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Author Archives: Justine Zavitz

Is Your Business Your Retirement Plan?

 

 

 

 

 

 

 

 

 

Justine Zavitz

Justine Zavitz

  If you own your business, you are likely banking on the fact that it has value, the value is increasing, and someone will buy it from you in the future.  You might even be relying on this sale to fund all or part of your retirement. Even if selling isn’t on your radar, having a valuation of your business can be important for your future planning.

For anyone who has gone through a formal valuation, you know that it is a lengthy process that requires a lot of your time and money.  Once it’s done, you will likely avoid repeating the process unless it is absolutely necessary. Most valuations will give you exactly what you would expect – the value of your business, but have you ever stopped to think about how saleable your business is in the marketplace? A valuation means nothing if your business doesn’t appeal to a buyer when it comes time to sell!

Let’s look at Sue and Mary – equal shareholders in a company. We have always made educated guesses on what their business is worth based on the “rules of thumb” in their industry.  Our estimates led to advice surrounding the tax liability of a sale; when they can retire and what kind of income they might expect; and how to organize their wills and insurance to leave their desired legacies.  On top of that, the key person and buy /sell insurance amounts were reflective of this estimate.  Long story short, a lot of planning was taking place around this assumed value.

Recently, we were introduced to a company called Eksit (www.eksitoutlook.com), a software company that has taken the expensive, time-consuming process of a valuation and made it significantly easier and budget friendly.  The resulting report also includes a saleability score that demonstrates the appeal of the business in the marketplace, or, how easy it would be to sell.  When Sue and Mary went through this process, they discovered their business was worth much more than we had anticipated – causing us to re-examine all their planning, savings, shareholder agreement and insurances.  It also exposed the fact that the company lacked diversification of customers and that the customer relationships were tied to either Sue or Mary.  These factors resulted in a low saleability score, but at the same time, the report provided Sue and Mary with concrete suggestions on how to increase the business’s attractiveness to a potential purchaser.

Knowing the importance that the value of your business has on your financial, retirement and estate planning, taking the short time span required to have a valuation and saleability score done through the Eksit program, makes good business sense.  The resulting saleability score and recommendations to improve your business’s appeal to others helps you to set goals to increase its value. 

At Zavitz Insurance & Wealth we work with you, our valued clients, to assist with retirement, estate and financial planning, to maximize growth and build wealth at every stage of your career.   When we come across innovative companies like Eksit that can help with this planning, as well as increasing your net worth, we want you to know about them.  

 If you want to gain a better understanding of how your business valuation effects your retirement and estate planning, please don’t hesitate to contact us.

 

Association Plans – If You Can’t Stand the Heat, Get Out of the Kitchen

 

 

 

 

Some of you may remember our past blog called Should I Buy Life Insurance from a Big Box Store? where we outlined the importance of doing your research before assuming associations have the best products and prices on the market. It’s true, a lot of the time an association’s membership includes various discounts on a multitude of products and services…but not always. In that blog, we explored the offering of one store’s life insurance products and prices and compared it to what was available through the open market.  It was clear that their pricing was not competitive in both the short and long run. 

So why are we revisiting this topic of association plans? Well there’s more to the story than just pricing, and more products than just life insurance.  Disability insurance is something many people are attracted to through their associations because it can cost less in their younger years (although more when they’re older!).  What most people don’t know about association plans is that they are considered group insurance, which means you do not own or control the policy, and the contracts and pricing are not guaranteed.  A large professional association in Ontario recently underwent some major changes on their disability product impacting everyone who currently holds a policy with them.  Associations, for the most part, want to provide value to their members, not take it away.  So why would the association ever do this?

Group plans involve a company/association/member group asking an insurance company to provide a product specifically for their members.  The insurance company agrees to do this with the understanding that the pricing assumptions they use will relate to this specific group rather than society as a whole.  Every year, they will measure if their pricing matched the actual claims experience of the plan.  If it was better than they assumed, some plans will provide a small refund.  If claims were higher, the insurance company will require a change in contractual language and/or an increase to the price.  The association is simply the messenger of this outcome.

Our medical advances and societal awareness has expanded more than we could have imagined 20 years ago. Mental illness, cancers, autoimmune diseases…these are all much more prevalent in all ages and cause significant, long term, disability claims.  It’s not surprising that disability insurance providers are seeing dramatic increases in claims putting a lot of pressure on their products and pricing.  The big difference is some of these providers have contracts and prices that are fully guaranteed, whereas others have the right to make changes. One association has already had to make difficult adjustments…there will be more. 

When it comes to protecting something as important as your income, financial stability, family, long term goals, businesses…and on and on…sometimes it’s worth an extra couple of bucks up front to make sure the product you secure now, is the product you have when you need it.

Are All Investment Options the Same?

Fees vs performance? Investment advisor or no advisor? Active or passive?…these are common considerations amongst today’s investors who have more choice than ever. What are these options and how do you decide what’s best for you?  Here is some food for thought…

Active Investing

With active investing, a portfolio manager and their team will research various companies, sectors, geographies, etc. and build a tailored mix of stocks, bonds and other assets to create a portfolio for their clients. The thought process is to offer a portfolio that is heavily weighted in areas that are expected to outperform the market and less weighted in those that will underperform. The intended end result? A better return than the market itself or what’s known as the benchmark.

This all sounds great, but the resources used in active management aren’t free so the cost of these portfolios is among the highest. The biggest questions to ask are…can the portfolio manager time the market such that the portfolio will beat the benchmark?  And, will it beat the benchmark by a higher amount than the added cost?

Passive Investing

Passive investing is the opposite. Instead of making educated guesses on what will over or under perform the market, these portfolios are built in the exact weighting of a particular market itself.  These funds can be based on a major index like TSX, or can be a subsection of an index, sector or geography. 

Whereas an active portfolio has the possibility to provide higher returns than the benchmark (or greater losses), passive funds will provide the same returns as the benchmark of the market it is replicating. Since passive investments require less resources, their fees are much lower.  As such, even if the funds aren’t surpassing the benchmark, the net effect can sometimes be greater (or less negative in a down market) than active. 

DIY Investing

A trend that has gained popularity with the evolution of technology is Do-It-Yourself Investing – there are a lot of new platforms where you can try your hand at building your own portfolio, whether it’s made up of passive and/or active funds.

Overall, this is the least expensive form of investing. That being said, you need to know what you are doing and be diligent in reviewing your portfolio frequently and researching the various options available to you. There is nothing worse than going on vacation and coming home to see that your stocks tanked while you were on the beach!

Which Option is Best?

At the end of the day, the best option is the one that makes you most comfortable…but having a trusted advisor to help you manage the bigger picture will ensure all of the pieces of the wealth puzzle fit properly together. After all, wealth is made up of more than just investment returns and fees…it’s a long-term strategic plan involving investments, insurance, taxes, retirement and so on, all working in conjunction to support your vision of the future.

What Have We Learned From Morneau’s Proposed Corporate Tax Changes?

Justine Zavitz

Justine Zavitz

Depending on where you get your information from, I am considered a Millennial or a Xennial. In my career, I have not experienced what I would consider to be extreme changes to the way various income is taxed. Sure, there have been increases in personal tax rates, decreases in corporate rates, various tax credits being enhanced or taken away and so on… but nothing as jolting as the proposals on changes to the taxation of CCPCs that we saw in July, 2017. 

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Family, Charity, and the CRA…Which Two Would You Choose?

Justine Zavitz

Justine Zavitz

Most of us appreciate the role that taxes play in our lives and society, but as with any money we spend, we like to be cautious to make sure we’re not spending too much. For anyone who has sat down in a meeting with me, you know how excited I get about the amazing advantages that come with permanent life insurance policies. They are financial vehicles that help with accumulating assets, preserving assets,and transferring assets in an extremely tax efficient manner. 

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