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“How One Advisor Doubled His Book in Six Years”

An article featuring our very own, Corey Butler, CIO – Chief Investment Officer, Wealth Advisor, Ecivda Financial Planning Boutique.

by: BMO Mutual Funds HQ

Corey Butler began his career as a bricklayer, where he learned the value of building a solid foundation. Now a successful Wealth Advisor and Chief Investment Officer at Ecivda Financial Planning Boutique, Butler shares the secrets that have allowed his advisory practice to more than double its assets under management in only six years, and why he sees the BMO Strategic Equity Yield Fund as an important building block for client portfolios.

Click HERE to read the full article!

#ECIVDA #ThinkForward #planningrighttoleft #BMO #BMOglobalassetmanagement

Prioritizing debt is an important skill to learn because it determines how fast you will pay down your debts. Debts have varying payback plans that will require you to place them on a scale to decide which should go first. Obviously, the interest rate is an important factor to consider when prioritizing your debt. It is advisable to have a strategy for paying your debts so that your other financial goals can be met. Debts are known to affect the attainment of one’s financial goals. There are a few strategies you can try that can help you prioritize your debts for easy payment. Some of these strategies include starting with the debt with the highest interest rate; starting with the least balance; starting with the highest balance; and consolidating your debts.

Starting with The Debt with Highest Interest Rate

This is known as debt avalanche. It entails you starting off paying the debt with the highest interest rate to the least. Debts with high-interest rates are always difficult to pay because of the accumulation of the interests. Getting it off your books first will save you money and help you focus on paying off other debts and financial goals. Picture an avalanche and imagine your debt tumbling down quickly. That is how this strategy works.

Starting with The Debt with the Least Balance

This strategy is good for gaining momentum. It is known as the snowball debt repayment strategy, and it is more motivational than strategic. If you are finding it difficult to figure out how to pay your debt, start from the lowest and gradually work your way up. Another advantage is that it gives you that little bit of extra cash to tackle your big debts. This strategy also comes in handy where you feel you cannot adopt the previous strategy. Start with the least balance.

Starting with Your Largest Balance

This is the opposite of snowball strategy. This strategy prioritizes the debt with the largest balance, and it is an unpopular strategy because it may be difficult to achieve. The question is why will I start with my highest debt? It may not give room for other financial goals because all your resources will be channeled towards paying off that debt. However, there are cases where you may opt for this type of strategy. An example is when that particular debt has a promotion of a reduced interest rate, and you need to pay it off before the promotion ends.

Consolidating Your Debts

This is usually what you resort to when it is taking too long to pay your debts, or the interest rates are making it difficult to get it off your books. When you consolidate your debts, it gives you the opportunity of paying all your debts at once. You can take a loan to pay for your consolidated debts which then leaves you with the repayment of that loan only. For example, you can consolidate all your credit card debts and pay them off with a balance transfer credit card. This strategy is particularly effective when you have multiple debts that are hindering you from achieving your financial goals.

The very nature of debt implies that there is nothing good about it. No debt is good debt. However, taking debt is almost the only way most people can stay afloat. What differentiates a good debt from bad debt is the purpose of the loan. While some loans are a necessary evil, some unnecessary debts drag one into a financial abyss that may be difficult to climb out of.

What Is Good Debt?

Good debts are generally referred to as future investments that will appreciate in due time. The phrase ‘it takes money to make more money’ comes to mind. There are loans you may need to take to generate more income and build your net worth. Such loans are justified because they are needed investments for a future reward. Paying such loans back is not usually a problem because you would have used it to make double the loan. Examples of good debts include student loans, business loans, and mortgages.

However, there is an inherent risk in taking a ‘good debt’. As was mentioned earlier, debts are generally an inconvenience on one’s financial plan, so there is always that inherent risk when taking a loan even when it is supposedly going to build your wealth and increase your net worth in the future. When you take a loan for investment, there are a lot of assumptions involved. Nothing is certain; you may not get the return you hope for but what’s life without risk. This is why it is always advisable to be conservative about your projections. In other words, when taking a loan, always consider when the return will start coming in and what will be the amount of returns you will be expecting. Juxtapose it with the loan you are taking and ask yourself if it is worth it. When it comes to debts, there are no guarantees, even for good debts, the purpose of the loan is all that matters.

What Is Bad Debt?

Debt is said to be bad when you are borrowing to purchase a depreciating asset or an asset you do not need. Borrowing money to acquire a want and not a need is usually ill-advised. Financial advisers will say if the money will not increase in value or generate more money for you, then don’t borrow. Borrowing money to purchase a depreciating asset will only put you in more debt. The risks in a bad debt are visible as day. Examples of bad debt include car loans, credit card loans for shopping, football tickets, etc…

Other Debts

There are other types of debt that do not fall within the category of good or bad debt. These are debts that are relative to everyone’s financial capacity at the time of taking the debt. These types of debts may be good for one person and bad for the other. Someone with enough financial cushion may afford to take further loans to pay off his other debts or invest in more portfolios compared to someone already drowning in debt.

Debt Choices

As discussed, be it a good or bad debt, the reality is that it is still a debt, and you must pay it back. In deciding what type of debt to take, you must consider the type and purpose of the debt. This will help you determine whether a debt is truly worth it. Are you investing in your future or satisfying your wants? That question will help you in deciding whether to take the loan or not.

A capital gain can be defined as an increase in the value of an asset (stocks, shares, etc.) from its original cost price.

There are two forms of capital gain:

Realized capital gain: You have a realized gain when you sell an asset for a higher price than you bought it.

Unrealized capital gain: This occurs when there is an increment in the value of your asset, but you haven’t sold it.

Therefore, you only ‘realize’ a capital gain once you sell that particular asset that has increased in value. However, you must know that a realized capital gain isn’t just yours to possess, and the government takes a cut from it by way of tax.

How is Capital Gain Taxed in Canada?

Capital gain gets taxed at a rate of 50% in Canada. Once you realize a capital gain, you’ll need to add 50% of the capital gain to your revenue. This means the portion of extra tax you pay will differ depending on how much you’re earning and what other sources of earnings you possess.

The only way you can have a capital gain without being taxed on it by the government is if your investments are registered in tax-sheltered plans like Registered Retirement Savings Plan (RRSP), Registered Retirement Plan (RPP) or Registered Education Savings Plan (RESP).

Apart from these plans, your capital gain will be taxed. You must know how to calculate said capital gain tax.

How To Calculate Capital Gain Tax?

Before effectively calculating your capital gain tax, you must know some significant amounts. They are:

Adjusted Cost Base (ACB): The price of an investment, including any costs related to obtaining the capital property.

Dividends of Disposition: This refers to the amount you have profited by selling your capital asset. This is the amount gotten when you deduct any outlay or expense you may have incurred by selling.

Expenses Required to Sell:  These are any outlays you may have to make when selling your capital property.

Capital gain subject to tax = Selling price – the Adjusted Cost Base

Bottom Line

Ultimately, you possess a capital gain when you sell a capital asset for a higher amount than the total of its ACB and the outlays and expenses incurred to trade the property.

By: Louai Bibi, Advisor Associate

We are pleased to announce that we will be able to offer our clients the new First Home Savings Accounts (FHSA) at Ecivda Financial Planning Boutique as of June 12, 2023!  If you are in the market for your first home, or if you know someone that is in the market for their first home, this is an exciting new opportunity!

Outlined Below:  What is the FHSA & how does it work, who is eligible to open one, the benefits & planning opportunities around this new account, what happens if you no longer wish to buy a home, and how to get in touch if you’d like to review considering this account for yourself.

What is the FHSA and how does it work?

This exciting new account came about as part of the 2023 federal budget to help Canadians build more tax-free savings to fund their home purchase goals. The FHSA characteristics are a blend of the TFSA, RRSP, and RESP rules; so it is easy to get confused. I have compared the FHSA to the RRSP & TFSA in a past blog, which I encourage visiting if you’d like to look at specific differences and similarities of each account.

The basic premise is:

• You can contribute $8,000 per year, up to a lifetime limit of $40,000. Contributions are tax-deductible!
• Since the FHSA came into effect on April 1^st of 2023, you can only deduct contributions made between April 1^st and December 31^st of 2023 for the 2023 tax year. Contributing in the first 60 days of the following year does not count towards your 2023 taxes like RRSP contributions do.
• You can carry forward the tax deduction indefinitely to a year where your taxable income is higher.
• These contribution limits are separate from those of the TFSA and RRSP.
• You can hold a variety of investments in the FHSA, or you can simply choose to keep the funds in savings plan within the account.
• If you are withdrawing from this account to purchase a home, you can do so tax-free. Otherwise, you would pay taxes on the withdrawal at your respective tax rate.
• You can carry forward unused contribution room to future years. So, if you open a FHSA in 2023 and don’t fund it, in 2024 you can contribute $16,000. You can only carry forward room if you have already opened your FHSA.

Who is eligible to open a FHSA?

Most of us read ‘first home savings account’ and immediately assume that this account won’t be relevant to them if they have owed a home in the past. This is not necessarily the case! The definition of first-time home buyer is unique here and I’ll address this further below.

You are eligible to open a FHSA if you satisfy the following conditions:

• Canadian resident for tax purposes.
• Between the age of 18 and 71 years old.
• Have not owned a home in the current year or last four years prior to opening a FHSA.
• Have not lived with a spouse or common-law partner who owned a home in the current year or last four years prior to opening a FHSA.

Disclaimer: this account may not be appropriate for US taxpayers. Please consult with your advisory team to ensure the FHSA is an appropriate fit if this applies to you.

What are the benefits and planning opportunities of the FHSA?

I’ve addressed the features and eligibility of the FHSA and you may be wondering how this account may benefit you. Here are a few benefits that you may find compelling:

• You get to deduct your contributions against your taxable income. If you had $50,000 in taxable income in 2023 and contributed $8,000, you will be taxed as though you made $42,000 instead.
• As great as the tax deduction can be now, you may wish you took advantage of it when your income was higher. You can absolutely do so!
• While there is a lifetime contribution limit, there is no limit on how much you can withdraw and it is tax-free if it is for a qualifying home purchase! Your account could have doubled in value and you won’t owe a cent in taxes.
• Many of us may be familiar with the Home Buyer’s Plan feature of the RRSP (RRSP HBP) that let’s us borrow up to $35,000 from our RRSPs tax-free as a loan. If you have existing savings in a RRSP that you may want to use for your home purchase but also want to save regularly in a FHSA, why not take advantage of both programs?
• Better yet, if you are buying a home with your spouse or common-law partner, how great would it be if you each leveraged the RRSP HBP and the FHSA? That is a lot of tax-free money to put towards your home!
• There are more advanced tax applications of the FHSA that can be assessed on a case-by-case basis, regardless of what life stage you are in. I’ll save these for another blog, but there are some unique and beneficial ways to merge your first-home savings goals with your ongoing tax planning.

What if I change my mind about buying a home?

if buying a home is no longer a part of your current financial plan, this is no problem at all. You can transfer the funds in your FHSA into your RRSP without needing to withdraw and pay taxes.

Beyond this, you need to close your FHSA by no later of December 31 of the year in which the earliest of the following events occur:

• 15^th anniversary of opening your first FHSA.
• You turn 71 years old.
• The year following your first qualifying withdrawal from your FHSA.

How do I get in touch if I’d like to learn more?

The FHSA is an exciting opportunity for eligible Canadians and we are exciting to be able to offer it to our clients. We would love to review the merits of implementing the FHSA into your financial plan but believe it is also important to consider the existing options available to first-time home buyers as well how each account fits our individual circumstances.

If you are saving for your home purchase goal, please get in touch with any member of our advisory team to coordinate opening/funding your FHSA. We will be happy to help you tailor your FHSA contributions & investment portfolio to your goals!

You are welcome to book yourself into any of our calendars here.

By: Louai Bibi, Advisor Associate

Should I get mortgage protection or life insurance?

If you have a mortgage, your mortgage lender has likely brought this up to you, and for good reason.

It’s important to have insurance when you have people who depend on your income, whether it is a spouse and/or child. It’s also important that you know what you are paying for and how it may or may not benefit you.

Term insurance is generally cheaper, allows for you to cover other insurance needs like leaving behind income replacement for your spouse or ensuring your children experience a fully funded post-secondary education if you aren’t around to contribute to their RESP, and allows you to structure coverage for a shorter, longer or permanent period as insurance needs change.

With mortgage protection through your bank/mortgage lender, your coverage reduces as you pay your mortgage down (which makes sense in theory, until you realize your insurance payment stays the same), the bank is the sole beneficiary of that money and every time you renew or switch lenders, you need to re-apply this coverage to your mortgage and are subject to whatever increase in cost is offered.

These are just a few differences between the two products. More listed in the snapshot below!

By: Natalie Thornhill Pirro, Supervisor – Wealth & Client Experience

As an investor you will, no doubt, have a lot of questions for your advisor.  How much money do I need?  How do I get started?  What are the best investment strategies? What type of investment should I open?

When you meet with your advisor, they will ask you to provide information so that they can better understand your unique situation as well as your immediate and long-term financial needs.  With this information, they will be able to come up with “a plan”, recommend investments that are suitable for you, and answer all your questions.  Securities legislation and regulations require that each recommendation your advisor makes be suitable for you in relation to your investment objectives, risk tolerance and other personal circumstances.  This is referred to as the “Know-Your-Client” (KYC) Rule under securities law. This Rule requires your firm and advisor to collect the following information from you.  Your advisor may be restricted from opening your account if you do not provide this information.

• • Annual Income – Your approximate annual income from all sources.
  • Net Worth – An estimate of the value of your assets less your liabilities.
  • Investment Objectives – The specific characteristics of investment products and how they relate to the achievement of your investment goals.
  • Time Horizon – This is the period from now to when you will need to access a significant portion of the money you invest in the account.
  • Investment Knowledge – This is your understanding of investing, investment products, and their associated risks.
  • Risk Tolerance – This is your willingness to accept risk and your ability to withstand financial losses.
  • Full Legal Name and Date of Birth – This is required by the Proceeds of Crime (Anti-Money Laundering) and Terrorist. Financing Act. This legislation is designed to prevent the use of the financial system for hiding proceeds of criminal activity or financial terrorist activity.
  • Proof of Identity – This is required for certain accounts by Anti-Money Laundering legislation. To verify your identity, you may be asked to provide a driver’s license, citizenship card, passport, or birth certificate.
  • Residential Address and Contact Information – This is required by Anti-Money Laundering legislation. This information will allow your firm to contact you to provide investment advice or notify you of any changes with respect to your investments. This information is also required for account reporting.
  • Citizenship – This is required for tax reporting and may be used to determine if you are permitted to purchase certain types of securities.
  • Social Insurance Number – This is required for tax reporting.
  • Signature – This is required by Anti-Money Laundering legislation.
  • Employment Information – This is required by Anti-Money Laundering legislation to help your firm and advisor determine suitable investments for you.
  • Number of Dependents – This is required by regulation to help your firm and advisor determine suitable investments for you.
  • Politically Exposed Persons – This is required to meet requirements under Anti-Money Laundering legislation. Your firm will need to determine whether you or a member of your immediate family have ever held a position with a foreign government that qualifies any of you as a “Politically Exposed Person”. You can find more information on this requirement HERE.
  • Other Persons with Trading Authorization on the Account/Financial Interest in the Account – This is required by Anti-Money Laundering legislation. Your firm is required to maintain the names, dates of birth, employment information and the relationship of any individuals with trading authority or a financial interest in your account.
  • Source of Funds – This is required to meet requirements under Anti-Money Laundering legislation. (banking information will be required for Electronic Funds Transfers “EFT”)
  • Trusted Contact Person – (“TCP”). A TCP acts like an emergency contact for your account, although they cannot make financial decisions or account changes.

Important To Know

Your advisor is required to keep this information current. Depending on the type of account you have, your advisor may check in with you every one to three years to confirm your information remains accurate and update your KYC. As your circumstances may change over time, you should keep your advisor up to date on any changes to the information above, such as:

• Changes to marital status
• Relocation to another province or territory
• New job or job loss
• Long-term illness
• New debt financing
• Major increase or decrease in your financial resources (for example: due to inheritance)

In Conclusion

While this may seem like a lot of personal information, it allows your advisor to recommend investments suitable to your present circumstances and your financial goals.  Whenever you are scheduled to meet with your advisor, whether you are setting up a new investment or discussing current investments, you should always have your list of questions for the advisor; and be prepared to have a list of any, or all, of the above information.  If you use this Blog as a checklist, you will be ready-to-go!

Happy Investing!!!

Not only has the cost of university risen sharply, but so has the importance of graduating with a marketable skill and knowledge set. In 2016, the cost of tuition, books, supplies, residence and travel for a student in an undergraduate program at a Canadian public university is approximately $20,000 per year.

For many new grandparents, Registered Education Savings Plans (RESPs) were not as commonly known as when their children passed through post-secondary education.

If you want to conscientiously pass wealth between generations and help minimize your grandkids’ debt load in the future, opening and contributing to an RESP on behalf of your grandchildren is an excellent option.

What you need to know

The opportunity to set aside a useful inheritance directly to your grandchildren for the expressed purpose of education is extremely appealing for many.

Although more in-depth analysis may be required to understand the eligibility for the Canadian Education Savings Grant (CESG), the quick RESP facts are:

•  The CESG will match 20% of RESP contributions up to a maximum of $500/year per beneficiary and to a maximum of $7200 lifetime per beneficiary.
• There are no minimum or maximum annual RESP contributions, but each beneficiary has a $50,000 lifetime contribution limit.
• Contributions grow tax-free until they are withdrawn, like an RRSP.
• Contributions are not taxed at withdrawal, only the grants and earnings withdrawn, called Education Assistance Payments (EAP) are taxed.
• EAPs are taxed in the hands of the student, typically a lower income tax rate or no tax at all if their income is low enough

EAPs can be used for education-related expenses, including housing and transportation, when enrolled at any eligible domestic or foreign post-secondary institution or training program. You can contribute to an RESP up to its 31st year and it can stay open for 35 years.

Bottom Line

Canadian Education Savings Grants (CESG) provide an annual $500 and lifetime $7200 incentive to save for your grandchildren’s post-secondary education by contributing to an RESP. All the contribution and grant money will grow tax free to help fund any education-related expenses for your grandchild’s future education.

If you’re concerned about your children funding a post-secondary education for your grandchildren, give us a call. We can provide you with details and a plan that will allow your grandkids to go after their dreams!

 Click here to book an appointment with us today!