1. A STEP-BY-STEP APPROACH TO INVESTING

2. WHY ARE YOU INVESTING ?
It’s simple. If someone is going to invest, there has to be a reason why.
Have a discussion with your clients to find out what are their goals and dreams. Note them all and then ask them to prioritize their goals.
There can be many goals: big trip, wedding, renovations or down payment on a house or cottage, retirement, major purchase, and many more…

3. By identifying specific financial goals, there’s a much better chance that clients will commit to invest.
Before we get started, it’s important to mention that we will be using illustrations in this presentation to show you the functions of savings and retirement calculators.
These illustrations, just as the ones that you will use with your clients, are estimates, not guarantees.
Results will vary with clients goals and financial situation (job status, family status, etc.)
That is why that when it comes to investment clients, it is essential to review the investment plan and investment results periodically. Generally, an annual review is the standard recommendation, but some clients may require more reviews in a year. Ask them how often they want to meet or talk over the phone to review their portfolio.

4. CLARIFY GOALS
WHEN DEALING WITH MORE THAN ONE INVESTMENT GOAL, HELP CLIENT PRIORITIZE.
Determine how much money is needed to realize the goal.
What’s the desired timeline to achieve the objective?
Use available tools – online calculators or financial planning software - to establish investment strategy.
Determining goals and prioritizing them is the first step. However, it’s important that these financial goals be specific in the amount that is required and the time in which it has to be reached. These two elements are key to help you make appropriate recommendations. The other important aspect to consider is the client’s investor profile. We will cover this element in the next session.
Once you know the specifics of a goal, you can then use a calculator or financial planning software to determine an investment strategy to reach the goal. This tool will also help you see if the goal is realistic or not. If it is not, it’s important to let your client know to prevent him or her of having unrealistic expectations. By being upfront about whether or not the goal can be achieved as stated, it will help establish credibility and trust, as well as manage the client’s expectations with regards to their financial goals.

5. RETIREMENT: THE GOAL ON EVERYONE’S MIND
Clients can have many financial goals and those goals will be different from one person to the next.
One goal that most everyone has, is retirement.
However, the definition of retirement is different for everyone.

6. RETIREMENT AS A FINANCIAL GOAL
NECESSARY INFORMATION:
When will retirement start?
How do you see yourself living during retirement? What will the expenses be?
What are the sources of retirement income that will be available?
Government pensions
Employer pension
Personal savings
Severance pay / Retirement allowance
Sale of asset / Downsizing
How long will retirement last?
When it comes to the Retirement goal, there are more elements to take into consideration in order to determine how much personal investments must be made.
Before getting into the numbers, take time to ask your client when they would like to retire and how do they see themselves living during retirement and for how long. By taking interest in their goals, it will help establish a trusting relationship. Also, you need to know the lifestyle they want to have in order to determine the expenses they will incur in retirement. The retirement budget (annual expenses) will be the financial goal to attain.
Once you’ve established with your clients their retirement goals, it’s then time to find out what sources of income will be available to get them there. (see slide)

7. RETIREMENT AS A FINANCIAL GOAL
Before determining a personal investment strategy for your client’s retirement, it’s important to take into account the various sources of retirement income your client will have.

8. IMPORTANCE OF PERSONAL SAVINGS IN RETIREMENT PLAN
Depends on the amounts of retirement income from other sources, mainly pension plans.
People without pension plans will generally need to contribute more to there personal investment plans (RRSP, TFSA, etc.) to reach their retirement goals.
Self-employed
Professionals (i.e. doctors, lawyers, accountants, dentists, etc.)
People with generous pension plans may still need to contribute to their personal plans, especially if their retirement objective is high.
Retiring at a young age.
High annual income required.

9. PREPARE A RETIREMENT SCENARIO
Many retirement calculators available on the internet
Financial Institutions such as banks and insurance companies
Service Canada website ( )
Education websites (i.e. GetSmarterAboutMoney.ca)
Your choice of financial planning software
Typically, you will have more flexibility with a financial planning software to create more complex retirement scenarios and include two people in the same scenario (couples).

10. There are different types of calculators
There are different types of calculators. Here, the first one (CLICK) takes into consideration only the personal savings.
The second one is more complete, taking into consideration CPP, OAS and if applicable, employer pension plan.
Let’s look at the Retirement Planner.

11. BASIC RETIREMENT SCENARIO
Client is currently 45, would like to retire at 65.
Current salary = $70,000
CPP benefit estimated at $ monthly in today’s dollars, starting at age 65.
OAS benefit estimated at $ monthly in today’s dollars.
Employer defined benefit pension estimated at $3,500 per month. According to employee guide, this benefit is not indexed to inflation.
Client expects to contribute $300 per month in his RRSP, which is currently worth $35,000.
Goal = 70% of current income, indexed to inflation.

12. At the bottom of the calculator, you can select which pension amounts you want to index to inflation. Currently, the CPP and OAS benefits are indexed to inflation. As for an employer DB pension plan, it depends: some are indexed to inflation others aren’t. Look at the client’s pension statement or employee benefit guide to confirm this information.

16. Answer = YES: Maintain the current strategy. Answer = NO…
THE QUESTION ON EVERYONE’S MIND
Will I have enough money to cover my expenses for the entire duration of my retirement?
The retirement scenario will help answer this question.
Answer = YES: Maintain the current strategy.
Answer = NO…

17. OPTIONS TO REACH RETIREMENT OBJECTIVE
SAVE MORE
TAKE LESS
EARN MORE
WAIT S T E W
Because of its tax benefits, TFSAs are preferable to non-registered plans and can be used for many different financial objectives, contrary to an RRSP which is mainly for retirement.

18. DETERMINE GOALS, ESTABLISH PLAN
When clients have specific goals they want to achieve, and see what they need to do to reach those goals, there’s a much better chance they will commit to the investment plan you will recommend.

19. INVESTOR PROFILE What types of investment are they comfortable with?
Once a list of priorities is set, select the goal you want to address and take the first step to building a recommendation.
INVESTOR PROFILE QUESTIONNAIRE
What types of investment are they comfortable with?
Different options carry different levels of volatility.
The Investor Profile questionnaire will help you and your client in this regard.
A very useful tool is the Investor Profile Questionnaire. It will help determine the types of investments and the asset mix that the client will be comfortable with. In the world of mutual funds, it is mandatory. While the SROs in the insurance industry hasn’t made it mandatory yet, it is clearly a tool that fits in the “Best Pract
The Investor Profile Questionnaire consists of simple multiple choice questions. Each answer is worth a certain amount of points. The total amount of points will correspond to an investor profile on which you can base your investment asset mix.
Depending on the financial goal you focus on, the answers to the same questions may vary. That is why we recommend that a profile be done for one financial goal only, for example retirement.
Let’s have a look at the questions in the Investor Profile Questionnaire.
ices” approach. Let’s look at an example of an investor profile questionnaire.

20. After all the questions have been answered, add up the total score and you will see which investor profile applies to the client. Ask them if they recognize themselves in the description given for their corresponding profile.

21. Once your client’s investor profile has been established, you can base your investment recommendation on the guidelines indicated on this page.
Option 1: If you and your client prefer a simpler, more “hands-off” approach, you may want to consider using the fund portfolio that corresponds to the client’s profile.
The portfolio manager chooses the funds within the portfolio and rebalances the portfolio to respect the target asset mix.
Option 2 : You also have the option of a more customized approach where you and your client select the funds you want. You will have to follow the evolution of the portfolio and in order to rebalance when the actual asset mix is different than the target asset mix.

23. INVESTOR EXPECTATIONS
GAPS
INVESTOR EXPECTATIONS
INVESTOR PROFILE
PLAN / STRATEGY
FINANCIAL GOAL

24. SOURCES OF GAPS BUDGET INVESTMENT RETURN INVESTMENT VOLATILITY
Gap between what the client can contribute and the amount used in the illustration. To avoid this gap, address the budget element early on.
“So Mr. X, how much of your monthly budget were you thinking of dedicating towards attaining your retirement goal?”
INVESTMENT RETURN
Is the client’s expectation realistic?
Ask your client what average annual return they are expecting on their investments.
Most of the seg funds you’ll work with will contain one or a combination of these asset classes.
There are of course many other investment instruments that can be used such as derivatives, real estate, etc.
For the purpose of this presentation, we’ll stick with these major three asset classes.
Cash and liquidities
Ideal for very short term goals (2 to 3 years or less) and an emergency fund, which requires safe liquid assets. Not good for long term goals because of the risk of having a negative net return (inflation higher than investment return).
In a diversified portfolio, it will act as a cushion during down markets.
Fixed Income / Bonds
Used for conservative investors who still want the earn a better return than the rate of inflation. In a diversified portfolio, it will often act as the counter part to the equity portion since generally, bond funds perform well when equity funds don’t, and vice versa. However, it does happen that both types of funds have negative return at the same time or positive return at the same time.
Although not guaranteed, this asset class is less volatile than equities.
Equities
Among the three asset classes, it is still considered as the one with the best potential return over the long term. However, investors must be ready to accept the short-term volatility that comes with it.
The majority of investors, especially for retirement savings, will use a combination of the three asset classes in a balanced approach. The weight of each asset class will differ from one person to the next.
INVESTMENT VOLATILITY
Does the client understand the potential short-term ups and downs of his investment portfolio?

25. INVESTOR EXPECTATIONS
SOURCES OF GAPS
INVESTOR EXPECTATIONS
INVESTOR PROFILE
To attain specific goal at a certain date, needs average annual return of 7%
Investor Profile is “conservative”. Expected rate of return is 4% annually.
GAPS

26. Gap should be resolved before implementing investment strategy
EXAMPLE OF GAP
Possible solutions:
Stick with the investor profile risk level and accept to reach the goal at a later date.
Stick with the investor profile risk level and accept to increase the amounts being invested to reach the goal in time.
Accept more short term risk and adopt an investment strategy that will potentially generate the required rate of return to reach the goal in time.
What does the client prefer?
A combination of solutions can also be applied.
Gap should be resolved before implementing investment strategy
Managing your clients expectations by addressing the gaps early on will prevent frustration and dissatisfaction.

27. FINAL WORD
Remember, find out why your client wants to invest before making recommendations. Get them committed!
Establish their goals (how much?, when?) and their investor profile, bridge the gaps between the two, and then implement an investment strategy.

28. ? ?
QUESTIONS ?