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Saving for Retirement and Managing your Money: There’s Someone for Everyone

Saving for retirement and managing your money
Don’t get frustrated by your money

Saving for retirement and managing your money can be frustrating. Many of us face a similar long-term problem when it comes to managing our wealth: we need to save enough of it in our working years to meet our uncertain retirement needs. Save too much and you sacrifice too much in your working years, save too little (or manage it poorly) and you risk running out of money before you pass away.

This seems like a simple proposition, but like many things in life, it’s not as simple as it first seems. Understanding financial jargon, making decisions under uncertainty, managing market risk and cycles, minimizing taxes, and doing it all in an efficient and cost-effective manner is not easy. While some possess the time, skills, knowledge, and desire to do it themselves, this approach is not for everyone and can have discouraging results when it’s applied by those lacking the skills to consistently execute it.

When seeking the services of a professional wealth advisor it can be difficult to find the right fit; it is important to understand that different educational and licensing requirements provide many different options for investors, and that financial firms are different. For example, if an advisor is licensed only with the Mutual Fund Dealers Association (MFDA), they are limited to talking about mutual funds, whereas if they are licensed with the Investment Industry Regulatory Organization of Canada (IIROC), they are licensed to offer you a much broader range of financial solutions.

One of the most important elements in choosing a wealth advisor is matching your approach and style of investing with that of your advisor. Understanding the kind of advisor you are working with and the firm they work for are critical when making this assessment. Asking the right questions up front can save you a lot time and energy later. If you don’t understand financial jargon, or know the right questions to ask, we recommend speaking with someone you trust that knows and can help.

Saving for retirement and managing your money does not have to be hard. If you feel that it is or you are getting frustrated by your results, it might be time to consider some professional assistance.

For more detail about MFDA licensing, please see www.mfda.ca/about/

For more detail about IRROC licensing, please see www.iiroc.ca/about/

Shiny Things

Steve, what are your thoughts on gold? Should I include some in my portfolio as a hedge against conflict between the US and Iran?”

The short answer to this question is we include a small allocation to gold in client portfolios for diversification purposes. This allocation is benchmarked at 1-2%; variations from the benchmark are a tactical decision based on several financial market factors.

Going slightly above benchmark weight in gold became of interest around August 2019 when the Fed started to cut interest rates during an expansion – a policy usually reserved for recessionary times. A combination of easy monetary policy, expansionary fiscal policy, and tight labour markets tends to create inflation which benefits gold. An expanding global economy also tends to weaken the USD, so early signs that the global economy is gaining steam would be another reason to like gold and other metals at this juncture. 

If forced to make a choice, my feeling is the Fed seeks to support continued economic expansion. After this lengthy period of persistently low (below target) inflation, I expect the Fed to prioritize the full employment component of its mandate over its second monetary policy goal of stable prices – generally accepted to mean inflation of about 2% – and let inflation run above target for a time. Should inflation increase without increases in the policy rate, it would take the “real” interest rate into negative territory which is positive for gold. (For a more in-depth look at the relationship between real interest rates and gold prices, refer to this analysis by PIMCO at https://global.pimco.com/en-gbl/insights/viewpoints/demystifying-gold-prices). 

The recent events in Iran are a reminder that demand for gold also has a geo-political component, although this is not enough to justify an overweight position (it supports the 1-2% benchmark allocation). Geopolitics is very unpredictable but is clearly supporting gold right now.

So, as a short answer, yes, a ~2% allocation to gold makes sense in client portfolios for diversification purposes. To go higher, I would be expecting inflationary conditions. While I think the balance of probability is that we get continued easy policy and some inflation, the factors that have many expecting a recession this year must not be overlooked. I wouldn’t over do it on gold until I had more confidence in this expansion gaining momentum in conjunction with a continuation of loose monetary policy.

If you have any questions about wealth management, don’t hesitate to contact us. We’re always happy to talk.