an adviser do better financially and feel more confident about their future.

In the next few blog posts, I will talk more about fees, how much you actually pay, discuss the value we add and how competitive our fees are.  Stay tuned!

How to achieve inner peace in a volatile market.

market emotions

The other day a friend of mine said that the market has her “totally stressed”. She asked me how I cope.

“I’m not worried at all”, I said. “However, when I feel stressed, yoga and deep breathing really help.”

From her eye roll (a very exaggerated one I might add), I could see that Ujjayi yoga breath wasn’t the advice she was looking for.

So, for anyone feeling nervous about the recent market fluctuations, here’s some solid financial advice.


Seriously, take a breath. Don’t act or react. As I’ve mentioned in previous posts, markets always right themselves. Even during the two worst financial periods in recent history (the 1930’s and at the start of this century), stocks still bounced back eventually.

Do the math.

People are loss adverse – multiplied by two. According to Nobel Prize-winning psychologist Daniel Kahneman, loss yields about twice the psychological effect of an equivalent gain.

So, despite the fact that, over time, stocks yield more than they lose, we feel the loss twice as much as the gain.

It makes my left brain hurt.

Back away slowly and don’t make eye contact!

Given that we feel loss twice as strongly as gain, I suggest you avoid loss. Don’t check your portfolio daily. All the ups and downs will cause you more anxiety and prevent you from thinking rationally.

According to an article in the New York Times, checking your portfolio:

• Once a week means facing loss 43.7% of time

• Once a month means facing loss only 40.4 percent of the time

• Once a year means facing only 27.6 percent of the time

So check less often. Stay more peaceful (and more rational).

Don’t talk about it.

Because we feel loss twice as much as we do gain, talking about it with others suffering the same irrational anxiety is more likely to turn you into a psychological mess.

Hanging around the cooler and venting about the market is not self-help. Worse still, you leave yourself open to very bad advice.

Stay informed.

Read the finance section of reputable newspapers. Get educated about capital markets and asset classes.

The more you understand about how investments work, the better you’ll be able to accept, tolerate and manage risk. It’s also the perfect antidote to acting on impulse.

On a final note, you can always call or email us when you’re feeling unsure. We’ll happily talk through your concerns and make you feel at peace again (big eye rolls aside, I still think Ujjayi breathing isn’t such a bad idea!).