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By Cyndy Batchelor Financial Advisor, O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd. Insurance Advisor, Assante Estate and Insurance Services Inc. Many Business Owners operate their business without considering the impact of losing a key employee. While the first concern when an employee pass is always their family; Business Owners must also consider the effect that this will have on the business. A key person is anyone that is integral to the business and whose loss would drastically impact the daily operations of the business. This could be the Owner, a top Salesperson, a manager, a technical expert, or someone with specific relationships within the business. Losing a key person may have several negative impacts. The business can experience a loss of sales or revenue, there may be increased costs to replace the employee, other employees may also leave, and customers may lose trust in the business. To plan for a key employee loss, businesses may set aside funds to deal with these costs, but these funds would likely be taxed at higher corporate tax rates. There is an alternative to setting aside funds and that is through the purchase of a life insurance policy on key persons within the business. The life insurance policy is set up so that the business is the owner and the beneficiary of the policy, and the key person is the insured. On the death of the insured/key person, the business will receive a tax-free lump sum of cash which will cover any erroneous costs or lost revenue associated with their passing. In addition, corporate funded life insurance has added benefits beyond receiving loss coverage funds on the death of an employee. Private corporations are eligible to receive a credit to their capital dividend account (CDA) equal to the net death benefit proceeds of the life insurance policy less the ACB (adjusted cost basis). As such, at an appropriate time, the corporation can choose to make a payout up to the amount of the CDA account, tax-free to the shareholders. Ensuring your key team members are insured is one of many reasons why a business owner should consider incorporating life insurance as a part of their business planning. For additional information, contact your Financial Advisor. We welcome questions so please reach out! See our ad in this week’s North Dundas Times and follow us on Facebook @OFarrellWealth. Cyndy Batchelor is a Financial Advisor with Assante Capital Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd. Please contact her at 613.258.1997 or visit ofarrellwealth.com to discuss your circumstances prior to acting on the information above. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Insurance products and services are provided through Assante Estate and Insurance Services Inc.

The Bank of Canada and the US Federal Reserve both increased policy rates by 75 basis points during the month of September, bringing policy interest rates to 3.25%. Furthermore, the guidance on policy path going forward continued to indicate a firm resolve towards fighting inflation even at the cost of a recession. As inflation continues to remain stubbornly high, the need to hike policy rates even higher was evident from the Fed’s dot plot chart from September 2022 meeting. Published quarterly, the Fed’s dot plot is a chart that summarizes the views of the Federal Open Market Operations (FOMC). The FOMC committee members vote on appropriate levels of policy rates with each dot representing the vote of a committee member. The latest votes revealed that members increased their estimates of appropriate policy rates from the last quarter and now expect policy rates in the US to be ~4.50% by end of 2022 and ~4.75% in 2023 (See Figure 1), i.e., an additional 125 basis points hike for 2022 and a 25 basis points hike in 2023. Figure 1: Median Implied Fed Funds Target Rate, % Source: Bloomberg On top of the tough message delivered by the US Fed chair, Jerome Powell, during the Jackson Hole meeting held in late August, this led the financial markets to reprice the risk assets to the new reality of potentially even higher rates for a longer period. Recall that the Fed chair indicated that there will be a softening of labour market conditions, hardships on households and businesses as the committee moves “purposefully” to bring inflation back to 2%. As concerns resurfaced, the North American equity markets erased the gains made during mid-July to mid-August to make fresh lows for the year during the month. The S&P 500 Index and S&P TSX were down by ~-9.3% and ~-4.6% for the month, respectively. The fixed income asset class suffered as yields advanced across the curve and the yield curve inversion deepened with short-end yields increasing more than the long-end. The inflation number in the US was at +8.3%, ahead of the expected +8.0% but below the last month’s number of +8.5%. In Canada, the inflation number was +7.0%, below the expected +7.3% and last month’s number of +7.6%. The unemployment rate in Canada inched up to +5.4% from +4.90% last month and in the US to +3.7% from +3.5%. While the inflation numbers remained a disappointment, the rising unemployment provided some respite as it weakened the argument of a wage-price spiral feeding inflation. Looking ahead, the bad news on the economic front could prove to be good news for stock markets. Central banks’ emphasis on the goal to tame inflation by bringing aggregate demand in align with the supply put together with an extreme risk-off sentiment indicates any moderation in economic activity is likely to be viewed constructively by investors. This is because it will indicate that the policy tightening measures are working. That said, the stock market rallies on such datapoints may be short-lived until they begin to accompany a meaningful softening in inflation numbers. Given that the monetary policy affects the real economy with a lag, the impact of higher interest rates working through the economy should start to become visible in the economic data and the companies’ earnings reports in the coming months. As the incoming data gets incrementally negative, the markets will be looking for cues from the Central Banks on the timing of a potential pivot in the policy path. We continue to believe the ebb and flow of the news; inflation numbers are other datapoints that provide a read through on potential inflation numbers ahead will keep markets choppy in the short-term. Until the central banks begin to drop clues of a potential policy pivot in response to the softening inflation, we think it is prudent to stay invested defensively.

By Sarah Chisholm, Financial Advisor O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd. As inflation and gas prices continue to be at historic highs, individuals are turning back to budgeting as a tool to live within their means. Budgeting can be a very challenging and even disheartening experience and should be thought of as a process that needs to be reviewed consistently. Step one is to create a list of incomes and expenses. For those handy with excel, it can be a very useful tool for tracking. The income section of your budget captures your various sources of income: pay cheque, money from a side hustle, rental income etc. On the expense side, it is important to look at expenses as they come in. If possible, build your excel budget so that you can list expenses as daily, weekly, bi-weekly, monthly, quarterly, or annually and then tag those expenses to specific months. This helps you estimate the expenses you will have each month. Not every month is created equally, and knowing the breakdown is an important aspect of budgeting. Step two is to review. Tally up your total income versus your expenses. If expenses are higher than income you have two basic options. One – find ways to increase your income. Two – find ways to reduce your expenses. Step three is to budget funds for the month to include a sinking fund and an emergency fund. Regular monthly expenses should be allocated monthly. The extra lump sum expenses throughout the year should be allocated using a sinking fund. A sinking fund is an account you save into every month until major expenses arrive. For example, for 10 months of the year you could set aside 50/m so that in November and December you have a pot of $500 that can be spent on Christmas. Property taxes is another great example. You know roughly what your tax will be annually and that it comes due at certain times of the year. Take your 2021 tax bill and divide it by 12. Start setting aside this amount immediately so that when the next bill comes due you have the cash available. In addition, building an emergency fund will provide a safety net for all your regular expenses in case of an unexpected illness or layoff that impacts your pay cheque. Ideally an emergency fund should hold enough to cover three months of expenses. Step three is to revise your budget as you go forward. Update your expenses to show the impact of inflation. As credit card debt and line of credits are paid off, build in new goals such as saving for retirement or for a vacation. Celebrate when you transition from credit card debt to a flush sinking fund and emergency fund. Budgeting is not meant to be simple. It is a process of getting your cashflow in line so that you can enjoy life within your means. A trusted financial advisor can sit with you to build and review a budget. We welcome questions so please reach out! See our ad in this week’s North Dundas Times and follow us on Facebook @OFarrellWealth. Sarah Chisholm is a Financial Advisor with Assante Capital Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd. Please contact her at 613.258.1997 or visit ofarrellwealth.com to discuss your circumstances prior to acting on the information above. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

By Sarah Chisholm, Financial Advisor O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd. Typically, as the snow begins to melt, I begin preparing lists of all the amazing things I want to do in the summer. I daydream about family adventures and personal goals to reach. However, as we move into the summer months it is easy to get pulled in multiple directions. Every weekend there is a different event or family occasion requiring your participation and the work week flies by as you also try to coordinate your schedule with daycare and summer camps. Do you ever get halfway through the summer and realize you have not checked off anything on your list? A strategy that we use in the investment world is to take small steps and then gradually grow towards bigger goals. When looking at a Wealth Plan it is easy to say “well if I saved $10,000 annually, I could meet my retirement goals”. Saving $10,000 in a year, however, especially in a lump sum, is difficult to achieve. Rather than aiming too high, start small. Incorporate a $50 biweekly or $100 biweekly until that becomes routine, and then add to that amount. Overtime you may increase your contributions to $384 biweekly and realize you are now on track to meet that bigger $10,000 per year goal. Start small, build confidence, meet your goals. For the summer I recommend: 1. Pick one family goal for the summer. Don’t worry about creating endless lists of places to visit and things to try. Pick one thing to do as a family and build that into your schedule over the next 2 weeks. Maybe it’s fishing at the local boat launch or visiting the nearest splash pad. Just work towards the one goal and then when it is complete re-assess and pick a new goal. Take small steps rather than trying to tackle a huge master plan for the summer. 2. Choose one personal goal for the summer. This could be to read a specific book, try a certain restaurant or master a certain video game. Again, reach one goal and then re-assess and bring a new target into sight. Take the time to congratulate yourself on the small success so that you can create momentum for the next. Whether on the personal side or the investment side starting with small steps will lead to greater success. Get rid of those massive lists and works towards small achievable goals. At the end of the summer, you’ll be amazed at all the family adventures and personal goals you have met. We welcome questions so please reach out and follow us on Facebook @OFarrellWealth. Sarah Chisholm is a Financial Advisor with Assante Capital Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd. Please contact her at 613.258.1997 or visit ofarrellwealth.com to discuss your circumstances prior to acting on the information above. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

By Cyndy Batchelor, Financial Advisor O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd. Many of us worry about our parents and their well-being but are uncomfortable sitting down and discussing their finances and their plans about aging and end of life. This can be a difficult conversation to have, even if you have an open relationship with your parents. It may feel intrusive and insensitive, but the “money talk” is an important discussion to have. Here are some tips to on how to start the conversation. Start by being open with your parents, perhaps discussing your own finances and the decisions you have made regarding your financial future. You can also bring up difficult financial situations that may have happened with other family friends. Be sure to start the conversation in a private place. Discussing something that may be uncomfortable to them at a family gathering may make your parents feel as though they are being cornered. If there are several children who are concerned, determine who might be the best one to approach your parents to have this conversation instead of doing it altogether. Stress the importance of knowing and understanding their wishes for their future. As an example, whether that be staying in their home or entering a long-term care facility. In addition to gaining an understanding on their wishes for the future, you should all discuss their financials and determine where their wealth is kept and the contact information for those institutions. This will include their banking, investments, insurances, accountant, and any other income sources. If a safety deposit box is used, have your parents add you on so that it can be accessed in case of incapacity. Otherwise, you may not be able to access important papers when you need to. Original Wills and POAs should be kept at the lawyer and stocks certificates should be deposited into an investment account to avoid high costs and long delays when an owner passes away or becomes incapable of handling their own finances. Circling back to Wills and Power of Attorneys, all adults, especially those with dependents should have a will. Additionally, a Power of attorney for Personal Care and Property should both be drawn up in Ontario to avoid a court-appointed Guardian. Don’t forget to reach out to experts for legal and financial advice. A lawyer can advise you on elder law and estate matters and a qualified financial professional can assist you with financial planning and critical decisions with respect to making choices on investments, income, and planning. As hard of a conversation this may be, you and your parents will feel better knowing that these important issues have been addressed before they arise. We welcome questions so please reach out! Follow us on Facebook @OFarrellWealth. Cyndy Batchelor is a Financial Advisor with Assante Capital Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd. Please contact her at 613.258.1997 or visit ofarrellwealth.com to discuss your circumstances prior to acting on the information above. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

Each year since 1982, the Federal Reserve Bank of Kansas City sponsors an Economic Policy Symposium in Jackson Hole, Wyoming. This event is attended by Central Bankers, Economists, Academics, and Financial Industry participants to discuss economic policies. Participants typically go on a hike after these discussions and enjoy a dinner together afterwards. This event is keenly watched by investors looking for clues on the future monetary policy path. Given that the year-to-date price action in the financial markets has been driven by narratives on inflation and interest rates, the industry participants focused primarily on comments made by the US Federal Reserve Chair, Jerome Powell. The message from Mr. Powell left little room for misinterpretation with the opening sentence being - “Today my remarks will be shorter, my focus narrower, and my message more direct.” Succinctly, Mr. Powell emphasized that though inflation has come down in July, a single month’s improvement falls “far short” of the evidence required by the committee that inflation is heading back towards its goal of 2%. The committee is moving “purposefully” to restrict economic activity enough to ensure that inflation heads back to 2%. The Fed Chair acknowledged that there will be a softening of labour market conditions, hardships on households and businesses, and indicated that the Central Bank is prepared to endure the unfortunate economic costs of reducing inflation. According to Statistics Canada’s August reports, inflation in Canada has dropped to +7.6% from +8.1%, while the unemployment rate remained at +4.9% as in the previous month. In the US, the Bureau of Labor Statistics’ August reports indicated that inflation dropped to +8.5% from +9.1% and unemployment rates dropped to +3.5% from +3.6% in the previous month. In summary, inflation is still running uncomfortably high, and unemployment is at historic lows. This backdrop, put together with the US Fed Chair indicating a softening of labour market conditions, and the advice from the Bank of Canada Governor, Tiff Macklem, urging companies to not adjust wages for inflation indicates that the wage-price spiral remains a top concern for the Central Banks. The initial reaction of financial markets on expectations of a turning inflation trajectory is now knocking against risks to economic growth as Central Banks firmly remain on the path of policy rate hikes. Investors’ expectations of a pivot after the last FOMC (Federal Open Market Committee) meeting found resistance in the subsequent unofficial remarks from the committee members and finally, a firm pushback in Mr. Powell’s speech at the Jackson Hole event. The markets reacted with initial gains on hopes of a Fed pivot, however retreated during the latter part of the month after the pushback. As per data from the CME Group (Chicago Mercantile Exchange), the probability of a 75-basis point hike implied in Fed Futures contracts increased to 74.5% on August 29th (post Jackson Hole speech) after having receded to 26% on 28th July (post FOMC July meeting) (See Figure 1). Figure 1: Target probabilities for 21 September 2022 Fed Meeting Source: CME Group As indicated in our previous updates, the Central Banks may have no choice but to induce a recession to bring back a balance between supply and demand. This message from the Central Banks is becoming forthright, and the unfortunate costs to this will be higher unemployment and reduced corporate profitability. In the coming months, volatility is likely to stay elevated as it reacts to the ebb and flow of weakening economic data, reports of corporate profitability, outlook on unemployment, and inflation trajectory. Overall, the markets may have no choice but bear with the Central Banks as they go hiking. We continue to advocate overweighting on a defensive exposure in investment portfolios to navigate the near-term challenging macroeconomic environment.

Financial Cup of Tea – Financial Jargon Round Two By Sarah Chisholm, Financial Advisor O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd. In April, we dove into Financial Jargon, the acronyms used to identify investment accounts such as RRSPs, RESPs, RRIFs, and TFSAs. Now, as promised, we will look at investment holdings jargon including stocks, bonds, ETFs, crypto etc. So please grab your favourite cup of tea or coffee and let us dive in. Stocks and bonds are at the heart of most investments. Stocks represent a direct ownership in a corporation. This means you can participate in the corporate success by receiving dividend payouts and through having the value of the stock increase (capital gains). Conversely you can also participate in the failures or challenges and see the dividend payments paused and the value of the stock drop (capital losses). You may also hear stocks referred to as shares or as equities. Equities are often discussed in terms of geography, sector, and capitalization. Large cap stocks refer to corporations whose market value is greater than $10 billion. In comparison, small cap stocks refer to corporations whose market value is less than $3 billion. Depending on the country of origin or the type of corporation, you can follow equities in the general sense by following different indexes such as the TSX in Canada or the S&P 500 in the United States. Bonds are also connected to corporations or to governments. With bonds, you lend money to the corporation or government and in return you receive payments (coupons), typically, on a semi-annual basis. Your coupons are based on a locked in or variable interest rate for a set term. At the end of the term, you receive your money(principal) back. With bonds you often hear the term “yield”. Yield helps represent the return on your investment based on the coupon you receive and the amount you paid for your bond. Yield is important because you can buy bonds at a discount or at a premium. Rather than holding stocks or bonds directly, many people use mutual funds or exchange traded funds (ETFs). When they were first introduced, ETFs primarily tracked specific indexes. Now you can choose from a variety of mandates including passive, active, or leveraged. With an ETF, you can buy the fund any time during trading hours and instantly know your purchase price or sell price; whereas with a mutual fund a sell or buy order is processed at the end of the day based on the closing values. Finally, we come to the digital world with crypto, bitcoin and NFTs. Cryptocurrency refers to a wide range of digital currency options available. Digital currencies can be used as a currency (to buy products or services), or to hold as an investment asset with the goal of the currency rising over the long run. Bitcoin is one of the many cryptocurrency options available. NFTs (Non-Fungible Tokens) is a record of ownership of a digital or physical asset. Each NFT is unique and is connected to a specific asset such as a digital artwork. Financial jargon is truly endless, however, there are always resources available to help you navigate any questions. Reach out to a trusted Financial Advisor, read the news, take a deep dive into the mutual fund or ETF fund facts. These are all great starting points to expand your financial knowledge and confidence. We welcome questions so please reach out and follow us on Facebook @OFarrellWealth. Sarah Chisholm is a Financial Advisor with Assante Capital Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd. Please contact her at 613.258.1997 or visit ofarrellwealth.com to discuss your circumstances prior to acting on the information above. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

As a rule of thumb, contraction in Gross Domestic Product (GDP) for two consecutive quarters is considered a recession. Officially, the NBER (National Bureau of Economic Research) is the authority that decides on dating business cycles. For NBER, apart from a mere contraction in GDP - a host of other parameters such as real income, employment, industrial production, and retail sales etc. are also factored in to determine if a period can be officially classified as a recession. The above premise is necessary to appreciate the complicated environment currently faced by investors. The US GDP contracted for two consecutive quarters (-1.6% during the first quarter and -0.9% during the second quarter) meeting the technical definition of recession. However, the other conditions such as employment levels, retails sales etc., are too high to come to a such a conclusion. On the other hand, Canadian economy fared relatively better with 0.3% expansion in May as per Statistics Canada. During the second quarter earnings season so far, companies have fared better-than-expected in general but the forward guidance from Walmart, Target and Best Buy suggests consumers are beginning to hold back on purchases and inventories are rising. Overall, the trajectory of economic data is indicating that economic activity is slowing down. We had argued in our previous updates that a little moderation in economic activity and levelling off or softening of inflation data are the necessary conditions for markets to react constructively as this would indicate Central Banks’ policy actions are yielding results and things are heading in the right direction. In the US, the headline inflation at +9.1% for the month of June (reported in July) was ahead of market expectations of +8.8% and +8.6% for the month of May. In Canada, the headline inflation at +8.1% was lower than market expectations of +8.4% and ahead of +7.7% for the month of May. Nevertheless, the equity markets in July traded on expectations that inflation has peaked and will begin to show signs of moderation in the coming months. During the press conference after the FOMC (Federal Open Market Committee) meeting on July 27th, the US Fed Chair, Jerome Powell, mentioned that policy rates at about 2.5% (after the 75-basis points hike) are now at a level what the committee broadly considers as a ‘neutral rate’. Earlier, the Bank of Canada had raised policy rates by a full percentage point to 2.5%. A neutral rate is the policy rate that is neither too stimulative nor too restrictive for the economy. Expectations of peak inflation and the interpretation of Jerome Powell’s comments as the bulk of rate hikes are now behind us and the pace of future rate hikes might slow down if future economic data co-operates led to a positive reaction in the markets in July. The recent market cheer is justified if future reports confirm that peak inflation is achieved as investors can begin to put the scare of runaway inflation behind them. That said, it would only be half the battle won as bringing inflation back to 2% target would become the next goal post. While central banks recognize that future rates hikes are going to be restrictive for the economy, as long as unemployment remains at historic lows, we believe the risk of a wage price spiral will keep central banks on a hiking path. With estimated about two job openings for every unemployed looking for work and labor force participation not increasing as expected, the risk remains elevated. In addition, the war in Ukraine, and the ongoing Covid-19 lockdowns in China adding to inflationary pressures from the supply side indicate it does not yet look like a cake walk from here. In other words, to break the back of inflation central banks might have no choice but to increase unemployment and reduce demand by inducing a recession. The yield curves on both sides of the border have inverted (see chart 1) and historically inverted yield curves have been a harbinger of recession (see chart 2). This implies the resilience of corporate earnings could be put to a test in the coming quarters. Though the markets have already priced in a lot of bad news, the outlook suggests there are several reasons to stay cautious in the near-term. Long-term investors with risk appetite to withstand near-term volatility can go bargain hunting as many quality assets are now trading at cheap prices. However, investors with shorter time horizon and/or lower risk appetite would be well served by staying invested defensively until darker clouds clear the horizon. Chart 1: Yields Curves: Beginning of the year and now Source: Bloomberg Chart 2: US Recession and yield spread between 2-year and 10-year treasury note Source: Bloomberg We welcome questions so please reach out! Follow us on Facebook @OFarrellWealth.

The month of May began tumultuously with the S&P 500 and S&P TSX Indices, at one point, down by ~-8.5% and -5.8%, respectively. The markets recovered most of the losses during the last week and ended almost flat for the month which allowed investors a much-needed respite. The bond markets witnessed similar movement with 10-year bond yields that initially moved over 3% on both sides of the border early but shed about 20-25 basis points in the second half to finish the month at 2.75%-2.80%. Market jitters increased after the US Fed chair, Jerome Powell, stated in an interview with the Wall Street Journal that the Fed would continue to push through the interest rate hikes until there is convincing evidence that inflation will move down towards the targeted 2%. These remarks undid investors’ hopes that the Central Bank could ease the pressure after the US inflation report indicated that the US inflation has probably peaked. The inflation numbers for the 12-month period ending April 2022 stood at 8.3%, lower than 8.5% in March but above the expected 8.1%. Canada witnessed inflation numbers for April 2022 increase to +6.8% from +6.7% in March 2022. The pivot in equity markets came after the sell-off in the S&P 500 index exacerbated to briefly push it into bear market territory (technically defined as a peak-to-trough decline of >20%). Bear markets in absence of a recession are rare and are short-lived. Given that the incoming economic data is indicating an overall strong but somewhat moderating economic activity, the market participants saw the sell-off as overdone. The PMI (Purchasing Manager’s Index) numbers for manufacturing and services activity in the US have declined from their highs, but at +55.4 and +57.1 for the month of April (See Chart), they remain well above the threshold of 50 (a number above 50 indicates the activity is expected to expand and below 50 indicates the activity is expected to contract). Chart 1: PMIs have declined but remain at healthy levels as compared to history Source: Bloomberg In addition, the Federal Open Market Committee (FOMC) minutes released later during the month indicated the Federal Reserve members agreed that front-loading the hikes (i.e., larger hikes at the start of the cycle) would leave the bank in a favorable position to re-evaluate and readjust, if needed, later this year. This also raised market hopes that the federal Reserve is wary of the impact of policy tightening and is likely to take a cautious approach as long as the inflation trajectory remains on track. Thus far in the cycle, the markets seem to have discounted the inflation headwinds and the policy path, in other words - the valuation multiples have contracted. As the central banks continue tightening the financial conditions, the market narrative is now beginning to focus on the impact on the real economy and, in turn, company earnings. In other words, the inflation worry is gradually giving way to growth worry as the impact of tighter financial conditions begins to take hold. A drop in the earnings would be the second shoe to drop and strengthen the protracted bear market narrative. We think some dialing down of earnings expectations is likely as inflation eats through the companies’ margins and falling demand forces companies to reduce prices. However, unless the fall in earnings expectations is significant, this would be consistent with the narrative of moderating economic activity and align with the Fed’s objective of a softish landing, in our opinion. Rather than be in the bear camp so early in the cycle, we like to view growth and inflation as a trade-off decision, i.e., some demand destruction and not demand decimation could be enough to bring down the inflation. We acknowledge the war in Ukraine, potential impact of unwinding ultra-loose monetary policy during the pandemic, and the zero covid goal of China; the world’s manufacturing factory, has muddied the outlook for the Fed to navigate successfully and thus increased the likelihood of a policy error. The Fed might well continue to tighten the financial conditions and put the economy into a recession, however, that seems more likely to be a 2023 scenario, in our view. In the interim, moderating inflation put together with moderating economic activity thereby giving the Fed a reason to potentially go slow on the hike path could give tailwinds to the risk assets.

Daren Givoque, CDFA, Financial Advisor O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd. Over the past few years there has been a rise in people feeling like RRSPs aren’t the great retirement savings tool they claim to be. Registered retirement savings plans (RRSPs) are a tool that many people use in Canada to finance their retirement. Contributions that you make throughout your working career are income deductions on your taxes which leads to a lower tax bill and may mean you receive a tax refund cheque after you file your taxes. Any investments or transactions made inside your RRSP are not subject to tax, however when you take money out of your account it is taxed as income. In simple terms you can look at RRSPs as a giant tax deferral tool. At the age of 71 you must convert your RRSP into a registered retirement income fund (RRIF). It is at this point that people must start taking money out of the RRIF in minimum withdrawals, mandated by the government. Unfortunately, some people are reporting that they are being taxed at roughly 50 per cent on the dollar when they withdraw their money, causing them to feel like the RRSP they had been paying into their entire career is a tax trap, rather than a valuable tool to support retirement. While this situation is unfortunate, it is the exception not the rule. Recent studies have shown that RRSPs are no worse than any other savings options if your tax rate in retirement is the same as it was when you were paying into the RRSP. For most people their tax rate actually decreases in retirement, so they end up paying less tax on their RRIF withdrawals than they would if they had used a different tool to save which wouldn’t have had the same tax deferral benefit as an RRSP. Regret over using an RRSP normally comes when they see a portion of their savings going to taxes, however it is important to remember the tax breaks you received when you were paying into your RRSP. Many people are choosing to use tax free savings accounts (TFSAs) as they see it as a better way to save for retirement. While withdrawals from a TFSA are not taxed as income, contributions are not tax deductible. This means that there are only tax savings if you will have a higher tax rate in retirement than you did in your working years. TFSAs are ideal retirement savings tools for low income Canadians as they won’t trigger a clawback of the Guaranteed Income Supplement. For others though, TFSA contributions may not be enough to build significant retirement savings as the limit you can contribute per year is $5500. The percentage of tax filers who make contributions to RRSPs has been on the decline for the past 15 years. Partially because of the economy but also because people are believing in the unfounded belief that they are a tax trap. Don’t believe the rumours. For most people RRSPs are a great savings tool and making consistent contributions will help ensure your financial stability in retirement.

Daren Givoque, Financial Advisor O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd. Having a family cottage is a great asset. Not only will it provide you with some great family memories but like a lot of real estate it will likely grow in value over time. That being said, from a wealth management point of view the family cottage needs to be given different consideration than your typical investment. One thing to keep in mind is that there are often a lot of emotions tied up in the family cottage and this needs to be accounted for. It is extremely beneficial to be open and realistic about your plans for the cottage and make sure that everyone who has stake in the property is in the loop. It is not uncommon for a mother or father to promise their children that they will never sell the cottage, when in reality they need to money wrapped up in the property to fund their retirement. If the plan is to transfer the cottage to the next generation the most important thing to consider is the capital gains tax on the disposition. The capital gain is the amount that the proceeds exceed the tax cost. Even if parents gift the cottage to their offspring it still triggers a capital gain at fair market value. To reduce capital gains tax, it is often recommended that clients document tax costs, which not only includes the initial cost of the property but also the amounts paid on improvements to the cottage over its lifetime. This includes things like redoing a deck, building a boathouse or other significant upgrades (not routine maintenance). Make sure to keep a spreadsheet of the improvements with invoices and receipts to back up the costs. If you want to be strategic about how much tax you pay on capital gains you will also want to be aware of the true market value of the property. With cottages there can be a lot of variance even if they are on the same lake. Things like the view, quality of the lakefront and which direction the cottage is facing can all play a role in its value. It might be worth it to get an appraisal of the property so you know exactly what you are getting into. Another major tax issue when it comes to the family cottage is probate fees on assets. In Ontario people have to pay $5 on every $1000 on the first $50,000 of assets and $15 for each $1000 above that amount. This can add up when it comes to something as valuable as a family cottage. One way to get around probate fees is to gift the cottage to children before you die rather than leaving it to them in your will. This only works if you don’t need the money for your own retirement or if you don’t want your kids to use their own assets on the cottage transfer. Another way to reduce probate fees AND capital gains tax is to change the title on the property to joint tenancy with one adult holding the right of survivorship. In this situation three people would legally own the property and you would only be taxed on disposing one third of the property to one of your children. When you die the other two thirds would automatically be transferred to your child triggering a capital gains tax on the rest of the property. In the end the estate would end up paying a smaller amount of capital gains tax and probate fees than if the cottage was just left in the will. While this type of planning is useful it can be complicated, and it is important that everyone who has stake in the cottage be on board. The last thing you want is for the family cottage to turn into a breeding ground for arguments and discord in your family. The best way to plan for cottage transfer is to start thinking about it early. Talking with a financial advisor can help lay everything out for you so that you can carve a path forward that works for you and your entire family.

Daren Givoque, Financial Advisor O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd. Life insurance is all about risk mitigation. It’s about protecting your loved ones financially if something should happen to you unexpectedly. There are so many insurance products out there that it is often difficult to sift through policies and find the one that is right for you. Insurance companies aren’t always great at being clear about which insurance plans are best for each individual client. Here are a few things you should know about life insurance and some tips on how to pick the policy that is right for you. Insurance companies are for profit businesses Insurance companies make their money off calculating risk. Typically, the more likely you are to die the higher your insurance premiums will be. Insurance companies group people into different categories of risk (ex. non-smokers, smokers) and they know how much they need to charge in premiums based on calculating the risk of death for each grouping of people. A smoker will typically pay 3-5 times more in insurance premiums than a non-smoker because of statistical data that indicates that smokers are more likely to die sooner than those who don’t smoke. When it comes down to it insurance companies do protect you in case of unexpected death, but they are also in it to make money. The best policy is the longest you can afford As a general rule, the longer the policy the better. A Term 20 insurance policy will cover you for 20 years with a fixed premium that will not increase. A Term 10 policy will provide you with the same coverage but only for 10 years. At this point if you wanted to keep it you would face a premium increase. Term 10 policies are cheaper than Term 20 because there is less risk involved for the insurance company. A Term 10 policy might cost you $20/month while a Term 20 policy would be $30 or $35/month. While paying $20 for the same coverage might seem attractive in the short term, the issue comes up when it is time for it to be renewed. At the ten year mark it is certain that your insurance premiums will go up as you will be a decade older and if you decide to keep the original policy it could cost you as much as 3 to 5 times more premium. One option is to apply for a new policy altogether but there is no guarantee that you will be healthy enough to qualify for a new policy ten years down the road. This is why paying a bit more for a longer-term policy is better than saving $10-$15 a month for a shorter policy. You end up paying less in the long run and are guaranteed the insurance pay-out for longer should something happen to you unexpectedly. In certain situations, it might also a make sense to buy a Term 65 (which guarantees you coverage until you are 65) or Term 100 (which guarantees you coverage until you are 100). However, these policies are more expensive because it poses more risk for the insurance company. Buy young It may seem counter-intuitive to buy life insurance when you are in your 20s, have no money and likely no dependents to look after if you pass away. However, this is the best time to buy life insurance. Unless you have a health condition it is likely that you will be in the best shape of your life and as a result your insurance premiums will be at an all time low. Think long-term. If you buy a Term 20 insurance policy when you are 25 it will last until you are 45. In that time are you likely to have built a career? Gotten married? Had a family? Probably. Therefore, it is good to get locked into a plan young. It will never be cheaper to get insurance than right now. The most important part of buying insurance is understanding your options. A good financial advisor will typically look at how much debt you have, what your annual income is and if you have children or a spouse to calculate the amount of insurance you need. Using this information, they will be able to advise you on the insurance product that works best for your situation. There is no reason to go into a meeting with an insurance agent blind. Know what your needs are and what you are willing to spend before you buy into a policy to avoid getting trapped in an agreement that is not in your best interest.