Guest writer: Mark Pretorian at Manulife Securities Inc.

What should Canadians worry about most?  According to current monetary policies, deflation is the nearest and greatest monster intimidating the economy. Interest rates remaining at historical lows, regardless of the recent market rallies, indicate the Central Banks believe our economy is still sick. However, all the government prescribed medicine will also likely lead us to inflation in the future.

President Obama warned on November 18th that if government debt keeps piling up, a double-dip recession is likely. When combining the US unemployment rate reaching over 10%, a 26 year high; and the current extreme government debt levels, the prospect of another downturn appears very real.

On the other hand, Berkshire Hathaway CEO Warren Buffet recently stated ‘The financial panic is behind us’. According to the famed investor, the worst of the financial crisis is over and the US economy is still the largest of all, an optimism in stark contradiction to President Obama’s warning of trouble ahead.

So who do you believe? The President? The Investor?

Although neither has a crystal ball, some facts can shed some light into our near future:

• Leading indicators have improved.
• Global banks are repairing their balance sheets.
• China, India and the emerging world continue their growth.
• Governments remain in stimulus mode.

These four themes point towards a slow moving recovery albeit not without problems. Unemployment, increasing debt levels and concerns over the US dollar are among the most notable threats. It appears that our economy has narrowly escaped the worst case scenario and is nervously making a comeback to normalized levels. Inflation is now in the horizon. Interest rates are expected to increase to reflect a return to a normal economic cycle.

We are certainly living in interesting times. An opportunity for many to review, amend and improve their own finances- A chance to better manage risk. Learn what risks your investment portfolio is exposed to by seeking out a second professional opinion.

Investors looking for more information are encouraged to contact Mark Pretorian at Manulife Securities Inc. (514) 421-7090 ext 270 or mark.pretorian@manulifesecurities.ca

Guest Writer: Karin Mizgala  MBA, CFP

I’m not sure when it happened, but sometime a few years ago I realized that tables were turning in my relationship with my parents.  Although still extremely healthy and vibrant 70 years olds, my parents were starting to ask me for advice and I could feel a subtle shift in the power balance.  I didn’t (and still don’t) feel ready for what’s likely to come – but whoever is?

Most of the children of aging parents that I know are busy, stressed and ill-equipped to deal with the added time and financial demands of caring for elderly parents.  And often the need to step in comes during a crisis.  Needless to say, this isn’t a great time to make the emotional, financial and legal decisions that are often necessary.

If at all possible, have a conversation with your parents early.  Find out what your parents have in mind for their future, get a sense of where they stand financially and get an idea of the role that you and siblings might be called upon to play.  None of these points is easy to talk about and there is a need to be sensitive and to respect your parents need for privacy, dignity and sense of control.

Here are some simple guidelines to help in developing a “Care-Giving Plan of Action”:

1.  Start your dialogue with parents and siblings as soon as possible – strive for practicality and openness.  Remind yourself, and each other, that these issues will eventually have to be faced – and that it is best to be prepared well in advance.

2.  One of the chief objectives of your plan should be to maintain your parents’ self-esteem and a degree of personal independence.  Studies have shown that most seniors want to stay in their own homes as long as possible.

3.  Get informed.  Find out what services and assistance is available in your community. Local senior’s centers can provide a wealth of information and advice.

4.  Get a sense of your parents’ financial capacity and their desires.  Do they have enough money to cover medical expenses, the costs of home care or a retirement home?  Do they have a retirement community in mind?  Would they like to live nearer to you or other family?

5.  Find out where your parents keep financial and legal documents.  You don’t need to know all the details unless there’s a crisis, but know how to access the information quickly and easily if something does happen.

6.  Find out if your parents have up to date wills, powers of attorney and health care directives.

7.  Create a list of names and contact information for doctors, lawyers, accountants, brokers, financial planners, bankers, etc.

Don’t be discouraged if you try to broach the topic with your parents and it’s a non-starter.  Be patient and gently persistent.  (It took a couple of glasses of red wine to get the conversation going with my Dad!)

Knowing where your parents stand on these issues and having a plan in place will save your family much grief later.

Karin Mizgala is a Vancouver-based fee-only financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

Guest Writer Article – Mark Pretorian at Manulife Securities Inc.

The objective of this article is to help seniors make educated investment decisions. In the past, retirees could comfortably live on income generated by savings accounts. Today however, with historical low interest rates, thousands of older Canadians seek higher returns from investment products to make ends meet. Understanding today’s inherent investment risks are crucial for seniors relying on investment income to meet their expenses.

Here are the top 5 financial risks facing seniors today:

• Double-Dip Recession

Today’s greatest financial risk is what experts call ‘A Double-Dip Recession’. The risk that gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth. A double-dip recession refers to a second economic downturn just as markets start recovering. For many seniors it might be the second 15 – 30% loss which will truly impact their retirement lifestyle.

• Fraud

Seniors who grew up in the 1930’s, 1940’s and 1950’s were commonly raised to be polite and trusting. These attributes unfortunately make them the perfect targets for con-men. Bernard Madoff, Earl Jones and Vincent Lacroix are but a few of the alleged con-men unmasked by the latest recession. More than ever, seniors need to carry out their own due diligence about the investment firm and the individuals managing their money.

• Focus

Successful investing is about managing risk. Unfortunately for many seniors, investing is mostly about sprinkling money between too many investments. Warren Buffett has often said, “I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did, and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”

• Misleading fund names

Mutual fund names often inappropriately reflect their investment risk. Investors can be misled in believing that mutual funds with such names as ‘government’ or ‘income’ will not carry risk. In fact, the value of such investments will likely fluctuate depending on market conditions.

• Confusion over account statements

Most investment firms account statements reveal very little about performance, fees and commissions. It is crucial for older investors to ask their financial professional to calculate these figures and provide them in writing if they are not available on their account statements.

Mark Pretorian at Manulife Securities Inc.
(514) 421-7090 ext 270
mark.pretorian@manulifesecurities.ca