Guide to Covid-19: Government Relief Programs in Canada

The intention for our “Guide to Covid-19: Government Relief Programs in Canada” is to help businesses and individuals to cut through the noise and make sure they’re getting all the help they can receive from the federal and provincial programs.

Federal programs include:

  • Small Business Wage Subsidy

  • Canada Emergency Wage Subsidy

  • Canada Emergency Business Account

  • Canada Emergency Response Benefit

  • Student Loan Programs

Individual provincial programs include:

  • Utilities

  • Housing

  • Student Loan Programs

Succession Planning for Business Owners

Succession Planning for Business Owners

Business owners deal with a unique set of challenges. One of these challenges includes succession planning. A succession plan is the process of the transfer of ownership, management and interest of a business. When should a business owner have a succession plan? A succession plan is required through the survival, growth and maturity stage of a business. All business owners, partners and shareholders should have a plan in place during these business stages.

We created this infographic checklist to be used as a guideline highlighting main points to be addressed when starting to succession plan.

Needs:

  • Determine your objectives- what do you want? For you, your family and your business. (Business’ financial needs)

  • What are your shares of the business worth? (Business value)

  • What are your personal financial needs- ongoing income needs, need for capital (ex. pay off debts, capital gains, equitable estate etc.)

There are 2 sets of events that can trigger a succession plan: controllable and uncontrollable.

Controllable events

Sale: Who do you sell the business to?

  • Family member

  • Manager/Employees

  • Outside Party

  • There are advantages and disadvantages for each- it’s important to examine all channels.

Retirement: When do you want to retire?

  • What are the financial and psychological needs of the business owner?

  • Is there enough? Is there a need for capital to provide for retirement income, redeem or freeze shares?

  • Does this fit into personal/retirement plan? Check tax, timing, corporate structures, finances and family dynamics. (if applicable)

Uncontrollable Events

Divorce: A disgruntled spouse can obtain a significant interest in the business.

  • What portion of business shares are held by the spouse?

  • Will the divorced spouse consider selling their shares?

  • What if the divorced spouse continues to hold interest in the business without understanding or contributing to the business?

  • If you have other partners/shareholders- would they consider working with your divorced spouse?

Illness/Disability: If you were disabled or critically ill, would your business survive?

  • Determine your ongoing income needs for you, your spouse and family. Is there enough? If there is a shortfall, is there an insurance or savings program in place to make up for the shortfall amount?

  • Will the ownership interest be retained, liquidated or sold?

  • How will the business be affected? Does the business need capital to continue operating or hire a consultant or executive? Will debts be recalled? Does the business have a savings or insurance program in place to address this?

Death: In the case of your premature death, what would happen to your business?

  • Determine your ongoing income needs for your dependents. Is there enough? If there is a shortfall, is there an insurance or savings program in place to make up for the shortfall amount?

  • Will the ownership interest be retained, liquidated or sold by your estate? Does your will address this? Is your will consistent with your wishes? What about taxes?

  • How will the business be affected? Does the business need capital to continue operating or hire a consultant or executive? Will debts be recalled? How will this affect your employees? Does the business have a savings or insurance program in place to address this?

Execution: It’s good to go through this with but you need to get a succession plan done.  Besides having a succession plan, make sure you have an estate plan and buy-sell/shareholders’ agreement.

Because a succession plan is complex, we suggest that a business owner has a professional team to help. The team should include:

  • Financial Planner/Advisor (CFP)

  • Succession Planning Specialist

  • Insurance Specialist

  • Lawyer

  • Accountant/Tax Specialist

  • Chartered Life Underwriter (CLU)

Next steps…

  • Contact us about helping you get your succession planning in order so you can gain peace of mind that your business is taken care of.

When and Why You Should Conduct an Insurance Audit

As our lives grow and change with variable circumstances, new additions, and job transitions, our needs for insurance will also evolve. Additionally, economic fluctuations and external circumstances that influence your insurance policy will need frequent re-evaluation to ensure that you are making the most appropriate and financially favorable decisions. Perhaps you aren’t sure whether you should conduct an insurance audit or not. The following scenarios are usually a good indication that you should thoroughly assess and review your current policy contract: 

  • Bringing new life into your family? A new baby may not only prompt you to adjust your beneficiary information, but it is likely to change or influence your coverage needs.

  • Changing jobs? Probationary periods may not provide the same level of disability or accident insurance.

  • Is your policy nearing the end of its term? Be sure to compare prices for new policies as they can sometimes be more affordable as compared to renewing the current plan.

  • Has your marital status changed? Your insurance policy will likely need updating to reflect such.

The specific type of insurance policy you carry as well as personal details certainly influence coverage and premium prices, so if any of the following factors apply to you, be sure to update your policy accordingly. You might be eligible for a rate reduction. 

  • Changes to your overall risk assessment like smoking cessation, dangerous hobbies, high risk profession etc.

  • If you have experienced improvements to a previously diagnosed health condition.

  • Do your policy’s investment options still fall in line with current market conditions?

  • Have you used your insurance policy as collateral for a loan? Once that loan is paid off, collateral status should be taken off the policy.

Insurance policies generated for business purposes should also be regularly reviewed to make sure the policy still offers adequate coverage to meet the needs of the company and includes the appropriate beneficiary information. With life happening so quickly, it can be easy to forget about keeping insurance policies up to date, however, major changes can have a profound impact on coverage and premiums. Be sure to conduct insurance audits often to ensure your policies are still meeting your needs. 

Contact us to see how we can help. 

The Difference between Segregated Funds and Mutual Funds

Segregated Funds and Mutual Funds often have many of the same benefits such as:  

  • Both are managed by investment professionals. 

  • You can generally redeem your investments and get your current market value at any time. 

  • You can use them in your RRSP, RRIF, RESP, RDSP, TFSA or non-registered account. 

So what’s the difference? Who offers these products? 

  • Segregated Funds: Life Insurance Companies

  • Mutual Funds: Investment Management Firms

Why is this important?  

  • Since Segregated funds are offered by life insurance companies, they are individual insurance contracts. Which means….

  • Maturity Guarantees

  • Death Benefit Guarantees

  • Ability to Bypass Probate

  • Potential Creditor Protection

  • Resets

  • Mutual Funds do not have these features.

What are these features?

Maturity and Death Benefit Guarantees mean the insurance company must guarantee at least 75% of the premium paid into the contract for at least 10 years upon maturity or your death. 

Resets means you have the ability to reset the maturity and death benefit guarantee at a higher market value of the investment.

Bypass Probate: since you name a beneficiary to receive the proceeds on your death, the proceeds are paid directly to your beneficiary which means it bypasses your estate and can avoid probate fees. 

Potential Creditor Protection is available when you name a beneficiary within the family class, there are certain restrictions associated with this. 

What are the fees?  

  • Segregated Funds: Typically higher fees (MERS)

  • Mutual Funds: Typically lower fees

We can help you decide what makes sense for your financial situation. 

The Best Way to Buy Mortgage Insurance

Before buying insurance from your bank to cover your mortgage, understand the difference between self owned mortgage life insurance and bank owned life insurance. The key differences are ownership, premium, coverage, beneficiaries and portability.

Ownership:

  • Self: You own and control the policy.

  • Bank: The bank owns and controls the policy.

Premium:

  • Self: Your premiums are guaranteed at policy issue and discounts are available based on your health.

  • Bank: Premiums are not guaranteed and there are no discounts available based on your health.

Coverage:

  • Self: The coverage that you apply for remains the same.

  • Bank: The coverage is tied to your mortgage balance therefore it decreases as you pay down your mortgage but the premium stays the same.

Beneficiary:

  • Self: You choose who your beneficiary is and they can choose how they want to use the insurance benefit.

  • Bank: The bank is beneficiary and only pays off your mortgage.

Portability:

  • Self: Your policy stays with you regardless of your lender.

  • Bank: Your policy is tied to your lender and if you change, you may need to reapply for insurance.

We’ve created an infographic about the difference between personally owned life insurance vs. bank owned life insurance.

Talk to us, we can help.

Financial Advice

An advisor can help you determine where you are today financially and where you want to go. An advisor can provide you guidance on how to reach your short, medium and long term financial goals.

Why work with a Financial Advisor?

  • Worry less about money and gain control.

  • Organize your finances.

  • Prioritize your goals.

  • Focus on the big picture.

  • Save money to reach your goals.

What can a Financial Advisor help you with?

Advisors can help you with accumulation and protection

Accumulation:

  • Cash Management – Savings and Debt

  • Tax Planning

  • Investments

Protection:

  • Insurance Planning

  • Health Insurance

  • Estate Planning

How do you start?

  • Establish and define the financial advisor-client relationship.

  • Gather information about current financial situation and goals including lifestyle goals.

  • Analyze and evaluate current financial status.

  • Develop and present strategies and solutions to achieve goals.

  • Implement recommendations.

  • Monitor and review recommendations. Adjust if necessary.

Next steps…

  • Talk to us about helping you get your finances in order so you can achieve your lifestyle and financial goals.

  • Feel confident in knowing you have a plan to get to your goals.

Real Estate or Investments?

One of the age-old financial quandaries asked of financial advisors is “shall I invest in property or funds?”. Predictably, the answer is not at all straightforward and depends on many factors, including your own financial style, personality and circumstances. Let’s take a look at the pros and cons of each choice to help you to be better informed about which could be the most lucrative option for you:

Benefits of investing in funds

It’s all too easy to go along with the generally-accepted myth that investing in property is a sure-fire way to secure your financial future. After all, house prices have appreciated in general terms for several years now and have become a very popular way for young people to invest for the future – this could also be, in part, down to the fact that their parents have benefited from the property booms of the past and made their own money this way, therefore presume the same will work for their children.

It’s fair to say, then, that investing the stock market is a much less common and popular way for people to invest their money. Despite market crashes, long term fund ownership is hands down the greatest creator of wealth in history and high quality funds generally not only increase their profits every year but also pay out increased cash dividends too.

Other advantages of fund ownership include the fact that you can diversify your portfolio easily, borrow against your funds easily and also benefit from the fact that funds are much more liquid than real estate, giving you maximum financial flexibility.

So, why do fewer people invest in funds than real estate?

It could be due to the two market crashes that have occurred since 2000, making people wary of getting involved in what they perhaps see as a complex and inherently risky way to make money. Many fail to take the long-term view of funds and the fact that, to financially benefit in the best way, you need to ride the highs and lows for a number of years to get a good return on your initial investment.

Another reason could be the fact that many people underestimate the real cost of home ownership. Additional costs such as maintenance, insurance and mortgage interest must be factored into investment calculations but are often not, making property a seemingly more attractive investment option.

Drawbacks of investing in funds

You really have to be in this game for the long term to see your money grow consistently and many people don’t have the discipline or patience to hold their nerve and keep their money in the same place for a prolonged period. This can often result in cashing in one’s funds too early and missing out on long term benefits. Similarly, because the prices of funds can fluctuate so much, many are too nervous about investing and don’t see the opportunities to purchase more funds at reduced prices to benefit them in the long term.

Benefits of investing in real estate

Many individuals in their twenties and thirties who are just starting out thinking about how best to secure their financial future feel more comfortable with investing in property and the notion of “owning one’s own home” – likely brought about by their parents’ influence, as discussed above. They perhaps feel more confident in the process, terminology and philosophy of real estate and believe that they are more likely to succeed in this area.

Another benefit could be the fact that, by purchasing a property, you feel that you own something tangible, as opposed to the money invested in funds and shares which could be said to exist only online or on paper.

Finally, many take comfort from the fact that it is potentially harder to be defrauded in relation to real estate as there are so many varied, physical checks that one can perform to verify the facts, such as property inspections, tenant background checks etc, whereas with funds, a lot of trust has to be given to the management company or auditors.

Drawbacks of investing in real estate

There are a number of hidden costs to real estate, particularly if your property is unoccupied for a period of time and you are still liable to pay taxes, maintenance etc. It’s also true that the maintenance of a property can be a time consuming as well as an expensive business, due to the requirement to deal with routine as well as emergency issues.

What’s more, it’s true that the actual value of real estate hardly ever increases in inflation-adjusted terms, therefore the returns can be healthy but the true value of the property doesn’t actually change. It’s due to this that many feel that investing in funds is a much more solid and lucrative way to receive good returns.

Talk to us, we can help you determine what works best for you.