[Soft music]

 

[An Advisor talks to clients. Timelapse image of crowds on Wall St. Market data on a screen.]

 

Investing can be uncomfortable at times.

 

[People with umbrellas walking in the rain. Timelapse of clouds over Toronto.]

 

We understand that, and in periods of upheaval, it's a natural reaction to seek shelter from what appears to be a storm.

 

[Michael Keaveney

Vice President, CIBC Managed Solutions

CIBC Asset Management]

If the comfort takes the form of the safety of a guaranteed investment now yielding more than what we've seen in a number of years, then it's extra tempting to forget our long-term goals in favor of the short-term solution. But that could be a mistake.

 

[Expert Access: Back to balanced investing with Michael Keaveney]

 

[CIBC Square South]

 

The 2008 to 2023 period was marked by a global financial crisis, a global pandemic, and a war.

 

[Wall St. sign with the American flag in the background. Exterior of an EU bank building. An urban crowd wearing masks Tanks rolling down a street.]

 

But in spite of these events, and to be clear, each was a negative for a balanced investment portfolio.

 

[A line chart measures the following: Wealth Generation Balanced Portfolio vs. 5-year GIC (2008 - 2024)

The Y axis measures growth of $100k

The X axis shows the date from 2008 to 2024

 

A dark red line measures: Wealth Generation Balanced Portfolio - $182,231

 

A light red line measures: 5-year GIC - $136,439

 

A black line measures: Inflation - $141,659]

 

[Source: Morningstar Direct and St. Louis Fed. Data as at February 29, 2024. All values are in Canadian dollars.]

 

The balanced approach ended up far ahead of the results of the guaranteed approach.

 

We also see that while the GIC approach was indeed safe with no short-term losses along the way, it barely ended ahead of inflation and that shouldn't be a surprise.

 

[A laptop showing CIBC GIC information.]

 

Taking no risk wasn't likely to do much other than to tread water, so the GIC investor didn't wind up further ahead of their starting point years earlier when it came to protecting their purchasing power.

 

[A line chart graphic appears with the title, “Cottage plan” and the subtitle, “My goal timeline.”

 

The X axis measures time in 5-year increments from 2020 to 2035.

 

The Y axis measures savings goals from 0 to 100k in 20k increments.

 

A solid line goes from 0 to 100k by 2035, then back down to 300k by 2035. A semi-transparent circle roll up as it reaches 100k]

 

 

[A young woman stands outside a cabin]

 

 

We understand there could have been several times in this period where a potential investor sought the safety of a GIC because of events that shifted their focus to the worries of the moment and away from their long-term goals. But once an investor starts to allow the current conditions to dictate their approach, it becomes more likely that they go from negative headline to negative headline and stay in the costly safety of a short-term investment.

 

One additional consideration if you're investing in your taxable account, is that earnings from a GIC are typically taxed as income.

 

[Images of tax forms.]

 

The highest level of taxation for individuals. In the same taxable account, returns to a balanced portfolio are more varied, and a mix of capital gains, dividend income, and interest income will likely combine for a better blended tax rate versus the GIC. GIC’s and money market funds can be part of an overall investment strategy and can meet some of your investment goals.

 

But as your investment time horizon extends towards major goals like retirement, that could be over ten years away.

 

[An Advisor talks to a client in an office.]

 

The short-term steadiness they provide is comfortable in the moment, but could be a barrier to reaching your long term goals that need higher growth.

 

We believe that most investors are best served through some sort of balanced investment approach for their long-term goals.

 

[Canadian flags in downtown Ottawa.]

 

In fact, you might already be benefiting from a balanced approach, as this is often the way large pension plans, such as the Canada Pension Plan, have evolved to meet the needs of their members.

 

We've been through some turbulent times in recent years, and a balanced approach has come through for those willing to remain invested through the ups and downs. Short term volatility is a feature, not a bug of investment markets. If you were able to take a longer-term view and a balanced approach, it will help you meet your financial goals.

 

[To learn more connect with your advisor or CIBC Asset Management representative]

 

[The views expressed in this video are the views of CIBC Asset Management Inc. and are subject to change at any time. CIBC Asset Management Inc. does not undertake any obligation or responsibility to update such opinions. This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this video should consult with his or her advisor. All opinions and estimates expressed in this video are as of May 14, 2024, unless otherwise indicated, and are subject to change.

 

CIBC Asset Management and the CIBC logo are trademarks of Canadian Imperial Bank of Commerce (CIBC), used under license.

 

The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc.

 

Certain information that we have provided to you may constitute "forward-looking" statements. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or achievements to be materially different than the results, ' performance or achievements expressed or implied in the forward-looking statements.

 

Mutual funds, unlike guaranteed investment certificates (GICs), are not guaranteed and they are also not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer.

 

© 2024 Morningstar Research Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content]

 

[CIBC Asset Management logo]

 

[The CIBC logo and "CIBC Asset Management" are trademarks of CIBC, used under license.]

[Inspiring music]

[CIBC logo]

[CIBC Private Wealth Wood Gundy]

[CIBC Miracle Day
Impacting children’s lives since 1984]

[A group of three children in wheelchairs sitting at a table writing and drawing with markers and crayons on cutouts of oversized white puzzle pieces. A young child looking down intently at something they’re working on. A young child smiling and holding up a large white puzzle piece with “Thank you” written on it. A child writing “Thank you for helping” on a large white puzzle piece.]

[Floyd H. Harris
Senior Wealth Advisor
CIBC Wood Gundy]

Floyd: I would describe Miracle Day as magical. Being able to see what we as CIBC employees and just human beings can do to help others.

[Sean Messing
Senior Wealth Advisor, Senior Portfolio Manager
Messing Ross Advisory Group
CIBC Wood Gundy]

Sean: It is a day that I look forward to all year long. It's a long-standing tradition where our clients, my colleagues and our charities all get together and have a whole lot of fun with one common goal.

[A photo of a large group of adults and children in a meeting room decorated with balloons and Christmas decorations. A portrait photo of a large group of adults and children, many wearing red Miracle Day t-shirts, gathered in an office lobby. A portrait photo of several adults and a child holding a large novelty cheque for $1,000,000 with the words: “Un Million Fondation CIBC”. A portrait photo of several adults, a child with medical equipment beside them, and a bear mascot. A photo of two parents with their two young children, placing a star-shaped paper onto a red wall with the CIBC logo.]

And that goal is raising as much money for kids and kids’ charities in our community as we can.

[A screenshot with the words “The Market Is Open”, an array of squares showing adults clapping and smiling, charts of markets and the prices of several stock indices. A large, busy office space with gold novelty balloons spelling out “CIBC Miracle Day”. Two speakers standing at a podium in an office. A group of adults, many wearing red CIBC t-shirts, posing for a photo while holding a sign that reads: “CIBC Miracle Day”]

[Ross Ferrier
Investment Advisor, Branch Manager
Commerce Valley Financial Group
CIBC Wood Gundy]

Ross: Miracle Day is a great annual reminder of just how grateful we should be and how much we can do in the community with our shared resources to make other people's lives better.

[A large screen hanging on a wall showing the CIBC logo, “Miracle Day”, and “The Market Opens In” with a clock counting down. A group of five adults posing at a large podium with their arms stretched out and pressing on a green box; the podium shows the CIBC logo and reads “Miracle Day”. A similar shot of a group of four adults posing at the same podium. A shot of a young girl smiling, posing at the podium. A shot of a large group of adults, two children and two babies posing at the podium. A close-up of the previous shot, focusing on a father and his young son.]

[Fred Guzzi
Senior Wealth Advisor, Senior Portfolio Manager
Guzzi Wealth Advisory Group
CIBC Wood Gundy]

Fred: The spirit of giving has always been part of the culture of our bank. When I started at CIBC 25 years ago, it was one of the first charities that I participated in, so it always had a special place in my heart.

[A wall made up of large white puzzle piece; the middle of the wall reads: “CIBC Miracle Day – 35 Years Of Helping Kids Rise Above”. A person carrying a large white puzzle piece on which a child has written: “Thanks for my tennis lessons!”. A large white puzzle piece on which is written: “Thank you for paying for my medicine.” A young adult in a wheelchair on a podium addressing a crowd; behind them are two walls showing the large puzzle pieces that have already appeared throughout the video.]

[Doug Wright
Senior Wealth Advisor, Portfolio Manager
The Wright Financial Group
CIBC Wood Gundy]

Doug: The charities that benefit from Miracle Day are able to give hope to a lot of the families that benefit from it.

[An office boardroom with a large crowd of people, with a middle-aged adult addressing the room as they read from notes. A close-up of the middle-aged adult from the previous shot, reading to the room. A close-up of two babies being held by their mother, looking towards the camera. A wider angle of the previous shot, with the mother clapping.]

Doug: You know, we saw some families today, we met some families today that are such an inspiration to all of us.

[Floating balloons with “CIBC Miracle Day” written on them. An office lobby area filled with people applauding. A large group of adults and a baby; one of the adults is ringing a hand bell while holding the baby’s hand to it. A group of adults in an office, most of them wearing red Miracle Day t-shirts, smiling and posing for a camera. A group of five kids wearing hockey jerseys and a couple of adults standing behind them, smiling and posing for the camera.]

[Lois Smith
Senior Wealth Advisor
Smith Falconer Group
CIBC Wood Gundy]

Lois: It’s always been really important in our branch. We love telling our clients about it. We love giving back to the community where we work and encouraging others to do the same.

[Bryan Baker
Senior Wealth Advisor, Portfolio Manager
Branch Manager
CIBC Wood Gundy]

Bryan: We have the opportunity to give back to so many children and youth in this society that are in need.

[In an office space filled with people, an adult shakes hands enthusiastically with a young child. A young child in a wheelchair holding a large white puzzle piece, on which is written “Thank you!”. A young child in a wheelchair with their older brother, holding a large white puzzle piece on which is written “Thanks for helping us paint!”. A smiling adult and child in an office space. An adult holding two children in his arms, in front of a green screen with balloons behind them, all of them posing and smiling. A young child in a wheelchair holding a large white puzzle piece on which is written “Thank you for your support”.]

It makes me proud. It makes me feel good to be a big part of CIBC and to serve our greater communities.

[Since 1984, CIBC Miracle Day has donated over $266 million to children’s charities.

In 2022 alone, CIBC Wood Gundy and our clients donated over $4 million!

Talk to you advisor to learn how you can get involved.]

[CIBC logo]

[CIBC Private Wealth Wood Gundy]

[CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc.

The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc.]

Generative artificial intelligence – What investors need to know 

 

[Energetic music] 

 

[CIBC logo] 

 

[Generative artificial intelligence – What investors need to know] 

 

[Robertson Velez  

Portfolio Manager, Global Equities 

CIBC Asset Management] 

 

What's unique about my background is that I come from two worlds. After graduating from university with my computer engineering degree, I spent the first 12 years of my professional career as an engineer where I designed semiconductor chips in the computer graphics industry. 

 

I later graduated from an MBA program and I switched to finance, where I have spent the last 15 years on the “buy” side covering technology stocks as an analyst and then as a portfolio manager. 

 

[What is generative AI?] 

 

Artificial intelligence is not a new field.  

 

[An older-looking computer display screen with a headline of text reading “Welcome to Eliza}”, and underneath a text conversation between two characters (“You”, and “Eliza”,) in which they discuss “You’s” problems with men. A small, two-wheeled robot slowly maneuvering through a hallway (Auat Cheein F, Lopez N, Soria C, di Sciascio F, Lobo Pereira F, Carelli R, CC BY 2.0, via Wikimedia Commons). An empty self-driving car driving on the street.) 

 

We’ve actually been doing it for many decades. What has changed is that with the most recent iteration, which is generative AI, we're able to do a lot more. Write essays, write code, create videos, create graphics.  

 

[A computer application interface. Topmost line of text reads “Write an essay about the history of finance”. In a box below, an essay with the title “Title: The Evolution of Finance: A Journey Through History” appears, and an essay begins self-generating.] 

 

And this has the potential to allow us to interact with machines in a whole new way. 

 

[How will AI use evolve?] 

 

We have seen AI used in voice recognition, image recognition, chatbots and recommendation systems.  

 

[A woman carrying her newborn baby boy asks a question to a smart speaker. A brain scan image showing four different angles of a brain. A ‘chat’ app interface showing a text conversation between a woman and a chatbot, with the woman booking a reservation at a restaurant.]  

 

Going forward, looking at generative AI, I see three areas where we would see potential new use cases. 

 

[Potential use cases for generative AI: 

 

1. Content creation and productivity 

2. Search queries 

3. Data analytics and customer interaction] 

 

One is in productivity. Word processors, spreadsheets. 

 

[Changing data on spreadsheet. Young professional woman sitting at an office desk using a desktop computer showing charts and graphs. A woman looking at data on screen; the data is reflected in her glasses.] 

 

They would incorporate generative AI to help create content. And this can be applied to graphics creation as well as coding. 

 

Secondly, I see potential in revolutionizing search where users can put in more complicated queries and get better, more structured answers to those queries. And that would revolutionize the way that we interact with businesses online. 

 

And third, there's also the potential for all these businesses to make use of its troves of data that it's collected about its customers and use that data, and generative AI to be able to serve those customers and interact with them in a much more comprehensive way. 

 

[A drone POV of a busy urban pedestrian crossing, with minimalist graphics overlaid onto the people walking around. A busy shopping mall with graphics of moving numbers overlaid on top.]  

 

[Lessons from previous tech innovations] 

 

So in previous technology revolutions, investors often fall into the trap of overestimating the short term and underestimating the long term. So in the case of the internet for example, we did see a sharp correction in 2000 because investors were overly exuberant about the short-term promise of the internet. 

 

[MSCI World Information Technology vs. MSCI World 

(Data Source: †Morningstar Direct June 19, 2023) 

 

A chart with two line graphs: one plotting “MSCI World/Information Tech GR USD” and one plotting “MSCI World GR USD”. Date range on the x-axis is 1995 to 2004. Y-axis shows values for “Growth of $10,000”, with values ranging from $0 to $90,000. The line graph for “MSCI World/Information Tech GR USD” animates to show a sharp rise then drop from about 1998 to 2002, with the value beginning at about $20,000, rising to a high of about $80,000, then dropping back down to about $20,000.] 

 

But you look out the next two decades, the potential of the internet has been realized by more than the expectations in the initial hype.  

 

[The previous chart now zooms out to show a date range from 1995 to past 2020, and values from $0 to over $250,000. Starting in the mid 2010’s, the value of “MSCI World/Information Tech GR USD” begins spiking upwards to a high of nearly $250,000 at the current date.] 

 

So it's important for long-term investors to have a clear view of the potential of new technologies both in the short term and the long term. 

 

[Threats of AI?] 

 

I think every new technology is always greeted by some trepidation about the potential risks.  

 

[An old black and white photo of a radio tower. An old black and white photo of a nuclear plant. Old black and white footage of fashionable women arriving at a location in a car. A space shuttle launch. A satellite orbiting the earth. Robotics engineers watch and discuss a robot arm in motion.] 

 

But generally speaking, revolutionary technologies have provided more benefits than harm to society, and we've always successfully navigated the risks. I think the same applies to AI. There are clear risks in letting machines take over human functions. But what is important to remember is that AI is meant to replace human prediction, not human judgment. So as such, I think that some type of regulatory framework makes sense. But it is a fine line and a fine balance between protecting society against possible AI threats and inhibiting new technologies before the potential is realized. 

 

[Investor’s perspective] 

 

I think we're still at early stages of development for generative AI, and there is a lot of noise in the near term. Practically every company claims to be incorporating generative AI into their products and services. So it's important to understand the value chain to determine which companies really benefit from generative AI and why. It's also important to be very selective in that process as performance is determined as much by what we don't own as what we do own. 

 

So in the global technology funds, this is what we do.  

 

[A screenshot of the webpage for the CIBC Global Technology Fund. A screenshot of the webpage for the Renaissance Global Science & Technology Fund.] 

 

We follow a disciplined process to find these opportunities in a concentrated portfolio of stocks to generate alpha over the long term, while managing the risks in the near term. 

 

[Talk with your advisor to learn more about 

the CIBC Global Technology Fund 

and the Renaissance Global Science & Technology Fund] 

 

[The views expressed in this video are the views of CIBC Asset Management Inc. and are subject to change at any time. CIBC Asset Management Inc. does not undertake any obligation or responsibility to update such opinions. This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice, it should not be relied upon in that regard or be considered predictive of any future market performance, nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this video should consult with their advisor. All opinions and estimates expressed in this video are as of the date of publication unless otherwise indicated, and are subject to change. Any information or discussion about the current characteristics of this fund or how the portfolio manager is managing the fund that is supplementary to information in the prospectus is not a discussion about material investment objectives or strategies, but solely a discussion of the current characteristics or manner of fulfilling the investment objectives and strategies, and is subject to change without notice. You should not act or rely on the information without seeking the advice of a professional. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.  

  

CIBC Asset Management and the CIBC logo are trademarks of Canadian Imperial Bank of Commerce (CIBC), used under license. 

  

The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc. 

  

†©2023 Morningstar Research Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. 

 

[CIBC logo] 

 

[The CIBC logo is a trademark of CIBC, used under license.] 

Canadian Equities Overview
[CIBC Asset Management logo]
[Soft music plays]
[Colum McKinley
Senior portfolio manager
CIBC Asset Management]
Equity volatility has been a reality for investors for—really since the beginning of time, and
the last year has been no exception to that.
[Sheets of Canadian money being printed. The Bank of Canada and the Federal Reserve
buildings.]
We've had to deal with significant inflation, we've seen central banks take interest rates to
record levels, so the Fed has gone from 0% to 5% in the last year.
[The Ukrainian flag flying high over Kyiv. Soldiers lined up in a row.]
We've seen very significant geopolitical challenges, a very unfortunate war in Ukraine. We’ve
seen equity markets in Canada and the U.S. down as of March 31st, 2023.
[Canadian equities trends and CAM opportunities in 2023]
Throughout this though, we’re reminded that the volatility creates opportunity.
[“Be greedy when others are fearful and fearful when others are greedy.”
Warren Buffet]
[A picture of Warren Buffet.]
Warren Buffett has a great saying, "Be greedy when others are fearful and fearful when
others are greedy".
[Stock market data on screens.]
We often look through periods of volatility for opportunities to add to positions in great
companies.
[Canadian and U.S. currency.]
And we’re starting to see inflation come under control. Not that that problem is completely
dealt with, but it is becoming a lesser issue. And so, markets are forward looking and they're
seeing a bit of a light at the end of the tunnel.
[The White House in summer.]
Now for sure we're going to have more volatility in the marketplace. Coming this summer, we
have a big, important debt negotiation for the United States.
[A man goes over financial spreadsheets.]
We have some uncertainty around earnings. I think the next several quarters, businesses are
going to find more clarity around their earnings growth. It's not hard to envision a period of
time where we have a sluggish growth. Companies are still growing, but maybe not growing
as fast as we would like.
[A man looks over documents. Two men in suits shake hands. Two people go over financial
spreadsheets on a table.]
But all in all, businesses continue to have a fairly positive and optimistic outlook. We're
encouraged that companies continue to focus on generating strong free cash flow in their
business and returning that capital to shareholders.
[CAM opportunities in 2023]
I think a great example of that where we have seen a significant opportunity across our
portfolios is in the energy stocks.
[Images of natural gas refineries.]
Specifically, CNQ, Canadian Natural Resources, is an energy producer that has benefited
from higher commodity prices. They've also implemented fairly significant discipline, on how
they grow and how they reinvest in their business. And as a result, this discipline is producing
substantial cash flows. CNQ in 2022 returned just over $10 billion to shareholders through a
combination of share buybacks and a combination of dividend increases.
[Business people on sit on bench and work on various devices.]
Most recently they increased it 6%. And over the last five years, that dividend has grown
quite substantially in excess of 30% a year, for the last five years.
[Canadian equities and dividend paying stocks look attractive]
When we look at an individual stock, we think about them on a total return basis. We like to
combine the income stream that can be earned through dividends and long-term capital
appreciation for equity investors.
[Investors like approvingly at their laptops.]
For Canadian investors, the dividends from Canadian companies, there's obviously a tax
advantage to that, that income stream that we want to avail to shareholders.
When we look at businesses, we want to think about the sustainability of that dividend. So,
how are the cash flows of that business evolving and changing over time? What are the
levers that management is pulling to ensure those dividends can grow over time? How are
they reinvesting in their business? And that leads to the second part of great returns for
equity investors—is good companies think about their future.
[Business people look at financial data on various screens.]
They continuously reinvest capital to generate excess returns to grow their business over
time. And the combination of the two of them is what we think will generate above average
returns over the long term for investors.
[A series of natural gas pipelines.]
One example of an area where we're seeing very attractive dividend yields today and
dividend growth, is in the pipelines and the midstream businesses. And these businesses
today are yielding around 6.5%, 7%. So very attractive dividend yields, and those dividends
have been growing.
[People adjust their thermostats]
Companies like Enbridge as an example, their cash flow relationships, or their business
relationships with their customers, are contractually tied in. So, they have certainty around
the level of cash flow that they will generate through their business.
[The OPEC flags waves in the breeze. People look approvingly at their energy bills.]
Second is their customers are doing quite well today, that oil prices at record levels ensures
that their customers have strong cash flows. They're able to pay their bills, they're able to
invest in future growth. That helps pipeline and midstream companies grow, as well.
[Canada vs. U.S. banking system and Silicon Valley Bank]
Recently, we have had some very concerning news out of the U.S. banking system where
we've seen failures of banks.
[Aerial views of Silicon Valley Bank.]
And the most significant is Silicon Valley Bank, which was the 16th largest bank in the United
States.
[A computer-generated image of a newspaper headline, “Financial Crisis”.]
The immediate reaction was this was bringing back fears and nightmares about the global
financial crisis. As a result, we saw reaction.
[Market data on screens.]
Financial stocks around the world sell off in fears of what could be happening. And as we
looked at this to understand the situation, our view was this was not similar to the global
financial crisis.
[Colum McKinley sits on a desk by a bank of monitors showing market data.]
There's a couple of reasons for that.
[The Federal Reserve building and seal on a banknote. An aerial view of a Bank of America
tower. A small regional branch in a town.]
Coming out of the global financial crisis, the U.S. made a number of changes to their
regulatory regime and as a result they ended up really with a two-tier regulatory system, one
for larger banks and then one for smaller banks, banks with less than $250 billion in assets.
[The CIBC logo on a wall in CIBC Square. The Canadian flag displayed on government
buildings in Ottawa.]
And Canadian banks, our financial regulator has continued to be quite disciplined and apply
the highest standards, and so our regulatory system looks like, if not better than the one that
is applied to large U.S. banks.
[The exterior of a Silicon Valley Bank office.]
And here's two main differences for those smaller banks where we were seeing the problems
occur. The first is they are not required to take mark-to-market losses on securities that are
held for sale. And so, Silicon Valley Bank as an example, were taking in deposits, investing
those assets in long-term government bonds as interest rates rose very, very quickly, they
faced significant losses in those portfolios. They're not required to report those losses as part
of their capital positions.
[A large CIBC logo sign outside CIBC Square. People analyze market data on a bank of
screens.]
In contrast, Canadian banks, already reflect mark-to-market losses on available for sale
securities.
The second big difference is a liquidity capital ratio.
[A modern CIBC bank machine. People take out U.S. currency from an older looking bank
machine.]
Our regulator requires Canadian banks to hold capital so that they can withstand 30 days of
stressed withdrawals. In the United States they had a liquidity problem that that all of a
sudden depositors wanted their money back and they didn't have enough liquidity to meet
those needs. And so, Canadian banks have to maintain that liquidity capital ratio at 100%.
[Images of CIBC Square from a variety of vantage points.]
Most of the Canadian banks are in excess of that level, 130 to 140% on average. So, they're
holding excess capital above and beyond what they need to do for regulatory system.
We continue to remain overweight the banks across our mandates. We think they have very,
very strong capital positions today. They're very well managed businesses. They have
demonstrated ability to generate excess cash flow and return that cash flow to shareholders
via dividends over time. We continue to think that Canadian banks remain a strong place for
us to invest for unitholders.
[The views expressed in this video are the views of CIBC Asset Management Inc. and are
subject to change at any time. CIBC Asset Management Inc. does not undertake any
obligation or responsibility to update such opinions. This video is provided for general
informational purposes only and does not constitute financial, investment, tax, legal or
accounting advice nor does it constitute an offer or solicitation to buy or sell any securities
referred to. Individual circumstances and current events are critical to sound investment
planning; anyone wishing to act on this video should consult with his or her advisor. All
opinions and estimates expressed in this video are as of the date of publication unless
otherwise indicated, and are subject to change.
CIBC Asset Management and the CIBC logo are trademarks of Canadian Imperial Bank of
Commerce (CIBC), used under license.
The material and/or its contents may not be reproduced without the express written consent
of CIBC Asset Management Inc.]
[CIBC Asset Management logo]
[CIBC Asset Management and the CIBC logo are trademarks of CIBC, used under license.]
[Recorded on April 12, 2023]

0:10
I'm pleased to be able to present our partners, Jim Stevenson, the estate planning specialist and John Lloyd, Senior Trust and estate Consultant. And rather than giving you their BIOS, Rodney and I thought the best way to start today's presentation was to ask them a question from the start and that is Jim and John. Tell us a little bit about what a typical day looks like for you in your capacities at CIBC.
0:40
I'm happy to jump in. Thanks very much Lois. And and I just want to say thanks very much everyone for joining. It's it's truly a pleasure to be able to speak to you and and demonstrate you know the showcase some of the conversations that Jim and I are are able to engage with and with clients on a day-to-day basis. And so thanks for being part of this. As Lois said, my name is John Lloyd, I'm a senior trust and estate consultant with CIBC Trust.
1:07
And my role with respect to private wealth clients of CIBC is I'm really sort of the first point of contact for clients that are looking at making changes to or creating an estate plan from scratch and considering the role of services offered by CIBC Trust. So that could be executor services that could be trustee services, power of attorney for property or agency services.
1:34
Offered by the corporate executor, corporate trustee of CIBC. So my role is to engage with clients really to offer them, you know, a consultation on their state plan to provide them with, you know, some broad strokes with respect to what they may need to be aware of with respect to their circumstances and then how the Trust Company might be able to assist with that. By way of background, I'm not, I'm not a lawyer, so I don't.
2:01
Offer clients, you know, legal advice per se, but I am my background is really in sort of the estate administration and trust administration world. So I am able to offer sort of that practical perspective on what the execution of an estate plan looks like and what clients should be aware of before they actually go and meet with their legal advisors. So that's what I do and Jim I'll, I'll hand it off to you.
2:27
Look at John and and it's funny, when I saw my picture a moment ago, I think I realized that my mean teenagers are right, that I do have a lot of Gray hair. For the past 30 years, I've been really supporting advisors and clients, helping them, you know, with any of their estate concerns. And I think of John and I as really just part of the overall planning team. So with one phone call to the Smith Falconer Group with whatever's on your mind pertaining to your estate.
2:57
You know, there's an army of nerdy specialists behind the scenes like John and I that can jump into support and and provide some analysis and thought and best practices behind whatever concerns you. So in my role specifically, I tend to deal with the math of, you know, people's family situations. So that may be.
3:18
You know, how do I transition my family cottage down in the next generation? Or you know, what taxes are associated with my RSP when that goes to my kids? What if I have a disabled child or grandchild? How does that affect things? So sometimes we work in collaboration with one of our financial planning partners and we're providing a comprehensive, exhausted, you know, sort of document that curates all of your assets, goals, savings. And then what I look at is, are there any gaps?
3:46
In your plan or are there any opportunities to, you know, basically improve on the situation? SO2 quick examples of gaps, you know, just from today, you know, I met a young surgeon this morning who you know is a very high income, very high amounts of debt, however, and three small children.
4:05
And you know, for him the right, you know solution was just implementing some very low cost term insurance. So for $100 a month we're putting $5 million of term in place for example. And then another family this afternoon, you know, very wealthy car dealer. His main concern was how do I get this dealership, you know, down to the next generation. I also want to spread my wealth between, you know, all of my kids recognizing that two of them are going to work in the business and one isn't.
4:35
So you know it's a totally different situation and different set of challenges, but you know we we help families work through all of the planning issues and opportunities that might be available. So we look forward to any questions you have today and you know and and subsequent conversations.
Just before Rodney asks the next question, one of the things I wanted to clarify is that if we had the opportunity to introduce you to either John or Jim as your situation dictates, we're proud of being able to offer our partners advice and services at no additional cost. It's part of our platform. Just to clarify that right from the beginning. Over to you, Rodney.
5:20
Thanks, Lois. And just so the rest of you know the, the idea for this afternoon is Lois and I are going to ask some questions just for the next half hour or so and then we'll open up to the rest of you. So these are questions that our team came up with that we thought you'd want to know the answers to. So my first question for the two of you is about being an executor and I remember many years ago a good friend of mine asked me to be an executor and I was.
5:44
To be honest, quite honored when when he asked me and and felt that obviously he trusts me and and I felt quite happy about the situation and then I was read about being an executor. I went from being happy to being tired and I realized there's a lot involved in being an executor and a lot of responsibility. So maybe the two of you could just kind of share what exactly is involved in being an executor and some of the things we should be careful of when we're asked to be an executor.
6:14
Certainly no that's a great a great question to start things off and and Jim if you don't mind I'll I'll dive into that one first and and you can follow it up. So I guess from from sort of a simple definition an executor is the person or persons in the case of coexecutors who are named in an individual's will who are responsible for administering that person's estate upon their passing.
6:46
So essentially, I guess another another term that's often used in place of executor is a state trustee. So essentially another way to think of it is you are the trustee of a person's estate when they've passed away and you are essentially expected to administer that person's assets within the confines of the law and with respect to the wishes that they've laid out in their will.
7:14
So in in broad terms what that could look like in for the majority of people would be you know for instance seeking a grant of probate on the will which is often sort of the first step that has to take place from their collection of assets. So that could be you know investments, bank accounts and so forth. In the case of dealing with real assets such as real estate or personal effects you are expected as an executor to take reasonable care.
7:41
In safeguarding those assets. So that could be maintaining property in ensuring that there's proper insurance in place before those assets are administered. You as an executor are responsible for dealing with any outstanding liabilities in the state. So that could be, you know, it could be a mortgage, that could be the final taxes owed by the estate or the deceased person and then finally you are expected to transfer.
8:11
The assets in the estate to the beneficiaries named in the will. So in broad terms that's really sort of the expectation of the executor. There are other duties and responsibilities that I think we can get into in more detail. The role of an executor is one that in the simplest of in simplest of times is going to take you know a year to a year and a half and in many cases more.
8:37
So I think when you are considering who you want to name as an executor, you need to really consider somebody who is diligent, trustworthy, organized and and responsible. Yeah, I'll just follow up with a just a personal story. So my wife's parents passed away about five years ago and my father-in-law named my wife is sort of coexecutor her other siblings.
9:06
He's a documentary filmmaker and another brother was a a photographer and her sister was a runs a bed and breakfast in the middle of Saskatchewan. So you know it kind of fell to Leslie to take over some of the financial responsibilities and but thank goodness we had the Trust Company involved because CRA audited us twice and it wasn't like we were dissolving IBM as a corporation. My father just had a very small little insurance practice.
9:36
But it warranted an audit at APEI and then a second one at a Quebec, I mean I couldn't believe it. So the complexity, I mean Even so you know Leslie and I kind of worked on it jointly, but reams of paperwork and and thank goodness we had professionals to support us throughout that. Like I, I, you know, I think people get hung up on the fees and you just have to look at that and say do I have the ability and do I have the time and the expertise to just, you know, see this through, especially if you've got any kind of complexity in the estate.
10:05
Such as international properties or private company shares. No, that's very true. And just one final point to that, Jim, even even you know, I often interface with clients who will say, you know, my, my son is a lawyer, my daughter's an accountant, you know, they're a perfect fit to be my executor. I often say those, those are the people that have the least amount of time to actually take on the role. You know, you're talking about hundreds and hundreds of hours of work.
10:33
So just because you have the the wherewithal to do it does not mean that you're necessarily a good fit for an executorship. Great answers. Thank you. The word probate has come up. I can assure you it's a word that we hear a lot about from clients. It's a common worry and or something that's that people want to avoid. What is probate and should it be such a common worry?
11:03
John, yeah, that's a great question and very, very common one that we come across probate in. In simple terms, I mean probate is essentially the legal process through which an executor goes in order to validate or have a will validated by the court. And it's it's sort of seen as really the first major step in an estate administration.
11:30
You you essentially when an individual passes away and you are named as the executor when you are seeking probate, you are essentially submitting that will to the court through you know an application and you are saying I believe this to be the last will of the individual. I intend to administer the estate. This is the information I have on the deceased assets and I'm essentially asking for the courts.
11:59
Approval to proceed in the process of seeking that approval in Ontario and in most jurisdictions, you are expected to pay a tax or a taxes levy and it's called different things in different places. In Ontario, the formal name for the probate tax is that the estate administration tax, which I think is always kind of funny because the acronym is actually EAT.
12:25
And as I, as I was saying, it's 1.5% of the assets is the tax that's levied. Now as to whether or not it's a major concern, you know, it really comes down to the individual. Some people, you know, are very concerned. They think it's unfair for, you know, what is actually taking place and they tend to, you know, come up with some pretty extreme measures in terms of avoiding probate.
12:53
What I often say to clients is you don't, you know, you don't want to get too granular on this issue. Yes, it's a tax. Yes, you know, you can make the case that it's an unfortunate tax. But you can often open yourself up to a lot of risk by, you know, doing things simply for the, you know, the purpose of avoiding probate. So some of the ways that people will look to circumvent probate are first and foremost, make assets joint with.
13:21
Family members. So when you have an asset that is held jointly by way of survivorship with a family member, that asset will pass outside of probate when that when the individual passes away and go to the their survivor. In terms of you know, other other asset or other strategies that you might look to employ when you're dealing with you know, corporate assets, private corporation people will often employ what's called a dual will strategy.
13:50
People will often look at setting up, you know, a living trust, alter ego trust or family trust as a you know, a planning mechanism to to circumvent some assets outside of probate. The important thing to know that it is that in in most circumstances you are going to incur additional legal and professional expenses when you're looking at doing that planning and so.
14:14
You know, you need to really kind of do the do the math on that and see, well, what am I ultimately facing in terms of this probate tax and what am I going to end up paying, you know, my lawyer or my, my accountant in order to circumvent it? And is it really worth it? Yeah. And, John, you're so right. There's some some unintended consequences, aren't there? You know, as my Scottish dad would say, you fixed it worse.
14:36
Jamie Golombek had a had an article recently where he's kind of said, OK, mother wanted to equate the values of her estate. So she said, OK, well, I've got $500,000 RSPI, don't want to pay probate on that. So I'm just going to name my daughter as the beneficiary and I've got this other $500,000 asset over here and I'm, you know, I'm just going to leave that to my will to be divided to the kids equally. But you know, the unintended consequence of course was the daughter received the entire RSP because she was a name beneficiary.
15:05
That the state received the tax liability. So you know when the when the net values were distributed it was it was not the way it was supposed to be and this effort to save 1 1/2% although it's you know we we want to do everything we can to minimize fees but you know we have to make sure that it's fair. So I I think the the bottom line is communication and and dealing with professionals that can point out all of these issues.
15:34
So Lois mentioned the word probate. Another word that our team hears a lot is the word tax. And obviously there's lots of moving parts when you've got maybe an RSP or a riff, maybe a recreational property, investment securities and a non-registered account, lots of moving parts. So quite often there's confusion about what kind of taxes can someone expect to pay.
15:57
When a state's being settled, So what? What should people expect? And the second part would be, is there anything people can do to maybe minimize that burden or if not, completely eliminate it, Right. Yeah. I don't know if Benjamin Franklin seems to be able to take credit for this death and taxes quote over 200 years ago and it's I guess it's true to this day and we'll see what the budget has to say in a few minutes. But.
16:23
It's it's probably important to just differentiate our system here in Canada from the United States. So we have an income tax whereas they have an estate tax and the key difference is if you have taxpaying assets in Canada, you can leave those to kids, you can gift them today. There is there is no traditional estate tax but rather.
16:49
When somebody passes away, if there's a surviving spouse, then assets can all transition to that spouse without taxes. So that's that's a home, That's an RSP, That's public securities. Private Securities. Anything can be transferred under the spouse or rollover rules effectively and tax free, thus deferring taxes until the death of that second spouse. But when that occurs?
17:16
It it's an income tax, so you think about your Rs, P's or rift balances. If you have $1,000,000 in a registered account when you file your terminal return. So when John said when you pass away, the government says anything. Any income that has accrued to the date of death will be caught in this terminal tax return. So $1,000,000 RSP. It's as if that person earned $1,000,000 of income that year.
17:45
So it doesn't take, you know, a whole lot of estate assets to get up into the high bracket, which in Ontario is 53.5%. So any riff balances above $230,000 basically will be taxed at 53% in the terminal tax return. Any capital gains, half of that gain is taxed as income. So you might have $1,000,000 stock portfolio gain.
18:15
500,000 of that game will be taxed as income in the terminal return. It gets a little trickier as John said, when we start talking about private companies, because we have to make sure there isn't double tax. We don't want to pay tax on the private company shares and then a second tax when the underlying asset in the company such as real estate or public securities are sold. So.
18:37
If anyone is in that situation would like a little bit of extra help, we're happy to engage you and then follow up with your tax advisor to ensure that double tax does not apply. But the mechanics are sort of an income tax versus state tax. I see a lot of confusion around recreational properties as well. Many clients own a home, but they also own a chalet or a cabin or a cottage. And then the question is.
19:06
Which should I designate which is my principal residence and which is my cottage? Because I only get one tax free asset, one of those is able to go to the kids tax free, the other will be treated as an investment and that capital gains tax will apply. And there's a formula for that and we can help you work it through. But Rodney, I guess.
19:32
That does open up. Sorry. Part two of your question was what can we do about it? And you know the government does allow Principal Residence Exemptions. Hopefully they're not changing anything right now as we speak, they do allow TFs A's. The challenge with TFs A's of course is that the maximum contribution, $6500 this year, you know, it's great, but it's just it's not that substantial. Clients would like to do more. So that's when we introduce things like tax sheltered insurance.
20:01
There is no limit on the amount of capital that can be contributed into a tax sheltered insurance policy in this country. And again, hopefully those rules aren't changing. But once deposits are made into a tax sheltered policy, funds accumulate without tax for lifetime. And that entire balance of cash, whatever accrues over many decades for instance, is paid out to an estate without taxes. And we can name beneficiaries to avoid the probate taxes as well.
20:31
But other than that, you know we're really looking at RSP's in the pension rules where you know we've got limits. We get a deduction when funds go into them, but at the end of lifetime that that entire balance is taxable. And just that just to add to that too if charitable giving is is something that.
20:51
You know you you is important to you and that you're engaged in you know keeping good records and and keeping you know track of that any tax credits can often be carried forward and just against you know taxes owing on the on the terminal tax return that Jim was referencing. So just ensuring that that you know you keep good records in that regard I think is important to good records on on improvements to cottages as well. We see that very often.
21:19
You know, so in other words, if you pay, you know, $1,000,000 for your cottage, but then you invest 500,000 in renovations over the years, your ACB is now 1.5 million. Therefore, you know that'll reduce your taxable gain in the future that goes into that formula. That would apply to should I, you know, consider my home or my cottage as my principal residence, we're typically looking for the the asset with the largest gain.
21:48
John, I'd like to take any records for his cottage. That's why I mentioned it. It's close to home. Yeah, it can relate to that topic. John, I just wanted to circle back to you and ask you about the cost of an executor, generally speaking, relative to appointing.
22:10
A Trust Company as an executor or coexecutor because I think it's a commonly misconstrued topic and if you could address that, that would be helpful. Certainly no, I'm I'm happy to. That's a very good question and I think probably one of the most common ones that that comes up when we engage with with clients as well. What are your fees and you know what what can an executor charge for their for their labors so.
22:39
In Ontario it's it is not written directly into law. However, over a great period of time the courts have established a precedent schedule that they consider to be reasonable compensation for anyone that is taking on the role of executor or trustee. And it's basically through common law it's been established sort of a a set schedule that.
23:07
Anyone is able to charge with respect to a trustee ship, it's it's can be a bit more complicated because that typically will go over a much longer period of time. However, for an executorship, the schedule basically is settled at about 5% of the value of the estate that is that is typically seen going through probate and.
23:32
So that goes for any individual that's that's named in the role, it's the courts have deems 5% to sort of be the fair and reasonable sum that that can be charged. You as as an individual have the option of setting your executor's compensation in your will at a different amount. You can set it at for example 2% or 1% or at a flat.
23:58
Amount your will ultimately will override whatever the OR it's sort of accepted prescribed rate is with respect to a corporate trustee, we have a fee schedule that we provide to our clients that is signed and agreed to on a nonbinding basis, meaning that you're not, you know writing us a check simply for having us named as executor in your will.
24:25
But in all circumstances, our fee is going to be less than that amount. Even at sort of our minimum level, we're always less than the 5%. And when when you're sort of dealing with a typical wealth profile of a private wealth client, we're well, well below sort of the 5% level. What I can say about executor compensation is, you know, 5%.
24:53
Can be quite a bit of money, but I always circle back to you're dealing with a multiyear timeline with, you know, hundreds of, you know, responsibilities that have to be taken care of, many of which are time sensitive, many of which can result in additional costs to your state if not done properly. And so you know, it really is a very serious undertaking and I think that someone that does the job of an executor and does it right and does it well and responsible, they really earn every penny.
25:23
Of of their compensation. Thank you. I had a question in regards to assets outside of Canada. So if you have you know recreational property or something like that outside of Canada, what point should someone look at extra planning as far as having assets outside of Canada?
25:46
Yeah, I would say that's very common nowadays. Many Canadians you know will own properties you know in Florida for example or you know other other jurisdictions. I I would say that in the case where you have anyone has an asset that is outside of Canada, it at least warrants considering whether additional planning is required. At least you should be turning your mind as to whether additional steps need to be taken in your estate plan.
26:19
What I mean by that specifically is you know you do, you need to look at for example, having a will, a separate will outside of your Canadian will to deal with your, your foreign asset. In the case of you know there's as I as I said, you know, there's lots of Canadians that own property and for example Florida because of the similarities in our legal system.
26:42
You know in the United States and Canada you can have what's called an ancillary grant of probate, which is a secondary grant of probate issued on a Canadian will in Florida because they see so many of them, they're able to interpret what the intention is of the Canadian will. So you in that kind of circumstance might not need to have a separate will, but depending on the asset and depending on where it's located, certainly you may need to look at having a multi will strategy.
27:12
You know, other things to consider as well are you know if you're looking at investments or cash that's located in a different jurisdiction, you know you want to look at things like currency fluctuation. Is that a potential risk as an executor to the estate? You know you may need to work with a financial advisor on a strategy to sort of mitigate those risks.
27:38
Depending on where the asset is you may have you know language issues. So is is English not the the language of the of the land where your asset is and do you need to look at having an sorry a translation of your will done which is certainly going to you know create complications and and further need for planning. So I think it's very you know situation specific but certainly it warrants turning your mind to whether additional planning is required or not.
28:07
And we also have a treaty between the US and Canada. And so for most families, you know, there will not be a US estate tax associated with that property. But as one's wealth increases, like right now it's sort of around a little over 12 million U.S. dollars. As long as your, you know, your estate per spouse doesn't exceed that, you know, then you're not really in the US net.
28:35
We have a specialist internally here available to the Smith Falconer Group. Yes, since she's based in Quebec and she can help clients understand the formula as it pertains to them. So I E do I have a US estate tax concern or not? If so, then do we consider ownership options such as transferring that property perhaps, into a trust like a Canadian trust?
29:00
Of course, the great concern is that the the US exempt amount changes meaningfully. And you I can remember because I'm old, I guess that it was $1,000,000 then it went to $5 million, now it's 12 and there's a sunset clause that'll expire in a few years. And so if that amount comes materially down and a Canadian with maybe a $5 million net worth owns a, you know, $1,000,000 property in Florida, well, all of a sudden they're back.
29:28
In the US estate tax net where they wouldn't be today. So as John said it's it is case specific, but you know we've got people here that can help and then direct the proper information and questions to your own tax and legal advisor. I'll ask the last question before we open it up for others. What are considerations for gifting money to your children during your lifetime?
30:01
Yeah, that's a loaded one, isn't it? It's in my, you know, in my anecdotal experience, I it sort of depends on what the gift is intended for. Is it intended to, you know, help with daytoday needs? Like I want to make sure the grandkids can, you know, afford to play hockey, you know? Or is IT support for a first home or is it really intended for the child's future and depending on.
30:26
What the need is whether it's current or future then you know not much you can do. If the if the kids just need basic supports then then it's just an outright gift and it just gets spent. But homes I'm seeing loans being established. I think that is a very smart thing to consider just because you don't marriage breakdown is a reality in our world and I don't most families don't want to see their.
30:56
Hardearned capital being subject to the Family Law Act in future if the wrong, you know, events occur. So I see loans happening. Maybe there's no interest rate on that loan, but it's a loan just as valid as as the next from a bank and you know, or perhaps trust.
31:18
Yeah a common a common vehicle is is you know you when specifically with property I think is is the use of a trust. You know it's when when you make for example a property joint or you get it out right it it typically is a taxable event when when you're using a trust you in some circumstances can avoid that and it also allows you to have some control over the final disposition of that asset meaning that.
31:46
You know, you can set sort of a longer term before the property will actually vests to the beneficiaries outright. And you know as Jim was alluding to specifically when you're when you've got concerns about, you know, marital breakdown or or other risks or concerns, having that longer time frame can kind of allow allow you know a bit longer of a runway to see if those risks will actually manifest. So that's another planning strategy that I I see quite commonly.
32:16
Right. So I was kind of like loan my 30 year old child some capital today to support you know the down payment on a home and it may be 1520 years later or whatever forgive that loan. Yeah, that's a very common question. It is, I'm sort of smiling at your responses because I think as our audience can see there are.
32:44
Occurrences almost daily where we need the counsel of John and Jim and others in serving our clients to the best of our ability. So thank you for this. The few different I guess causes for concern for a non resident executor first and foremost, I think that it there's a distance factor that people tend to overlook in terms of practicality so.
33:19
Even just simply not being local, you know the distance in and of itself can can cause a problem for that individual to to do the job adequately and and appropriately. When you have a non resident executor in Canada, very commonly when the probate process is is ensuing and the executor is is applying for probate, the courts.
33:47
In in Ontario and other Canadian provinces will often impose what's called a bond of administration requirement which basically says because an executor it lives outside of the laws of our our land. We as a as a way of protecting the estate and protecting the interest of the beneficiary require that the executor pay in the value of the estate as a bond to the court so.
34:17
You know, if you're dealing even with a modest estate in in today's world, I know it sounds crazy, but let's say for instance you've got $1,000,000 state. Very few people have $1,000,000 in cash lying around. So that requires the executor to then go to a financial institution to put up a loan to be paid into court. And the question then comes about was the will properly drafted? Does the executor have a?
34:44
A power to borrow against the estate because if that's not in the will, the financial institution may say we we can't help you. So you know there's there's that there is potential other tax issues that can be opened up particularly if you've got testamentary trust that stem from the will where that that individual is also named as trustee.
35:07
Typically the the residency of a trust for tax purposes is based off the residency of the trustees. So that's another factor to consider. Wherever possible you you should be looking at a local executor. I think that that's a very, very important thing that people tend to overlook. So I would say it can happen, you know within a matter of days where it can kind of be really when is is.
35:39
You know, as soon as you'd like to make it happen, we can make it happen. It's a very it's a very straightforward process and largely it depends on the availability of your lawyer. Our ability to act as an executor stems from the client appointing us in their will. So that does require their lawyer to to update their will and have us actually named in the executor clause CIBC Trust Corporation. Otherwise we don't have the authority to act. It's not it's not a case where.
36:07
Our agreement gives us that authority. The will actually has to have us named. So you know I've had emergency situations where a client is you know going in for you know for example surgery and they need to update their will and you know we've got it done same day we do like to have a little more time so. So it's appreciated you know, but you know a couple of weeks I think is a pretty typical time frame.
36:36
To get it all said and done, oh, we don't want it to be overly taxing. So, you know, yeah, there's there's no hard and fast, you know, laundry list. We do have an exhausted array of questions. So prior to a meeting, we could send you a worksheet. But you know, usually, you know, our conversations just stem from a question or perhaps a financial plan.
37:09
So some clients have a very specific sort of a rifleshot question about gifting to an adult child or a family cottage or family business or you know, charitable gifting and we can address that. But we really would like to offer a comprehensive financial plan and I would take that you know, inventory and and come back to you with some thoughts.
37:32
Just to follow on in that answer, I'd also say that there's a big role for us, the Smith Welkner Financial Group in supporting you in that process. So we have a lot of your information and it can be augmented, but I would say assume that any meeting you would have with either Jim or John may or may not include us, but it often does, typically does. And we have provided the relevant information to the best of our ability before that meeting with your authority.
38:08
Believe it or not, even intraprovincially the bonding requirement can be imposed. Now I just I should, I should clarify, you can request your lawyer to ask the court to dispense with the bonding requirements so in certain circumstances you know if you have, you know if it's a if. It's a simple distribution in the will. And let's say you know one sibling is the executor.
38:35
And and all this, all the beneficiaries live within Canada. Sometimes the courts will dispense with that requirement, but but generally speaking you know even when you're dealing with you know out of province executor that that the requirement can be imposed sometimes really what the court is looking at is how complex is this situation, how much margin is there for potential error or potential risk.
39:04
And how vulnerable is the are the beneficiaries interests in the estate to to I guess error or you know improper action on account of the executor and and that really sort of dictates what what the bonding requirement is And John does that delay the clearance certificate from being issued in your experience the from the Canada Revenue Agency, yeah.
39:32
I think I think it can have some impact. I've I've found that the clearance certificate is a bit of a crapshoot. Sometimes it can be, it can kind of come through in very short form and other times that you know there can be delays in receiving it. So certainly I think that that's something to consider as well. It could impact it, it doesn't always but but I have seen that so.
40:00
Quick question and and and there's so many different situations because I, I we deal with a lot of multigenerational situations and you know here in Toronto it it's really tough for young people to get established and afford a home but the cost of living is horrendous and when you layer on little kids, sports teams, it's really tough but at the same time you know mom and dad or grandparents they don't necessarily want to or are able to gift.
40:30
You know, a lot of capital they they are only able to make, you know, monthly contributions just to support the family's needs, whether it's private school or sports. That's just the analogy I'm using. So you wouldn't probably formalize the loan there. You're not going to say, hey, here's $3000, but you're going to have to repay that. It, it becomes more substantial when you're talking about, you know, larger gifts of capital, right.
40:53
And and that's when you want to make sure that your gift stays in the family so that if there is a marriage break, then you're going to get the money back. Yeah, cool. But regardless of residency, nothing can compel a person to accept an executorship. So certainly that that person has the ability to to renounce their right to the executorship and and in often cases, you know.
41:25
When you have family members living in different jurisdictions that are named as executors, that's very common. You know, one executor will turn to another and say, look, I think if I'm involved here, that's just going to kind of complicate things. So I'm happy to sort of walk away and they'll provide it, you know, a written renunciation prior to the to the application for probate. Certainly that kind of thing happens all the time. I think that.
41:53
With respect to just going back to the sort of the bonding requirement, when you are looking at a coexecutorship and you have multiple executors, if the majority of them are in Canada, my understanding is the court is a bit more lenient on dispensing with with the bonding requirements. So you know there, there there may be reason to continue to be involved that that's really that the non resident executors main concern but certainly they don't have to be involved, they don't want to be.
42:29
This is a very important consideration for the estate planning process. I think it's really something that you need to consider. You need to talk to your advisors about. You need to talk to you. You know your family members and and your the state's lawyer about is what happens. What happens if my number one choice can't do it and you can. You have the option of naming executors in sequence so you know if if your top pick is not in a position.
42:57
Who who then steps in as a as an alternate. And that is all stipulated within your will. Your executor has in in most cases the option of hiring an estate agent too. So you can as an executor continue through with an estate administration and essentially retain a third party agent to assist you with the administrative burden.
43:24
Which is an option that a lot of people aren't aware of. And, you know, understanding that, I think a lot of people might actually be compelled to continue on and accept the appointment and just get professional assistance. So the clearance certificate is essentially the executor when they have reached the point in the administration where they believe all final taxes have been filed and paid.
44:00
You and you are in a position to do a final distribution to the beneficiaries. You are essentially asking for the the tax authority in this country to certify that they're not going to come back to you for any any reassessment of taxes. So that's typically done at the point that you are looking to pay out the final amount is a very important step. It it protects you, it's really sort of your ultimate.
44:26
Protection that that you're not going to have any final amounts owing with respect to the probate application. They're sort of apples and oranges being that the probate is really sort of done at the beginning of the estate administration, right. You really, it's sort of you're as I was saying previously, you're having the court certify that it is the last and true will of the individual who has passed away. So you know there's the state administration tax that's applicable for that step.
44:55
The clearance certificate typically happens at the end and yes it does typically get applied for once the terminal return and the estate T3 tax filings have been completed do run into this, you know a fair amount and I I think the thinking of most clients is that they need to do this.
45:21
You know, in in contemplation of what happens if they fall sick or if they're deemed incompetent or you know, just simply are getting older and finding it harder to sort of manage things. You know, they're they're compelled to make, you know, some assets joint with an adult child to assist them with, you know, managing funds and and I don't think there is anything necessarily wrong with that, but I do think that it is situation specific again.
45:52
There are disadvantages. There are risks that that you open yourself up to by doing that. You know, depending on what the asset is making a joint can be a taxable event. If you're dealing with, you know, a bank account, you're not really going to open yourself up to any more tax in in that regard. But I think it's really what people need to come back to and I think sort of realize is that.
46:18
The their powers of attorney are really the appropriate documents that they should be looking at with respect to what happens when I'm you're no longer able to manage or not even that I'm no longer able to manage right you you you can be of competent mind and still have your attorney for property begin assisting you. And it doesn't actually when your attorney for property begins acting on your behalf and representing your interests.
46:43
They have legal authority to manage your assets in the same way that they would if they were a joint folder of a bank account, for instance. But it doesn't change any ownership of your assets. It doesn't change anything. It doesn't impact your estate plan. So I always try to sort of bring clients back to, well, you know, have you, have you done your powers of attorney? Because that's really I think the most important thing with respect to the overall estate plan picture.
47:12
And Rodney, our own Jamie Gollenbeck has written numerous articles, as you know, and he's got a great one on exactly that topic, which you know, we could send out after the call. I think that a coexecutorship with CIBC is a great fit for many clients. It strikes a good balance between having some family involvement without leaving the full load of responsibility to, you know, a busy individual who has.
47:46
You know perhaps you know their own family and their own career and and things to worry about. I I think that it allows for a family to be involved from a control and a decision making perspective. But when your lawyer is drafting up the will they're going to include what's called the burden of administration clause. Basically saying that the the the professional trustee is to do the heavy lifting. But from a decision making perspective you know we're we're.
48:13
We're on equal footing and you know we need to come to decisions jointly. So I think that's a great solution for a lot of clients. I think that also applies when there's a special needs in the family. So you know you often want a relative to make all the decisions for that person's care and hand off the the tax and investment responsibilities to the Trust Company exactly.
48:42
Okay. Well, Jim and John, thank you very much. This has been very, very helpful. So thank you for taking the time and thank you, everyone for joining us. Now, we've covered a lot of ground today. And so I would say that if there's anything that we've touched on that you still have questions about, please reach out to the team and we'll be happy to put you in touch with Jim or John. Or if there's something that we haven't covered today, again, please reach out to us and we'll be happy to point you in the right direction. So thanks again for your time. We really appreciate it.
49:12
Thanks everyone. Thank you. Thank you

So I think it's important to emphasize that the banking system broadly is very robust, strong deposit base, strong regulatory
framework, a strong business models. That's particularly the case in Canada where the problems have arisen have been in
idiosyncratic pockets of the banking system. Regional banks in the US, for instance, where there have been a confluence of some mismanagement, a more volatile deposit base and also some shortcomings on regulation, but of course have led to capital flight or deposit flight out of several institutions which have led to a number of policy initiatives by central banks, the federal government in the US and then in Europe, in Switzerland, the arranged takeover of Credit Suisse by UBS Bank. Market expectations around central bank policy outlook have swung wildly over the past two weeks ahead of the financial volatility. Markets had been conditioned by the Federal Reserve to expect more interest rate increases with the onset of the volatility. Those expectations shifted to expect no more rate increases and actually a quick pivot to rate cuts. We think the truth lies somewhere in the middle. Markets have been too aggressive in pricing a pivot towards rate cuts. At the same time, we do expect growth to slow. We are looking for a mild recession to occur in the US, in Canada, in Europe over the next 12 months and that will slow inflation.

 

The inflation rate in the US and other economies will moderate over time. The question is how quickly. That suggests to us that central banks continue to focus on the importance of cooling inflation, reducing inflation back towards their target, but also being very cognizant that their words have great import for confidence in the financial system. In terms of specific opportunities, One that is particularly attractive right now is fixed income. Fixed income has had a difficult couple of years. When interest rates rise, bond prices fall. So that has been quite painful for investors in bonds. That situation has changed significantly with interest rates and bond yields much more attractive levels. This means that bonds can get back to playing their traditional role within a balanced portfolio as a counterweight to equities during periods of market volatility, but also as a standalone attractive source of return. So what does this mean for investor portfolios in normal market conditions? Trying to time market participation is difficult during periods of high volatility.

 

Timing markets is almost impossible. We think it really important to focus on long term fundamentals. Which asset classes have the most attractive of long term expected returns. So again, a focus on long term investment goals and objectives is particularly important during periods of volatility such as we're experiencing right now.

2023 Economic Outlook – Light at the End of the Tunnel?
[Soft music plays]
[Benjamin Tal, Managing Director and Deputy Chief Economist
CIBC Capital Markets Inc.]
Everybody is talking about inflation. But the reality is that at the end of the day, this is not
about inflation.
[Sheets of currency being printed. The Bank of Canada, in Ottawa. The Federal Reserve in
Washington.]
This is about the cost of bringing inflation down to 2%, which is the target. The Bank of
Canada, the Fed in the U.S., have established their reputation as inflation fighters. They are
not going to toss it away. Given a choice between a recession and inflation they will take a
recession any day. That's the reality.
[Sources of inflation]
The trajectory of inflation is important here. This trajectory is changing.
[An aerial view of a shipping dock. A person online shops on their phone. An aerial view of a
warehouse and shipping center.]
At any point in time, there are two sources of inflation, supply driven inflation and demand
driven inflation.
[A full warehouse. Bustling shipping docks. The Bank of Canada building. A timelapse of
downtown Toronto.]
What we are seeing more and more, is that the contribution of the supply driven inflation is
diminishing, which means that the supply chain is improving, shipping cost is down. And
that's actually extremely good, because it means that the Bank of Canada is becoming more
powerful in its ability to deal with the situation because more and more inflation is not
coming from the outside, but rather from domestic sources which the Bank of Canada can do
something about.
[Interest rates]
So, what's the next move?
[The Bank of Canada building.]
The Bank of Canada is now at 4.25% overnight rate. We think it's done. We think that's the
end of it. Maybe another 25 basis points if they have to, but we are, basically, extremely
close, maybe at the end of the hiking cycle.
The next question, of course, is what's next? When are you cutting? Usually, the lag between
the last hike and the first easing move is relatively short. This time we believe it will be
relatively long, maybe a year, maybe early 2024.
[The Federal Reserve in Washington. Sheets of currency being printed.]
Why? Because the Bank of Canada and the Fed have to make sure that inflation is dead
before they ease monetary policy.
[An aerial image of the Brooklyn bridge in the 1970s. A CIBC branch in Toronto in the 1970s.]
The last thing they want to do is to repeat the mistakes of the 1970s when monetary policy
was eased prematurely and led to another wave of inflation, and therefore, the double dip
recession of the early 1980s. They would like to avoid that and, therefore, they will wait until
inflation is dead before they cut.
And then when they cut by how much? Now, we started this saga at 1.75% overnight rate.
We are going to 4.25%, 4.5%. We rest for a year. And then cut––to where? I say about 3%. A
full percentage point, maybe more, above the rate we have seen before the crisis.
Why? Because in the background there are three inflationary forces that are putting pressure
on overall inflation.
[A low angle view of a Canadian flag in Ottawa. A full warehouse. A woman carries a box of
office supplies.]
We are talking about deglobalization. We are talking about Just-in-case inventories that are
replacing Just-in-time inventory. And clearly the labour market is much tighter now with
vacancy rates in the sky. And the target is the same target, still 2%. So, in order to achieve
the same target with more inflationary forces, by definition, interest rates have to be higher
and the new neutral rate, about 3%, clearly higher than what it was before the crisis.
[The risk of central bank overshooting]
What's the risk? Overshooting. To the extent that supply chain does not behave. To the
extent that we don't see a significant decline in the external source of inflation, that will lead
to a situation, in which the Bank of Canada will overshoot, will raise interest rates to 5%,
5.5%.
[The Bank of Canada crest. A person fills out a job application. People sit in a waiting room.]
That will take you to a real recession, with the unemployment rate rising significantly. Every
economic recession was helped, if not caused by a monetary policy error, in which central
bankers raised interest rates too much.
[The Bank of Canada building.]
At this point of the game, it seems that the Bank of Canada is getting it. They would like to
avoid this risk. Basically, stop at 4.25%. That's the main case scenario.
[The Housing Market]
Let's talk about the housing market now. The housing market is extremely sensitive to higher
interest rates than in any other time in history.
[An aerial view of houses in Toronto.]
It is slowing down. Is it a correction? Is it a crash? Is it a meltdown? In order to answer those
questions, we have to understand what happened to the housing market during COVID. We
know that prices went up by 46% in two years. The question is why? The answer is the
asymmetrical nature of the crisis. All the jobs that were lost were low paying jobs.
[An empty warehouse. A person reads a layoff notice. Apartment buildings in Toronto.
Homebuyers look at listings in the window of a real estate office.]
Young people, renters. That's why rent actually went down during the pandemic.
[A young couple looks at the front door of a house.]
At the same time, homebuyers and even potential homebuyers, their jobs were there. They
were assuming their income was there and interest rates were in the basement. So basically,
we have a situation in which, if you think about it for a second, homebuyers during COVID
got the benefit of a recession, vis-a-vis extremely low interest rates, without the cost of a
recession, vis-a-vis a broadly-based increase in the unemployment rate.
[A street view of a residential neighbourhood.]
There was a sense of urgency to get into the market. So, if you have a sense of urgency to get
into the market, you frontload activity. You borrow activity from the future. We are in the
future. This is not a freefall. This is not a crash. This is a reallocation of activity over time. We
frontloaded activity, now we are resting due to higher interest rates. That's a very positive
development. It's not over.
[A “For Sale” sign on a lawn.]
Now, this is the first correction ever, in which the supply resale activity is actually down.
Usually, you see supply listings going up when the market is correcting. This is not the case
now. Supply is down because people simply are worried about the overall situation, they are
not willing to list, and therefore, supply is down by 10% on a year-over-year basis. That's
protecting prices from falling further. I believe that will change in 2023 and 2024. We will
see supply rising because the fog will clear.
[An aerial view of houses in Toronto.]
But also, some people will be forced to sell given the huge increase in interest rates and the
shock that they will experience moving from variable rates to fixed rates or renewing their
variable rates. And therefore, I see further downward pressure in the housing market in
2023. However, it's not a crash, it's not a meltdown. It's a very healthy correction.
[An aerial view of houses. A plane lands at an airport. A woman waits for a ride at an airport.
A man holds up the Canadian flag. The Ukrainian flag flying over Kyiv. An agent shows a
couple a condo]
So, expect to see further declining sales and clearly declining prices, especially in the low-rise
segment of the market. At the same time, remember, the fundamentals of this market are
still very strong. This year alone, we got 700,000 new immigrants, plus non-permanent
residents, foreign students, and people from Ukraine. 700,000. None of them carries his or
her house on their back. The demand is there and what's happening to supply? We are not
building.
[An aerial view of houses in Toronto. The interior of a semiconstructed apartment.]]
One third of activity is being canceled or delayed because of the fact the cost is rising too
fast.
So, you don't have the supply coming. The demand is definitely there. You don't need to be
an economist to see what will happen two or three years from now. So, the fundamentals of
the market, the lack of supply, a lot of demand still there. But at the same time, the market is
now adjusting, basically reflecting the asymmetrical nature of this recession.
[This video is provided for general informational purposes only and does not constitute
financial, investment, tax, legal or accounting advice nor does it constitute an offer or
solicitation to buy or sell any securities referred to. Individual circumstances and current
events are critical to sound investment planning; anyone wishing to act on this document
should consult with his or her advisor. All opinions and estimates expressed in this video are
as of the date of publication unless otherwise indicated, and are subject to change.
The CIBC logo is a trademark CIBC, used under licence.
The material and/or its contents may not be reproduced without the express written consent
of CIBC.]
[CIBC Logo]
[The CIBC logo is a trademark of CIBC, used under licence.] 

Opportunities amid turmoil

[CIBC logo]

[Upbeat music]

[Opportunities amid turmoil]

[Michael Sager

Vice-President, Multi-Asset & Currency

CIBC Asset Management]

So it's clear that the US dollar has been broadly strong against pretty much every currency this year, including the Canadian dollar. But the source of that strength has been the US Fed and its willingness and commitment to continue to increase policy interest rates until it sees a meaningful decline in the rate of inflation. That's not likely to happen any time soon because some of the slower moving elements of inflation, things like rents and housing costs broadly and wage costs are just too high and showing no evidence of a downturn.

[Aerial shot of a residential housing. Condo buildings and skyscrapers. Aerial shot of a residential housing.]

So until the Fed sees that evidence of weaker inflation, it's going to keep tightening policy. And as long as it keeps tightening policy, the dollar is going to remain strong.

[Upbeat music]

[Signs inflation has peaked?]

The Fed has become increasingly determined in its efforts to regain control of inflation. The measure of inflation that it focuses on strips out volatile components like oil or food, which have shown some evidence of weakening in recent months.

[Combine harvester in a cornfield. Corn cobs being sorted onto a conveyor belt. Farm workers sorting a larger bin of corn cobs.]

Instead, the Fed focuses on a measure of inflation called "core". The main components of core inflation - the main drivers - are housing and rent and wage costs.

And thus far, there's no evidence that any of those more sticky components are showing any signs of weakening. This means that the Fed has quite a bit more tightening to do. But it also is obvious from "Fed speak" that it's very committed to following through with the necessary rate increases. So this is a very different episode from 2018.

Back then the Fed., under current Chairman Powell, started to tighten policy rates, but stopped too soon as it saw a decline in equity markets. That's not going to be the case this time. It's all eyes on control of inflation to a large extent regardless of the damage it causes to financial markets.

[Upbeat music]

[Investment opportunities]

With central banks committed to delivering low inflation via tighter monetary policy it means that the outlook for economic growth is increasingly difficult, which in turn means the outlook for corporate earnings is also difficult. That hasn't necessarily been fully reflected in market expectations for equity returns, which suggests that in the near term at least, there is more downside side for broad equity markets. But even within that relatively pessimistic outlook, there are opportunities.

The Canadian equity market looks relatively attractive, both given its valuation compared to other markets, but also its focus on dividends in a number of sectors.

[The Toronto skyline. The Toronto Stock Exchange building.]

Both of those are positive attributes in difficult periods, challenging periods for markets. Fixed income opportunities are getting more attractive. That includes both at the short end of the curve, but also if you think about developed markets, sovereign bonds. Yields have increased quite significantly over the last couple of years as market participants have priced in higher policy rates.

But now yields have moved a lot higher. It means that sovereign bonds can get back to playing their traditional role as a counterweight to equities during challenging periods for equity markets. So bonds become relatively more attractive.

[Upbeat music]

[C$ outlook]

The US Dollar is likely to continue to strengthen against the Canadian dollar for as long as the Fed continues to tighten policy. There are a number of reasons. First, it looks like the Fed will increase interest rates more than the Bank of Canada. Interest rates are a key driver of exchange rates, so more tightening from the Fed suggests that the US Dollar will continue to appreciate against the Canadian dollar. The Canadian dollar is also a very pro-cyclical currency. It does well when the economy does well, when commodity prices do well.

[A rural oil refinery station. Rural oil derrick pumps.]

At the moment, the outlook for economies and commodities like oil has soured. And so that suggests, again, that in the short term, at least, the Canadian dollar is likely to experience a little bit more weakening against the US Dollar. Once we get to the point that the US Fed signals an end to its tightening phase. I think that weakening of the Canadian dollar can start to reverse and will probably regain a lot, if not all, that we've lost over the last few weeks in terms of the level of the Canadian dollar against the U.S.

[Upbeat music]

[The views expressed in this document are the views of CIBC Asset Management Inc. and are subject to change at any time. CIBC Asset Management Inc. does not undertake any obligation or responsibility to update such opinions. This document is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this document should consult with his or her advisor. All opinions and estimates expressed in this document are as of the date of publication unless otherwise indicated, and are subject to change.

Certain information that we have provided to you may constitute “forward-looking” statements. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or achievements to be materially different than the results, performance or achievements expressed or implied in the forward-looking statements.

CIBC Asset Management and the CIBC logo are trademarks of Canadian Imperial Bank of Commerce (CIBC), used under license.

The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc.]

[The CIBC logo is a trademark of CIBC, used under license.]

How to Stay Balanced in Volatile Markets

[Soft music plays]

 

[Onscreen Text: Craig Jerusalim, Portfolio Manager, Canadian Equities, CIBC Asset Management]

 

Craig: Markets are really experiencing some unprecedented moves right now. The drop in oil, 20 to 30 percent in one day. The drawdown in the broad indices is really unprecedented in the scale and the speed of which it's dropped. And the problem right now is no one can give definitive answers, definitive answers of when the Coronavirus is going to be cured or when the imminent recession is going to come or not come. And it's really that fear of the unknown that is causing some market participants to panic. And there's no answer that I can give to fully allay fears of an imminent V-shaped bounce back, because no one knows for certain that that's what's going to happen.

 

Advice for clients really has to be in line with what you feel comfortable, what risk you feel comfortable taking on. However, don't try and time the market. All the evidence we've seen over history is that investors are really poor at getting out as the market is dropping and then getting back in when the market's rebounding. There's really only one mistake an investor can make throughout the history of investing, and that's selling at the bottom. If you miss just the 20 best days over the past 20 years, you would've wiped out 100 percent of your returns over that time period for the TSX. So instead, be comfortable with your asset allocation and be able to perhaps either dollar cost average in or dollar cost average out to help alleviate some of those fears.

 

[Onscreen Title: The importance of long-term investing]

 

Craig: Today's market price is probably not the low, tomorrow's low probably won't be the cycle low either, but we don't know when that rebound is going to happen. And there are a number of differences between the situation today and the situation in 2009, for example, during the financial crisis.

 

Today, there's a factor, the Coronavirus, that is causing people to just tighten up and cause people to not go out and spend, not travel. And that's causing a short-term demand impact. However, unlike in 2008 and 2009, there's not massive fraud in the system. There's not excesses in valuations or any bubbles forming. The U.S. consumer, for example, is much healthier today than they were in 2008. Saving rates are high. Debt service ratios are low. Unemployment is extremely low. So, there's reasons to believe that there's going to be some sort of built up demand that will come back to the market when those fears alleviate. We also know that interest rates are extremely low at all-time record lows and that the federal government is there for monetary and fiscal stimulus, as well as many other countries around the world that are going to be throwing everything they can at this economy to get it moving again. We don't know when that's going to happen, but we know we want to be positioned for it. So, we're not throwing out the babies with the bathwater or using the opportunity to high-grade portfolios to move to the highest quality companies, to be best positioned for that rebound when it happens.

 

[Onscreen Title: Portfolio positioning]

 

Craig: There's two sets of assets that we need to think about. The asset where the allocation is a little bit more flexible, where you could raise cash and you can move more defensive. And there's another set of assets that are going to stay fully invested. And that's the money that we're managing for clients, for the money that's staying fully invested in mutual funds, for example, we're not sitting on our hands and doing nothing.

 

[Onscreen Text: Five indicators we are watching in our portfolios]

 

Craig: There's five things that we're doing within those funds.

 

[Onscreen Text: 1. Look at company balance sheets]

 

Craig: The first is looking at balance sheets. Any company that is at risk in the short term, due to their leverage, is something that needs to be taken out of the portfolios. We have to be invested in the companies that can use this market disruption to their advantage as opposed to it causing risks from an ongoing basis.

 

[Onscreen Text: 2. Identify potential switch trades]

 

Craig: The second thing is we're looking for switch trades, which companies with similar exposures are down more than others because right now everything is moving lower. But at different paces. So, we're looking for the switch trades in the portfolio.

 

[Onscreen Text: 3. Look for overreaction in company shares]

 

Craig: The third thing is we're looking for companies that have just overreacted: which companies have are discounting a worst case scenario, recession, even though the cash flows are still recurring and ongoing.

 

Craig: The fourth is we're looking for the opportunities in the companies that have recurring earnings, that have domestic focused earnings, because we think that Canada is going to be less impacted than some other emerging markets around the world. We're looking for the companies that we know where their next dollar is going to come from. Think about all the companies whose bills you receive every month that you're going to continue to pay. Those are the telcos and the utility companies.

 

Craig: We're starting to sharpen our pencil on those cyclical companies. The companies that are down the most now but are likely to snap back at the time when the stimulus and the recovery begins. We're too early at this stage, but sharpening the pencil and getting ready for that rebound is important.

 

[Onscreen Text: The views expressed in this video are the personal views of Craig Jerusalim and should not be taken as the views of CIBC Asset Management Inc. This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this document should consult with his or her advisor. All opinions and estimates expressed in this document are as of the date of publication unless otherwise indicated, and are subject to change. ®The CIBC logo is a registered trademark of the Canadian Imperial Bank of Commerce (CIBC), used under license. The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc. Certain information that we have provided to you may constitute “forward-looking” statements. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or achievements to be materially different than the results, performance or achievements expressed or implied in the forward-looking statements.]

Dispelling Common RRSP Myths

Runtime 3:46

 

GFX

Jamie Golombek, Managing Director, Tax & Estate Planning, CIBC Financial Planning and Advice

 

In recent years RRSPs have gotten a bit of a bad rap. People are saying should I still be using the RSP as the primary retirement savings vehicle, or should I maybe be using a TFSA or maybe I shouldn't even bother and just use an unregistered account. After all when I take money out of my RRSP or rough I'm going to pay tax and that tax could be high. So why even bother with RRSPs. Our latest report addresses some common myths that we're trying to dispel with RRSPs.

 

GFX

Myth #1

There’s no point investing in an RRSP

 

Perhaps the biggest myth is that there's no point in even bothering with an RRSP because after all when you take the money out under an RRSP ultimately in the RIF there a forced minimum withdrawal you're going to pay tax on it anyway. And in fact what's really the point at the end of the day because you're getting a deduction now and you're including the income later. But in fact if you look at the numbers behind this you find that effectively your rate of return on your after tax contribution is ultimately tax free. In other words what was your option. Sure you could have done TFSA and for some people that might make sense but on the other hand if you're comparing an RRSP with a non registered account you're still going to pay capital gains tax tax on interest income tax on dividends on the non registered money. Remember you're only dealing with a smaller pool so with an RRSP you're investing pre-tax dollars with a non registered account. It's after tax dollars and you're still taxable on the investment returns. We've proved mathematically in our report that you're always going to be better off with an RRSP or a TFSA than a non registered account.

 

GFX

Myth #2

Investing in a TFSA beats an RRSP

 

The second myth says that maybe TFSA is are the way to go and for some people that might be true for individuals in the lowest tax bracket. Say someone making under forty five thousand dollars a year yeah I wouldn't do any RRSPs I would do all TFSAs as your tax rate could only be higher when you retire. But I think a majority of Canadians who will be in a lower tax bracket in retirement than when working, then RRSPs do make most sense.

 

GFX

Myth #3

It’s better to pay off debt

 

The third myth is maybe I should really focus on paying down my mortgage rather than putting extra money into an RRSP and again with low historic rates on mortgages, many mortgages having rates below even 3 percent, we’ve proved in a prior report called Mortgages or Margaritas that it really doesn't make a lot of sense to pay down low rate debt provided you can sleep at night. In other words your long term rates of return on a balanced portfolio inside an RSP or even TFSA will outweigh paying down low interest rate mortgage debt.

 

GFX

Myth #4

I don’t have enough money to save in an RRSP

 

The fourth myth is I don't have enough money to save in an RSP. In other words I don't have thousands of dollars at the end of the year to contribute to an RRSP. That's OK. You can set up a regular contribution from your paycheque automatically coming out of your bank account on a monthly basis. You can do it for a hundred dollars a month. In other words start small it's important to get into the habit of long term savings.

 

GFX

Myth #5

I don’t need an RRSP because of other retirement sources

 

The fifth myth is maybe I shouldn't bother with RRSPs after all I've got Canada Pension Plan and OAS and while that's certainly true when you do a financial plan you may realize that those retirement pensions are simply not enough to be able to afford the type of retirement that you're looking for only with a financial plan. Can you determine how much you want to get into an RRSP.

 

GFX

Myth #6

Saving too much in an RRSP = large tax bill upon death

 

Finally some people say well shouldn't bother with RRSPs, because the end of the day after I die or after my spouse dies the full amount will be taxable and that's certainly true. But when you do the math on that, and you look at the tax deferral and the fact that you never pay tax on the income on the way in, what choice did you have? In other words the best solution. And we can prove this mathematically is that RRSPs despite facing a tax burden at the end of the day still remain for most Canadians the number one way to save for retirement.