Affiliated with Sentinel Life &
Sentinel Financial Management Corp.
- Hans H. Mathisen
LETTER for September deals with a topic most of us don't like to discuss:
What should be done the day I walk out? You may want
to put this sheet with your will and other important papers.
LIFE LETTER covers a subject important to all of us: How
safe is my money? For more detailed information about the limits
of the guarantees on your life insurance policies and segregated fund
contracts, l suggest that you visit CompCorp's web site or call the
toll free number given in the last paragraph.
THE STOCK MARKETS
I'm enclosing Garth Turner's Sept. 10, 1999,
column from the Star Phoenix. Garth Turner, the noted author and
broadcaster on financial matters, takes the same approach to investing
as Hans Mathisen: Get as much of your money as you can invested outside
Canada. "Clone Funds" have been available
in Canada for more than 5 years, but it was just recently that the large
Canadian mutual fund companies introduced their "Clones".
WHAT ABOUT Y2K?
During the past couple of months, some of my clients have
contacted me, asking questions like, "When is the market going
to collapse?", and, "When do you think I should cash in my
equity funds and go into cash?".
to these and similar questions from my clients is, "Let your money
stay where it is invested now".
I can confidently say this to my clients, is that l know where their
money is invested now: In high quality securities, in well established
economies where the financial wherewithall to address Y2K is present.
says, "Any market carnage between now and the end of the year should
be viewed for exactly what it will be: A chance to buy the future, on
Clone funds bypass investment
(written for the Star Phoenix on Sep.10,1999.)
During the past 15 years, the Templeton Growth Fund has
given investors an average return of
13 per cent, despite recession, a war with Iraq, the Asian flu, a global
currency crisis, double digit inflation and 20 per cent interest rates.
But, sadly, you could not put this fund into your RRSP. Until now, that
Hey, this is not a column promoting Templeton, but it is
a piece written in praise of clone funds which are currently revolutionizing
retirement investing and spitting in the eye of Ottawa's dumb insistence
that only 20 per cent of your RRSP could be made up of "foreign
property." That has handcuffed investors because foreign markets
have outperformed Canadian ones by a significant amount, and keeping
80 per cent of your retirement assets in domestic assets means you lack
There are, at the moment, more than 80 100-per-cent-eligible
foreign mutual funds available, and here's how they work: Invest $1,000
in one of them and that money will be deposited with a Canadian bank.
The money is then pedged to buy a forward contract (that's a derivative)
to mirror the performance of an actively managed foreign content fund.
That's why it's called a "clone" fund, and it means, in effect,
you get foreign zing within your Canadian tax shelter.
These things have proven to be hugely popular and the expectation
is that, come RRSP season, they could attract a lot of money that worried
investors have been squirreling away in near-cash investments like GICs,
high-yield bank accounts and even savings bonds during 1999.
Is there risk with a clone fund? Not any more than with
the ones they are based on, which means long-term investors who ignore
meaningless temporary volatility should end up in great shape by the
time the retirement years start.
But, typically, you will pay a little more in management
fees for an RRSP-sheltered clone fund than a typical global equity fund
-- something close to a half point premium.
And how do the feds feel about this blatant circumvention
of the foreign content rules? Pretty chilled out, actually.
Templeton president Don Reed had Revenue Canada take a
look at the four clone funds that company is launching, and the ruling
came back that the Global RSP Funds would be considered legitimate Canadian
assests. That is welcome news to all to the companies, like Trimark,
BPI, Mackenzie and others who have clone funds on the market.
Of course, this is not the only way to boost the foreign
content in your RRSP past the 20 per cent mark. For years investors
have bought into Canadian mutual funds that have 20 per cent of their
assets offshore and, when combined with their own 20 per cent of foreign
content, that can give 36 per cent foreign exposure. Or, your can buy
units in a labour-sponsored fund, allowing you to triple your non-Canadian
RRSP dollars for every one put into the labour fund, to a max of 40
per cent in offshore content.
Those are still useful and effective strategies. But I
think with the advent of the 100 per cent-eligible foreign funds, they
pale in comparison. If you have any doubt, just consider that so far
in 1999, the TSE 300 is ahead eight per cent, while the
Dow is up more than 20 per cent and the tech-heavy NASDAQ has given
an eye-pop- ping 30 per cent return. If you have held yor money in a
"safe" GIC or high-yield bank account, then you have grown
it by only four per cent. Worse, half of that will be gone in tax, giving
you a two per cent yield, one-half of which will b negated by inflation.
So, by trying to avoid risk, you have gone a year without increasing
your wealth while those people who stay fully invested, and ignore inevitable
corrections and ongoing volatility, have done just fine.
I'm a fan of the clone funds. You should buy some.
You should also be feeling positive about the future because today's
economic fundamentals suggest the first decade of the millenium is going
to be terrific. Any market carnage between now and the end of the year
should be viewed for exactly what it
will be: A chance to buy the future, on sale.
Garth Turner is an
author, broadcaster and speaker.
"If anything should
happen to me. . ."
While waiting for surgery, Uncle George realized that Aunt
Grace might not know about everything that needs to be done if he dies,
so he made her this list of things she should do.
1. Before you tell anyone - Clean out our safety deposit box and joint
bank accounts. When the bank finds out I'm dead, they're liable to close
off all access to them until my will is probated.
2. Call the funeral director
- But go there with somebody who won't be suckered into buying the fanciest
coffin. Just remember, the money you spend on my funeral won't be available
for the party I want you to have!
3. Gather up all my important
papers - My will, life insurance, disability insurance, and general
insurance policies, business agreements, bankbooks, notes receivable
or payable, stock or bond certificates, real estate deeds, recent tax
returns, marriage, birth and death certificates, military papers, automobile
registration forms and all recent contracts. Don't throw away anything
that looks official, even if it appears to be terminated.
4. Call our life insurance
agent - He'll not only help you in collecting the money from my life
insurance, but also in collecting the death benefits of my group insurance,
company pension and Canada Pension Plan. He'll also advise you on things
like settlement options and the guaranteed death benefit on my segregated
5. Call our accountant
- He'll be needed for the various tax returns that have to be filed.
6. Call Our lawyer - She'll
tell you what other stuff is needed and what must be done to settle
my estate. She'll also tell you whether my will has to be probated (proven
that it's mine). As the province charges probate fees for everything
passing through my will, I've tried to minimize them through joint ownership
of most of our assets and naming beneficiaries where I could.
7. Call the other executors
- You know you're my primary executrix, and you know who the other two
are, so call them. Even though our lawyer will probably call them, it
would be nice if they heard from you first.
8. Call my business associates
- My partner will want to know that our buy-sell agreement has just
been triggered so he can collect the insurance money to buy my share
of the business from you. And call Marie in Admin to spread the word.
Ask her if there's anything else coming to you such as my vacation pay,
Workers' Compensation, Employment Insurance, unpaid expense accounts,
ongoing group benefits, etc.
9. DON'T PANIC! I picked
my executors and the above mentioned professionals to assist and advise
you in this situation. So let them. And don't rush into anything, like
selling the house, or anything major, for a year.
Copyright ã 1999 Bowen Financial
Inc. and Donald F. Pooley, Inc. All rights reserved. Illegal to copy
without written permission
"How Safe is Albert's Money?"
Albert was concerned about his financial plans. He remembered
the collapse of Confederation Life a few years ago and wondered if the
life insurance he took out, both before and after that, was itself safeguarded.
And the answers he found reassured him about the safety
of all life insurance company products.
The Canadian life insurance industry decided to insure
the insurers well before any of its members faced collapse. Despite
the fact that not one Canadian life insurance company had ever failed
to meet its obligations to its policyholders until then, it established
CompCorp (Canadian Life and Health Insurance Compensation Corporation)
to provide protection similar to that provided by the CDIC (Canadian
Deposit Insurance Corporation) on the deposits of banks and trust companies.
While the CDIC was established after the fact, CompCorp
was created before it was needed. Albert discovered that it took the
failure of 47 of 97 active banks in the first 150 years of Canadian
banking to awaken our legislators to the need for such protection. In
contrast, though no Canadian life insurance company had ever failed,
the industry, not the government, wisely chose to insure against such
a possibility. CompCorp was therefore established and funded by levies
from its members in the late 1980's.
Like the CDIC, CompCorp's protection is only available
to clients of its members and most life insurance companies operating
in Canada are members. However, organizations that offer prepaid dental
or medical care and fraternal organizations are normally not members.
In some areas, CompCorp's protection is superior to the
CDIC's. While it matches the CDIC's $60,000 limit on deposits, its coverage
extends beyond the CDIC's 5 year limit. As its main purpose is to protect
life insurance products, CompCorp guarantees up to $200,000 life insurance
per policyholder, and up to $2,000 monthly per annuitant of each of
its members. It also insures the minimum guarantees of segregated funds
offered by its members. Segregated funds are similar to mutual funds
but with certain guarantees.
This means that Albert can have a $60,000 ten year deposit,
$60,000 in an RRSP, $200,000 life insurance, $2,000 per month annuity
or disability income, and segregated funds all with the same CompCorp
member, and all five would be protected. Even his policies issued before
CompCorp existed are covered. In fact, all contracts with CompCorp members
that guarantee an amount to be paid in the future are protected.
Albert got most of this information from its web site,
www.compcorp.ca, which also told him that, thanks to CompCorp, Confederation
Life's Canadian policyholders recovered 100 cents on the dollar. To
find out more about CompCorp and it's members, use the web site or phone
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