Scott Mosher, advisor with RBC Dominion Securities, presented a Financial Basics workshop to the SMACNA-BC membership at a dinner meeting in November.
By Jessica Kirby
As business owners, we often look to the future and dream of retirement, but we don’t always understand a clear path to get there driven by the investments we make today. What kinds of investments are out there? How to we open investment accounts? How should we be planning our will and legacy? These are some of the questions Scott Mosher, advisor with RBC Dominion Securities, answered for SMACNA-BC members at a dinner meeting in November. Forty-six members and their guests showed up interested in charting that clearer path forward.
“We had several new faces out that night, which was great to see,” says Jeremy Hallman, executive director of SMACNA-BC. “We asked companies to send younger people that might not have been exposed to some of this at home or in school.”
Hallman adds that Paul Charbonneau of Cascade Metal Design and a SMACNA-BC board member originally requested the presentation because he wanted young supervisors to ensure they were planning accordingly for their futures.
“Knowledge of risk, returns, and market principles are key for anyone, especially living in the Vancouver area,” Charbonneau says. “Without basic financial understanding, investing is like sailing without a compass—you may move, but not in the right direction.”
The presentation was well received and laid out some basic, straightforward options for meeting short-, medium-, and long-term investment goals.
Common Investment Accounts
A First Home Savings Account (FHSA), for example, is a registered savings account used to squirrel away funds for a first home purchase. Investors can contribute $8,000 per year (tax deductible) up to a total $40,000. That cash will grow and be withdrawn tax-free on purchase of a home. After 15 years, if a home is not purchased, the funds can roll into an RRSP.
Speaking of RRSPs, any Canadian taxpayer under 71 years of age with a social insurance number can open an RRSP—even minors. RRSP contributions are tax deductible, and earnings grow tax deferred. Individual RRSP limits are typically 18% of last year’s income to a yearly maximum.
“Generally, I would only recommend using the RRSP if you are in a higher tax bracket than you expect to be when you will take funds out,” Mosher says. “Tax Free Savings Accounts (TSFA) tend to be the best savings vehicle for those in lower tax brackets that do not benefit from tax deductibility.”
Funds deposited to a TFSA grow tax free and can be accessed tax free, and contribution room starts to accrue the year in which the investor turn 18 and has a valid SIN. Contributions are not tax deductible, but TFSAs provide greater flexibility than other registered accounts, because funds can be invested with a short-term or long-term time horizon.
“In early years, TFSAs are often combined with other accounts for home down payment or major life needs,” Mosher says.
Individuals with children may choose to invest in a Registered Education Savings Account (RESP), which is structured like RRSPs except the funds are used to save for a child’s education and there is no tax deductibility. Contributed funds receive a Canadian Education Savings Grant at 20% of the contributed amount up to $500 grant per year when $2500 is contributed.
Investments
There are also investment products that provide varying levels of risk and diversification and typically require the help of an advisor. Mutual Funds, for example, represent a pool of funds collected from investors and invested by a professional fund manager with a direct mandate or objective. They offer diversification and the initial investment can be smaller, although the advisory fees tend to be higher.
Exchange Traded Funds are like mutual funds, in that they are often a basket of investments, but they trade on an exchange similar to a stock, allowing them to be bought or sold throughout the day. ETFs provide diversity and tend to have lower fees than mutual funds.
Guaranteed Investment Certificates (GIC) are a lower risk option, since they generate a fixed interest rate, and the capital is usually protected up to $100,000. Bonds are slightly riskier than a GIC because they come with credit/default risk. Stocks—individual shares in publicly traded companies—have varying degrees of risk, as the value of stocks is determined by the company’s earnings and assets.
“Stocks are typically more volatile than bonds and should be invested in for longer time frames to account for higher volatility,” Mosher says.
Know Before you Go
Investment options are almost endless, but there are restrictions and considerations for each that are important to understand before committing. Each product has a level of risk associated with it, for example, and accounts have restrictions or penalties for early withdrawal. Some accounts allow contribution amounts to carry over from one year to the next or have generous maximums to maximize investment potential.
“The best way to find the clearest path for you is to speak with a professional,” Mosher says. “There is no ‘one stop shop’ option to answer all questions.”
He adds that the most important consideration when choosing an advisor or service is deciding how much of the work you will want to do yourself. “Do it yourself has you looking for more of the answers to upfront questions like how to hone your vision,” he says. “Working with an advisor is typically more expensive and often comes with minimum initial investment amounts.”
Leaving a legacy
When looking beyond retirement to estate and legacy planning, Mosher says every British Columbian should have a will, assign powers of attorney, and have a representation agreement in place. This planning addresses what would happen to one’s assets on their passing, who would oversee their estate, and who would make medical decisions if they were unable.
“Doing the work of financial and estate planning brings peace of mind, knowing you have a plan and goals to achieve,” Mosher says. “It can also mean better financial security and protection for you or your family.” ■
Create a simple will and representation agreement for around $200 at epiloguewills.com
Learn more about investment at
rbcgam.com/en/ca/learn-plan/investment-basics
