UP IN SMOKE Marijuana Smokers Now Qualify As Non-Smokers For Life Insurance
Charles Duerden Septen Financial
Smoker rates translate into a substantially higher price or premium which reflects the additional mortality risk of cigarette smokers.”
mokers of marijuana have long been considered at equal risk as smokers of tobacco products by the life insurance industry. The result has been such smokers have been charged insurance premiums as much as three times as non-smokers. This was the case although there was insufficient science to substantiate the Industry’s implicit position that marijuana was as harmful to smoke as tobacco. This has radically changed as of June with four of Canada’s major life insurers announcing that they will underwrite marijuana users as non-smokers so long as they don’t consume tobacco products. By value, these insurers represent the majority of life insurance paid in Canada. We are happy to inform our readers that the policies of all four companies are available through Septen Financial.
The insurance Company’s new rule for occasional marijuana smokers applies only to new underwritten life insurance applications for coverage amounts up to $2 million. The Company’s position is that occasional marijuana smokers do not share the same inherent risks as those who are regular cigarette smokers. It has assessed the mortality and morbidity results for associated death, including smoker-related impairments linked to marijuana usage, and feels comfortable that the risk is not equal. Statistics show that 18 percent of Canadians smoke marijuana occasionally for recreation purposes. The Company said in a press release it will continue to evaluate and stratify each case on its own merits and differentiate those risky cases where applicants abuse drugs whether marijuana itself, or other substances, from those that smoke marijuana occasionally. Provided they have no associated underlying risk factors or conditions like mental or nervous history, poly drug use, alcohol abuse, occupational hazards or other medical or lifestyle concerns, the Company maintains a high level of confidence it can approve these applications at standard, non-smoker rates.
As of going to press, out of the four, three who are corporately linked have yet to update their application forms, so clients who do smoke marijuana will still have to answer “yes” to smoking questions. However, Septen advisors will use the detail section on the application forms still available to explain that the client uses marijuana, as opposed to tobacco, and include information on how much he or she consumes. One particularly good piece of news is that existing clients of this family of companies may also apply for Existing clients…may non-smoker rates, subject to health and also apply for nonlifestyle underwriting review. Moreover, these companies will also consider smoker rates, subject marijuana smokers as non-smokers to health and lifestyle when applying for critical illness and underwriting review. disability insurance as well as for life coverage.
The fourth Canadian insurance company referred to is taking a more conservative approach than the other three by considering occasional marijuana smokers for non-smoker rates.
RISK NOT EQUAL So what constitutes an occasional smoker? According to a Company spokesperson, it’s someone who smokes two or less marijuana cigarettes per week. Such marijuana smokers will be considered for non-smoker rates, subject to an underwriting review of the complete risk profile of the applicant. So far, this does not apply to consumers of marijuana in solid form such as baked hash cookies, although Septen Financial has been informed by the Company in question that this stance is under consideration. Here are the Company’s guidelines for its new policy concerning occasional marijuana smokers: •
up to two marijuana cigarettes per week, as indicated above, and for recreational purposes only, excluded are medicinal marijuana users.
The policy is applicable to new life insurance applications with no age restriction. However, existing inforce policies may be considered in some individual cases but only after an underwriting review has been completed. Includes all life insurance products, but unlike the other three insurers mentioned, excludes critical illness products.
INSIDE SEPTEN TO HONOUR PATHWAYS HEROES Page 2
MORTGAGE FUND BUILDS CONSISTENT RETURNS, CONSERVES CAPITAL Page 3
FAVOURABLE PREMIUMS Meanwhile, the Company is monitoring the increased level of research being performed on the use of medicinal marijuana and its effect on symptoms for chronic conditions and wearing ailments.
The decision by Canada’s major insurers to consider marijuana smokers for nonsmoker rates has come about as the result of a number of developments. They include: the considerable volume of research that has been carried out on the effect of infrequent marijuana usage compared to that of cigarette smokers; the growing acceptance of the use of cannabis for medicinal purposes; its impending legalization by the Trudeau government for recreational usage; and a soaring demographic of Canadians who consider themselves to be regular smokers of marijuana. Historically, anyone who had smoked marijuana within 12 months of submitting an application for life insurance coverage was charged smoker rates. Smoker rates translate into a substantially higher price or premium which reflects the additional mortality risk of cigarette smokers in the general population. This higher price would often hinder the purchase by interested clients or lower their coverage amount for reasons of affordability. Are you a marijuana smoker and the owner of a life, disability or critical illness insurance policy? Were you rated as a smoker? Perhaps because of the cost you decided to take a smaller amount of coverage, or perhaps you decided not to take any coverage at all. If so, why not call Septen to see if you can now be underwritten as a non-smoker to gain more favourable premiums. Perhaps also you may finally you able to get the coverage you want and need.
THE MACRO APPROACH TO INVESTMENT Page 5
HOME SALES BREAKING ALL RECORDS Page 6
NEGATIVE INTEREST RATES IN CANADA? Page 6
BORROWING TODAY TO BUILD WEALTH FOR TOMORROW Page 7
HIV POSITIVE? WE HAVE INSURANCE! Page 7
While occasional marijuana smoking is defined as
2016-07-19 3:58:33 PM
2 OKANAGAN MONEY | SUMMER 2016
elcome to the first edition of Okanagan Money.
If you’re reading this, you are interested in protecting your family financially, or looking to make your money work for you better than it has done previously. You’ve come to the right place. We at Septen Financial are proud to serve thousands of clients across Canada through eight offices, including five in British Columbia and one in Toronto. We have more than a half-billion dollars in assets under management (AUM) and through these pages we hope to share the strategies that have brought financial success to our clients.
“Dedidicated to the furtherance of finance literacy and well-being.”
Much is happening in the world of investment and insurance and our premier edition reflects these changes. Our lead story is on how the major insurance companies are now willing to treat marijuana smokers as non-smokers of tobacco. This is a major shift and is due to research that points to important differences between the impact of marijuana and tobacco on health. The payoff for marijuana smokers is that they may now qualify for lower premiums. Our story on a major insurer who will now insure HIV positive persons is of an equally epochal nature and reflects also the huge leaps in the treatment of what was not too long ago considered a terminal condition.
Two columns will become regular fixtures, those by realtor Monique Kaetler; and mortgage broker Mardi Hassell, since the housing market and mortgage rates are of perennial interest. On the investment front we focus on Tyler Mordy who has returned to his home town of Kelowna to manage the $600-milion Forstrong Global Asset Fund – now available as a segregated fund – at an office not too far from ours. Tyler’s macro approach to investment coupled with the Fund’s investment vehicle of exchange traded funds (ETFs) is on track to drive Fund AUM to $1 billion. Leveraging your purchasing power to buy into the Forstrong (or other “seg funds”) is the topic of “Borrowing
to Invest,” our feature on B2B and well demonstrates the difference between good and bad debt. An equally powerful read is the contribution by Ches Hagen of AP Capital on the origin and performance of AP’s Mortgage Investment Fund, which has consistently delivered annual returns over 7 percent through investment in mainly British Columbia mortgages. We hope the offerings of this first edition will be instructive and encourage you to engage with us about how these and other strategies can be of benefit to you. Enjoy!
SEPTEN TO HONOUR PATHWAYS HEROES
Gala Event Will Recognize Employers Of The Diversely Abled
very day, businesses throughout our community support people in need and the organizations that serve them.
Charles Duerden Septen Financial
Businesses will be recognized individually and special guests will be on hand to present awards to those being honoured.
You’ve probably shopped at many of these businesses without ever considering or knowing the many contributions those businesses are making to the health and well-being of our city. Take businesses like Home Depot, Century 21 or Buckerfield’s Country Stores. Did you know these local companies, along with many others, employ individuals in our community with diverse abilities? These are business leaders with foresight, vision and genuine compassion and concern; business owners and managers who have re-considered conventional employment paradigms, choosing instead to think outside the box and develop new, innovative employment programs for the benefit of everyone! But how, you may ask, do these businesses even find employees with diverse abilities? That’s accomplished through the good work of a local notfor-profit organization called Pathways
Abilities Society. Pathways works with the local business community to match prospective employees with diverse abilities to prospective employers who recognize the value those employees can bring to their businesses! The Pathways team develops what it refers to as Customized Employment Opportunities, based on the needs of each business partner with which they work. The Team identifies needs not already being met by current staff and creates an employment program that can easily (and successfully) be filled by a parttime employee with diverse abilities. The end result is an employee keen to do a great job, happier staff, more efficiency in the workplace and often, even an improvement to the bottom line! So who is Pathways? Pathways started out as Sunnyvale Centre in 1953, formed by a group of parents, teachers, doctors and concerned citizens coming together to create a centre for children with, what was then called mental handicaps. Over the years, Sunnyvale Centre evolved. As its
Choice. Advantage. Service. Savings. Mardi Hassell, Mortgage Specialist VERICO Versa Mortgage Corp Office: 604-998-1392 Okanagan: 250-980-3886
children aged, their needs changed, and Sunnyvale adapted its services to include support for adults too. By 1973, the centre divested itself of children’s services altogether, ceding those responsibilities to the Neurological Association and School District #23. Over the years Sunnyvale became the Kelowna & District Society for Community Living, then eventually, in 2012, Pathways Abilities Society. Today, Pathways supports 200 individuals in our community and works with many local businesses and organizations, developing customized employment opportunities for people with diverse abilities. At Septen Financial, we think pretty highly of Pathways and their team and we think what they do is a big deal. We also think those business leaders who show exceptional vision and a willingness to revisit preconceptions and stigmas for the benefit of everyone are also a big deal. We think more people should know about the great work Pathways is doing and the tremendous contributions businesses across our community are making every day. So we’ve partnered with Pathways to create what we believe
will become a major annual event in our city beginning this October. Pathways Business Heroes presented by Septen Financial will be a gala event, celebrating the many local businesses that employ individuals with Diverse Abilities in Kelowna, and the many volunteers who work behind the scenes to make those opportunities possible! To coincide with Community Living Month in British Columbia, the event will take place this coming October. The exact date and venue will be announced later this summer. Businesses will be recognized individually and special guests will be on hand to present awards to those being honoured. Limited tickets for the event will be available soon and will include a full, sit-down dinner. Corporate tables will also be available for businesses wishing to attend. Our business community in Kelowna has many heroes, and in partnership with Pathways Abilities Society, this fall we want to see to it those heroes receive the recognition and appreciation they deserve!
Monique Kaetler REALTOR®
2016-07-19 3:58:35 PM
OKANAGAN MONEY | SUMMER 2016
(778) 753 2020 ∙ email@example.com
MORTGAGE FUND BUILDS CONSISTENT RETURNS, CONSERVES CAPITAL AP Capital’s Success Stems from Commitment of Transparency to Investors
Ches Hagen AP Capital
WHAT’S AN MIC?
A Mortgage Investment Corporation (MIC) is a company created by virtue of the Residential Mortgage Financing Act in 1973. A MIC enables investors to invest in a pool of Canadian mortgages. Investing in mortgages has long been an investment vehicle available to sophisticated and affluent investors. AP Capital allows investors at all levels to share in the returns generated by mortgages backed by Canadian real estate.
oday’s low interest rate environment is a challenge to investors.
three years is: for 2015, 15.28 percent; 2014, 8.15 percent; and for 2013, 8.07 percent.
A one-year GIC at the Bank of Montreal will net you 0.85 percent per annum, and the Bank won’t give you anywhere near 2 percent unless agree to tie up your money for 10 years. Meanwhile, a bank savings account is akin to pouring money away given the even lower return, bank charges and the pernicious effect of inflation on virtually static funds. Meanwhile, the volatility of the equity markets in the post-Brexit world has left many investors wondering where they can place their funds with a reasonable expectation fund managers will endeavour to preserve their capital and have the track record to prove that that they can do so.
So what does AP Capital MIC actually do? As a mortgage investment corporation, it is in the business of investing in first and second mortgages sourced by AP Capital MIC Management Corp. (known as “the Manager”) through a well-established network of independent mortgage brokers and financial institutions. Security for the mortgage loans is in the form of independently valued real estate located mainly in the province of British Columbia and on occasion in the provinces of Alberta, Saskatchewan, Manitoba and Ontario. These mortgages are registered against the title of specific properties making AP Capital MIC secured creditors of the mortgagors/ borrowers. The Corporation has established strict policies and procedures relating to how it can loan the funds that are secured by way of the mortgages, including:
In short, where have all the good investment opportunities gone? This was the question that vexed me back in the mid-2000s when I was invested in a number of mutual funds through my RRSP and had regular bouts of “investment anxiety” whenever my quarterly statement would arrive. It wasn’t uncommon to see my portfolio value decrease. Still, I would save earnestly each year in order to contribute to my registered holdings and continue buying mutual funds as per my financial advisor’s advice. Time and again, the quarterly reports did not contain the results I hoped for, or expected. Yes, there were quarters where my portfolio increased in value, but it got to the point where the statements would arrive and I would think, “I just hope they do not go down.” At this point, I only wanted my investments to consistently rise in value – not at an unreasonable rate – just rise! But, over again, I found myself thinking, “I hope I just don’t lose money.” The idea of AP Capital Mortgage Investment Corp. (then Alta Pacific) was born when I could no longer handle the anxiety (and losses). I approached the other (now) founders of AP Capital to discuss how we could develop a business that treated capital preservation as the first and highest priority. Because of the group’s experience in Western Canadian real estate, we were confident this could and would be the cornerstone of our nascent company. Return on capital was an extremely important second priority as well.
SECURED CREDITORS Today, AP Capital still focuses on these sound principles and strives for consistent returns for its investors. At AP Mortgage Investment Corp. (MIC), the target rate of return to investors is 7 percent; the company has met this target since the first funds were invested in 2008. In fact, the performance of the last
Primarily lending on independently valued and desirable residential homes in urban areas of British Columbia and to a lesser extent select residential homes located in Calgary and Edmonton, Alberta. Balancing both first and second position mortgages in the portfolio. Not allocating more than 75 percent of funds in second mortgages.
When the Corporation’s funds are not invested in its mortgage portfolio, such funds must be held in a Canadian chartered bank.
ACTIVE & STEADY The Corporation holds all corporate funds with HSBC Bank Canada. The Manager monitors and manages the mortgage (loan) portfolio of the Corporation and makes decisions in the best interest of AP Capital MIC. On May 31st 2016, AP Capital had 262 mortgages (worth $54.5 million) under administration. The average size of mortgage is $208,000. The Manager also develops and implements all aspects of the Corporation’s marketing and distribution strategies and manages the ongoing business and administration of the Corporation. In exchange for the business operational services provided under the Management Contract, the Manager receives a fee from the Corporation, equal to three percent per annum of the net assets of the Corporation. Under the Canadian Tax Act, a Mortgage Investment Corporation must distribute all income earned in a particular year of operations to its
shareholders. The Corporation pays out all of its net income and net realized capital gains in the form of taxable distributions (referred to as “dividends”) within the year earned, or within 90 days from the end of the year (June 30th) as specified in the Tax Act. As a result, the Corporation does not pay income tax. All distributions to Open/Cash investors are taxed as interest income, while registered account holders (RRSP, TFSA, etc.) receive distributions tax free. How is AP Capital doing right now, you may ask? Mortgage activity in Western Canada has remained active and steady in AP Capital MIC’s 2015/2016 fiscal year and management continues to see strong demand in key sectors of the residential lending market. The current portfolio displays diversification and strong capital security. Annual returns are on track to meet the fund’s target return of 7 percent per annum for the year ending June 30th 2016. As we look to the 2016/2017 fiscal year, low interest rates continue to put downward pressure on the mortgage rates in all sectors; from Canada’s large institutional lenders to lenders like AP Capital. Management is mindful that low interest rates could translate into a slight decline in portfolio yield when considering its target return in the coming fiscal year.
CONFIDENT OF PERFORMANCE AP Capital’s lending has shifted in the last two years to a larger concentration of mortgages in British Columbia; with a focus on Greater Vancouver, the Lower Mainland, and Fraser Valley. Uncertain market conditions in Alberta, as a result of low oil prices coupled with a change in provincial government, have accelerated this shift. At the end of May 2016, AP Capital held 12.1 percent of the fund’s portfolio in Alberta with 87.5 percent of mortgage funds in BC. AP’s mortgage underwriting experience results in a discipline that avoids unique properties such as high-end homes/condos, acreages, construction mortgages, and development deals. The fund maintains a strong focus on single-family detached homes in target urban markets. We protect investors’ capital by maintaining a loan-to-value (LTV) ratio in the fund of less than 70 percent (at May 31st 2016 the portfolio LTV was 65.5 percent). AP MIC’s management objective is to protect investor capital while making sound lending decisions that yield consistent returns. Our client base has expanded steadily since we opened our doors in 2007 and now we count over 1,000 shareholder accounts, many of whom are drawn to invest in AP since our mortgage investment fund can be placed in registered plans such as RRSPs, TFSAs,
LIRAs and RESPs. As we enter our ninth year of operation, the managing partners are confident in the performance of the fund and have invested in a great team of people, strong partners, and technology to manage growth today and into the future. Our firm is bolstered by committed and knowledgeable internal employees and external stakeholders. We depend on valuable insight gained through our work with approved Exempt Market Dealers and their dealing representatives, as well as top firms and individuals in select accounting firms and legal practices. As AP Capital has grown over the past five years, the company has continually improved its policies and procedures and has made investments in software technology to manage growth and optimize financial reporting. As with every growing business in the 21st century, at AP Capital we know that it is imperative to capitalize on new opportunities through cutting-edge technology, and the systems we use are chosen for that purpose.
CLEAR PICTURE Our business is driven by two intertwined tenets of faith: commitment and transparency. In the early days of AP Capital, the founders and managing partners made a firm commitment, which they extended to every shareholder that has entrusted their savings to the fund. The commitment: be transparent at all times with shareholders and stakeholders, so that all parties can access the facts and always obtain a clear picture as to its state. Far too often, the investment world witnesses situations where parties are not aware of the critical working elements of a business — namely, its performance and financial health. Our commitment to publishing the “MIC Fast Facts” each month, our accessibility to every investor and Exempt Market Dealer, and our participation in associations and industry events mean that every AP capital shareholder and stakeholder has unimpeded access to our business. To all our shareholders, whether you’ve been with us for a short while or since 2008, we say thank you for your participation. Our team continues to work diligently to deliver results and we’re proud to have distributed positive returns every month, quarter and year since our launch eight years ago. If you want to know more about investing in AP Capital MIC, get in touch with our trusted dealer, Septen Financial; they’ll be more than happy to help you out. For more information, contact your local Septen Representative.
“Dedidicated to the furtherance of finance literacy and well-being.”
ISSUE 1 ∙ SUMMER 2016
Septen Financial Ltd. 778.753.2020 PUBLICATION
STEPHEN HILL Publisher ROBERT EGER Executive Editor CHUCK DUERDEN Managing Editor CHASE JESTLEY Creative Director NEXT ISSUE INC. Distribution
The editorial offices of Okanagan Money are located at 203 Rutland Plaza, 125 Highway 33 East Kelowna, Canada, BC V1X 4G7 Phone (778) 753 2020 Email firstname.lastname@example.org Fax (778) 753 5090 Toll-free 1 (844 385 2020)
2016-07-19 3:58:37 PM
W E H A V E T O M O RRO W C O V E RE D
ARE YO UR IN V E STM E N TS L A CKIN G GL O BA L FL A V O UR?
Savvy Canadian investors realize that globally diversified portfolios provide the best risk and return characteristics. Let us show you how adding a global flavour to your portfolio allows you to lead the Okanagan life more comfortably.
2016-07-19 3:58:40 PM
OKANAGAN MONEY | SUMMER 2016
(778) 753 2020 ∙ email@example.com
THE MACRO APPROACH TO INVESTMENT
Tyler Mordy’s Forstrong Fund looks global with Exchange Traded Funds (ETFs)
Charles Duerden Septen Financial
on’t talk about stockpicking to Tyler Mordy. This Kelowna-born fund manager, who has recently relocated back to his hometown from Toronto, has brought success to his investors by taking the global macro approach to investment. “The macro process is the history of wealth management,” Mr. Mordy explains. “Finance suffers from ‘physics envy.’ Investors want precision but emotions interfere and volatility rises. I believe in active management.”
When people think of globalization they think of information flows; I think rather of capital flows.”
Mr. Mordy manages $600 million within the Forstrong Global Asset Fund for whose management company, Forstrong Global Asset Management Inc. he is the president and Chief Information Officer (CIO). The Forstrong fund is entirely based on Exchange Traded Funds (ETFs) rather than individual stocks, and such has been his success, he is on track to expand the Fund’s assets under management to $1 billion within the next 18 months. Forstrong’s 19 employees manage about 3,700 accounts with an average account balance of about $110,000. Forstrong Global is now available to investors as a segregated fund, an investment fund that combines the growth potential of a mutual fund with the security of a life insurance policy. It was in London working as an analyst working for Deutsche Bank Asset Management where, said Mr. Mordy, he “fell in love with macroeconomic analysis” through observing the global flows of money.
AN ETF PRIMER An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does. An ETF is a type of fund which owns the underlying assets (shares of stock, bonds, oil futures, gold bars, foreign currency, etc.) and divides ownership of those assets into shares. The actual investment vehicle structure (such as a corporation or investment trust) will vary by country, and within one country there can be multiple structures that co-exist. Shareholders do not directly own or have any direct claim to the underlying investments in the fund; rather they indirectly own these assets.
But what is a global macro investment strategy? Rather than looking at the internal workings or relationships within individual companies, it’s based on the interpretation and prediction of large-scale events affecting national economies, or relating to their history and international relations. It involves forecasting and analysis of interest rate trends, international trade and payments, political changes, government policies, inter-government relations, and other broad systemic factors. A fund manager believing that the European Union is bound for
recession, for example, may short sell stocks and futures contracts on major EU exchanges or short the euro itself. The same manager who sees opportunity for growth in Malaysia might take long positions in Malaysian assets.
the renminbi? None, but Chinese bonds are the best performing.”
“When people think of globalization, they think of information flows; I think rather of capital flows. Greece and China can impact Canada, and since [the financial crisis of ] 2008, the DOWNSIDE PROTECTION By contrast, individual investors central banks have gone wild.” He can be disadvantaged by a lack of this maintains the upshot of “freakish broad approach. “Retail investors central bank policies” such as forcing are horrible investors because of negative interest rates, quantative horrible timing,” he said, “they are easing, and upping the tendency to behaviourally driven and they try to use “helicopter money,” i.e. printing outperform the market by picking money for specific infrastructure projects, has what they been to create consider to be diminishing the best stocks. The goal of a money returns and greater However, our core belief is manager is to extract currency volatility. that you can In the new, emotion from the ‘hyperglobalized” outperform by picking whole equation. world that has asset classes.” emerged since the financial crisis, “Making money is a game of mistakes,” Mr. he believes the central banks try to Mordy advised. “Winners make outdo the effects of one another small mistakes, losers make big by their unorthodox policies. mistakes. There’s an old quote: “Central banks are not stewards of ‘Every investment is right; it’s just the economy,” he warned. Noting that investors tend to “check their the timing that’s wrong!’” stocks too often,” the result of Mr. Mordy believes there is a this manufactured volatility is to strong case for Canadian investors create emotion which leads to poor to break away from their home decisions. “The goal of a money bias and think globally. Equities manager is to extract emotion from outside Canada, including those of the equation,” Mr. Mordy said. developed and emerging markets, “Our role is that of hired hands and account for 96 percent of global our mandate is to deliver smooth market capitalization and represent returns by building in downside the bulk of the world’s equities. protection.” According to a recent survey from the International Monetary Fund SUPER TRENDS (IMF), however, Canadian investors His investment guidelines? “We only allocate about 40 percent always have 40 percent of a portfolio of their total equity investments in equities. On the bond side, we tilt outside Canada. A Canada-centric to the best currencies to create high investment strategy means investors yield. It’s not static.” build their portfolios mainly on Overall, Forstrong Global applies energy and financial stocks – a three-tier investment process to its some 50 percent of the TSX – so fund management. This begins with shutting themselves off to greater identifying major trends. Forstrong opportunities in growth areas like develops and tracks a number of technology and healthcare. global scenarios based on “super
“When the Canadian market falls short, it shows that it’s globally deficient, like it’s needing vitamins,” he explains. “This is true worldwide but especially in Canada; how many investors have Chinese bonds in their portfolio in the Chinese currency,
types and corresponding ETFs that are congruent with these trends. The third tier is managing currency. This is done by employing hedged and unhedged currency exposures – which can have a significant impact on the risk and return characteristics of global strategies – to actively modulate risk. “At Forstrong our core belief is in super trends that last three to five years. It’s grunt work,” elaborated Mr. Mordy, “and we have very spirited debates.” He said Forstrong treats its data “more like a library” to analyze macro trends in the context of history. “After 2008,” he explained, “there was a belief that gold would rocket to $5,000 and interest rates would leap but that was not confirmed by history.” The Forstrong strategy has worked, delivering returns above benchmark over the last ten years (see monthly performance chart below). Forstrong has had a varied history of ownership. Founded as Hahn Investment Stewards & Co. Inc., it was bought into by Jovian Capital, which in turn was taken over by iA Financial, a Canadian institution founded in 1892 with $102 billion in clients assets. Jovian bought into Hahn, said Mr. Mordy, because “all investment companies want get into the wealth management space, and iA’s purchase of Jovian was an opportunity to get into ETFs since Forstrong is 100-percent ETF.” As such, Forstrong represents a “lowcost and tax-efficient” way to invest in global asset classes and manage money. In conclusion, the Forstrong Global president and CIO not only thinks globally about what regions of the world would to give the best returns to his investors, he also “travels a lot, too, to see what’s going on,” admitting to “wearing out a lot of shoe-leather” in the process.
trends,” i.e., themes and events that are expected to drive future portfolio returns. To choose the right asset class, Forstrong uses a multidisciplinary process that involves fundamental and behavioral analyses and then selects and combines asset
FOCUS: Tyler Mordy Tyler Mordy was born in Kelowna, British Columbia and graduated from Mount Boucherie High School. He later completed a joint degree in Mathematics and English Literature at the University of British Columbia. When he was 21 he moved to London to work for Deutsche Bank Asset Management as an analyst focusing on developments that straddled North America and Asia. He has always worked as an analyst, never a trader. After three years he returned to Canada in 2003 upon being hired by Wilfred Hahn to serve as director of research at Hahn Investment Stewards & Co. Inc., the first Canadian management company to provide actively managed diversified global strategies made up of exchangetraded funds (ETFs). Jovian Capital bought a significant interest in Hahn in 2009 after which Jovian itself was acquired by iA Financial in 2013. Mr. Mordy was then appointed to the role of Chief Intelligence Officer (CIO). Hahn Investment Stewards & Company Inc.
rebranded itself as Forstrong Global Asset Management Inc. in August 2015 with Mr. Mordy serving as both president and CIO of the company. In May 2016, iA Financial added the ETF-based Forstrong Global Asset Fund to its Savings and Retirement Plan fund line up. ETF.com recently profiled Mr. Mordy as one of the “best and brightest” working in the ETF industry and described him as “a money manager for the modern era.” CNBC has also described him one of the “best independent ETF experts.” Mr. Mordy returned to his hometown of Kelowna in the summer of 2015 as a lifestyle decision and now divides his time between Kelowna and Forstrong’s head office in Toronto.
2016-07-19 3:58:44 PM
6 OKANAGAN MONEY | SUMMER 2016
Monique Kaetler Century 21
“Dedidicated to the furtherance of finance literacy and well-being.”
HOME SALES BREAKING ALL RECORDS
elowna has been a busy place over the last few months with many of our buyers coming in from the Lower mainland and other provinces. It has been many years since we have seen multiple-offer situations and the empty nesters that were planning to downsize are benefiting from the frenzy. We are seeing a lot of homes in the $400,000 to $500,000 range flying off the market as quickly as they come on. There are still some challenges to selling higher-priced homes and strata properties, but not as in the recent past.
The big question is, as always, how long will this last? There are predictions that the Kelowna market will continue to climb for at least another year and that, in the meantime, the Vancouver market will plateau…….I may have to consult my crystal ball!
“Housing demand is exceptionally strong across the southern regions of the province,” said Cameron Muir, BCREA Chief Economist. “Consumers appear to be particularly active in the Vancouver Island, the Fraser Valley and the Thompson/ Okanagan regions.
In the words of The British Columbia Real Estate Association
“Vancouver, BC – May 13, 2016. BCREA reports that a record 12,969 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in April, up 30.3 per cent from the same month last year. “Home sales last month beat March’s record of 12,560 units. Total sales dollar volume was $9.64 billion in April, up 52.7 per cent compared to the previous year. The average MLS® residential price in the province was up 17.2 per cent yearover-year, to $743,640.
“Strong employment growth helping underpin consumer
confidence,” added Muir. The B.C. economy employed more than 78,000 additional workers during the first four months of the year, an increase of 3.5 per cent compared to the same period last year. The year-to-date B.C. residential sales dollar volume
increased 64.3 per cent to $31.2 billion, when compared with the same period in 2015. Residential unit sales climbed by 36.2 per cent to 28,028 units, while the average MLS® residential price was up 20.6 per cent, to $761,860.
MAXIMIZE THE EQUITY IN YOUR REAL ESTATE How to Create Value in Your Home!
Mardi Hassell VERICO Versa Mortgage Corp
or investors looking to maximize their return on investment, here’s all you need to know: building an income suite is by far the most profitable homeowner reno. How do I increase the value of my property? That’s the question on every homeowners mind. There are two key survival strategies. The first is to think long term, have a plan and stick to it. History shows that this plan of action can pay off. The second tactic is to outperform the market. This means ensuring your property increases in value at a greater rate than those in your surrounding market. One way to do that is through renovations - but not all projects are created equal when it comes to generating a return on investment (ROI). Here are the top five renos for ROI
on investment: Building an income Suite Also known as a rental suite, this is by far the most profitable reno a homeowner can undertake. Income suites typically have a 150 percent to 250 percent ROI. Painting This is an inexpensive way to freshen up a property. Picking neutral tones and doing a good job are key. This simple reno project gives 100 percent ROI. Renovating Kitchens and Bathrooms Kitchens should be bright and spacious with a smart layout. Replacing old appliances with inexpensive and more efficient newer ones also adds a lot of appeal. Bathrooms are equally important. The more you have, the better the
ROI. This delivers about 75 percent to 10 percent ROI. New Flooring This has a dramatic impact and hard surfaces are the way to go. Laminate flooring is inexpensive, easy to lay, durable and looks great. With modern styles and improved design, it has become the flooring of choice for real estate investors. New flooring can generate an avg. of 70 percent to 90 percent ROI. Light Fixtures and Door Hardware These can reveal the true age of a property. Installing proper lighting and a few nifty fixtures in the right places, namely the kitchen and dining room, will brighten up the space and create atmosphere. With the right touch, updating light fixtures and door hardware can generate 60 percent to 75 percent ROI.
Current Discount Mortgage Rates Variable Rate
* Rates subject to change and OAC.
Canadian Qualifying Rate Rate 4.64%
NEGATIVE INTEREST RATES IN CANADA?
Michael Barcley Guardian Capital
here is a quick rule for calculating roughly how long it takes to double money, called the “Rule of 72”. Dividing that number by your expected rate of return will give you a rough idea of how long it will take for your money to double. If the equity market is expected to provide 8 percent, its historical average, then every nine years your money should double – if you earn the average every year. As the rate of expected return is tied to risk, investment counsellors may find this Rule instructive when constructing the asset mix for clients. The Rule even works for a zero return as money invested without a return will obviously never double. But who would invest for zero return? “The Bank is now confident that Canadian financial markets could also function in a negative interest rate environment,” said Bank of Canada Governor Stephen Poloz in December of 2015. How many
years would it take to double an investment at negative rates? What is the case for investing in bonds if rates go negative? Who would buy a bond with a negative return? First, we should clarify the position. Bonds could trade to negative yields in Canada, but there are no guarantees of this drastic policy action coming from the Bank of Canada. The current overnight rate is 50 basis points, which is historically quite low, but the Central Bank still has room to move before rates go negative – and to be sure other, less blunt implements are likely to come into play before rates move below zero. The Bank, as evidenced by Mr. Poloz’s comments above, is likely to do a great deal of talking about negative rates before imposing them as “going negative” has some pretty extreme attachments to it. Canadians are used to being
charged a fee for their banking, but a negative rate environment could mean that a deposit of $10,000 falls to $9,950 in a year. Over and above a fee for maintaining a bank account, money will effectively disappear from the account each month. The intent of negative rates is to push deposits into the system, either through consumer spending or through investment. This experiment has been run in Europe, and the answer is that it works – sort of. Savers are prepared to accept some level of negative yields to maintain liquidity, which on its face seems odd, but it can also be understandable behaviour. Which brings us to buying bonds with negative yields, and who would do that? Lots of people. Insurers looking to match liabilities, funds who have to own Government debt, those who believe that a small negative yield is worth the guarantee for repayment of principal, and those
who are avoiding all risks other than trivial losses. Negative yield bonds are unlikely to be seen in Canada, and corporate bonds will continue to offer spreads which will create positive returns. The trend for real returns on fixed income has been around 2 percent in the past, this trend may be tested by negative rates – if we see them in the future. Negative rates could feel deflationary, they would test both conventional math and patience. We have seen negative rates in Europe, and European investment continues. The markets, and banks, remain open. The great continental experiment with negative rates should give everyone a sense of relief, the markets continue on. Fixed income has always involved being patient, prudent investment involves thinking the long game. No matter where rates go tomorrow, there is no need to fear them.
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OKANAGAN MONEY | SUMMER 2016
(778) 753 2020 ∙ firstname.lastname@example.org
BORROWING TODAY TO BUILD WEALTH FOR TOMORROW Use your Borrowing Power to Invest in your Future
Charles Duerden Septen Financial
very day, we use borrowed money to spend on lifestyle items that we want now, such as furniture, clothes, electronics and automobiles. Imagine using your borrowing power to invest for the future and build wealth instead? You may already be doing it with an RSP loan or a mortgage, because investments like an RSP or a home have the potential to increase in value over time. This is a good type of debt, because rather than borrowing to spend on lifestyle items that depreciate quickly, when you borrow to invest, you’re investing in your future. Working closely with your Septen Financial advisor, you may be looking at investment strategies that will help you build wealth while utilizing a disciplined approach to saving. There are three factors to consider as you work with your advisor to create an investment strategy to make your goals a reality.
Let’s assume you have excess cash flow of $920 a month, and you need a car. You could use the entire $920 a month to finance a $50,000 car, assuming a four percent annual interest cost to finance the car over five years. Although, assuming a rate of depreciation of 40 percent over five years, your car will have depreciated to a value of $30,000. Consider this option instead – use your monthly cash flow to purchase a car and build
your wealth at the same time. Instead of paying $920 to finance a $50,000 car, you could buy a $30,000 car, where your monthly payment would be $553 instead. This would free up $367 a month, which could be used for a principal and interest payment on a $20,000 investment loans. Assuming a 4-percent annual interest cost on a 5-year investment loan, after 5 years, you would have paid off the loan, and the combined value of your car and investments could be $42,333. It’s straightforward: borrowing to invest is smarter than borrowing to spend!
LONG INVESTMENT HORIZON • Let’s take a closer look at investment loans. An investment loan allows you to borrow money to purchase investments that have the potential to increase in value, and: •
Accelerates savings through an initial lump sum investment and enables to start compounding returns right away. • Interest costs may be
tax deductible. (However, interest is not deductible in all circumstances and individuals should consult qualified tax specialists for more information.) •
Can be used as a wealthbuilding tool
Is an investment loan right for you? Only your Septen Financial advisor can help you determine if investment lending is right for you. In general, investors who may benefit from this strategy will have: •
A long investment horizon
Available cash flow
A high risk tolerance!
Septen Financial works closely with financial institutions that have been delivering investment loans for over 20 years. The loan products we are happy to provide are among the most competitive in the industry and offer: •
Flexible payment options
Manageable loan amounts starting as low as $10,000
Broad fund eligibility
A wide range of product features
REDUCING INVESTMENT COST We have mentioned building wealth through investment depends upon compounded returns, but how what exactly does this work to the benefit of the investor? Compound returns on an investment means that returns are calculated not only on the initial investment, but also on the accumulated growth from year to year. Having a larger initial investment growing for the longest possible time is essential for compounding success. Here’s another topic we have mentioned above that readers might not be familiar with: interest deductibility. What is it, and how can this benefit the investor? Generally speaking, interest paid to borrow money to earn investment income is tax deductible. When the interest is deducted, it can be an effective way of reducing the overall cost of an investment lending strategy, although as we have mentioned above, interest is not deductible in all circumstances. While investment loans have the ability to magnify gains, they also have the potential to magnify market losses. Leveraging involves greater risk than purchasing investments using only your own cash resources because it has the potential to magnify investment losses. You are required to repay the loan, including interest, regardless of the investment return. An investment loan may limit your access to credit due to the outstanding debt of the loan. Work with your Septen advisor to understand both the benefits and risks of this strategy.
Septen May Have A Life Insurance Policy For You!
hen the human immunodeficiency virus was first identified in the 1980s, those infected were considered to have received a virtual death sentence. Today, anti-HIV therapy has advanced to the point where a young person who becomes infected with the virus but who takes daily medication and has avoided untreated co-existing health issues— such as addiction, depression, schizophrenia, or co-infection with hepatitis – can expect to live decades longer. For these reasons, a leading Canadian insurance company now offers life insurance to people who are HIV-positive. The Company made the decision after reviewing the latest mortality and long-term survival rates of HIV-positive Canadians and gained a better perspective on individual risk profiles. On the basis of extensive research it has carried out in the United States, the Company has identified the following key criteria for consideration of HIV positive clients. The following, somewhat technical list, is designed to determine if an
applicant will qualify: •
Compliant with antiretroviral therapy for at least 5 consecutive years
Well followed by a specialist
Viral load undetectable for the last 2 years and current CD4 count ≥350
Current negative Hepatitis B and C testing and no history of hepatitis
No viral treatment
No history of IV drug use or other substance abuse
No history of coronary artery disease, diabetes, or cancer
No AIDS-defining illness
The premium rating charged for each case will be determined by the age, sex and smoking status of the applicant and is higher at younger ages. As the Company continues to monitor the progress in treating HIV, it will revisit the guidelines developed so far for this and other
chronic conditions the Company routinely underwrites, such as diabetes. Applications will be submitted on a trial basis with a fully completed standard application for life, critical illness and disability insurance, so a picture of the entire risk can be painted. An Attending Physician’s Report (APS) will be ordered. Once the APS has been reviewed, additional underwriting requirements may be determined. At a minimum, vitals will be recorded, and samples of blood and urine will be required.
Cohort Collaboration, an HIV research centre, said the overall life expectancy of Canadians undergoing antiretroviral treatment for HIV had climbed to 65 years. In a statement, the Company said
it continues to invest in underwriting research and innovation as it seeks new ways to expand its product reach to Canadians who want to make insurance a part of their financial plan
Limited time offer: 3.45% on all investment loans
According to the most recent government data, roughly 75,000 Canadians were living with HIV in 2014, but Ottawa estimates that more than one in five of them do not know they have the virus. A report last year by the Canadian Observational
I wanted to share some great news! For a limited time, we’re offering a reduced rate of 3.45% (prime + 0.75%) on new investment loans regardless of program type or loan size (minimum $10,000). Take advantage of the offer today, as it’s only available from June 13, 2016 to October 31, 2016. Visit B2B Bank loan rates for further details.
call (778) 753.2020 for further details
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Pooled Western Canadian Mortgages * Residential Mortgages * Working for Western Canadians
Annual Targeted Return 2011 11.65%
This investment is offered through Pangaea Asset Management Inc.
Septen Financial Ltd. Phone: 778.753.2020, Email: email@example.com Suite 203 Rutland Plaza, 125 Highway 33 East, Kelowna, B.C. V1X 2A1
Past performance is not indicative of future returns. This advertisement is for information purposes only and does not constitute an offer to sell or a solicitation to buy the securities referred to herein. The information contained in this advertisement is for your information only and is not intended to provide any tax, legal or financial advice. If there is any conflict between the provisions of this presentation and a relevant Offering Memorandum, the latter shall govern. Please consider a fundâ€™s objectives, risks, and charges and expenses, and read the Offering Documents carefully before investing. Any reproduction, modification, distribution, transmission, or republication of the content, in part or in full, is prohibited.
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