6 Key Lessons Learned as a Fee-For-Service Financial Planner – Talk With Ellen Roseman’s Investment Club

I was honoured to be invited by Ellen Roseman to speak with her Investment Club about the 6 key lessons I have learned as a fee-for-service financial planner. 

They have had investment guest speakers, but never someone just talking about financial planning.

Ellen Roseman is a journalist who sticks up for ordinary Canadians. Her personal finance & consumer columns appeared in the Toronto Star for 20 years, she was the Star’s business editor, a columnist for the Globe and Mail, associate managing editor of the Globe’s Report on Business, author of 4 books, has a podcast, and she’s been teaching courses on investing and personal finance at the University of Toronto.

My views are common sense based on experience writing over 1,000 financial plans and making them work for the lives of our clients. However, they are unconventional compared to the investment industry’s normal practices.

This video is the actual zoom recording of the Club meeting with the other members removed for confidentiality.

You’ll learn:

• Why dividend investing is a brain fart.
• Why almost nobody can retire comfortably with a balanced or conservative portfolio.
• Why risk tolerance is a learned skill.
• How marginal tax brackets, including clawbacks of government programs, can change your financial plan completely.
• Why taking advantage of leveraged investing, such as the Smith Manoeuvre, can be the best growth strategy for the right people done the right way over the long term.
• The importance of having a financial plan, and why it’s the road map to the life you want.

1/ Almost nobody can retire comfortably with a balanced or conservative portfolio.

• After retiring: The 4% rule for annual withdrawals is more reliable with equities than bonds.
• High risk of bonds as a long-term investment.
• With most financial plans, 80% of retirement income is investment growth AFTER retiring.
• Importance of a growth mindset. High equity focus is a huge benefit in a financial plan.
• Getting the full equity return (global or US) over the long-term is an effective goal.
• For further reading: https://edrempel.com/high-risk-of-bonds/

 2/ Risk tolerance is a learned skill.

• Similar to “turbulence tolerance” with flying, learning to tolerate risk is a highly beneficial skill – possibly the most beneficial investment skill.
• Study actual long-term stock market returns (crashes, recoveries, etc.), most people overestimate the risk of the stock market.
• Further reading: https://edrempel.com/3-principles-of-successful-investors-part-1/

3/ “Dividend investing is a brain fart.”

• Dividends are a withdrawal from your investments controlled by the company.
• Self-made dividends are better than ordinary dividends IN EVERY WAY.
• Further reading: https://edrempel.com/?s=brain+fart

4/ Marginal tax brackets, including clawbacks of government programs, can change your financial plan completely.

• Canada Child Benefit (CCB) is a 34% tax bracket starting at $35,000 of family income.
• Makes RRSP contributions more valuable and for lower incomes.
• Further reading: https://edrempel.com/tax-planning-for-parents/

• GIS and OAS clawbacks for seniors can lead to many creative strategies to minimize tax and clawbacks.
• Dividends mean the clawbacks are grossed-up on your income tax return.

Self-made dividends are better than ordinary dividends in every way:

• Better investment returns. (Invest for return/risk, not just dividend stocks.)
• Diversify globally.
• Complete control of timing, frequency & amount.
• Lower tax (tax-free capital + capital gain).
• Deferred tax until you sell. (Deferred capital gains – the lowest taxed investment income.)
• Lower clawbacks of government benefits (not grossed up).
• Cash flow only when you need it. (Not forced to pay tax when you don’t need it.)
• Provides cash flow, not income (taxable).
• Further reading:
• https://edrempel.com/rrsp-gross-up-strategy-easily-contribute-40-70-more-to-your-rrsp-updated/
• https://edrempel.com/make-your-retirement-comfortable-with-the-8-year-gis-strategy/
• https://edrempel.com/tfsa-vs-rrsp-clawbacks-income-tax-on-seniors/
• https://edrempel.com/dividend-investing-perfected-with-self-made-dividends/

5/ Leveraged investing, such as the Smith Manoeuvre, can be the best growth strategy for the right people done the right way over the long term.

• The Smith Manoeuvre’s expected benefit over 25 years is roughly the value of your home today without using any of your cash flow.
• Investment loans for the long-term can be highly effective wealth-builders for the right person done the right way over the long-term.
• Further reading: https://edrempel.com/smith-manoeuvre

 6/   Importance of a financial plan. It’s the road map to the life you want.

• You usually make very different financial decisions than you would without a plan.
• Know exactly what to do to have the life you want.
• What to do for saving, investing and minimizing lifetime tax.
• Know which strategies might be most effective for you.
• Further reading: https://edrempel.com/importance-of-one-financial-planner

 Ed