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A guide to money management: Who should handle your nest egg?

The Globe and Mail – By Dianne Maley

At age 59, Anne-Marie is at a turning point. She …

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News

A guide to money management: Who should handle your nest egg?

October 4th, 2018

The Globe and Mail – By Dianne Maley

At age 59, Anne-Marie is at a turning point. She and her husband ran a business for decades before it closed, and he recently died. She sold the family house in the city to free up some cash, then moved to a small town and bought a condo.

With the house sale, her retirement savings amount to $1.1-million, and she wonders what to do with that sum.

Anne-Marie is a composite of a number of men and women who have written to The Globe and Mail’s Financial Facelift feature seeking advice.

Where should someone like Anne-Marie look for advice, and how much should she pay for it? Who should handle her nest egg and help her invest it? The options are many for those with larger sums of money, and they can be confusing. While a robo-advisor could work for her, older people can be less comfortable with technology and likely to need more in-depth financial planning.

Macdonald, Shymko & Co. Ltd. of Vancouver offers a similar service to a broad base of clients seeking independent, fee-only financial planning and optional portfolio management. Like Kerr, Macdonald, Shymko does not sell investment products.

“You’re paying for advice, not the product,” said Ian Black, a financial planner and portfolio manager. Macdonald, Shymko’s clients pay an hourly rate or a price determined in advance for a particular project, Mr. Black says. At $260 an hour, a retirement analysis like Anne-Marie needs would cost $1,500 to $2,500, he says.

Clients can take the plan to their own investment adviser or have Macdonald, Shymko manage the money for them. All in, the fee is about 1.2 per cent on $1-million, or $12,000 a year. Money is held by a separate custodian and invested mainly in exchange-traded funds (ETFs), Mr. Black says.

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There’s a smart way to shut down the bank of mom and dad

September 6th, 2018

The Globe and Mail – By Kira Vermond

Forget asking for keys to the family car. Now, some adult children are soliciting parents for cash to pay for wheels of their own.

But is it any wonder why millennials are turning to the bank of mom and dad to bankroll everything from car payments and mortgages to day-to-day expenses such as phone bills and dental fees? Faced with mounting student loans, sky-high housing costs and lacklustre salaries, launching into early adulthood can seem downright overwhelming. Particularly in high-cost markets such as Vancouver and Toronto, asking parents and grandparents for a handout can even mean the difference between paying rent and not.

“It comes up all the time,” says Ngoc Day, a registered financial planner with Macdonald, Shymko & Company Ltd., a fee-only firm in Vancouver. “There’s a perception that the seniors are very wealthy because the real estate has done so well.”

 

Parents are often willing to acquiesce to the requests, even if they’re not rolling in real estate dough.

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Facing a major cash-flow shortfall, how should Faith deploy her substantial investable assets?

August 24th, 2018

The Globe and Mail – By Dianne Maley

Faith is a recently separated, 53-year-old professional woman who makes about $32,000 a year working in the complementary health-care field.

She has two teenagers, one going into second-year university this fall and the other Grade 12. Since the family house was sold, Faith has been renting for about $3,500 a month. She wonders whether she should continue to do so “or get back into the real estate market – a scary proposition in Vancouver, especially because capital preservation is my No. 1 goal,” she writes in an e-mail.

Either way, she will be relying on her investments to supplement her income, which falls far short of her spending. Fortunately, she has substantial assets, including assets in a corporation – part of her separation agreement – $400,000 of which is available tax-free.

Faith’s questions: “Can I afford to buy a new townhouse? If so, how much can I afford? What should I do with my investable assets? Will the proceeds of my investments cover the gap between my lifestyle expenses and my income?”

We asked Ian Black, a portfolio manager and financial planner at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Faith’s situation. Macdonald Shymko is a fee-only financial planner with an investment counsel arm.

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Don’t underestimate the threat of personal liability lawsuits

August 7th, 2018

The Globe and Mail – By Chris Atchison

A Muskoka cottage, a boat or two and a few luxury cars, plus the globetrotting résumé that comes with them. It’s an enviable lifestyle to many, but one that also invites risk.

The higher profile of most high-net-worth people, and the ease of acquiring information about practically anyone these days, makes them a target for litigation.

Let’s say you’re in an auto accident and you injure someone.

“Your auto insurance policy covers you to a certain amount,” says Karen Ritchie, senior vice-president at Baird MacGregor Insurance Brokers LP in Toronto. “But it’s not hard to find out about people nowadays by Googling them. They might find out you’re a senior executive, for example, and the amount of the lawsuit goes up.”

Even frivolous lawsuits can result in settlements in an effort to keep a case out of the courts.

Wealthy people need ample liability insurance, and specifically a personal liability umbrella policy that provides coverage over and above that offered by a home or auto policy, experts advise.

Many high-net-worth individuals fail to recognize the threat to their personal wealth, leaving them exposed to lawsuits for everything from libel and slander to property damage and personal injury.

“Typically, [buying adequate liability insurance] is very low on their priority list,” says Ian Black, a financial advisor with the Vancouver-based wealth planning firm Macdonald, Shymko & Co. Ltd. “ It’s not even on most people’s radar screen for a variety of reasons.

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How can this couple owning five rental apartments arrange a tax-efficient future for heirs?

July 20th, 2018

The Globe and Mail – By Dianne Maley

At the age of 67, Ed and Alexa are reaping the rewards of years of saving and investing: Rising income and the prospect of big capital gains down the road. They are retired with three grown children.

They have amassed a nice-sized real estate portfolio comprising five rental apartments in Vancouver in addition to their own principal residence. They also have substantial financial investments. As the mortgages on the rental properties are paid down over time, Alexa and Ed’s income has been rising – and so has their tax bill.

“We’ll soon have to convert our RRSPs to registered retirement income funds (RRIFs), resulting in even more taxable income,” Alexa writes in an e-mail. They’re worried about having their Old Age Security (OAS) benefits clawed back if their income is too high.

“We have three children and we intend to pass down our assets to all three equally,” Alexa adds. “We’d like to avoid as much tax as possible and organize our affairs so that our beneficiaries inherit the maximum amount.

What can we do about our rental property capital gains?”

We asked Brinsley Saleken, a fee-only financial planner and portfolio manager at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Alexa and Ed’s situation.

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