Financial Planning Tips from Warren MacKenzie

Seeking Alpha, July01, 2007
Larry MacDonald

I am finding Warren MacKenzie’s The Unbiased Advisor to be a good source of financial planning tips - and not just the usual generic kind. There is also detail on specific financial products and practices. Here’s a few from his book:

  1. Segregated funds have high management expense ratios but can be useful because they are creditor-proof and provide estate-planning tools for elderly or ill people by allowing i) naming of beneficiaries outside an estate (with no requirement to disclose to estate beneficiaries), ii) avoidance of probate fees, iii) no waiting period to transfer benefits upon death, and iv) purchase without a health certificate (unlike insurance policies)

  2. Don’t turn tax-free income into taxable income by putting growth investments into an RRSP (which converts capital gains into income that will be taxed at a higher rate when withdrawn)

  3. Buy front-end load mutual funds at 1% to 2% commissions instead of rear-end load mutual funds because most people end up selling the latter before fees decline to 1% to 2% (for various reasons such as departure of manager, etc)

  4. People planning to live off their investments lose tax benefits if they chose to do it all through interest payments from income investments versus a combination of income investments and equity (draw downs of equity capital have lower tax burden since return of capital has a zero inclusion rate and capital gains a 50% inclusion).

Larry MacDonald

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