General

Taking Notes

1. So what, exactly, is a fee-only | advice only financial planner?

Good question, and there is no quick answer. In Ontario the terms "financial planner" and "financial advisor" are just in the process of being regulated and title protected. 

 

At Merrick Financial inc. a financial planner is someone who offers unbiased, trustworthy advice about your financial affairs, risk management, retirement planning, investment planning, tax planning and estate planning. We offer a financial plan, a retirement plan or investment analysis.

Customers of ours have said that they appreciate the high level overview of their financial life we provide as this can often be forgotten when other professionals (lawyer, accountant, etc.) do their individual part. The return we offer to our clients is the peace of mind that all aspects of their financial life are being integrated and working optimally together.  We use top rate, modern financial planning software to project your financial affairs well into the future. All with unbiased advice as we are not selling you anything more than our time.

2. What is the difference between a fee-only Financial Planner and a Financial Advisor?

A traditional Financial Advisor is one who manages your investments and provides minimal financial planning. Their revenue model is to make fees off those investments, sell you insurance and other products. Sometimes this business model that relies on commissions can lead to conflicts of interest and not generate the best outcome for the client.

3. How often do I need your services?

Well that depends. Some clients will just use us for hourly advice, some will want a full financial plan done once and others will work with us on an ongoing basis with a monthly retainer agreement. If we do a retirement or financial plan we recommend a yearly meeting to make sure that you are on track and to see if there have been any changes in your situation.

4. Do you sell/ offer financial products like mutual funds, stocks, bonds, ETF's?

The answer is no.

 

We do not hold a securities licence and cannot tell you which individual stocks, ETF's, etc. to buy. What we can tell you is the correct asset allocation, how to invest cost effectively (robo advisor, self directed, investment advisor, etc.) and how to invest tax efficiently. Don't confuse our services with what some "fee only financial advisors" offer, which is to manage your investments for a certain percentage of them. There is nothing wrong with this business model, it is just not what we offer.

We offer unbiased, trustworthy advice about your investments as we don't make a commission, kickback or referral fee from them.

Retirement

Retired Happy Couple

5. Do I need to name a beneficiary and / or successor holder?

For all of your investment accounts we recommend you name a beneficiary that matches up with your wishes from your will. This is why estate planning is so important. For your TFSA you can name your spouse / common law partner as a successor holder (very useful, as you can keep the TFSA account) as well as naming them the beneficiary. Note that you cannot name other blood relatives a successor holder - like your brother, sister, etc.

How much can I expect from CPP and OAS?

They are two different programs: OAS is based on residency with 40 years of being a resident entitling you to the full amount. For 2022 this is $7,707 / year. CPP is based on how much you have contributed to the program. You can start it as early as 60 or as late as 70. Both of these programs should be taken into account for your retirement income planning you can control the date you start the payment and OAS can even be clawed back if you have a higher income.

FIRE - Financial Independence Retire Early

When thinking about this lifesytle the obvious question is: will I have enough money? The two most important components are recurring income and keeping a low overhead. A detailed, overall financial plan will also ensure that you haven't missed anything and a professional, second set of eyes has reviewed everything for you. Financial sacrifices now can lead to financial independence later in life!

What happens when your mortgage is paid off?

If you are able to pay off your mortgage, and continue working, you will have to decide where all of the excess cash flow will go. A few good suggestions are home improvements, increase your retirement investments, perhaps put the kids through school, change your work / life balance or even downsize. There are many options to consider and being mortgage free is a big step on the path to financial independence.

What happens when your mortgage is paid off?

If you are able to pay off your mortgage, and continue working, you will have to decide where all of the excess cash flow will go. A few good suggestions are home improvements, increase your retirement investments, perhaps put the kids through school, change your work / life balance or even downsize. There are many options to consider and being mortgage free is a big step on the path to financial independence.

1. How much can I expect from CPP and OAS?

They are two different programs: OAS is based on residency with 40 years of being a resident entitling you to the full amount. For 2022 this is $7,707 / year. CPP is based on how much you have contributed to the program. You can start it as early as 60 or as late as 70. Both of these programs should be taken into account for your retirement income planning as you can control the date you start the payment and OAS can even be clawed back if you have a higher income.

2. FIRE - Financial Independence Retire Early

When thinking about this lifestyle the obvious question is: will I have enough money? The two most important components are recurring income and keeping a low overhead. A detailed, overall financial plan will also ensure that you haven't missed anything and a professional, second set of eyes has reviewed everything for you. Financial sacrifices now can lead to financial independence later in life!

3. Retirement Plan matching for a DCPP

Employers often offer a matching program to encourage employees to save for their retirement. We have seen this range from a low of 2% all the way up to 9%. Meaning that if you put in 2% the company will also give you 2%. You should generally maximize this "free money" from your employer and invest it according to your expected cash needs / retirement horizon.

4. RRIF vs. RRSP withdrawal

You contribute to your RRSP for most of your life and now have to decide when to convert it to a RRIF. Doing so tax efficiently can have a big impact on retirment as you must convert the RRSP to a RRIF and start mandatory withdrawals at age 72. Once you convert to a RRIF you cannot make any more contributions and you will have a yearly minimum to withdraw. Both RRSP and RRIF withdrawals are taxable.

5. What are the benefits of RRSP contributions?

The major advantage of putting money into an RRSP is a reduction in that years income that often leads to a tax refund. The money grows tax deferred in the RRSP (ideally contributed in a high marginal tax year) and can then be taken out in retirement (ideally in a lower marginal tax year). You can then invest the tax refund or pay down debt for further gains. The RRSP also has some degree of creditor protection and the income can be split in retirement with a spouse after it has been turned into a RRIF after 65.

6. Do I need to name a beneficiary and / or successor holder?

For all of your investment accounts we recommend you name a beneficiary that matches up with your wishes from your will. This is why estate planning is so important. For your TFSA you can name your spouse / common law partner as a successor holder (very useful, as you can keep the TFSA account) as well as naming them the beneficiary. Note that you cannot name other blood relatives a successor holder - like your brother, sister, etc.

Your Money & Account Types

Taking Notes

1. How best to fund the TFSA?

If you have surplus money at the start of the year, and everyone gets their new TFSA contribution room on January 1, you should put it in the TFSA right away. With the money / investments in the TFSA it shields the gains that you achieve. Note that if you don't use your new contribution room it carries forward and you can use it in future years.

2. What should I invest my RESP into?

This is generally based on your overall time line. When your child is born you might be able to have a more aggressive portfolio based on the expected 18 years until the money will be used. When you get to within 1-2 years of when you think the money will be used it is a good idea to de-risk the portfolio and perhaps put most of it / some of it into GIC's. We never like to see a client selling their investments in a down market to pay for their child's education.

3. What to consider if buying a house jointly with my parents?

It can be very helpful to have your parents help you purchase a house. They can give you some money for the deposit and also be on the title (and most likely the mortgage). This does, however, present a risk to your parents as if you don't pay the mortgage they are also generally liable for it. This can get more complicated if you have a spouse / partner and it's the matrimonial home.

4. Is an "all in one" ETF worth it?

Should you decide that an ETF is the best choice for you the "all in one" ETF has many benefits. They are generally lower cost, rebalanced for you, generally very liquid, can be well diversified and easy to access through an online trading platform. For these reasons this type of ETF is finding a home in more and more peoples portfolios. Note: this is not an endorsement to buy these types of products.

5. What are the tax implications of a joint investment account?

If you have a joint account (bank or investment) you must be very diligent with the record keeping. This is because the income tax implications are generally attributed to the spouse who earned the money. You shouldn't assume that as 2 x people's names are on the account that the income will be split 50 / 50.

 

Note: This is general advice, not tax advice. 

6. What to do when your mortgage is paid off?

If you are able to pay off your mortgage, and continue working, you will have to decide where all of the excess cash flow will go. A few good suggestions are home improvements, increase your retirement investments, perhaps put the kids through school, change your work / life balance or even downsize. There are many options to consider and being mortgage free is a big step on the path to financial independence.