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Syed H. reference letter

August 20, 2015

Letter of Recommendation for Mr. Rick Honeyford

To Who It May Concern

I have currently worked with Mr. Rick Honeyford as my financial advisor for over three years. My original discussion with Mr. Honeyford was based on my goals of setting up the necessary RRSP contributions. As our discussions progressed, I began to understand the full suite of capabilities that Mr. Honeyford’s organization provides to help clients. This enabled a discussion on setting up the very important life insurance policies and a holistic financial plan.

During subsequent discusions, I appreciated Mr. Honeyford’s time invested into each conversation to understand my family’s priorities, goals and the required steps to achieve our financial objectives. Mr. Honeyford had introduced new concepts and strategies to further help enhance my financial position. These strategies resonated well with me and such ideas had never been presented to me in my dealings with previous advisors.

Over the years, The advice and recommendations provided with regards to our investments has yieded portfolio growth at an attractive rate of return. With the growth and addition of our family, Toronto Mutual Group was key in helping us to to secure RESP investments for our young children.

Based on my experience in working with Toronto Mutual Group and Mr. Rick Honeyford, I would gladly recommend him to anyone who is seeking a professional financial planning and investment advisor.

Best regards,

Syed H.

CMHC Mortgage Insurance Rates to Increase March 17th

CMHC has announced that it will be increasing the price for mortgage insurance effective March 17th. This is in response to new government regulations requiring higher capital reserves. Genworth (the private sector equivalent of CMHC) has announced that it will match the CMHC price increase. The price increase will only affect those that submit an offer to purchase after March 17th and according to CMHC the average mortgage will only see an increase of five dollars a month. So if your mortgage is already in place or you have already applied for a mortgage you can relax as it shouldn’t apply to you.

What disability coverage does the government provide?

If you develop or acquire a disability, the government has four possible income sources. On the surface, that seems like you might be eligible for a lot of disability coverage if you qualify. On closer examination, you will see that the government benefits may not help you maintain your standard of living if you become disabled.

The four government programs in Ontario are the Workplace Safety & Insurance Board, Employment Insurance, Canada Pension Plan, and the Ontario Disability Support Program.

This blog entry concerns disability benefits from the Workplace Safety & Insurance Board (WSIB), formerly known as the Workers’ Compensation Board (WCB). WSIB is mostly an accident-only disability insurance. The coverage for accidents is limited to those incidents that occur while you are on the job. If you have an accident on the public sidewalk in front of your workplace before you begin work for the day, chances are that WSIB will not cover your disability costs.

Although WSIB primarily provides coverage for disabilities caused by workplace accidents, the Board sometimes provides compensation for illness-related disabilities. To receive coverage, the claimant must prove that the work environment directly caused the disabling illness. For example, firefighters can receive benefit payments if they are diagnosed with certain rare cancers. These cancers are accepted as occupational diseases because they have been scientifically linked to the inhalation of chemicals from burning buildings. However, proving a causal link between a work environment and an illness is very difficult in most situations.

The Workplace Safety & Insurance Board provides coverage for work-related accidents and illnesses that meet distinct criteria. You are eligible to apply for compensation if you make contributions to WSIB through your workplace and have a disability caused by your work environment. For more details, please refer to the Workplace Safety and Insurance Board website.

For more information about disability coverage that complements WSIB, please contact me.

Real Rate of Return

One of the first concepts that it is important for people to understand when engaging in investment planning is Real Rate of Return. You may have heard people say that if you have your money in GICs or high-interest savings accounts you are actually losing money. On the surface, this doesn’t make any sense, if you are getting 2% interest, for example, and the principle invested is also guaranteed (Usually CDIC insured in fact) then how can you be losing money? What they are referring to is the Real Rate of Return on your money. More properly they should say that you are losing buying power if you are invested in a GIC or any investment with a low-interest rate return.

What the Real Rate of Return refers to is the total return on your investment after accounting for inflation, taxes, and costs/fees. Continuing with our 2% GIC example if the inflation rate is 1.5% then at the end of the year you would only have .5% (or 50 basis points) more spending power than you did at the beginning of the year. Inflation is the reason that money “doesn’t go as far as it used to”.

Unfortunately, Canada Revenue Agency doesn’t factor inflation into the calculation. Should you receive a T5 tax slip from the institution that sold you your GIC then that full amount must be included in your income when you complete your tax return. Should you be fortunate enough to earn a good income in Ontario then your marginal tax rate could be approximately 46%. This means that if you should earn an additional $100 in interest income, then you would have to pay an additional $46 in taxes. This would leave you with only $54 of “after tax income”.

Let’s return to the example of the GIC that pays 2% interest. We will say for this example that the GIC was purchased for $5,000 and paid $100 interest for the year. Assuming that the investor is in a 46% tax bracket then she will be able to retain $54 in after-tax income leaving her with $5054 at the end of the year. While this isn’t exactly great, many people accept this as they are risk averse and there is virtually no risk involved in purchasing a GIC. When we factor in inflation, however, this is where the problem arises. In order to be able to purchase the same amount of goods or services at the end of the year as she could have at the beginning of the year our investor would need to have $5075 assuming an inflation rate of 1.5%. Unfortunately, in this example, she only has $5054 after she has paid tax so she has actually lost purchasing power of $21. Assuming the interest rate, inflation rate, and her marginal tax rate remains the same she will incur this loss to her purchasing power every year that she chooses this investment.

The last component that we usually take into account when calculating a real rate of return are the fees and or costs associated with acquiring, holding, and/or selling the investment. It is rare to see any fees associated with a GIC investment (the exception being if there is some sort of annual fee for the account that the GIC is held in). For the purpose of this example, we can ignore the fee/cost component when calculating the Real Rate of Return which in this case is negative .0041% or negative 41 basis points. This is calculated by dividing the actual amount of after-tax money by the amount of after-tax money that would be required in order to break even at the end of the year. In this case, it would be 5054 divided by 5075 which shows that she would have 99.586 percent of the buying power she had at the beginning of the year. This is why some people might say that you are actually losing money when you invest in a GIC.

Should you have any questions about the Real Rate of Return please leave a comment below.

Mutual Fund Dealers Association has Proposed Restricting the Use of the Title “Financial Planner”

The Mutual Fund Dealers Association (MFDA) is one of two self-regulating organisations that “The MFDA regulates the operations, standards of practice and business conduct of its Members and their representatives with a mandate to enhance investor protection and strengthen public confidence in the Canadian mutual fund industry”. They have proposed restricting the use of the title “financial planner” to only those who have demonstrated proficiency by obtaining at least one of six designations.

It’s about time. There are far too many under qualified “financial planners” out there that hold themselves out as someone that you can go to for quality financial advice. Often the only service they really provide is mutual fund or insurance salesperson. I hope the insurance industry soon follows suit. There is a provincial committee that is supposed to be looking at this issue, but I haven’t heard much about it recently. There are actually people out there that work an unrelated day job and moonlight as “financial planners” or “financial advisors” on evenings and weekends. Most part-time advisors have relatively little knowledge or training beyond the minimum licencing requirement to sell the financial product they are promoting. People with good designations (look for CFP, CLU, CIM) are required to follow a code of ethics that put the client’s interest first. Society is not well served by people without the proper training holding themselves out as a “financial planner”.

Unfortunately, as I mentioned before the MFDA is only one of two self-regulating organisations that regulate mutual fund salespeople in Ontario. I would like to see this title restriction applied by the Ontario Securities Commission and the Financial Services Commission of Ontario (FSCO). FSCO is the regulatory body that licences insurance agents and mortgage brokers in Ontario (amongst other responsibilities). I urge you to consider contacting your member of provincial parliament or email Charles Sousa the Ontario Finance minister at [email protected] and encourage him to adopt restrictions on who is allowed to hold themselves out as a “financial planner”. Alternatively, you can call his office at 416-325-0400 or his constituency office at 905-274-8228.

Here are some links to the websites of the organisations I mention above.

FSCO -Financial Services Commission of Ontario- – You can check this website to ensure the person you are dealing with is licenced in good standing and if the regulator has ever suspended their licence.
MFDA -Mutual Fund Dealers Association- -you can see if your mfda investment advisor is registered and if the mfda has taken disciplinary action against them.
OSC -Ontario Securities Commission -amongst other things you can check if an advisor is registered, find out about investor warnings, file a complaint against an advisor or company.
IIROC -Investment Industry Regulatory Organisation of Canada- – this is the other SRO (self-regulating organisation) that deals with Mutual fund salespeople in Ontario.
FPSC -Financial Planning Standards Council- – The Council sets the standards of what is expected of Certified Financing Planning Professionals. They grant the credential to those individuals that have passed the exams and have agreed to abide by a code of ethics that places the interests of the client first. They have resources for Canadians. Under this link, you can find a Certified Financial Planner (such as myself) who practices in your area.
Article in the insurance journal if you would like to do further reading on this subject -

Should you have any questions about this article or anything relating to financial planning, mortgages or insurance please call me at 647-703-4962

Rick Honeyford, CFP

Ensuring your estate is in order

The following is a list of steps you can take to ensure that your estate is in order in case something should happen to you:

Make sure rsp’s/rif’s and pensions have a beneficiary named (RSP’s/Rif’s can be rolled over to spouse on a tax-free basis and most pensions will continue to pay a pension to the surviving spouse often at about 70% of the amount the pensioner was receiving but this will vary from pension to pension)

Ensure there is a will, many people simply assume everything will go to the surviving spouse but depending on the size of the estate this may not be the case, as intestacy legislation in Ontario merely gives the surviving spouse a preferential share and a share of the remaining estate. Also, a person that dies intestate (without a will) won’t have an executor and a court will need to assign one which can cause long delays.

Make sure the will is up to date (i.e. if leaving something to the children or grandchildren that the youngest children/grandchildren have been added to the will so they aren’t left out.) Also, make sure that any assets that are to go to a specific beneficiary are included in the will. (Houses that are owned jointly with right of survivorship and life insurance usually bypass probate and pay directly to the beneficiary and are not always listed in the will)

In the event that life insurance policies are mentioned in the will ensure that the beneficiary of the policy in the will matches the beneficiary of the policy that the life insurance company has on record or this can cause huge issues for the estate.

Ensure that the witnesses to the will are not named as beneficiaries or spouse of a beneficiary.

Ensure that the executor of the will is willing and able to act as the executor and that they have a copy of the will or can at least easily access the will. (a safety deposit box can be a really bad place to store a will as once the owner of the box dies it can require a court order in order to open it.)

Locate all life insurance policies and ensure that a beneficiary is named. If the physical policy has been lost a claim can still be made however knowing which company the policy is with and the policy number is very useful. If no beneficiary is named then the policy will pay to the estate, but you generally want to avoid this as life insurance paid to a beneficiary is protected from creditors (both the creditors of the life insured and the beneficiary, this protection from the creditors can be continued after the beneficiary receives the funds as long as the funds aren’t commingled with other assets (Basically this means you should keep the life insurance proceeds in a separate bank account, incidentally this can also prevent the life insurance proceeds from becoming a marital asset in the event of a divorce)

Life insurance policies can include group life insurance from an employer (retired people can also sometimes have group life insurance), creditor insurance (this can include mortgage life insurance, or life insurance on any loan including rsp loans and car loans) The actual beneficiary on creditor life insurance is actually the lender, but the family/estate of the life insured benefit as the loan is discharged (up to the amount insured).

Try and gather all of your important documents in one place. This can include property deeds, insurance policies, stocks and bonds, investment statements for mutual funds, will, Powers of attorney, living wills, pension information, benefits booklets (from an employer), mortgage statements, contracts, contact information for lawyers, financial advisors, accountants, funeral homes, spiritual advisor etc. Let your executor know the location of these documents, ideally, these should be stored in a fireproof and waterproof box/safe. A safety deposit box may not be a good place to store a will as it can take a court order to have it opened when the person renting the box dies.

Consider writing a living will. This can give your spouse or power of attorney for medical care direction under what conditions you would not want to be resuscitated or you would want to be removed from life support.

Consider pre-planning your funeral, while I rarely think it is advisable to prepay you can make important decisions in advance such as if you prefer burial versus cremation. What do you want on your headstone, what information should the obituary contain. Which cemetery and funeral home would you prefer to use, how much you want to spend on a coffin, who should be notified in the event of your death? (often when these decisions are made while family members are grieving they spend far more on the funeral than the deceased would have wanted)

Please note that none of this constitutes legal advice. It is advisable to consult with a lawyer that specialises in estate law to ensure that your will is legally sound and that it will achieve your objectives.

Major Changes to Mortgage Rules

Finance minister Bill Morneau announced changes to the rules governing mortgages. Effective October 17th, all insured mortgages will have to qualify against the Bank of Canada rate which is currently at 4.64%. These changes will affect both high ratio and conventional mortgages.

There is a new restriction placed on conventional insured mortgages. It is no longer possible to extend the amortization on an insured conventional mortgage beyond 25 years. (Conventional mortgages are also usually insured by CMHC or Genworth, usually the lender doesn’t charge the borrower any premiums. The exception is for loans from alternate lenders which will usually have an interest rate around 4% or more)

Ottawa has also tightened the tax rules for foreign buyers. Apparently many non-residents were claiming the house owned in Canada as a principal residence. This would allow them to avoid paying any capital gains tax when they sold the house. This will no longer be allowed.

How much of an impact will this have on home buyers? A borrower that earns $100,000 a year with great credit and job history could qualify for a high ratio mortgage of up to $738,500 based on a 2.34% interest rate on a five-year term. After October 17th the same borrower would only be able to qualify for a maximum of $579,000. A difference of $159,500.

On a conventional mortgage before the change, the same borrower would be able to qualify for up to $932,900 on a 35-year amortization at 2.34%. Once the new rules go into effect they will only be able to borrow up to $579,000 on a 25-year amortization. The difference being they will be able to borrow $353,900 less than before.

These changes will probably have quite an impact on the housing market. Please contact me at 647-703-4962 if you have any questions about this article or mortgages in general.

Ten Common and Expensive Mistakes that First Time Home Buyers Make

1. Not putting a condition of financing on the offer to purchase. Even with a pre-approval the lender can still say no if they don’t like the property.
2. Not getting a home inspection. Home inspectors can let you know if you will be looking at an expensive repair in the near future.
3. Using the seller’s realtor. The realtor that represents the seller must by law act in the sellers’ best interest, not yours.
4. Not getting pre-approved for a mortgage. You can spend a lot of time looking at properties you won’t be able to buy, in the meantime, you may miss the property that is right for you.
5. Not checking the status certificate of a condo. You could find yourself facing special assessments in the thousands and/or much higher maintenance fees than you expected.
6. Making mistakes with the RSP first time buyer program can render you ineligible and cost you thousands in taxes. You should always consult with your Certified Financial Planner or an accountant first.
7. Taking the lowest interest rate mortgage. The lowest rate isn’t always the best mortgage for you. %%%% of five-year mortgages end up being refinanced or broken before maturity, the amount of the penalty can vary widely. some mortgages can only be broken if the property is sold
8. Taking the mortgage life insurance from the lender is rarely the best deal and over the length of a mortgage, you could spend thousands in extra premiums for inferior protection.
9. Not taking title insurance. This confuses many buyers as there are different types of title insurance available to you. The mortgage lender will require you to purchase the title insurance that protects the lender, you should also buy title insurance that protects you.
10. Making a large purchase before closing. people will often go shopping for furniture or a new car or other major purchase once their mortgage has been approved. The lender will usually pull your credit one final time before it advances the funds for the purchase. If the lender sees that you all of a sudden have a bunch more debt you may no longer qualify for the mortgage. This of course often occurs 24 or 48 hours before closing and it may not be possible to secure new financing in this time period. You could be sued by the seller if you aren’t able to complete the purchase.

Bonus Mistakes:

a)Not budgeting enough for closing costs. Title insurance, legal fees, moving costs, distributions (prepaid property taxes, utilities, maintenance fees), and the home appraisal can all be part of closing costs.

b) Just signing your renewal when your mortgage comes up for renewal. Lenders know that because people are busy they will often just sign the renewal without taking the time to see what else is available. This can be very profitable for the lender and can cost you thousands in extra interest.

Website Finally Live

Hello and welcome to my blog. It has taken a lot of effort but I have finally got the website to the point where it is ready to go live. Having said this there is still a lot of work that needs to be done. There are many sections that are still under construction. If you can’t find the information you are looking for please let me know by filling out the contact us form or calling me at 647-703-4962. You can also respond to this blog post with any questions. I would also like to encourage you to sign up for my newsletter while you are here.

Thank you and happy browsing.

First-Time Home Buyer? Attend Our Next Seminar

We discuss key aspects of buying a home.

Understanding your credit score
Improving and maintaining your score
Qualifying for the best mortgage rate
Understanding different mortgage types
Discovering differences between bank mortgage insurance and life insurance
Selecting insurance that actually covers you
Realizing the value of working with a Realtor

Watch this page for the next seminar date.

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