Financial Planning - Unconventional Wisdom

Today’s guest has written over 1,000 financial plans for Canadians and is truly as experienced as it gets in this field. He has extensive knowledge on some of the higher impact investment strategies that can really help accelerate our returns such as the Smith Manoeuvre and how to use an RESP properly. We also cover how to structure your investment portfolio and what investments to buy.

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1. To start things off, tell us a bit about yourself and how you got into financial planning.

2. One of the strategies that I wish I knew about back when I was younger was how to make your mortgage tax deductible. Our friends in the US are able to easily deduct their mortgage interest against their taxes, whereas this is generally not allowed in Canada. However, you suggest a strategy called the Smith Manoeuvre for Canadians which when properly structured and deployed, lets Canadians deduct their mortgage interest as well.

Now you’ve set this up for many Canadians within you financial planning practice. Can you start off by taking us through what the Smith Manoeuvre actually is, how it makes all this possible, and how much money can actually be saved by doing this. In other words, is this actually worth our time to look into?

2.1. I get the impression that Canadians use this with their primary residence a lot, but what if somebody has their mortgage paid off or has a rental property. Is it highly beneficial to use this strategy then too? (ex. taking out equity from the home using a HELOC and using it for leveraged investing?)

3. I’ve researched the Smith Manoeuvre a fair bit and a common theme seems to be that you have to be very careful with how it’s set up so that the Canada Revenue Agency doesn’t flag you and treat this as tax evasion where you end up paying all sorts of fees. Can you talk about what to be careful of, and what the common mistakes are when Canadians try to set this up?

4. A lot of Canadians hear about the free money you can get from the government if you put money in an RESP. I remember when we had our daughter I got numerous calls from companies that were trying the “help” us with setting up an RESP.

To kick things off, can you explain what an RESP is, and is this something that we need a company to set up for us?

When you work with clients, at what point do you advise them to start moving the investments to something less volatile like bonds once their child starts approaching the age when they start their post-secondary education?

Do you start with a diversified, all stock portfolio, and then use a formula to know how much to move into bonds every year?

5. Let’s say you had to retire tomorrow with a $1,000,000 portfolio. You have no debt, a paid off house, but no work pension. How would you structure your portfolio and what investments would you buy so that it would last you indefinitely?

Would you change your investments and portfolio structure at all once you hit 65 (assuming that’s when you choose to start receiving CPP and OAS from the government).

6. Traditionally, the general accepted rule has been that the older you get, the more you should put towards bonds to keep your portfolio less volatile. You wrote a very interesting article talking about how loading up too much on bonds isn’t actually the sustainable thing to do. Can you talk about your findings and research.

7. Tell us more about where we can learn more from you?

8. What are some of the most common questions and problems that you tackle for your clients?