Investorial

It’s only a matter of time when somebody exposes Principal-Protected Notes for the shady investment vehicle that it is. I’m glad that Duncan Hood was able to write a nice piece examining why Principal-Protected Notes (PPNs) are not a good idea.

In the end, I wouldn’t avoid PPNs just because they’re largely unregulated or because their “Information Statements” are so poorly written that even Glorianne Stromberg, a securities lawyer and former commissioner at the Ontario Securities Commission, admits she can’t understand them. I would avoid them because you can find better places for your money.

I first encountered PPNs approximately 2 years ago when CIBC partnered up with Mackenzie to introudce the FulPay series of PPNs. I’m not a historian of PPNs and don’t know exactly when these notes started, but their popularity are certainly a recent phenomenon. The financial industry’s marketing machine has again scored victory over the scarred pschye of the Canadian investor; successfuly reaching out towards their yearn for a “guarantee”. I say it’s a guarantee for you to overlook other investments vehicles that make more sense!

Remember this! When the industry introduces a new investment product, they are first thinking “how do we make money from this?” before they actually consider “how does this benefit the investor?“. And you can trust that they’ll always find a rationale, an angle to support this “benefit”.

By subjecting 70% of your PPN investment into a zero-coupon bond, you’re letting the bank borrow your money for their own investments on the cheap! We should always remember who has mastered the money game!

MoneySense.ca: “Protection racket: principal-protected notes” by Duncan Hood

The RSP season has come and gone. I had previously promised to blog about RSP advertisements and compiled a bit of information to that respect. I had prepared some materials about ING Direct, Altamira, Scotia Financial, the ROI fund and more.

However, I had a change of heart.

As more and more media came out to try and “help” consumers deal with the RSP season. I kept questioning why there was need for a “season”? Investing shouldn’t be about a certain 60 day period of the year! One of my friends even remarked that she thought “RSPs can only be bought during RSP season! I knew I had a lot of work to do here.

I decided that I did not want to be an influencing factor during this season. Self-publishing on the internet may be my hobby, but it also carries a responsibility. Whether I want to or not, the words that appear here may influence peoples’ decision. No disclaimer in the world can do away with my own guilt if I feel that I should not be blogging about RSP during the madness.

Now that this “season” is over, I do intend to blog about the material I’ve prepared. I also wish to discuss more about this seasonal mentality that we carry with us.

I would like to get a series started about all the different RSP ads that are popping up for the season. What are the sales tactics of these mutual fund companies to get you to contribute to your retirement savings plans? How can we filter the truth from the marketing?

I’ll give you an example borrowed from Mark Cuban. Mark Cuban said that the smartest marketing that shampoo companies ingrained into the population was the slogan of “Rinse & Repeat”. It’s a genius way to get people to quickly use up your products and buy more! But no studies prove that rinsing and repeating will actually help versus just doing it once, and letting the shampoo bubbles work their magic!

I’m currently collecting any RSP ads in any media (internet, radio, television and print). When I have more spare time, I will examine these scrutinize these ads and I won’t hold back! For our American audience, I would also like to bring to light any type of marketing efforts you see in the Retirement plans, IRAs, 401Ks; whether it be internet articles, or advertising. Please submit to me, any advertising campaign that interests you, Canadian or American alike!

Now that The Conservatives are elected to form a minority Canadian government. I’m looking forward to Steven Harper’s commitment to reduce GST from 7% to 5%

A 5% GST will mean

Today’s last installment of the Canadian Election Watch analyzes the New Democratic Party’s (NDP) political promises about Canada’s financial prosperity. For those who joined us late, you can browse through previous articles about The Conservatives and The Liberals here and here respectively! You can also find out who I voted for and why at VinceChan.net! Enjoy and as always, your comments are welcomed!

Increasing the GST tax credit
This NDP declaration is in direct response to the other two party’s tactics to reduce personal taxation. (more…)

In today’s part 2 of the Canadian Election Watch, I will be examining the Liberal Party’s tax goodies. You can check out yesterday’s first part focusing on the Conservative’s tax cut promises. You can also find out who I voted for and why at VinceChan.net!

Increasing The Personal Tax Exemption
The basic personal amount of income exempted from taxation is $8,648 in 2005. Paul Martin and The Liberals promise to increase this amount to $10,000 over the next four years. Henry Choo Chong (CGA) states that this translates into approximately $500 of savings in an individual’s pocket, but does not elaborate on whether this is $500 per year, or over the four years. The increase will help all individuals in every tax bracket. My view: it’s going to be more compelling to split revenue with a spouse or pay family members if you are a small business owner! (Example: A small business generating $40,000 and spread it among 4 individuals, and you won’t have to pay a cent in taxes provided these individuals don’t have any other income sources.

RRSP Reform
The Registered Retirement Savings Plans are always fodder for The Liberals. (more…)

I was riding the subway today and picked up a copy of The Metro for some light reading. The Money Matters column by Henry Choo Chong (CGA), caught my eye as he answered a reader question about the different tax promises that each party is bringing on their platform for the Canadian election.

Henry was definitely correct to point out that simply voting for a particular party because of their tax policies is really not the right way to base a decision. Nevertheless, he analyzed 3 major points from the 3 major federalist parties. Unfortunately, the tax policies of the Bloc Quebecois do not offer any substance for the rest of Canada and none of the other independent parties have anything worth saying on the subject of the country’s finance.

I will do the same for these each political party starting with The Conservatives today, The Liberals tomorrow, and The NDP the day after! Be sure to come back and read my analysis of these tax policies! You can also find out who I voted for and why at VinceChan.net! (more…)

The Globe & Mail reports that a coalition of Canadian investment regulators have offered 55 investment firms that referred business to the scandal plagued hedge fund company Portus a settlement term. The terms were to repay the referral fees paid to advisors of said firms in exchange for dropping investigations against the firms and their financial advisors.

The deadline for firms to accept the offer is January 24th, 2006. Manulife has previously offered restitution proactively. 2 firms that have already accepted the terms of the proposal are Berkshire Securities (widely publicized during this scandal) and Aegon Dealer Service Canada Inc.

I feel this settlement offer is really generous and the advisors and firms involved are certainly getting away from this with a light slap on the hand! I predict that almost all the firms will accept the settlement terms by its deadline.

I know people who are part of the Aegon distribution channel and some have referred clients to Portus. It’ll be interesting to see if I can find out whether the settlement will be at the cost of the firms or if advisors have to be charged-back for the referral fees they earned themselves. You can also read my views on previous posts here.

Globe & Mail: Firms given option to repay Portus fees