Financial services are (some would say) a loosely regulated, complex, multi-faceted global industry. It covers off everything from lending, to stocks, to insurance and increasingly complicated investment products.

The negative light that has shone so brightly on the industry (rightly so) since 2008/9 has made way for regulatory changes even in Canada… a nation whose already heavily-regulated industry fared among the best during the economic crisis of 8 years ago.

We’re going to start seeing those regulatory changes, and others sparked by changes in taxation, come January 2017.

What, and how these changes will affect you as clients however, is what we’ll be outlining here.

CRMII… no, this isn’t the latest gadget.

This new legislation applies to fee disclosure on investments (including stock, bonds, mutual funds). If you’re currently invested at the bank, or with an advisor in mutual funds or ETFs for example, you’ll want to keep reading.

Are you paying your investment advisor a flat management fee, or are they receiving a commission and what’s called a “trailer fee” annually to manage your investments?

Although many advisors are in the habit of disclosing the fee structure that they’re using to invest your dollars – whether it be front-end load (FEL), no load, or deferred sales charges (DSC) during the investment conversation, these are often fees that you don’t really “see” as the client.

CRMII will be changing that.

Think of it as total transparency and a further incentive for your investment advisor to be working in your best interests (not all do y’know).

This new regulation is also causing many investment companies and advisors to rethink offering a deferred sales charge. What does that mean for investors? That you’ll see a payment of management fees more directly. In the past, DSC has been a favoured sales charge option allowing all the client’s dollars to be invested fully (instead of a portion going direct to fees), and in turn the funds would be invested for a length of time. Movements could still be made without fees, but to remove funds from the contract before the declining fee schedule had expired meant money lost. Incentive for long term savings to remain long-term, and all your dollars invested, with this new transparency there is more focus on having the client more aware of the actual cost of their investment.

So what does this all mean to you? Most of these changes will be noticed by active investors who are trading on a regular basis, or have a mutual fund portfolio managed by an advisor, or at your bank.

As your financial advisor, I design your portfolio with segregated funds (managed by portfolio managers with benchmarks and a mandate of performance), created for a longer-term horizon in most cases. Although CRMII does not currently affect segregated funds, I make every effort to disclose all fees that may be incurred before an investment is made.

What’s the difference between a segregated fund and a mutual fund? Segregated funds perform similarly to mutual funds, however act as a type of insurance policy, allowing for creditor protection (attractive to many business owners or professionals), guarantees on your asset deposits, as well as the ability for those assets to be paid directly to a named beneficiary bypassing probate on your death.

All investments will continue to be invested within your personalized risk portfolio, and any strategies, switches and recommendations are remain made in the best interest of your dynamic financial protection and retirement plan. If you’re currently invested with your bank or another advisor and would like to talk about other options for you, contact me.


Insurance Product Change to one of my favourites…

I rarely talk “product” in my blog posts because as an independent advisor I can offer anything available in Canada. That’s a lot of insurance products to talk about, so I just don’t favour one over the other. That being said, one insurance solution has always offered the most flexibility to my clients’ insurance needs, and it’s being taken off the shelf January 1, 2017!

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In insurance, there are two types – term insurance and whole life insurance. Then, many years ago, Universal Life insurance was introduced as a hybrid solution. The best of both worlds! It offered lower cost of insurance like a term policy, and the ability to build tax-exempt investments within the policy (think Tax-Free Savings Account within an insurance policy) by overfunding the premium beyond the cost of insurance. It wasn’t a guaranteed cash amount or dividend like a whole life insurance policy might offer, but it also didn’t have the cost of insurance that whole life did either – which often was a barrier to entry for younger families seeking long-term insurance protection.

One of the companies turned Universal Life insurance on its head by offering a choice of insurance cost levels, from term 10 or 20 cost to Level (which was similar to that of a whole life policy). The additional “overfunding” of the policy was held tax-exempt, and everyone was happy. Until now.

Due to tax changes, the tax-exemption of the policy is coming into question and is forcing the company offering this product to pull it, replacing it with something that isn’t nearly as competitive or flexible of a product.

I loved this product because it could be – literally – the last insurance policy someone would ever need to purchase. I own it myself. Luckily there’s still time this year to get in on this as the company is accepting applications through October to be placed by December 31, 2017.

How may this affect you?

If you have a term insurance policy (or no life insurance at all), then it’s worth reviewing to see if this is a good solution for your needs while it’s still available.

If you currently own this product, congratulations!