Our Two Cents

with TMFG

Your Monthly Update on Everything Going On in Your TMFG Financial World All in One Place. Ask TMFG videos, Our Podcast, Fun and Interesting Articles, Updates, Events and More.

To identify the 5-Star Advisory Teams for 2023, Wealth Professional asked investors across Canada to nominate their advisory teams and describe the key service offerings that set these teams apart and what value they provide to their clientele. For the purpose of this report, teams were classified as those consisting of three or more advisors.  

To narrow down the list to the final 58 5-Star Advisory Teams, WP reviewed all nominations, examining how each advisory team had made a meaningful contribution to their clients and the financial services industry.

The 5-Star Advisory Teams report is proudly supported by the Canadian Association of Alternative Strategies & Assets (CAASA).

FINANCE
Light Read – Useful and Relevant

Finance

The Good, The Bad, The Ugly

Most Canadians are familiar with the term GIC – Guaranteed Investment Certificate. For those that are not, a GIC is a type of fixed-income investment provided by financial institutions. Typically offered in specific terms (1 – 5 years), a GIC guarantees interest payable and the return of principle at the end of the term.

Like most investments, there is an element of risk associated with GIC investing with a commensurate rate of return.

The Good –In times of market uncertainty and volatility, GIC owners can rest assured that the principle of their investment is protected. There is no concern that their initial investment amount will decrease in amount.

The Bad –Depending on the health of the economy, the interest rate environment may not be very attractive. If interest rates are low, then your investment will not earn a high rate of return.

The Ugly –The Consumer Price Index measures changes in the price level of a market basket of consumer goods and services purchased by households. This index is widely accepted as the measurement of inflation for Canada.

Why is this important? Simply put, due to inflation, the value of $1 today, will be less or will purchase less goods and services, in the future.

Since March 2022, the Bank of Canada has been increasing the interest rate to combat rising inflation.

Wouldn’t that be good for GIC investors?  Not necessarily.  The current GIC rates may seem high (relatively speaking), but it’s during a time of high and uncertain inflation.

     5.5% 1-year GIC rate
(-) 2.2% (40% marginal tax rate)
(-) 3.4% inflation (May 2022 to May 2023)
=   - 0.1% rate of return

Taking into consideration the after-tax, after-inflation (real) rate of return, you are left with a guaranteed rate of near 0% or negative -- hardly a compelling reason to invest.  For context, the MSCI World Market Index (CAD) has an annual rate of return of 9.9% (1970 – 2022).  In my experience, most financial plans require an after-tax, real rate of return in excess of 1%.

Speak with your advisor to discuss investment options that provide the opportunity to outperform inflation.  

Carlo Cansino FMA, FCSI, CFP® Senior Financial Planner The McClelland Financial Group of Assante Capital Management Ltd.

FINANCE
Light Read – Useful and Relevant

Finance

The Impact of Inflation
on Canadian Consumers

The long-term rise in the prices of goods and services has significant consequences for Canadian consumers. It affects the cost of living, purchasing power, and overall health of the economy. In this article, we will examine the impact of inflation on Canadian Citizens and discuss how we can mitigate its impact.

The most notable effect of inflation is the increase in the cost of living. As the prices of goods and services increase, consumers must allot more of their income to pay for necessary expenses such as housing, food, transportation, and health care. This can put unwanted pressure on our household finances and forces us to reduce discretionary spending, affecting overall quality of life.

Inflation erodes the purchasing power of money over time. As the value of each dollar decreases, consumers will find it harder to pay for the same number of goods and services. This can lower living standards and make it more difficult to meet long-term savings goals, such as retirement planning or education funding.

Inflation also affects savings and investment decisions. If inflation exceeds interest rates on savings accounts or low-return investments, such as GICs, the real value of those funds will decline over time. It is important for consumers to measure their investment returns against inflation. Depending on your stage of life and time horizon, it is important for investors to put themselves in a position to outstrip inflation.

Impact Reduction

Creating a thorough budget and financial plan is essential during periods of high inflation. Individuals can better allocate their resources by tracking spending, setting priorities, and differentiating between needs and wants. This will help consumers make more informed spending decisions. This helps reduce the impact of inflation on their overall economic health.

Consumers should consider investments that have historically outperformed inflation to prevent a decline in purchasing power. Seeking guidance from financial professionals can help individuals identify appropriate investments that align with their risk tolerance and long-term financial goals. It is also recommended that diversification and regular reviews of your investments be carried.

Monitoring price changes and staying abreast with inflation allows consumers to adjust their budgets accordingly. Identifying market fluctuations, understanding the drivers of inflation, and being informed about government policies can help individuals make informed spending and savings decisions.

In this inflationary environment, the cost of debt has increased. It is important to manage debt responsibly and avoid excessive debt. High-interest loans, such as credit card debt, can intensify financial problems during periods of high inflation. Individuals should aim to reduce debt and seek reinvestment or consolidation options to stabilize their finances.

Inflation profoundly impacts Canadian consumers, affecting the cost of living, purchasing power, and savings. By implementing effective strategies, individuals can mitigate the effects of inflation on their financial well-being. Budgeting wisely, investing in assets that outpace inflation, staying informed, and managing debt responsibly are key steps toward maintaining a stable financial position in the face of rising prices.

Reid Landsberg Financial Advisor The McClelland Financial Group of Assante Capital Management Ltd.

LIFESTYLE
Light Read – Useful and Relevant

Lifestyle

ChatGPT

Artificial Intelligence (AI) has become a popular topic over recent years, even more so in the last couple months. The main reason for this surge of interest in AI was the introduction of ChatGPT in 2022. ChatGPT is an AI chat that allows users to enter prompts. The AI can then respond or perform the task written. With ChatGPT gaining popularity, many people have been using the site to generate creative ideas, compose essays, or even have an intellectual conversation.

Although ChatGPT has taken off, AI has been around for years. For example, in 1997 a machine named ‘Deep Blue’ was created and ended up beating a chess master in a game of chess for the very first time.

AI is more than just ChatGPT. AI is in everything around us, in many ways. For example, if you have used a mapping app on your phone that estimates how long it will take you to arrive at your destination, or your texting app has made grammar suggestions for your writing, you have used and been in contact with AI.

The big question now regarding AI and Finance is, can AI be used to beat the markets?

The simple answer? No.

The way AI functions is that it uses the information available to form its ideas and conservations. Since AI operates on the available information, it does not know anything that anyone else could not find out by looking it up on the internet.

The Efficient Market Hypothesis is a financial hypothesis that states that all share prices reflect all available information out there. Therefore, any information that you or I know, or that AI knows, is already used to make up the current market price.

This means that AI does not have any advantage over regular investors.

In addition, AI is only good at predicting consistent, regular patterns. Estimating your arrival time? AI can do this because it is predictable. Traffic, the time you leave, and the available routes to work are usually the same every day.

Markets are not predictable. If they were, everyone would be rich. Because of this, AI cannot ‘beat’ the market. It only knows what humans and numbers from documents give it. It cannot predict the volatility that is a daily part of the stock markets.

If we can’t use AI to beat the markets, what can AI help with?

AI can help people make their businesses or personal lives more efficient by processing data at a much faster rate. AI can process large amounts of data and simplify it much more efficiently than an Advisor or Fund Manager could.

The best use of AI is when integrated with the human mind.

Ingrid Kucera BAH, Economics Associate Financial Advisor The McClelland Financial Group of Assante Capital Management Ltd.

FINANCE
Light Read – Useful and Relevant

Finance

Investing in Your Child's Future:
The Benefits of RESP for Canadians

As a parent, a quality education is one of the greatest gifts you can give your child. However, the rising costs of tuition and expenses can make higher education seem financially daunting. That's where the Registered Education Savings Plan (RESP) comes in. In Canada, the RESP is a government-sponsored investment vehicle designed to help parents save for their children's post-secondary education.

One of the most significant advantages of an RESP is the opportunity to access government grants, such as the Canada Education Savings Grant (CESG). The CESG matches some of the contributions made to the RESP, providing an extra boost to your savings. Depending on your income, the CESG can contribute up to 20% on the first $2,500 contributed annually. This means you can receive up to $500 per year per child in CESG, which can add up significantly over time and accelerate your savings.

Another compelling benefit of the RESP is the tax-deferred growth it offers. Any investment income earned within the RESP is taxed once the beneficiary withdraws it, typically the child attending post-secondary education. This tax advantage allows your contributions to grow faster over time, maximizing the potential savings for your child's education. Additionally, since students generally have lower income levels, when they withdraw the funds for education, they may be taxed at a lower rate, resulting in potential tax savings.

RESPs provide flexibility in terms of how much and how often you contribute. Whether you make regular contributions or lump-sum payments, the choice is yours. This adaptability allows parents to contribute according to their financial circumstances, ensuring that saving for their child's education remains manageable. Additionally, extended family members and even friends can contribute to the RESP, providing a collaborative approach to saving and allowing others to contribute to your child's future with a Family RESP.

When it's time for your child to pursue higher education, the RESP allows for tax-efficient withdrawals called Educational Assistance Payments (EAPs). These payments consist of a combination of investment income and government grants. EAPs are taxed by the student, who typically has a lower income during their post-secondary years. As a result, the tax liability is often significantly lower than if the parents withdrew the funds.

Investing in an RESP is a prudent choice for Canadian parents aiming to secure their children's future by ensuring they have access to quality education. With access to government grants, tax-deferred growth, and flexible contribution options, the RESP provides a powerful tool for long-term savings. The tax advantages and ability to withdraw funds tax-efficiently through Educational Assistance Payments further enhance the benefits. By taking advantage of RESP, parents can give their children a head start in life, easing the financial burden of post-secondary education and providing them with opportunities to thrive and succeed in their academic pursuits.

John Iaconetti BCom, CFP® Financial Advisor The McClelland Financial Group of Assante Capital Management Ltd.

$25,000 minimum transfer.

Apply Here Today!
Deadline August 15th 2023

THINK SMART
Podcast – Listen to Mike and Rob and their latest thoughts and industry insights

Think Smart

How to Avoid Getting Audited by the CRA

No one ever expects to get audited by the CRA. Today on ThinkSmart Senior Financial Advisors Rob McClelland and Mike Connon walk you through the best practices to avoid a CRA audit and how best to handle it if you do.

Key points:
(00:23): Why do people get audited?
(01:35): What we do to ensure you don’t get audited
(03:03): Why you could be at risk too
(03:56): False alarms
(04:27): The difference between CRA and the IRS
(08:20): How do most people fare after an audit?
(09:27): Suggestions on how to avoid an audit
(10:36): Why making changes can get you flagged
(14:15): Don’t make it easy for the CRA to single you out

LISTEN TO THE LATEST PODCAST

Half Year Round Up

Missed a Few ThinkSmart Podcasts?
All our podcasts from the past six months are here for your convenience

The Greatest Portfolio of All Time

Senior Financial Advisors Rob McClelland and Mike Connon discuss a recent in-depth study on the markets and rolling returns from the Advisor publication Horsesmouth. This fascinating study spans five decades. Listen today to find out what the “GOAT” (greatest of all time) portfolios is.

Key Points
(02:52): The all-cash portfolio and how it fares.
(04:10): The half-cash, half-bond portfolio.
(06:20): The 60/40 portfolio.
(06:55): The diversified portfolio.
(11:20): Evidence of equity returns.



"Rising Interest Rates Might Not Be All That Bad?"

"Cash Solutions"

"Why is the Market So Difficult to Beat?"

"10 Attributes of Great Financial Advisors"



"Unique Ways to Increase Your Retirement Income" "An Integrated Portfolio and Plan Are the Key to Success" 

"10 Creative Uses for Life Insurance "

"Recession is it Coming?"



"Economic Predictions: Are They All They Are Cracked Up to Be?"

"Relentless Negativity in Journalism is Harming Our View of the World"

"Interest Rates Still in the Press: An In-Depth Look at the Markets"

"The Need for Speed: Our Modern-Day Obsession with Making Everything Happen Immediately"



"How Many Accounts Do You Need?"

"Fascinating Study of Investment Returns Over 96 Years"

"Why You Need an Estate Planning Checklist" 



"The Housing Market and How to Help Your Kids with their First Home"

"The World's Wealthiest Cities"

"AI, is it Good or is it Bad? And What the Heck is ChatGPT?"

"Saving for Your Child's University Education" 

"Why Do People Break Up with Their Advisors?"

"Increase Your Earnings in Retirement"

Ask TMFG

Line of Credit vs Credit Card

Watch The Latest Videos

Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see me for individual financial advice based on your personal circumstances. Insurance products and services are provided through Assante Estate and Insurance Services Inc.

Commissions, trailing commissions, management fees and expenses, may all be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the Fund Facts and consult your Assante Advisor before investing.

Certain employees of (TMFG Tax Service) maintain a relationship with Assante Capital Management Ltd. ("Assante") through which they sell investment products. The relationship that they have with Assante does not include tax preparation services which (TMFG Tax Service) is solely responsible. (TMFG Tax Service) is not associated in any way with Assante, and Assante has no responsibility for the tax preparation services offered by (TMFG Tax Service).

*Please note that a live recording may be conducted at our workshops. Consent will be obtained, should you be captured in the video.

**All personal information will only be used in accordance with your consent, and in compliance with Assante's Privacy Policy.

Let's keep communicating. We value our relationship with you and want to stay in touch, whether it's regarding events or newsletters. In brief, The McClelland Financial Group aims to provide you with information that is relevant to you. As you are likely aware, on July 1, 2014 Canada's Anti-Spam Legislation (CASL) came into force which requires your consent to receive electronic communications.

If we do not receive an unsubscribe email from you we will continue e-communications under the implied consent provisions under CASL. **