Elegance in my mind is effortless simplicity. To accomplish anything in life you have to execute a strategy. This strategy can be complex and have a number of steps and sets of sub strategies. The more steps and components then the more difficult your strategy and the more difficult it becomes to stay on track and maintain the flexibility to make adjustments. If you can boil your strategy down to the essential components then it becomes more elegant, easier to manage, and easier to teach.
As your financial strategies become more elegant, more time is freed up to focus on living and less is spent focusing on and worrying about money. This becomes even more important as we get older and cognitively we have less interest and ability in managing complex strategies.
Rick Coyle is a Financial Planner/Insurance Advisor specializing in the use of Insurance Products in Financial, Insurance, and Retirement Income Planning. He is based in Nova Scotia and serves predominately the Halifax and Annapolis Valley areas. You can contact him at financialbistro@gmail.com.
If a person has an area of expertise they will likely recommend a solution that utilizes their area of expertise and it will very likely help you achieve the result you are looking for. Is it the best solution? That is always a matter of subjective interpretation and opinion. There is the old saying that if you have a hammer then everything looks like a nail.
I have come to learn in my experience in financial services and life in general that there is usually not just one way only to get to your goal. There are usually a multitude of paths. Every financial product that exists was developed to fulfill a need and yes to make a profit for it’s provider. This is known as the classic win/win scenario. There is no free lunch and nor should there be. Is one particular product suitable for everybody, of course not, often they were designed for a specific purpose or situation.
Because in financial planning we are dealing with so many assumptions and variables that we cannot control, nobody knows for sure how any specific scenario is going to play out long term. To be dogmatic and cling to one strategy only, can at times be limiting.
Diversification can have a broader application than most think. We often think of diversification as meaning; to hold more than one stock, or to buy investments in more than one geographic area, or to include bonds in our portfolio.
Diversification can also be buying an annuity as part of an income strategy rather than holding only a traditional portfolio, it may be buying a 4 unit rental property to diversify assets and sources of income. It may mean buying an insurance policy as part of your investment portfolio. I label this, diversification of strategies. Keep your mind open and challenge your beliefs once in a while, for there maybe more than one way to skin a cat.
Rick Coyle is a Financial Planner/Insurance Advisor specializing in the use of Insurance Products in Financial, Insurance, and Retirement Income Planning. He is based in Nova Scotia and serves predominately the Halifax and Annapolis Valley areas. You can contact him at financialbistro@gmail.com.
As a business owner or the owner of a professional corporation has it occurred to you that with a few simple changes to your strategies that you can save a substantial amount of the taxes you are and will be paying over your life time and beyond.
The strategy I am going to talk about today is going to be targeted to Professional Corporation and Business Owners who have or expect to have more money built up in their Corporation than they expect to see themselves need to finance their lifestyle requirements during their lifetime.
Let’s look at what I like to call the Financial Hierarchy of needs. There are three levels to this pyramid. The bottom rung is Financial Independence, the second rung is Family Legacy, and the third rung is Social Capital Legacy (Charitable Giving). For this strategy to make sense and be a fit for you you have to see, or expect to see yourself having the bottom rung (Financial Independence) more than funded or covered. We are talking about the excess over what you require for Financial Independence.
As a Corporation Owner, anything you as an owner or your heirs as owners withdraw from your Corporation is subject to tax as a dividend, and any income your investment funds earn within your Corporation are taxed at the rate of 50%. So there are two levels of taxation, a tax on investment income, and a tax when you withdraw funds (dividend tax). This strategy effectively reduces both these levels of taxation to zero, removing funds from your corporation tax free. You can see in your minds eye that over time the number of dollars these taxes add up to are significant. The power of tax free compounding is the difference that makes a big difference in your returns, and the growth of your money, and the impact it can have for both your family and your charitable interests.
To understand this strategy you need to have an understanding that two types of funds can flow out of your corporation tax free. The first is the non taxable portion of capital gains (50% of any realized capital gains), and the second is the proceeds of Corporately Owned Insurance on the death of the person insured.
Now if you look at the amount of funds that you hold within your corporation, and you say to yourself, I do not expect to need in my lifetime let’s say 30% of these funds, then you could earmark some of these funds for this tax efficient strategy, referred to sometimes as a Corporate Asset Transfer, or a Corporate Estate Bond.
Here is how it works? You can buy a permanent insurance contract on one life or a joint last to die basis. By permanent I am referring to either a Whole Life, or Universal Life Policy, both of which have an investment component to them. When you buy the insurance you overfund the policy, which is basically a fancy way of saying you are putting in more than the cost of pure insurance so there is an investment component or aspect to this policy. The investment component will grow tax free, and you will be able to see this growth in the growth of your Cash Surrender Value (CSV) within your policy. When the insured person passes away then the investment component and the death benefit will be available to be withdrawn from your corporation tax free. These funds can then be directed to wherever the corporation owners see fit.
There are some additional points that I have not talked about or shown you here, such as insurable interest, investment options, and which type of policy is a better fit for you personally. We have laid out the nuts and bolts that should given you enough information to have a feel for whether you can see this strategy as being a fit for you. If you would like more info you can email me at financialbistro@gmail.com
Rick Coyle is a Financial Planner/Insurance Advisor specializing in the use of Insurance Products in Financial, Insurance, and Retirement Income Planning. He is based in Nova Scotia and serves predominately the Halifax and Annapolis Valley areas. You can contact him at financialbistro@gmail.com.
This morning an article appeared in my inbox and it was on the subject of “Financial Therapy”. I looked at this article and then said to myself, maybe this is really going too far. As I jumped into the article they were suggesting financial advisors team up with therapists to help clients work through their psychological issues that are holding them back when it comes to achieving their financial goals.
Now let me ask you this? When you decide that you want to have a conversation with a Financial Advisor, is it occurring to you that you may be signing up for therapy as well. Now I do believe that Financial Planning should be tied into Life Planning which basically means that your Financial Goals are reflective of your life goals and underlying purpose in life and that in order to motivate yourself to work towards your Financial Goals they need to be compelling.
How do you make your goals compelling? This involves having well formed goals and relating them to your bigger picture and values. It involves being able to visualize your goals and stepping inside yourself in the future to experience fully having accomplished your goals so you can see, hear and touch the result, feeling inside what you would feel as if being there. It may also involve understanding and changing some of your beliefs about money and finance. Maybe this is therapy in a broad definition of the term. I would prefer the term coaching.
Rick Coyle is a Financial Planner/Insurance Advisor specializing in the use of Insurance Products in Financial, Insurance, and Retirement Income Planning. He is based in Nova Scotia and serves predominately the Halifax and Annapolis Valley areas. You can contact him at financialbistro@gmail.com.
I purchased a copy of Persuasion by Arlene Dickinson at Costco last weekend. It is an excellent book with a lot of common sense wisdom. Kind of reminds me of listening to Jim Rohn’s words of wisdom, it isn’t complicated but it sure rings true.
There are no fancy tricks or magical secrets on how to manipulate people into doing what you want. Instead the advice is about being yourself and being authentic when you are working with people and working towards Win/Win outcomes. In order to do this, you have to completely understand the other person, and what they want to accomplish.
She stresses honesty and integrity in all your dealings, being well prepared, and being a good listener. There is also a section on overcoming your own personal hurdles. I really enjoyed this part where she focused on how you are talking to yourself, and the story you tell yourself, and how to change that story to become more effective and successful.
There are a lot of personal antidotes about Arlene and her life that add to the richness of the book. For me this book is a breath of fresh air on the subject of persuasion compared to the books filled with a multitude of techniques, that never feel quite right, or seem to overcomplicate the process, and actually get in the way of making a connection. Persuasion is about helping people achieve their desired outcomes, delivering value, and building relationships in the process.
Just imagine what a world would be like, where all sales people are “principled persuaders”.
Rick Coyle is a Financial Planner/Insurance Advisor specializing in the use of Insurance Products in Financial, Insurance, and Retirement Income Planning. He is based in Nova Scotia and serves predominately the Halifax and Annapolis Valley areas. You can contact him at financialbistro@gmail.com.
Are you considering these risks in your financial plan?
The risk of a serious market decline retesting the lows of 2009.
The risk of outliving your money (longevity risk).
The risk of developing a critical illness and having to incur extraordinary expenses.
The risk of not being able to work due to accident or illness.
The risk to your family’s life style in the event of a premature death.
How are you managing these risks in your Financial Planning?
Now ask yourself these questions:
What would you want to happen if you did not wake up tomorrow morning?
What do you want to happen if you could not go to work tomorrow as a result of injury or illness?
Are you planning to stop work at some point and if so how will you fund 20-30 years of income dealing with inflation and market risk?
What do you want to happen if you go to the nursing home?
What do you want to happen to your business if you become sick, injured or die prematurely? What are the tax implications?
So what is your first next step now?
Rick Coyle is a Financial Planner/Insurance Advisor specializing in the use of Insurance Products in Financial, Insurance, and Retirement Income Planning. He is based in Nova Scotia and serves predominately the Halifax and Annapolis Valley areas. You can contact him at financialbistro@gmail.com.
