CIFPs The Smith Manoeuvre as a New Business Prospecting Tool for Financial Planners

THE SMITH MANOEUVRE Is your mortgage tax deductible?

Tonight you will learn how to: Tonight you will learn how to: 1. Get FREE tax refunds from the CRA 2. Pay off your mortgage faster 3. Build an investment portfolio

Tonight you will learn how to: 1. Get FREE tax refunds from the CRA 2. Pay off your mortgage faster 3. Build an investment portfolio SIMULTANEOUSLY SIMULTANEOUSLY

The problem

The solution

History of The Smith Manoeuvre

What is The Smith Manoeuvre?

The Smith Manoeuvre is a financial strategy designed to convert the non- deductible interest debt of a house mortgage to the deductible-interest debt of an investment loan, which simultaneously ensures the building of a free and clear investment portfolio. The Smith Manoeuvre is a financial strategy designed to convert the non- deductible interest debt of a house mortgage to the deductible-interest debt of an investment loan, which simultaneously ensures the building of a free and clear investment portfolio.

A picture’s worth a thousand words

Ten thousand words… Ten thousand words…

THE SMITH MANOEUVRE Appraised Value Is your mortgage tax deductible? 75% Lending Value The left bar chart will represent the fate of the bad debt, the middle chart will show good prevailing over evil, and the right chart will confirm that debt does not increase.

THE SMITH MANOEUVRE Appraised Value 75% Lending Value Is your mortgage tax deductible? You win $30,000 in the lottery and having read the book, you use it to pay down your mortgage by the same amount, so your total debt drops by the same amount.

THE SMITH MANOEUVRE Appraised Value 75% Lending Value Is your mortgage tax deductible? Having increased your equity in your house by $30,000 you are immediately able to borrow back $30,000 to purchase investments of your choice. Good debt rises by $30,000 such that your total debt is back to $150,000.

THE SMITH MANOEUVRE Appraised Value 75% Lending Value Is your mortgage tax deductible? Let’s say you inherit $20,000 a few months later. You repeat the process again. You have paid down a total of $50,000 of bad debt, but you have immediately borrowed it back to invest it. Total debt is still $150,000.

THE SMITH MANOEUVRE Appraised Value 75% Lending Value Is your mortgage tax deductible? You pay down and immediately reborrow and invest another $20,000.

THE SMITH MANOEUVRE Appraised Value 75% Lending Value Is your mortgage tax deductible? We are winning.

THE SMITH MANOEUVRE Appraised Value 75% Lending Value Is your mortgage tax deductible?

THE SMITH MANOEUVRE Appraised Value 75% Lending Value Is your mortgage tax deductible?

THE SMITH MANOEUVRE Appraised Value 75% Lending Value Is your mortgage tax deductible? The end is in sight.

THE SMITH MANOEUVRE Appraised Value 75% Lending Value Is your mortgage tax deductible? The conversion is complete. The original bad debt is now all good debt. All of the interest is now deductible. Why not leave the loan in place for another 50 years and claim a tax deduction of $10,500 every year for the rest of our life?

I. Another thousand words…

Tidbit – how much do you have to earn to pay off a $200,000 loan?

Read it and weep… Summary $700,402 - you need to earn this much $700,402 - you need to earn this much 40% - at this tax bracket 40% - at this tax bracket $280,161 - to pay this much income tax $280,161 - to pay this much income tax $420,241 - to have this much left $420,241 - to have this much left $220,241 - to pay this much bank interest $220,241 - to pay this much bank interest $200,000 - to pay back the original loan $200,000 - to pay back the original loan $700,402 !!!!!! $700,402 !!!!!!

Is this legal?

During the past 20 years, The Smith Manoeuvre has not been challenged by any tax authority, by any lawyer, by any accountant, by any financial planner or by any financial guru as regards the theory, the strategy, the mechanics, the arithmetic or the projected outcomes During the past 20 years, The Smith Manoeuvre has not been challenged by any tax authority, by any lawyer, by any accountant, by any financial planner or by any financial guru as regards the theory, the strategy, the mechanics, the arithmetic or the projected outcomes

Quantify the value of The Smith Manoeuvre for the Blacks

The Blacks $200,000 at 7% for 25 years $200,000 at 7% for 25 years Both work, $100,000 per year Both work, $100,000 per year 40% tax bracket 40% tax bracket $50,000 rainy day fund $50,000 rainy day fund Adding $500 per month Adding $500 per month 40 years of age, 2 kids and a dog 40 years of age, 2 kids and a dog

Future value for the Black’s current investment program?

$1,205,152

What if they did The Smith Manoeuvre?

$1,962,770

Smith Manoeuvre way: 1,962,770 The Black’s way: 1,205,152 The difference: 757,618

For the Black’s, this is a decision worth three quarters of a million dollars.

The Smithman Calculator Go to page 35 of your book

Who is doing the financing?

Who’s paying for this?

Let’s summarize

Your next step

Procrastination is the enemy of your financial success.

Thank you for your friendly welcome, and thank you to Bick Financial Security for hosting me tonight.

BICK FINANCIAL BICK FINANCIAL Toll free Toll free

NEW BUSINESS IS THE LIFEBLOOD OF ANY BUSINESS, INCLUDING YOUR OWN

Where do planners go for their new business?

Wealthy people

Who’s looking after the not-wealthy people?

How many not–wealthy families are there in Canada?

Approximately: 32.0 million Canadians 10.5 million families 3.5 million in rented homes 3.5 million in mortgaged homes 3.5 million in free and clear homes Approximately: 32.0 million Canadians 10.5 million families 3.5 million in rented homes 3.5 million in mortgaged homes 3.5 million in free and clear homes

There are 7 million families that need your help starting today

How much investment needs to be done?

Half a trillion in mortgages $500,000,000,000 !!!

That $500 billion in non- deductible interest mortgages needs to be converted to $500 billion in deductible interest investment loans, starting now.

A mortgage is not a drag for the client or the planner – it is a big opportunity for you both.

How do most planners react to finding a $200,000 mortgage in that new client’s net worth statement?

PROSPECTING 1. Existing clients 2. Former prospects 3. Friends and neighbours 4. Former clients 5. Mortgage lists 6. Realtors 7. Mortgage brokers 8. Seminars PROSPECTING 1. Existing clients 2. Former prospects 3. Friends and neighbours 4. Former clients 5. Mortgage lists 6. Realtors 7. Mortgage brokers 8. Seminars

Which homeowners are prospects? 1. Zero equity? 2. 25% equity? 3. 50% equity? % equity?

Long or short? 1. Milevsky 2. HELOC’s 3. Readvanceable mortgages 4. Creditline mortgages 5. Austrailian mortgages

Proposed legislation

Next step

Thank you for listening, thanks to the folks at CIFPs, and thanks to Lloyd Snyder, CFP for his support.

The Smith Manoeuvre (250) (250)