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  • Investors Not Always Rational - Private Wealth Canada
    P 500 Index During the dot com Bubble The chart shows that when the value of the S P Index reached a maximum in the fourth quarter of 1999 investors rushed to purchase domestic equity funds When the S P Index reached a minimum in 2001 investors rushed to sell them Instead of pursuing their rational self interest investors actually bought high sold low While the chart is based on U S experience with the dot com bubble it certainly reflects my experiences with friends and clients in the 2008 market downturn As one client said to me Markets may be bottoming soon I am bottoming out right now I called my advisor to sell everything The recent book The Behaviour Gap by Carl Richards describes his experiences as a financial advisor in both the dot com bubble and the debt crisis of 2008 In particular he describes how people were pulling the equity out of their houses in 2007 to buy more stocks just before the crash Chart 2 Greed Fear Diagram He explains that the pain of losing a given amount of money is greater than the pleasure felt when you gain the same amount The pain of

    Original URL path: http://privatewealthmagazine.ca/articles/InvestorsNotRational.php (2016-04-26)
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  • the Rise Of Startup Investing - Private Wealth Canada
    have the capacity and ability to invest in technology startups often have the ability to avoid the pitfalls of a singular investing strategy The public markets preach diversity and investment brokers preach allocating percentages of your funds to different areas of investment It s these aspects of investing that give the private investor the advantage They hold a network of advisors and brokers that provide information and act as resources and ultimately remove the ego typically found in Angel Investing Angel Investors are typically those that have made their money and fame in the technology space and now have shifted their role from entrepreneur to investor With this experience they have a sharp eye for trends and what companies to invest in but their broad experience is very limited Most know a lot about investing in technology startups but only know about a specific area Anatomy Of A Technology Startup The most important thing to understand about investing in a technology startup is that it is different in almost every way from a public markets investment From a pure dollars in perspective your money is going to be illiquid and generally will be so for a good period of time The end goal of a private investment is to get liquidity on your dollars That isn t as simple as calling your broker and placing a sell order In startup investing you get out when everyone gets out That means there is an acquisition offer on the table or some form of entrance into the public markets through one of the options available in Canada Aside from the manner in which you get your money out the most glaring difference between public and private is the way reporting takes place As the startups don t report to a standardized governing

    Original URL path: http://privatewealthmagazine.ca/articles/startupInvesting.php (2016-04-26)
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  • The State Of Say On Pay - Private Wealth Canada
    of QLT Inc s advisory say on pay resolution Only three other Canadian companies have received less than 70 per cent approval Agnico Eagle Mines Limited 64 06 per cent Canadian Pacific Railway Limited 61 67 per cent and MDC Partners Inc 66 75 per cent The 70 per cent threshold is important Institutional Shareholder Services ISS U S Proxy Voting Guidelines state that if the say on pay resolution receives less than 70 per cent support ISS may recommend voting against the say on pay resolution the following year depending on the company s response to the vote whether the issues underlying the voting result are recurring or isolated and the company s ownership structure Although ISS Canada s Proxy Voting Guidelines do not contain similar language ISS Canada is likely to be influenced by the ISS U S approach in making its recommendations Say on pay remains a voluntary practice in Canada In January last year the Ontario Securities Commission OSC issued for comment OSC Staff Notice 54 701 Regulatory Developments Regarding Shareholder Democracy Issues seeking comment on several shareholder voting initiatives including say on pay However the OSC has not made any subsequent announcements on the issue and say on pay is not mentioned in the statement of priorities for the year ending March 2013 which was issued for comment earlier this year Outside of Canada say on pay has been a hot topic In particular In the United States public companies are required to conduct advisory say on pay votes ISS has reported that in 2011 41 Russell 3000 companies failed to receive majority shareholder approval of the company s say on pay resolution According to a recent report from Semler Brossy Consulting Group in 2012 there are already 40 Russell 3000 companies with failed say on pay votes Among them is Citibank the first major U S financial institution to lose the vote At least 13 shareholder lawsuits have been filed in the United States based in part on the failed say on pay vote including a lawsuit filed against Citibank within two days of the announcement of the results of its say on pay vote in 2012 Such lawsuits have not gained much traction to date and some have been dismissed by courts but the potential for opportunistic litigation following a failed say on pay vote remains a concern for companies and their shareholders Public companies in the UK are also required to conduct advisory say on pay votes This year several companies have been prompted to make changes in response to investor complaints about executive compensation In a dramatic turn of events the CEO of Aviva resigned within days after Aviva shareholders voted against approval of the company s executive remuneration practices Meanwhile the UK is considering a proposal to introduce a binding say on pay vote Under the proposal UK companies would be required to disclose the pay practices that will be in effect for the current year and these practices would

    Original URL path: http://privatewealthmagazine.ca/articles/SayOnPay.php (2016-04-26)
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  • The Evolution Of ETFs - Private Wealth Canada
    ETFs which are wonderful tools to provide access to bond indices or strategies We are just seeing the advent of different types of bond strategies beyond simple size weighted exposure to broad bond markets That is largely because the market is and has been traditionally opaque There is no transparency It is more difficult to actually evolve ETFs in that space but it is happening If you think about it fixed income ETFs are incredibly useful tools both for individuals and institutions to get access to bond markets on a liquid relatively transparent basis PWC Is there a natural trend toward sophistication BG If you look at the marketplace it is not revolutionary it is certainly only evolutionary and it reflects the broader marketplace The notion that active management can actually outperform is not new So if you are using the tools that active managers use to sift through the universe of stocks for good value but you do so on a low cost basis it really should not be a surprise to anybody that the market evolves in that direction It just makes sense that what you are going to see is people trying to take the best things that ETFs have to offer that liquidity transparency rules based unemotional decision making with the best things that active management has historically brought to the table which is looking for value looking through the universe of stocks screening for fundamental things that imply that a stock is a good one and is poised to outperform the market It is just the marriage of those I think the market is going to double in size and we are going to see more intelligent indexing products We are going to see more actively managed ETF products and when I say actively managed I mean people actually making decisions in ETFs I think we are going to see continued growth in the fixed income marketplace as well PWC Do you see ETFs having appeal to Canadian institutional investors BG Canadian institutions are big users of ETFs already They are huge users of ETFs that are traditional broad capitalization weighted because if you think about it the performance of pension funds and institutional investors is often measured against a benchmark So their benchmark is often the index If nothing else they will invest free cash balances in indexed ETFs in order to minimize their tracking error That is natural They also use these ETFS to get core exposure to different markets Where we are going to see the most growth in ETF use is actually in the advice channel in Canada Historically advisors in Canada and elsewhere but in Canada in particular have not really known how to implement ETFs into the portfolio management and portfolio construction process because they fear that implied in buying the index is a lack of advice Advisors have historically been concerned with that as well if I am just buying the index then my client is going to

    Original URL path: http://privatewealthmagazine.ca/articles/EvolutionOfETFs.php (2016-04-26)
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  • Contemporary Art: An Alternative Investment - Private Wealth Canada
    of advertising and the emptiness of celebrity culture are causing the more curious and adventurous among us to engage with more challenging subject matter including art that examines these phenomena Lia Rumma Milan Vanessa Beecroft Photo courtesy of Art Basel It s also helpful that for several reasons from about the mid 1990s contemporary art evolved into a multi billion global industry and if people don t understand art culture or the human spirit so much we all readily accept and understand the power and influence of money If some people have difficulty understanding the deeper intrinsic value of art and culture they have an easier time understanding it from a financial and business perspective Indeed contemporary art today is not only a symbol of status but is a powerful speculative mechanism Divided into collectors and speculators contemporary art boasts its own museums sees 5 5 billion a year in auction sales alone and is in a world where price fixing and the control of supply and demand are not just okay they are expected While art experiences fluctuate along with the markets some contemporary art has dramatically outperformed the stock markets particularly in hard times Long term Investment In discussing the increasing trend toward contemporary art as an investment Simon Cole director of the Cooper Cole Gallery in Toronto ON notes that With living artists attaining record prices at auction it has become very desirable to invest in the arts I think that technology has played a huge role in the growth in the art market as well With the power of the internet art galleries auctions and even art fairs are no longer regional and can reach collections across the globe It has always been fashionable to collect art but now it is easier to access it as well It seems Morley Safer tipping his hat in concession to contemporary art is well timed as interest in the contemporary art market is growing and prices continue to rise There is a fantastic generation of younger artists producing top work now says Cole and it is quite exciting to watch Collecting art is a rewarding investment you can enjoy your collection in your home or office rather than on a computer screen or in a portfolio It is a long term investment that can be enjoyed immediately Indeed like traditional art contemporary art is best viewed as a long term investment As Cole points out seasoned art collectors have a vision It takes a special kind of person to support an artist while they are beginning their career or are in a stage of development Art is an investment in people and personalities and should be thought of as a long term commitment Stephen Friedman Gallery London Photo courtesy of Art Basel Who is likely to venture into these long term commitments Cole finds that many of the art investors of today are young international art collectors and contemporary art as an investment seems to be attracting increasing attention

    Original URL path: http://privatewealthmagazine.ca/articles/ContemporaryArt.php (2016-04-26)
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  • Private Wealth Canada
    but also of your emotional assets such as photo collections or music files Elder Care In 1989 60 per cent of people aged 41 to 59 had at least one living parent currently this number is 71 per cent As life expectancy continues to increase so to does the chance of becoming a caregiver to an elderly relative Survey results indicate 18 per cent of respondents currently provide care to an aging parent 65 per cent other relative 22 per cent or friend 10 per cent Care for aging parents included 53 per cent that provide both personal and financial support 31 per cent personal support only and 13 per cent financial support only While 34 per cent of boomers had provisions for elder care in their estate plan 55 per cent did not and 39 per cent reported not including them because the probability of them outliving the boomer is small Estate planning considerations should address issues such as who will provide care for elderly parents and other relatives in the event of the caregiver s death or incapacity With the prevalence of second marriages and with changing family demographics consideration should be given to the term beneficiary which may potentially need to be expanded from the traditional choices of spouse children and grandchildren and perhaps include parents and older relatives After all relatives under one s care may lose the quality of long term care they have enjoyed in the event of the caregiver s unforeseen incapacity Pets As Family Members Pet ownership is a discretionary expenditure across all income levels however while once considered an eccentricity reserved for Hollywood more and more pet owners are realizing the need to make provisions for their pets Forty nine per cent surveyed own a pet with 76 per cent feeling

    Original URL path: http://privatewealthmagazine.ca/articles/EstatePlanning.php (2016-04-26)
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  • Private Wealth Canada
    affect insurance policies Permanent insurance policies provide both insurance protection and savings components The income earned on the savings component of a permanent life insurance policy that is an exempt policy under the Income Tax Act grows on a tax sheltered basis This tax free savings component makes insurance policies an attractive segment of overall financial portfolios as there are only two other tax free investments principal residence and TFSAs However the budget proposes changes that may result in a reduction of the savings component that is permitted to grow on a tax sheltered basis with an exempt policy This would not eliminate the value that the savings component provides but does limit the attractiveness of the feature This change is proposed to apply to policies issued after 2013 thereby making now an opportune time for people to review insurance planning initiatives It is expected that any policies issued on or before December 31 2013 will not be affected by these proposed changes For those with term policies in place now would be a crucial time to review the policy to check if it is convertible to permanent coverage This feature would allow conversion of part or all of one s coverage without undergoing new medical questioning which would help in obtaining preferred rates on premiums Will gift funds to foreign charitable organizations still be allowed Foreign charities are generally not qualified donees under the Income Tax Act so donations to such charities are not eligible for the charitable tax credit A foreign charitable organization that receives a gift from the Government of Canada within a prescribed time period will be a qualified donee if it is registered with the Minister of National Revenue The budget is proposing to modify the registration rules for foreign charities that wish to issue tax receipts to Canadians A foreign charitable organization that receives a gift from the Government of Canada may be designated as a qualified donee if it pursues activities related to disaster relief urgent humanitarian aid or activities in the national interest of Canada Once the foreign charitable organization has been designated as a qualified donee it will be able to issue tax receipts to Canadians for a 24 month period Will small businesses with an Employees Profit Sharing Plan established still be able to direct profits to the EPSP for members of the family They may not be able to make the same amount of contributions as they used to The budget proposes a targeted measure to discourage excessive employer contributions to EPSPs where the employee recipient has a significant equity interest in their employer or does not deal at arm s length with their employer This measure aims to ensure that EPSPs are used for their intended purpose and to limit the ability of business owners directing profits to members of their families in order to reduce or defer the payment of income tax on these profits The measure is proposed to apply to EPSP contributions made by an

    Original URL path: http://privatewealthmagazine.ca/articles/FederalBudget.php (2016-04-26)
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  • Supreme Court Of Canada Upholds New Test for Residency of Trusts - Private Wealth Canada
    there was no explicit evidence that this was the case the Tax Court came to this conclusion based on the evidence as a whole including the failure of the appellants to provide evidence establishing otherwise Woods J noted in her decision that although the administrative nature of the trustee arrangement was likely unwritten it was effectively enforceable through a protector mechanism that allowed the protector to replace the trustee and the protector itself could be replaced by the beneficiaries The Tax Court also found that more likely than not St Michael had agreed from the outset that it would defer to the beneficiaries recommendations and that the beneficiaries also understood this to be the arrangement The factors the Tax Court considered in concluding that St Michael had a limited role were as follows Internal Memoranda Indicating Limited Role There were internal memoranda setting out the intentions of St Michael and these documents showed that St Michael s role would be more limited than contemplated in the trust indentures Specifically it was found that the internal memoranda indicated that St Michael s role in respect of the arm s length share sale was administrative in nature and that St Michael would not make distributions to certain beneficiaries without the consent of other beneficiaries Trust Investments Appeared To Be Under Control of the Beneficiaries The evidence also suggested that investment of the share sale proceeds was under the direction of certain Canadian resident beneficiaries of the trust because the investment advisers were the same as the applicable beneficiaries investment advisers and the advisers appeared to have been selected and directed by these beneficiaries rather than by St Michael Tax Advisers Appeared To Be Directed by the Beneficiaries The evidence suggested that the tax minimization plans developed by the tax advisers were under the direction of certain of the beneficiaries of the trust rather than St Michael No Documentation Was Provided as Evidence that St Michael Played an Active Role There was no documentary evidence that St Michael had any involvement beyond executing agreements and providing administrative services St Michael s Expertise in Managing Trust Assets Was Questionable For a significant period of time St Michael had been an arm of an accounting firm and was likely formed to complement the tax services offered by the firm The Tax Court found that it was questionable on the evidence whether the firm had any expertise in managing trust assets Oral Testimony Was Not Inconsistent with the View that St Michael Had a Limited Role The oral testimony was also consistent with the view that St Michael had a limited role because it appeared that St Michael was not sufficiently informed of matters related to the share sale transactions the beneficiaries seemed to have little interest in what St Michael was doing St Michael appeared to have done minimal due diligence e g on investments of the trust to ensure that its fiduciary obligations were being complied with and St Michael did not appear knowledgeable

    Original URL path: http://privatewealthmagazine.ca/articles/TestForResidency.php (2016-04-26)
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