Author Topic: Canadian Case _ 92 year old investor recommendations needed  (Read 693 times)

Geodude13

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Canadian Case _ 92 year old investor recommendations needed
« on: February 06, 2020, 05:49:45 PM »
My healthy and vibrant 92 year old mother trusts me with guiding her portfolio management, and I am a little overwhelmed in helping her do so.  I would love your recommendations.  I do a simple ETF portfolio  for my own funds, that I manage myself and balance to my risk profile.  That is my comfort zone and find her investments overwhelming to manage.

 Background:
1) She is a Canadian and has very little in her RRIF and most investments are in non registered accounts
2) My mom has an investment advisor who has her in many preferred stocks with high dividends.  She is 85% in preferred stocks and 15% fixed. 
3) She is smart and healthy, and has been comfortable with a high North American equity portfolio . 
4) I am thinking, even though she is very healthy and financially comfortable, the equity portion of her mix is very high, and wanted to move her to more fixed income options
5) The fixed income option her advisor has her in is a GIC making only a little over 1%!
6) Although I am encouraging her giving money to the next generations to avoid high taxes after she passes, I have had limited success. 

Can you please suggest what portfolio options you think I should be suggesting to her?

Thanks so much
« Last Edit: February 06, 2020, 07:09:26 PM by Geodude13 »

YttriumNitrate

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Re: 92 year old investor recommendations needed
« Reply #1 on: February 06, 2020, 05:59:01 PM »
2) My mom has an investment advisor who has her in many preferred stocks with high dividends.  She is 85% in preferred stocks and 15% fixed. 
...
4) I am thinking, even though she is very healthy and financially comfortable, the equity portion of her mix is very high, and wanted to move her to more fixed income options

You didn't mention how much she has in her accounts. The answer to this question will be very different for someone who has $50 thousand compared to someone with $50 million.
« Last Edit: February 06, 2020, 06:00:47 PM by YttriumNitrate »

Geodude13

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Re: 92 year old investor recommendations needed
« Reply #2 on: February 06, 2020, 06:15:05 PM »
She has around $700k in investments, as well as owning her own home that she lives in independantly right now worth around $500k.   She lives off around $25k per year currently, but if her health fails would require around $30k more annually for assisted living

 She and my dad were true pre mustachians  living below there means their whole lives, while making meager wages and raising a large family.  However they read all they could about money, owned rental property and prospered. 

Thanks for your help
« Last Edit: February 06, 2020, 07:11:47 PM by Geodude13 »

Laura33

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Re: Canadian Case _ 92 year old investor recommendations needed
« Reply #3 on: February 07, 2020, 05:59:15 AM »
I'm not sure you need to make any changes, unless the advisor is charging ridiculous fees or commissions.  Preferred stock isn't like normal stock; it's sort of partway between a stock and a bond, and it typically pays higher yields, so the advisor probably chose it for the higher income and higher degree of security.

But if you want to feel more confident that the money will be there when she needs it, you can set up a ladder with individual bonds or CDs -- you'd put one year's expenses in CDs/bonds that mature a year from now, another year's expenses in CDs/bonds that mature in two years, and then a third year's expenses in CDs/bonds that mature in three years.  That way you know you have living expenses for the next three years covered, plus it sounds like you'd still have another chunk of cash in fixed income in the event that she suddenly needs more (e.g., if she needs more support).  And then each year as the CD/bonds mature, you use that money to live on and sell enough preferred stock (or use the income from that preferred stock) to buy another set of CDs/bonds that mature in another 3 years, so you keep that ladder going.  The kicker is that if the market crashes, you don't need to sell right away, because you have three years' expenses covered, so you can wait until things recover to replenish the ladder.

tl;dr:  your mom is doing fine.  She has more money than she will likely ever need, the advisor doesn't appear to be bleeding her dry or putting her in ridiculously inappropriate investments, so don't drive yourself crazy.  Research the kinds of investments she has, research the advisor and the fees, but otherwise don't let the perfect be the enemy of the good.

YttriumNitrate

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Re: 92 year old investor recommendations needed
« Reply #4 on: February 07, 2020, 07:10:17 AM »
She has around $700k in investments, as well as owning her own home that she lives in independently right now worth around $500k.   She lives off around $25k per year currently, but if her health fails would require around $30k more annually for assisted living.

She has about four years worth of expenses in fixed income products, and selling her house would pay for the better part of 8 years of assisted living. As Laura33 mentioned, your mom is doing great. I'm sure there are tweaks you could make, but I probably wouldn't bother since once you start fiddling with things you will get the blame from your mother (or possible other heirs) if things don't do well.

Freedomin5

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Re: Canadian Case _ 92 year old investor recommendations needed
« Reply #5 on: February 07, 2020, 08:05:16 AM »
It sounds like the investment advisor is basically doing what Laura33 is recommending. A GIC is basically a CD. Just make sure that the 15% in GICs are laddered with various maturity dates (i.e., 1-year-, 2-year, 3-year), and you'll have a laddered GIC.

RBC Bank has an article on laddering using GICs - https://online.royalbank.com/tools/gic-laddering/index.html?_ga=2.93061141.964745103.1581087563-1122205853.1581087561

I also agree that preferred stock is generally less risky than common stock, and it still allows her investments to grow at a decent rate.

Geodude13

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Re: Canadian Case _ 92 year old investor recommendations needed
« Reply #6 on: February 07, 2020, 09:04:45 AM »
Thanks everyone for your very helpful insights.  This makes me feel so much better about her current situation, and I will work  on laddered GICs with her and leave the rest alone.  I appreciate you taking the time to help.

Rosy

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Re: Canadian Case _ 92 year old investor recommendations needed
« Reply #7 on: February 07, 2020, 09:44:15 AM »
SNIP

But if you want to feel more confident that the money will be there when she needs it,
you can set up a ladder with individual bonds or CDs -- you'd put one year's expenses in CDs/bonds that mature a year from now, another year's expenses in CDs/bonds that mature in two years, and then a third year's expenses in CDs/bonds that mature in three years.

That way you know you have living expenses for the next three years covered, plus it sounds like you'd still have another chunk of cash in fixed income in the event that she suddenly needs more (e.g., if she needs more support).

And then each year as the CD/bonds mature, you use that money to live on and sell enough preferred stock (or use the income from that preferred stock) to buy another set of CDs/bonds that mature in another 3 years, so you keep that ladder going.

The kicker is that if the market crashes, you don't need to sell right away, because you have three years' expenses covered, so you can wait until things recover to replenish the ladder.
snip

Wow @Laura33 - AHA moment:)
I never fully understood the reasoning behind a ladder - seen in this light - it makes perfect sense for a situation such as this.
This is the answer I was looking for but didn't know how to ask. Thank you!

utaca

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Re: Canadian Case _ 92 year old investor recommendations needed
« Reply #8 on: February 07, 2020, 10:07:13 AM »
Just a thought on the GICs... EQBank is an online, CDIC insured Canadian bank that currently offers over 2% interest (I think it was just bumped up from 2.3 to 2.45%) for its savings account. This might be a better option than the GICs you refer to - although if you want the secure return of GICs, EQBank also offers GICs that pay a little bit more than its normal interest rate.

Geodude13

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Re: Canadian Case _ 92 year old investor recommendations needed
« Reply #9 on: February 08, 2020, 10:48:07 AM »
Thanks for the additional suggestion on EQ bank

daverobev

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Re: Canadian Case _ 92 year old investor recommendations needed
« Reply #10 on: February 08, 2020, 10:59:50 AM »
I'd suggest Oaken over EQ, rates are better.

https://www.oaken.com/gic-rates/

Oaken's 1 year is the same as EQ's 5...

In terms of prefs vs anything else... eh. I'd say you don't want to be that much in them. A portion sure, but some in 'proper' equity. ZPR is a nice and fairly cheap ETF instead of having loads of holdings. But as others have said... at this point, it may just not be worth worrying about.

If the advisor is up to snuff they should be making sure there is some.. I forget the term, cost basis harvesting each year, ie so when she dies there isn't a massive capital gains bill because smaller amounts have been taken year on year.

meghan88

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Re: Canadian Case _ 92 year old investor recommendations needed
« Reply #11 on: February 10, 2020, 06:53:16 AM »
Laurentian Bank is also offering a 3.30% HISA, no strings:  https://www.lbcdigital.ca/, and it's CDIC-insured up to 100K.  And they have a sister bank offering the same:  https://b2bbank.com/en/saving/high-interest-savings-account

Caveat:  I was unable to sign up online, despite multiple calls to helplines and Equifax.  But many others were able to sign up.  Might be something to do with my firewall.

I've also bookmarked this site:  https://www.highinterestsavings.ca/chart/.  It tracks, and gives history on, Canadian HISAs and also GICs. 

IMO, a HISA at EQ etc. is a good place to park emergency funds.  And (rhetorical question), why buy a GIC when funds can earn more, and stay liquid, in a HISA?