Monday, 21 November 2011

The 30 items you need before you die

Do you have a Death Book? 
It might sound a little morbid but everybody needs one. While you never know when it will happen, the "if" is pretty certain.

I deal with issues surrounding mortality on a daily basis so please excuse my candid nature. In fact, Bill Watterson found a great way to breath comedy into it with his comic strip "Calvin & Hobbes"

Why on earth would I want a Death Book?
Some people like to avoid talking about the inevitable - at times believing that if they just ignore it, it will solve itself. Unfortunately, those who leave it too long can create worlds of problems that they never intended to leave for their heirs. Here are a few reasons that illustrate that an ounce of prevention is worth a pound of cure:
  • The National Association of Unclaimed Property Administrators report that state treasurers in the US currently hold $32.9 billion in unclaimed bank accounts and other assets. (the Bank of Canada allows you to do a search for unclaimed balances)
  • Roughly 80% of term life insurance policies never pay out. Most result from people cancelling their policies before they die but at least ten states in the US have launched investigations into insurance companies accused of sitting on an unknown amount of unclaimed insurance policies. New York State alone holds more than $400 million in unclaimed life insurance related payments
  • Without a list of assets, the heirs will have to do their own investigative work to discover what was left behind - either waiting for clues to arrive by mail (tax bills, T slips, etc) or by hiring a private investigator

So what would go into your Death book?
Personal Information
  1. Your Personal Information - Full Name, Birthdate, Social Insurance Number, Address, Phone Numbers, Key Work Contact, Title and your Group Benefits Plan Number.
  2. Your Spouses Information - same as above.
Relative/Friend Contact Information
  1. Key Personal Contact - Who would you like notified first? This person would have the responsibility of administrating your affairs in your absence. They would notify family, take care of funeral arrangements and often act as your executor.
  2. Relative Contact Information - Which relatives would you like called first? Word will likely travel but your close relatives usually like to hear it from someone close to you rather than through the grapevine.
Advisor Contact Information
  1. Key Legal Professional - Should be the council who helped you to create your will. They can also keep a copy of your Death Book.
  2. Key Financial Professional - This person should keep a copy of your Death Book and in many cases has helped you to create it. They should be very acquainted with your finances, life insurance arrangements and assets and liabilities in general.
  3. Accountant/Tax Advisor
  4. Home and Auto Insurance Agent
  5. Bank Manager/Advisor

Other Key People
  1. Spiritual Leader
  2. Executor 
  3. Children's Guardian
  4. Alternate Guardian
  5. Doctor
  6. Dentist
  1. Your Current Will (including Enduring Power of Attorney and Personal Directive)
  2. Your Spouses Will
  3. 3 most recent Tax Returns
  4. Marriage Certificate (or Divorce records)
  5. Birth Certificates/Citizenship Papers
  6. Business Agreements
  7. Banking Access Information
  8. Record of Investment Holdings (incl: RRSP, LIRA, TFSA)
  9. Deeds and Real-Estate Documents
  10. Outstanding Loan Documents
  11. Funeral Arrangement Documents
  12. Life Insurance Policies
  13. All Other Insurance Policies
  14. Record of Credit Cards
  15. Record of Personal Valuables (jewelry, vehicles, etc)

Where should you keep your Death Book?
You can store the documents with your attorney or financial planner.  Also put a copy in a safe-deposit box or at home in a fireproof safe that someone else knows the combination to. You want it secure and accessible when it is needed.

If you don't know where to start, get in touch with us. We can give you some free simple templates that will get you started. Compiling your Death Book will also simplify things for your lawyer when drafting your will.

Friday, 18 November 2011

Top 3 Investing Secrets to Avoid Volatility

Apple pie. Apple pie? What does apple pie have to do with investing? A lot, actually.

You have probably had at least a few different apple pies in your life. Some good, some great, and if you are unlucky, some absolutely terrible. The ingredients are essentially the same - apples, flour, butter, sugar - but the outcome can be substantially different. Investing is oddly like an apple pie in that many people have a very similar criteria when selecting them, but small nuances in their selection process has drastic results on the outcome.

In this post, I will release some of my "secrets" in that really aren't so secret, in fact, they are actually quite obvious. Although quite ingenious, I can't take credit for them. I still remember when they were introduced to me. In their simplicity, I was left thinking "why didn't I think of that?".

Secret number One - Get Quality Security
This one is short and simple. Don't invest unless you have a margin of security. Take note in how the banks invest their money. They don't buy stocks or mutual funds with it, that would be ridiculous - they would only do that with someone else's money ;). Instead they lend it to companies with ongoing revenues, sound business plans and most importantly - assets that they can hold as security. They truly understand how the priority of claims work and it shows. As an investor, you should be doing the same.

Secret number Two - Invest where you can add value
If I invest, I want to share in someone's smart management AND add value. Buying stocks, funds or bonds in the traditional market, is just giving to some random person - not to the company who can use my capital to create something more. Buying units from another person (as opposed to buying them from the company itself) doesn't offer anything to the company. It's almost like getting something for nothing (which is one of my red flags). Instead, look for outstanding organizations where your capital can enrich the company you have chosen - it will amplify your investment return and create a win-win situation.

Secret number Three - Performance based investment management
Greed can push even the most honorable people to make decisions in their favour at the expense of others. Madoff, Jones and many others had a doorway open to them that they just could not resist. In another life, they may have been honest people - but for many, the temptation is too great. Performance based management introduces a structure where management is rewarded in the same manner as the investor. Usually the management will take a minimal fee to cover basic expenses and costs while the bulk of their pay comes at the end in the same form as the investor. If structured right, the management only gets paid if they do well. Take a look at your fund statements from the last year - was your manager winning while you were losing? If your answer is yes, then performance based fees may be for you.

In Conclusion
Over the last few years the markets have been compared to Mr Toad's Wild Ride. I have watched portfolio's that remained constant and steady, and these 3 secrets were the common ingredients.

If I gave you a hankering for apple pie, I apologize. To make it up to you, you can either make your own, go to Vi's for Pies, or give me a call and I'll buy you a piece as we talk about how this process can increase your returns and decrease risk and volatility.

Wednesday, 9 November 2011

Are You In The 99%?

With all the #OccupyWallStreet noise going on right now, we keep hearing about this 99% (or the 1%) - but what does that really mean? This infographic from is far more digestible than a sandwich-board worn buy a unkempt protester.

See what side of the line you sit on here:

Wednesday, 2 November 2011

The Markets Are Falling!!!

"The sky is falling, the sky is falling!!!" was the absurd warning we heard in the story of Chicken Little.

In the more recent animated adaptation, Chicken Little happened to be right. Only this time it was invading aliens and he happened to save the world. While age old maxim's continue to be true, they reminds us to look at old problems in new light.

If you have been following the markets over the last few years, you know what I am talking about. The advice used to be "wait 10 years, the market always wins" - and they were right. Until now.

So what has changed?
Why does the institution that is our financial marketplace no longer seem to function the way we thought? Well, I have a few theories but that is all they are, just theories. If anyone says they have the financial markets all figured out, they are lying. Or delirious. Or both. So here we go:

Theory 1: Too many emotional traders. 
In the "olden days", you used to pick up your briefcase sized cellular phone (hello 1989) and yell "SELL BABY, SELL!!!". Generally, if it was a bad move, your broker might try to talk some sense into you before making the trade.

These modern times are quite a bit different. The advent of trading technology has taken this ability to the streets. Quite literally. I can walk down the street, turn on my cell phone and make a trade between stopping for coffee (or hot chocolate) and catching the next bus. From what I understand, the majority of trades (trade volume, not capital volume) will soon be made by the technically "uneducated" investor. That means that trading is not their day job, nor do they have any formal experience or education. This results in far more emotional trades than trades that use sense and reason. The end result - good companies and bad companies fluctuate in price for reasons completely unrelated to their actual performance.

Theory 2: Too many electronic traders. 
Just like the big trading brokerages, I can set my trading account to sell when a price drops or to buy when a price jumps (actually its just automated emotion - see theory 1). A prime example of this was in the spring of 2010 when the NASDAQ and NYSE among others had to cancel trades after an electronic landslide occurred. I imagine that it went sort of like this:

Theory 3: Baby Boomers Want out. 
Whether running from volatility to calmer waters or just pulling their capital to buy that built-for-a-rockstar sized Class A Motorhome, baby boomers hold a large (and when I say large, I mean LARGE) portion of the world's wealth. If they exited from the markets in ANY organized fashion, it could have astronomical effects on market prices. Right now, the workforce still needs them, but mark my words - one day they will want out. Working at 65 keeps the mind sharp but in 5 or 10 years, they are going to pull themselves from the workforce and start drawing on their wealth. My guess is that it will look like a 13 year old kid cannon-balling into the middle of a seniors aqua-sizing class.

In Conclusion
So what do we make of this? Some say life is hunky dory and its time to buy while others say the world is coming to its end. Whether that cannon-balling kid is the Sub-Prime Mortgage Debacle or the Greek Credit Crisis, I am not convinced that fixing them will stop the waves of volatility. Ultimately, I feel our current model is broken. Our world has changed significantly and the markets haven't. Instead, they have become more nebulous and complicated - adding options, derivatives, and other "attachments" to an antiquated model. There comes a time when you stop waiting for the stagecoach and catch a bus. Or a plane. Or a spaceship.  In the end, you need to ask yourself one question: Can the markets can efficiently serve your needs when they have become detached from the actual performance of the underlying company.

Simplicity is making a comeback. Baby Boomers have demanded something different and a new market has emerged. Fully secured investment, performance based fees, thin investment management and tangible companies that give you face time with the CEO (if you really want it). In the immortal words of Bob Dylan, times they are a changin'.