Medicine + Beyond. Vanessa Flockton, Partner Nicola Wealth Management. Mark Therriault, Partner Nicola Wealth Management

Transcription

1 Medicine + Beyond Vanessa Flockton, Partner Nicola Wealth Management & Mark Therriault, Partner Nicola Wealth Management

2 About Nicola Wealth Management $2.5-billion in assets under management. Successful entrepreneurs, professionals, high net worth business owners, and their families. Comprehensive financial planning services that integrate portfolio management, tax planning, retirement planning and more. Extensively diversified portfolios with investment opportunities not traditionally available to the retail investor.

3 Agenda Make a Plan Incorporation, Tax & Compensation Track, Measure, Review Invest Prudently

4 Our Focus: Total Integration of Financial & Wealth Management Strategies Estate Planning + Philanthropic Giving Budgeting Cash Flow + Debt Management Insurance + Risk Management Asset Allocation + Investment Management Corporate Structure Legal Coordination + Document Retention Coordination of Tax + Compensation Planning

5 Making a Plan First the Facts Net Worth

6 Making a Plan Then The Strategies Risk Management

7 Planning

8 Tax & Compensation Planning Issues for Doctors Practice Income Taxation Issues 100% personally taxed Maximum tax rate of 39% (Alberta) on income over $135,000 No opportunity for an IPP Limited income splitting with spouse or children Maximum tax rates on investment income

9 Self Employment Self Employed $400,000 Income Case Study Age 32 Married, one child age 2 Investment portfolio $40,000 Maximize RRSP Need $120,000 after-tax for personal living expenses Additional Savings $120,000 Total Taxes $136,000 Total Savings $144,000 Personal Living Expenses $120,000 RSP Cont $24,000

10 Incorporation Practice Income $400,000 $400,000 MedCo AB Tax rate: 14% Remaining Funds HoldCo Case Study Age 32 Married, one child age 2 Investment portfolio $40,000 Need $120,000 after-tax for personal living expenses Dividends $67,500 Dividends $67,500

11 Incorporation Tax Implications Income $400,000 $400,000 MedCo Corporate Tax $56,000 Remaining Funds $344,000 Holdco Dividends 67,500 Personal Tax $7,500 Dividend Income $67,500 Personal Tax $7,500 Future Dividends Through Trust

12 Benefits of Incorporation Total Savings $209,000 vs. $144,000 Benefits of Incorporation Additional Savings $209,000 Total Savings $209,000 Personal Living Expenses $120,000 RSP Cont $0 $65,000 more savings than selfemployed partner Tax deferral Corp tax rate 14% vs. 39% personal Income splitting using dividends Reduce tax on investment income Option to do IPP in future Benefits and savings increase as income increases Total Taxes $71,000 Future ability to income split with kids

13 Benefits of Incorporation Working Spouse Benefits of Incorporation Tax deferral Corp tax rate 14% vs. 39% personal Spouse s income is $100,000 salary $180,000 needed for personal living expenses $51,000 more savings than when Doctor is selfemployed Benefits and savings increase as income increases Future ability to income split with kids Incorporated Self-Employed Additional Savings $203,000 Total Savings $221,000 Personal Living Expenses $180,000 RSP Cont $18,000 Additional Savings $128,000 Total Savings $170,000 Personal Living Expenses $180,000 RSP Cont $42,000 Total Taxes $99,000 Total Taxes $150,000

14 How Much Do I Need To Save? $400,000 $1,000,000 +??? $ to save 2% to 4% Over CPI Current Assets $40,000 Live to 100 $120,000, 2014 after tax Childcare Costs

15 Insurance and Risk Management Protecting your ability to earn an income Have you maximized your disability and critical illness insurance benefits? Do you understand the insurance you have in place? Will it protect you and your family in the event of illness or death. How much insurance do you need? Example John and Jane.

16 Financial Advisors: 2000 to 2013

17 What To Look for in a Financial Advisor? - Integrated Financial Plan - Independent Advice & Product Selection - Integrated Tax Planning? - Innovative Insurance & Estate Planning - Fee Based - Comprehensive Client Reporting (rate of return, tax)?

18 The Price of Advice

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20 What s going on in the markets?

21 Equity Markets S&P/TSX 2008 to 2014 Gross = -4.46%

22 Secular Bear Markets Dow Jones

23 Interest Rates at All Time Lows

24 The Lost Decade Investment returns ( Since Jan 2000 ) Typical Retail Canadian Balanced Mutual Funds Publicly Traded Bonds / Fixed Income 40% Publicly Traded Equities 60% 2.43%

25 Asset Allocation from Cap Gemini World wealth report (Investable assets > $1M)

26 Tiger 21 Asset Allocation (Investable assets > $10Million)

27 Asset Allocation 10 Year (2013) Nicola Wealth Management Canadian Equity Foreign Equities Bonds Foreign Bonds High Yield Bonds First Mortgages Second Mortgages Real Estate Private Equity Preferred Shares Cash Alternative Strategies

28 Cash Flow vs. Market Value (e.g.: Income producing real estate) Market value rises and falls but is unknown Income is stable and known Therefore, value is perceived to be income

29 Cash Flow vs. Market Value (e.g.: Stock/Bond Portfolio) Market value rises and falls and is known daily/monthly Income is unpredictable and unknown (usually) Therefore, value is perceived to be the market (not income)

30 Cash Flow is King 50% or more of long-term return

31 Real Estate as an Asset Class Overall asset allocation about 15% Range from 3% to 30% depending on client 2 private LP s (Canada and US) Private LP s since 2000

32 Investment-Grade Real Estate 10%+ annualized return from 1999 to 2013

33 Hard Asset Real-Estate Ownership Brae Centre Calgary, AB Purchase Price: $22.4M Excellent Location Cape Rate 8% IRR (10 yr est.) 12% National Tenants: Tim Horton s RBC Mac s KFC CITI Financial

34 Question + Answer

35 Medicine + Beyond THANK YOU