Archive for March, 2014

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Canadians Can Control Wealth Erosion In Uncertain Times

It’s difficult to think pessimistically about the great news released mid-March about our national net worth: it increased by 2.7% to $7.7 trillion in the last quarter of 2013, following a 2.5% gain in the third quarter.

The main reason was the value of real estate in Canada, which has been rising. But according to Stephen Poloz, the Bank of Canada Governor, dark clouds could lurk behind the euphoric news.

Mr. Poloz, identified key concerns for our economy, but few solutions, in his speech in Halifax on March 18. Specifically, he noted that recovery from the recent financial crisis could be prolonged in Canada as baby boomers – the largest cohort of our population – begin to retire in droves.

The rub is that as baby boomers prepare for retirement, they channel their savings into different types of investments, many of which are less productive to the general economy, he said.

What he did not say is that the hot values in the housing market could also cool as boomers downsize at the same time, or if interest rates rise. A seller’s market could quickly flip to a buyer’s market in those cases, especially if mortgage debt loads continue to rise.

At the end of the fourth quarter, Stats Canada noted that mortgage debt in Canada was just over $1.1 trillion, up 1.1% over the previous quarter.

But, for now, owner’s equity as a percentage of real estate was 69.5% at the end of the fourth quarter, marginally higher than the 69.4% recorded at the end of the previous quarter, and that’s pretty good news.

It’s Your Money. Your Life. There are several financial factors within your control in a period of profound demographic change: pay down non-deductible debt, reduce fees paid to institutions, and be more vigilant about tax reductions you may qualify for. All of those things will increase the ROI on financial and non-financial assets, alike.

Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. Her newest book Jacks on Tax: 2014 Edition is now available. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.


Building Wealth: Don’t Go It Alone

Are you wealthy? What’s your definition? One way to think about it is to consider: what does it take to achieve peace of mind – to be free of financial worry? Would you be truly wealthy then?

If you think so, go further: what is the definition of “enough” for you?  Is it $1 million? Is it $10 million? You may have quite a different number in mind than that of your spouse or neighbour.

This is all complicated by the great wealth eroders – taxes, inflation and fees – and for this reason understanding how much is enough in your future to achieve financial peace of mind requires knowledge, planning, and precision. Often, two or more heads are better than one.

Imagine the power in a multi-stakeholder approach to tax-efficient wealth management…and the potential chaos if multiple heads work against one another in the absence of a strategic plan to get results. To do it well, the mission is to bring a consistent, repeatable strategy to financial decision-making, together with the knowledge and skills families living in various economic situations need.

These professionals – individually and working as a group – must possess the skills to listen for the various life, financial, and economic events that affect that joint decision-making in both the short and long term. Then they need to have the skills to apply the most current tax, financial, and wealth management processes to get the financial results the client needs.

In short, the new wealth advisor – poised to help families and their whole wealth – must play a three-part role:  Educator, Advocate, and Steward of family wealth. That requires broad knowledge to co-ordinate tax compliance, debt management, investment product selection, family governance, and business succession and estate planning.

It’s Your Money. Your Life. Tax time is a great time to review professional relationships as well as tax documentation itself. A multi-stakeholder approach to responsible financial decision-making secures futures. So does a tax-efficient strategic plan everyone can work towards. That’s the role of a Master Financial Advisor™ proficient in the skills of Real Wealth Management.™  You may wish to seek one out, or if you are a traditional tax or financial advisor, look into earning the skills to become one.

Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. Her newest book Jacks on Tax: 2014 Edition is now available. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.


Poverty and Real Wealth Management: It Begins with Tax Literacy

Can the principles of Real Wealth Management™ apply to family units affected by the dark cycles of poverty, or a profound lack of trust in the family?  This is a question I was recently asked and happy to respond: yes.

Real Wealth Management is the strategic framework for a multi-stakeholder approach to joint financial decision-making in the areas of tax, investment, retirement, succession and business planning. It is taught exclusively by Knowledge Bureau.

This framework has developed over decades of collaboration with both tax and financial advisors, but also as a result of speaking to and working with millions of Canadians who struggle with their tax and financial literacy.

It provides a strategic process for financial empowerment that can apply to any household  on a consistent, measurable basis, without discrimination or judgement. It works because financial illiteracy is a common challenge across all socio-economic boundaries.

Real Wealth Management is not just about money; it begins with financial behavior – how individuals and families can move from a “present orientation” to a “future orientation” in managing their finances. When this happens, families can start to work towards the goal of building Real Wealth.

Real Wealth Management begins with an understanding of the 4 stages of the Use of Money:

Stage 1 – Non-discretionary (planning for food, clothing and shelter),

Stage 2 – Discretionary (planning resources to ensure food, clothing, shelter for the future),

Stage 3 – Use of Capital (planning for the use of financial capital to manage risk) and

Stage 4 -Sustainable Net Worth (planning for assets to exceed liabilities, and maintain their income-producing value)

Most families – whether of wealth or poverty – never move beyond Stage 1 or 2 because of circumstance or choices.

To get to the desirable Stage 3 and 4 in the Uses of Money, individuals and families must be able to accumulate, grow, preserve and transition capital.

This takes tax efficiency: maximizing refundable and non-refundable tax credits, minimizing tax withholdings from income sources and using tax efficient investments like the TFSA or RRSP as starting blocks in building wealth.

Whether trapped in a cycle of poverty or a high net worth family in need of financial governance, those who can execute on Real Wealth Management principles for their clients bring them closer to the utopian state sustainable financial security. Tax literacy is a big part of this.

It’s Your Money. Your Life. Human capital can be fragile. When people have capital, they can manage the future risk of losing jobs or health. Ask your tax professional about helping you manage economic risk by preparing the best return for your family unit and equipping you with a Real Wealth Management strategy to invest your family refunds.

Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. Her newest book Jacks on Tax: 2014 Edition is now available. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.