At Endeavour we have filled to trademark the phrase, Smart Money. These two words have become important to us because for us it describes how our client's money should be if it is truly working the best way it can be. A lot of people would think that in order for money to be smart, it needs to be earning the highest rate of return. Now, don't get me wrong, rate of return is important. But comparing high return money to smart money is a lot like comparing a calculator to an iPhone. The reality is, a smart phone just does way more.
First things first, your money must produce a rate of return that is required for you to accomplish your goals and live the lifestyle you wish. Before any of your money should be invested you should have a financial plan which dictates what rate of return is required to achieve those objectives.
When building plans one of the most important questions is how much you need in a return. We call this number your family index rate. Often, we find that this rate is much lower than what the maximum return we would feel comfortable being able to produce for our clients. What this means is that you as a client now have the opportunity to make an educated decision over how much volatility you want to experience in your portfolio.
Do you want the minimum required to achieve your determined goals? Or do you want to see what you can do if you take on a little more? Smart money also considers your comfort levels for volatility in this equation. When times are good, like they have been for over 10 years, it's easy to say you are comfortable with more volatility. Market crashes will quickly remind you of where your comfort levels are and smart money considers this inevitability all the time.
Smart money is also efficient as it relates to tax and other liabilities. Remember, it's not what you earn but what you keep which is always important. Have you ever wondered whether it makes more sense to invest in a TFSA vs. an RRSP? How about if you have a corporation, does it make sense to just invest in the corp and none personally? Or should you pull out some money for RRSPs? Smart money considers all of the options based on your own unique situation and plan (because there is no one answer to this question).
From there, smart money adapts because things can change including the tax code. Smart money also considers what happens to you if you are no longer around. It has a plan which is based on your wishes for where it should go the day you are no longer able to have a say in it whether that be through death or incapacity.
So smart money is customized to your unique needs and is efficient in limiting losses but one of my favorite characteristics of smart money is that it includes recommendations and an approach which is based on your own behavior. Smart money not only considers what needs to be done to achieve your goals, but it also considers the best path for you to take to get there.
No two clients are the same as they have their own unique goals for their lives. In addition, no two clients are the same in what is the most effective way to communicate advice and also the method for executing on that advice. Smart money considers your preferences and your tendencies so that you are not only receiving the advice that you need to be successful but the strategies being implemented are being recommended based on your past behavior and decision making in mind so that you will be more likely to remain committed to your plan.
Smart money isn't just smart at the numbers side of things, it is also intuitive and has a better understanding of what will be most effective for you. It's time that investors stopped trying to make phone calls with calculators. Welcome to the 21st century, it's time that money caught up.
- Grant White, CIM, CFP
Grant White is an award-winning Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Grant White who is a Portfolio Manager for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.
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