Personal Finance

Looking for long term financial planning advice

  • Last Updated:
  • Sep 12th, 2019 4:33 pm
Deal Addict
Mar 8, 2013
2360 posts
1094 upvotes
I am not familiar with Edward Jones, and what financial planning services they provide, but you might as well start there. Have you had a recent meeting so that they are aware of your marriage, wife's employment situation, plans for a house and family?

What strikes me immediately is that going forward:
1. Because of your wife's lower income, she should open a high interest savings account and put all her income into that account for the house purchase.
2. You should have a separate account from which to pay all the expenses from your (higher) income.
3. If you are going to contribute to an RRSP, it should be spousal so that you get the tax deduction but your wife will be able to withdraw at her (presumably lower) tax rate after at least 3 years.

It is the 102K in the open account that needs to be looked at. If you check the tax slips from the last few years, you should be able to see what your after-tax return really is. Forget about the history of this account, and try to determine if you are better off holding these funds for a few more years, or buy your house sooner rather than later. No point in looking for another investment firm if you are going to liquidate the funds anyway to put towards your house.
Member
Aug 23, 2019
445 posts
239 upvotes
sdutta6 wrote:
Sep 6th, 2019 11:39 am
Thanks for the detailed post and replies. I think seeing a fee-based financial planner might help

Couple answers here:
1. I am earning my income myself though have considered incorporating for some time.
2. We are still working on figuring out what benefits my wife gets access to. As a substitute, it is not very much.
3. These are the types of funds I have with Edward Jones:
Investment account (102k):

C.I.SIGNATURE DIVIDEND FUND (610)
FRANKLIN BISSETT CANADIAN DIVIDEND FUND (1017)
MACKENZIE CUNDILL CANADIAN SECURITY FUND SER C (738)
RENAISSANCE HIGH YIELD BOND FUND (908)
SYMMETRY CONSERVATIVE PORTF FUND FE (2912)

Over 11 years, I have received a 2.78% return.

TFSA (maxed):

BMO CONCENTRATED GBL EQTY LL (98213)
FRANKLIN HIGH INCOME FUND (186)
MANULIFE WORLD INVESTMENT CLASS ADV SRS LL (8721)

Over 3 years, I have received a 5% return which I feel is ok compared to the other account.

RRSP: 40k. Negligible returns as I just started putting money in last year.
How have you determined that your return was 2.78% over 11 years? That doesn't sound right. Do you mean 2.78% per year for each year over 11 years?
Member
Aug 23, 2019
445 posts
239 upvotes
sdutta6 wrote:
Sep 6th, 2019 11:39 am
Thanks for the detailed post and replies. I think seeing a fee-based financial planner might help

Couple answers here:
1. I am earning my income myself though have considered incorporating for some time.
2. We are still working on figuring out what benefits my wife gets access to. As a substitute, it is not very much.
3. These are the types of funds I have with Edward Jones:
Investment account (102k):

C.I.SIGNATURE DIVIDEND FUND (610)
FRANKLIN BISSETT CANADIAN DIVIDEND FUND (1017)
MACKENZIE CUNDILL CANADIAN SECURITY FUND SER C (738)
RENAISSANCE HIGH YIELD BOND FUND (908)
SYMMETRY CONSERVATIVE PORTF FUND FE (2912)

Over 11 years, I have received a 2.78% return.

TFSA (maxed):

BMO CONCENTRATED GBL EQTY LL (98213)
FRANKLIN HIGH INCOME FUND (186)
MANULIFE WORLD INVESTMENT CLASS ADV SRS LL (8721)

Over 3 years, I have received a 5% return which I feel is ok compared to the other account.

RRSP: 40k. Negligible returns as I just started putting money in last year.
your returns don't seem right and I think you may be miss-reading your statement. That needs to be investigated.
Thanks for prompting these questions.

1. I would say I would be a bit more balanced in my risk tolerance vs. a full growth tolerance. My main account with Edward Jones has a 2.78% return over 11 years.
2. I have shared the split of my accounts just now
3. Month to month is a bit hard for me since income fluctuates so much (several months without contracts being paid, followed by receiving 40,000 at once for example). I would say annually I am able to save around 20,000-25,000.
4. We do not have children. We are planning to in 2-3 years time.
5. Retirement Ideally at 60; though as I am self-employed I do not see myself fully retiring (ie. though I hope to significantly lessen my workload as I near normal retirement years)
6. No idea on my wife's pension; she just started as a substitute
7. I am self-employed, I am required to pay the max on CPP due to my income
8. During the time I was away, I continued to pay my taxes in Canada so should qualify for OAS
9. We do not have any debts at the moment
1-With regards to 1, a balanced portfolio should bring in around 4-6% rate of return per year. Any bank, including edward jones, primerica, CI, etc, they should easily be able to give you a balanced portfolio that can achieve these returns. If you want to do it yourself, it's not hard either. A group of 5 ETFs will get you a nice balanced fund. Or you can just buy XBAL and call it a day.

2- Assets seem to be building, so focus on maxing out your wife TFSA as well. Unsure how your family deals with joint finances and if you are comfortable doing that, but should be considered. Unclear if you are doing that already.

3- Saving $20,000-$30,000 per year now is great. You need to attach a goal to that then. You said you want to retire by 60. What does retirement look like for you, what income do you think you will need in retirement in today dollars?

4- Kids + house in 2-3 years:
house - ok you will need 20% down payment. On $500,000 you need at least $100,000 (if you don't want to go high-ratio CMHC/GE/Canada gurantee). Your income, assuming your T1 employment income is actually $100,000 a year, should easily qualify you for that. You will also need closing costs. A good rule of thumb is around 2% closing costs of purchase price. So $10,000. Land transfer taxes/legal closing/etc. If you go high-ratio insured, then you can obviously go with a larger mortgage and a smaller down payment. In addition to legals/land transfer, you will need HST on whatever the CMHC premium is. So if you go 95% loan to value, e.g. 5% down, your mortgage will be $475,000 + CMHC premium. There is HST on the CMHC premium which you pay out of pocket at closing usually to your lawyer - who forwards to the lender.
You can use first time home buyer to take out $35,000 from your RRSP which you will need to repay in the 2nd year of withdrawal $35,000/15 years would be your annual repayment into RSP. If your wife has an RSP you can take out same for her. You may want to consider starting to contribute into her RRSP to take advantage of this benefit.

kids - you will need to factor impact of mat leave. Your wife will get EI and as well you (assuming you are paying into EI.) However probably doesnt make sense if youre self employed.
When shes back at work, factor in child care expenses. Unsure costs in your neck of the woods.

5- retirement 60. As per above, what does retirement look like, what income in todays dollars do you tihnk you will need. AS you dont have a house now, maybe it's paid off by then?
Then factor in:
a) your wifes pension assuming she gets full time and vests with them. You would need to determine this.
b) your CPP - at age 60, assuming you are maxing out your contributions (not taking dividends) and YMPE is $57,400. So if you're at least claiming this at employment income then youre maxing out CPP. At age 60 you get -36% of the max benefit. That's assuming from age 18 to 60 you work 35 years meeting the MAXIMUM CPP contributions you will get -36% of max CPP which is roughly $13,800 right now = $8832
b) your wife CPP - seems like she just started working. CPP average is like $8000 at age 65, so -36% of that assuming you both retire at 60 = $5120
c) your OAS = assume max = $7200 at age 65
d) your wifes OAS = assume max = $7200 at age 65

Good rule to guess what you will need in retirement is 70% of income. So if you're making $100,000 now, $70,000 would be good starting point + Wife = $90,000
So you need roughly $90,000 - $8,832 - $5120 at age 60
At age 65 you need $90,000 - $8,832 - $5120 - $7200x2
Assuming you live till 90.

Im sure you arleady have an accountant you work with? So you will need to discuss with him in more detail if its worht taking dividends or paying eomployment income. It may be worth splitting it because the CPP pension is pretty good and is 1 less thing you need to worry about... and it's inflation adjusted. So it's a no brainer to at least MAX OUT your employment income at YMPE and take the rest dividends in my opinion.
You need to discuss topping up RRSP for spouse for home buyers plan as I think that's a good opportunity to get some extra cash flow.
Flow of money = RRSP contributions ==> tax return ==> tfsa
and then obviously repayment in 2 years but it's tiny. $2,333 annual repayment.
Member
Aug 23, 2019
445 posts
239 upvotes
MK1986 wrote:
Sep 6th, 2019 8:32 am
Thanks for replying. I'm pretty new to Canada, its been 5 year's now. Yes I'm very scared to do anything with my money as I have very little knowledge about investing and don't have any family members for proper guidance. My wife wants me to buy a second house for investment. My risk tolerance level is very low as I'm the main bread winner and have three small kids ! I had posted here to get some general ideas and suggestions on how to start building up my assets in Canada. Yes definitely I'll put more money into my kids RESP's but I doesn't make any sense If i'm not investing it correctly, right ?
RESP = 20% return, even if it's sitting in cash when you DEPOSIT money.
So $2500 goes in for your kid, you get $500 from government. If you're low income you get a bit more which helps accelerate how fast you get to the max grant amount of $7200. That means less deposits out of your pocket to get to $7200.
So with 3 kids, if you put in $2500 per year, = $7500 you will get deposited into the RESP an additional $1500.
You can catch up previous years, so you can put $5000, assuming you didn't put anything this year, and then you will get $1,000 per child. But you are just catching up 1 previous year.
Of course you want to invest this. Honestly, if you don't have experience - and RESPs are a pain in the as.s to setup as self directed accounts, you can just buy any moderate mutual fund at any bank and you will get a decent return. Which bank are you with?

As for building assets:
Everyone wants investment properties when markets are hot, but you will need 20% down payment for a rental property + you need to qualify. So I don't know where you are in Canada, but in Toronto you can't really get anything worth your time with $80,000 down payment. At least not a positive cash flow. You will need to do your own research.

Does your company/wifes company have a pension?

I would start wtih popping that $80,000 into a TFSA for your and your wife. Split it equally. You'll need to do research who will give you the best rate. Likely for a cash account you won't get much, maybe 1.2% if you're lucky. But at least you don't pay taxes on it.
You can invest if you're willing to take on some risk. You can do a low-risk balanced fund at a major bank. You might get 2% to 4% depending on how things go, but you are taking on some level of risk. IF youre set on buying a place in a few years, you really can't invest it....

I think you need to sit down and see the following:
1) when do you want to retire and how much do you need to live comfortably.
2) how much will kids cost - school/etc.
3) do you have pensions
4) As you're new to Canada for 5 years, I don't know how old you are.... But... assuming you are in mid 30's, early 40's, CPP and OAS will be reduced for you.

There's no easy way. Building assets = savings and making money and taking calculated risks.
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May 11, 2014
3233 posts
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Doebird wrote:
Sep 6th, 2019 8:52 pm
How have you determined that your return was 2.78% over 11 years? That doesn't sound right. Do you mean 2.78% per year for each year over 11 years?
I concur. @sdutta6 that number doesn't add up. Looking at these funds even on the most expensive Series A still yields healthily over 5% if you were to split those 5 funds 20% each. The worst performing Symmetry Conservative Portfolio's 10 year average is 4.9% annualized, so even if you meant 2.78% annualized, that number seems quite low.
https://www.mackenzieinvestments.com/en ... 912-en.pdf

While some of these don't even have 11 years in history. Did the portfolio ever change funds by your manager? Were funds switched? Were any of the funds you have segregated versions? Or is the 2.78% return not correct. Something isn't adding up.
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[OP]
Newbie
Oct 16, 2017
15 posts
xgbsSS wrote:
Sep 7th, 2019 1:14 pm
I concur. @sdutta6 that number doesn't add up. Looking at these funds even on the most expensive Series A still yields healthily over 5% if you were to split those 5 funds 20% each. The worst performing Symmetry Conservative Portfolio's 10 year average is 4.9% annualized, so even if you meant 2.78% annualized, that number seems quite low.
https://www.mackenzieinvestments.com/en ... 912-en.pdf

While some of these don't even have 11 years in history. Did the portfolio ever change funds by your manager? Were funds switched? Were any of the funds you have segregated versions? Or is the 2.78% return not correct. Something isn't adding up.
Hi

This might be helpful. Yes I believe there is an average of 2.80% per year since 2011 (and apologies, this is a 8-year period not 11, just mislabeled the 2011)

Summary Since 2011/01/01
Assets Held at Edward Jones
Beginning Value $103,019.72
Assets Added/Withdrawn -$26,144.47
Return in $ $26,115.80
Personal Rate of Return % 2.80%
Ending Value $102,991.06
Total Value (2019/09/09) $102,991.06

Gains have been withdrawn in the past to place in the TFSA.
[OP]
Newbie
Oct 16, 2017
15 posts
Doebird wrote:
Sep 6th, 2019 9:30 pm
your returns don't seem right and I think you may be miss-reading your statement. That needs to be investigated.



1-With regards to 1, a balanced portfolio should bring in around 4-6% rate of return per year. Any bank, including edward jones, primerica, CI, etc, they should easily be able to give you a balanced portfolio that can achieve these returns. If you want to do it yourself, it's not hard either. A group of 5 ETFs will get you a nice balanced fund. Or you can just buy XBAL and call it a day.

2- Assets seem to be building, so focus on maxing out your wife TFSA as well. Unsure how your family deals with joint finances and if you are comfortable doing that, but should be considered. Unclear if you are doing that already.

3- Saving $20,000-$30,000 per year now is great. You need to attach a goal to that then. You said you want to retire by 60. What does retirement look like for you, what income do you think you will need in retirement in today dollars?

4- Kids + house in 2-3 years:
house - ok you will need 20% down payment. On $500,000 you need at least $100,000 (if you don't want to go high-ratio CMHC/GE/Canada gurantee). Your income, assuming your T1 employment income is actually $100,000 a year, should easily qualify you for that. You will also need closing costs. A good rule of thumb is around 2% closing costs of purchase price. So $10,000. Land transfer taxes/legal closing/etc. If you go high-ratio insured, then you can obviously go with a larger mortgage and a smaller down payment. In addition to legals/land transfer, you will need HST on whatever the CMHC premium is. So if you go 95% loan to value, e.g. 5% down, your mortgage will be $475,000 + CMHC premium. There is HST on the CMHC premium which you pay out of pocket at closing usually to your lawyer - who forwards to the lender.
You can use first time home buyer to take out $35,000 from your RRSP which you will need to repay in the 2nd year of withdrawal $35,000/15 years would be your annual repayment into RSP. If your wife has an RSP you can take out same for her. You may want to consider starting to contribute into her RRSP to take advantage of this benefit.

kids - you will need to factor impact of mat leave. Your wife will get EI and as well you (assuming you are paying into EI.) However probably doesnt make sense if youre self employed.
When shes back at work, factor in child care expenses. Unsure costs in your neck of the woods.

5- retirement 60. As per above, what does retirement look like, what income in todays dollars do you tihnk you will need. AS you dont have a house now, maybe it's paid off by then?
Then factor in:
a) your wifes pension assuming she gets full time and vests with them. You would need to determine this.
b) your CPP - at age 60, assuming you are maxing out your contributions (not taking dividends) and YMPE is $57,400. So if you're at least claiming this at employment income then youre maxing out CPP. At age 60 you get -36% of the max benefit. That's assuming from age 18 to 60 you work 35 years meeting the MAXIMUM CPP contributions you will get -36% of max CPP which is roughly $13,800 right now = $8832
b) your wife CPP - seems like she just started working. CPP average is like $8000 at age 65, so -36% of that assuming you both retire at 60 = $5120
c) your OAS = assume max = $7200 at age 65
d) your wifes OAS = assume max = $7200 at age 65

Good rule to guess what you will need in retirement is 70% of income. So if you're making $100,000 now, $70,000 would be good starting point + Wife = $90,000
So you need roughly $90,000 - $8,832 - $5120 at age 60
At age 65 you need $90,000 - $8,832 - $5120 - $7200x2
Assuming you live till 90.

Im sure you arleady have an accountant you work with? So you will need to discuss with him in more detail if its worht taking dividends or paying eomployment income. It may be worth splitting it because the CPP pension is pretty good and is 1 less thing you need to worry about... and it's inflation adjusted. So it's a no brainer to at least MAX OUT your employment income at YMPE and take the rest dividends in my opinion.
You need to discuss topping up RRSP for spouse for home buyers plan as I think that's a good opportunity to get some extra cash flow.
Flow of money = RRSP contributions ==> tax return ==> tfsa
and then obviously repayment in 2 years but it's tiny. $2,333 annual repayment.
You are correct in identifying an error. It averages out to 2.8% return annually over the period. My wife just became a permanent resident in August, so I believe we can now start contributing to her TFSA.

There are quite a few extra costs in purchasing the house in your breakdown. We would have enough for a 20% downpayment however to avoid insurance. I am trying to understand the benefit of taking this money out of my RRSP if we have already saved for it separately?

I am also debating whether it is worth it to hold off on claiming CPP until later on to maximize that benefit, however obviously want to enjoy something I'd been paying into.
Deal Addict
User avatar
May 11, 2014
3233 posts
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Iqaluit, NU
I'm still not understanding the return calculation you have. It doesn't make sense. Something tells me either you have had funds traded in and out or you have some sort of segregated product. Regardless at your age and income, the returns and types of investments the Edward Jones has you in are both too expensive, too low of return and too conservative. I champion self-service options. Whether these interest you or not, however I would recommend you take a look here at a few different options...
passive-investment-comparison-thread-su ... d-2218030/

If you could tell us your plan, how much money you plan to use for your home purchase, what assets you have in your RRSP, TFSA and non-reg, a plan can be made with those assets.

In general, the best approach in your case would be to prioritize your TFSA as a long term investment toward your retirement. The tax free growth of your TFSA will be a great tax-free cash source in the future. Feel free to ask any questions about self-service options as a way to grow your assets. You can also PM me if you prefer.
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Deal Fanatic
Oct 1, 2004
5856 posts
510 upvotes
Toronto
Can anyone recommend a good fee only financial planner in Ottawa that have good knowledge of family trusts? Went to see few that really had no knowledge in the area. Also anyone dealt with PWL?
Sr. Member
Aug 15, 2013
785 posts
399 upvotes
Guelph
I am surprised at so many recommendations for "Fee only advisors". I see most times this is based on the assumption that because they are not making any commission on the sale, their advice is always good. I think more important question should be how have they performed rather than who is paying them. Most big fund managers fail to beat the market returns, am not sure how you can rely on a small time "fee only advisor" to do that for you. I see some need of these advisors if your situation is too complicated with a big estate / inheritance / very high income + taxes etc and even this can be managed with some education and a good accountant.

To the OP, i don't think your situation is complicated enough or you have capital enough to justify a fee only advisor. That is the easy, but lazy approach. I think your complication is more towards what you want to achieve and how you will achieve that. I mean.. did you discuss your objectives with your current advisor and did they have a plan in place to achieve it? I suggest you do this one step at a time instead of overwhelming yourself.

1. Figure out the short and long term objective.
2. Lay out an investment plan to achieve the objective.
3. Plan the savings to fulfill the investments.

I understand this is easier said than done, you need to do some reading and make yourself aware of the investment opportunities, regulations etc but if you don't make yourself aware, you run the risk of coming here 10 years later and putting this same post again.
Sr. Member
Apr 17, 2014
893 posts
333 upvotes
Corunna, ON
Read these books in this order.

A random walk down WallStreet
Winning the losers game
Common Sense on Mutual Funds

Make sure to get most recent copies.
Sr. Member
Apr 17, 2014
893 posts
333 upvotes
Corunna, ON
MK1986 wrote:
Sep 5th, 2019 3:02 pm
Hi Folks,
I'm in a similar situation but just opposite of OP, I have a full time job and earns around $105K, my wife is self employed and earns around $30-35K part time and we have three small kids (older one is 6 year's old). None of us have any pension plans. I have already saved $15K in RRSP and around $7K in RESP with TD direct investing but didn't start investing any money anywhere. Own a house with mortgage balance of around 350K. No other debts, we have around 80K in our checking and savings account..... I'm 33 and she is 31 year's old. Thinking of real estate investments but scared to jump in as the market is crazy and unpredictable. Kindly advice or share your experiences or thoughts.
Open a Questrade account.

Move $70 k of your ch/save money to them

Put as much as you can in RRSP and TFSA as you are allowed.

Put 25% in S&P 500 ETF (VFV)
Put 25% in U.S Dividend ETF (VGG)

Put 15 % in FTSE Canada index ETF (VCE)
Put 15 % in FTSE Canadia Capped REIT ETF ( VRE)

Put 10% in Developed Asia Pacific ETF (VA)
Put 10% in Developed Europe All Cap ETF (VE)

Rebalance once a year as % gets out of wack due to wins and losses. Put percents back.
Take money from the winners and add to the losers. Buy low sell high.

Once you are 12 years from retire start buying bonds. 4% a year until you reach a 60/40 split. Of Stock/bonds.

Add monthly to your quest retirement.

Make bank.

Fees are ridiculously low on ETF Index Funds

If you make 7% in a year and an advisor who has you in mutual funds makes 10% theirs fees will make either you even or you ahead.
Jr. Member
Apr 5, 2017
111 posts
14 upvotes
proplayer44 wrote:
Sep 12th, 2019 11:48 am
Open a Questrade account.

Move $70 k of your ch/save money to them

Put as much as you can in RRSP and TFSA as you are allowed.

Put 25% in S&P 500 ETF (VFV)
Put 25% in U.S Dividend ETF (VGG)

Put 15 % in FTSE Canada index ETF (VCE)
Put 15 % in FTSE Canadia Capped REIT ETF ( VRE)

Put 10% in Developed Asia Pacific ETF (VA)
Put 10% in Developed Europe All Cap ETF (VE)

Rebalance once a year as % gets out of wack due to wins and losses. Put percents back.
Take money from the winners and add to the losers. Buy low sell high.

Once you are 12 years from retire start buying bonds. 4% a year until you reach a 60/40 split. Of Stock/bonds.

Add monthly to your quest retirement.

Make bank.

Fees are ridiculously low on ETF Index Funds

If you make 7% in a year and an advisor who has you in mutual funds makes 10% theirs fees will make either you even or you ahead.
Thanks a lot for the detailed explanation. Do I have to open a new RRSP with Questrade again or can i start investing with my TD direct investment as well based on what you have suggested ?
Sr. Member
Apr 17, 2014
893 posts
333 upvotes
Corunna, ON
If TD is personally driven then yes. The fees will probably be more though.
Deal Addict
User avatar
May 11, 2014
3233 posts
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Iqaluit, NU
dundeal wrote:
Sep 11th, 2019 11:37 am
I am surprised at so many recommendations for "Fee only advisors". I see most times this is based on the assumption that because they are not making any commission on the sale, their advice is always good. I think more important question should be how have they performed rather than who is paying them. Most big fund managers fail to beat the market returns, am not sure how you can rely on a small time "fee only advisor" to do that for you. I see some need of these advisors if your situation is too complicated with a big estate / inheritance / very high income + taxes etc and even this can be managed with some education and a good accountant.

To the OP, i don't think your situation is complicated enough or you have capital enough to justify a fee only advisor. That is the easy, but lazy approach. I think your complication is more towards what you want to achieve and how you will achieve that. I mean.. did you discuss your objectives with your current advisor and did they have a plan in place to achieve it? I suggest you do this one step at a time instead of overwhelming yourself.

1. Figure out the short and long term objective.
2. Lay out an investment plan to achieve the objective.
3. Plan the savings to fulfill the investments.

I understand this is easier said than done, you need to do some reading and make yourself aware of the investment opportunities, regulations etc but if you don't make yourself aware, you run the risk of coming here 10 years later and putting this same post again.
Not at all. The OP is in a situation where incorporation should be considered. This means he needs to set up estate planning to avoid huge taxation problems when it comes time to collapse it. While he doesn't have lots of assets, going to one with experience in incorporation and estate planning is prudent. After getting this, the OP can pretty much set his investments in accounts according to the tax strategy set up.

I would say fee-only advisor with accountant in this case not for the investments, but rather the corporate structure.
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