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Retirement Planning - The Opportunity and Responsibility. Credential Group Sales Skills Development - Spring 2001. Daryl Diamond CFP CLU CHFC Diamond Retirement Planning Ltd. THE POST-LUNCH DIP. www.personalfinanceseries.com. Monday of next week. AEGON Mission Statement. Make Money.

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retirement planning the opportunity and responsibility

Retirement Planning - The Opportunity and Responsibility

Credential Group

Sales Skills Development - Spring 2001

Daryl Diamond CFP CLU CHFC

Diamond Retirement Planning Ltd.

aegon mission statement
AEGON Mission Statement

Make

Money

Respect

Others

Have

Fun

five areas to cover
Five Areas To Cover
  • THE OPPORTUNITY AHEAD
  • ILLUSTRATE OUR RESPONSIBILITY
  • THE CRITICAL ROLE OF PLANNING
  • THE VALUE OF WHAT WE DO
  • THE POWER OF “TEAM WORK”
booming opportunity number of retirements year
Booming OpportunityNumber Of Retirements / Year

Currently 225,000

By 2005 265,000

2005 - 2020 320,000

2020 - 2029 425,000

Source: Toronto Star, Aug. 1999

keys to success
Keys To Success
  • Understand and focus on their chosen market
  • Develop systems and procedures for that market
  • Possess conviction in the value of their work and love what they do
  • Become recognized for the work they do
processes that focus on
Processes That Focus On

Issues that are important and unique to them

  • Client education and awareness
  • Comprehensive planning
  • Investment portfolios
  • Risk management
  • Service
five stages of retirement planning
Five Stages of Retirement Planning
  • Accumulation
  • Positioning
  • Income Structure
  • Disposition
  • Distribution
five stages of retirement planning10
Five Stages of Retirement Planning
  • Accumulation
  • Positioning
  • Income Structure
  • Disposition
  • Distribution
slide11

I DECIDED NOT TO LEARN HOW

TO PLAY THE PIANO …

BECAUSE I HEARD IT TOOK TEN

YEARS TO LEARN TO PLAY IT WELL

… UNFORTUNATLEY, I MADE THAT

DECISION TEN YEARS AGO

slide12

How Inflation Erodes Your Income

Future Purchasing Power of $1,000

at 2% inflation

at 4% inflation

slide13

Inflation And Its Impact On Prices

MENU ITEM 1967 TODAY

Hamburger $0.20 $1.15

Cheeseburger $0.25 $1.25

French Fries $0.20 $0.95

Milkshake $0.20 $1.45

Soft Drinks $0.10 $0.99

Coffee $0.10 $0.75

Smiles Free

Still Free

slide14

Canada’s Demographic Reality

Number of Births in Canada By Year

1994

Year

slide15

Provincial Health Care Spending

by Age and Sex

Canadian Average, 2000

current dollars

age group

Sources: Canadian Institute for Health Information 2000

inflation and political issues
Inflation and Political Issues

As all levels of government search for revenues

Utilities

Property Taxes

Income Taxes

Estate Taxes

Dental and Medical Costs

inflation and political issues17
Inflation and Political Issues

As all levels of government search for revenues

Utilities

Property Taxes

Income Taxes

Estate Taxes

Dental and Medical Costs

Prescription Drugs

inflation and political issues18
Inflation and Political Issues

As all levels of government search for revenues

Utilities

Property Taxes

Income Taxes

Estate Taxes

Dental and Medical Costs

Prescription Drugs

Health Care “Premiums”

Long Term Health Care Costs

two key contentions
Two Key Contentions

The Baby Boomers will use retirement assets

to pay for those services that, today, we take for

granted

The government will move to a system of

taxing assets as well as income

advisor opportunity
Advisor Opportunity
  • Diversify assets by type, geography and

tax treatment

  • Shelter taxable growth through

Unrealized capital gains

Investment funds set up as corporations

Cash value life insurance

  • Position to receive varying types of

taxable income

the quality of personal financial advice
The Quality of Personal Financial Advice

Dalbar Inc Market Research

  • 85% Want investment advice
  • 80% Want advice on minimizing taxes
  • 70% Want the highest investment returns
  • 64% Want a complete financial plan
  • 63% Want help in defining their goals
slide22
In 1996, fewer than 35% of tax filers made an RRSP contribution of any kind
  • There is over $216,000,000,000 in unused

RRSP contributions

Source: Revenue Canada

Source: KPMG Consulting 1998

the reality
The Reality

Arecent survey of over 1,200 Canadians , by a major financial institution, revealed the following;

  • 21 % have not started to save for retirement
  • 51% have saved less than $30,000
  • 33% have saved more than $100,000
  • 7% have saved more than $400,000
  • 62% expect to work to age 65 out of necessity
  • 72 % do not have a financial plan even though

48% use a “financial advisor”

Source: The Financial Post

five stages of retirement planning24
Five Stages of Retirement Planning
  • Accumulation
  • Positioning
  • Income Structure
  • Disposition
  • Distribution
what is different about this market
What Is Different About This Market?
  • Planning driven
  • Money driven
  • People are seeking our services
  • Client loyalty / retention is exceptional

AND …

according to the globe and mail
According To The Globe and Mail

$700,000,000,000

of investable assets are in the hands of Canadians over the age of 55

the retirement income market areas of specialized knowledge
1. Income Structure

2. Investment Portfolio

3. Health Risk Management

4. Wealth Transfer

5. People

The Retirement Income Market,Areas of Specialized Knowledge
changing factors

Year

Life Expectancy

Income Factors

1965

1975

1985

Today

17.5 Yrs

2010

20 + Yrs

Changing Factors

Male Age 65

7.5 Yrs

Only a few retirement years to fund

CPP commences

10 Yrs

Appreciating real estate values

High nominal interest rates

14 Yrs

Excessive taxation

Excessive Government borrowing

None of the above apply in the

same manner

opportunity
Opportunity
  • Concern over viability of CPP / OAS
  • Rarity of pension plans
  • There is an increased need for planned saving through RRSP and Non-RRSP vehicles …
  • This money MUST be intelligently invested if targets are to be reached
the two factors from two perspectives
The Two Factors… From Two Perspectives

Accumulation

Retirement

Income

Return

Risk

Risk

Return

In the retirement market, there is an incredible opportunity

in risk analysis / risk management

becoming a risk manager
Becoming A Risk Manager

Capital Loss

Investment Loss

Purchasing Power Loss

Health Related Loss

Tax Loss

investment results
Investment Results

Investment returns

Investor behaviour

+

our consulting role
Our Consulting Role
  • It is the same for investment portfolios as it is for structural planning …
  • We are simply trying to help the client reduce the number of “unknowns”
  • Involve them so they will understand
slide35

Most Common and Costly Mistakes Made by Investors

  • More time spent “picking funds” than on asset allocation
  • Lack of discipline / impatience
  • Unrealistic expectations
  • Trying to time the market
slide36

Investor Vs. Investment Returns

  • Mutual Fund Investors earn far less than reported returns, due to their behaviour
        • S&P return 1984-1997 = 17%
        • Fund investor returns = 6.7%
        • Average fund retention = 3 years
  • Conclusion
      • -In their attempt to cash in on impressive market gains, investors jump on the bandwagon too late and switch in and out of funds trying to time the market
      • -By not remaining invested for the entire period, investors do not benefit from the majority of market appreciation
      • Dalbar Inc. Investor Behaviour Study, 1997
slide37

Most Common and Costly Mistakes Made by Investors

  • More time spent “picking funds” than on asset allocation
  • Lack of discipline / impatience
  • Unrealistic expectations
  • Trying to time the market
  • Chasing returns, buy high and sell low
advisors are no better
Advisors Are No Better !

January 01 2001 - July 31, 2001

AGF Mutual Funds $2,000,000,000 net sales

International Value

70%

Fidelity Mutual Funds$1,000,000,000net sales

slide39

Most Common and Costly Mistakes Made by Investors

  • More time spent “picking funds” than on asset allocation
  • Lack of discipline / impatience
  • Unrealistic expectations
  • Trying to time the market
  • Chasing returns, buy high and sell low
  • Expecting all investments to perform positively at

the same time

insight pool performance 1 year returns to june 30 2000
Insight Pool Performance1 Year Returns To June 30, 2000

Canadian Value 49.57 % Global Equity -3.1%

Canadian Growth 21.54 % Global Equity RSP 2.82 %

Canadian Dividend 27.85 % Global Small Cap 24.37 %

Canadian Small Cap 19.84 % Cdn High Yield Inc -0.67 %

U.S.Value - 12.56 % Cdn Fixed Income 3.30 %

U.S. Growth 10.86 % Global Fixed Inc - 0.46 %

International Value 20.28 % Money Market 4.72 %

International Growth 37.51 %

Source: C.I. Mutual Funds

slide41

Most Common and Costly Mistakes Made by Investors

  • More time spent “picking funds” than on asset allocation
  • Lack of discipline / impatience
  • Unrealistic expectations
  • Trying to time the market
  • Chasing returns, buy high and sell low
  • Expecting all investments to perform positively at

the same time

  • Expecting a manager’s investment approach to work

all the time

  • Not enough proper diversification
true diversification includes
True Diversification Includes ...
  • Different Asset Classes
  • Different Assets
  • Different Geographical Content
  • Different Management Styles
slide43

High

Return

Low

Return

Low

Volatility

Exploring the Efficient Frontier

You are not here !

High

Volatility

the three most difficult things to do
The Three Most Difficult Things To Do
  • Climb a fence that is leaning toward you
  • Kiss a person who is leaning away from you
  • Buy an investment fund that is flat or negative in recent performance
investment returns
Investment Returns

Assuming capital of $200,000

Years before account is exhausted

Monthly 5.5%7.0%8.5%

Income

$1,500 16.8 20.5 28.5

$1,500 @ 2.5% 13.5 15.3 17.8

how long will your investments last
How Long Will Your Investments Last?

5%6%7%8%9%10%11% 12%

6% 37 * * * * * * *

7% 25 33 * * * * * *

8% 20 23 30 * * * * *

9% 16 18 22 29 * * * *

10% 14 15 17 20 27 * * *

Rate of

Return

Rate ofWithdrawal

Years

* Capital will never be exhausted

what are clients really seeking
What Are Clients Really Seeking?
  • A Trust Relationship
  • Security and Safety
  • Peace of Mind
  • Care For Loved Ones
  • Remembrance / Legacy
  • Insight
use our expertise
Use Our Expertise

Most people plan only one retirement

How many things do people do well

that they do only once?

use our expertise49
Use Our Expertise

Most people plan only one retirement

How many things do people do well

that they do only once?

We plan 2.5 retirements each week

five stages of retirement planning50
Five Stages of Retirement Planning
  • Accumulation
  • Positioning
  • Income Structure
  • Disposition
  • Distribution
slide51

Your health is your wealth

It may be your health

that destroys your wealth

slide52

REASONS FOR RETIRING

%

Source: Statistics Canada General Social Survey, 1994

slide53

Major Causes of Death

in 1900

Pneumonia

Tuberculosis

Enteritis

Stroke

Heart Attack

Nephritis

Accidents

Infancy

Cancer

Senility

slide54

Major Causes of Death

in 1993

Heart Disease

Cancer

Stroke

Accidents

Chronic Pulmonary

Pneumonia / Influenza

Diabetes

Chronic Liver / Cirrhosis

Arteriosclerosis

Suicide

slide55

Critical Illness

Major costs of dealing with an illness that are borne by you:

1. Adapting your residence for special needs

2. Paying for private care at home or for a care facility “per diem”

3. Seeking more immediate medical treatment

4. Paying for experimental or alternative medical treatments

5. Seeking the best physicians and facilities to treat your illness

6. Covering the costs of extended travel or relocation

7. Paying the costs of drugs and treatments not covered under provincial plans

the complete list of u s medical facilities that take canadian money at par
The Complete List of U.S. Medical Facilities That TakeCanadian Money At Par

1.

2.

3.

4.

5.

using your own dollars for critical illness costs
Using Your Own DollarsFor Critical Illness Costs
  • To get $1.00 U.S. requires C$1.50
  • From RRSP … it requires $2.00 to get

$1.00 After Tax

  • To get $1.00 U.S. , after-tax, requires

$3.00 from your RRSP

  • So, an $80,000 U.S. procedure will take

$240,000 of RRSP assets

slide58
If I could show you a way to have access to the U.S. healthcare system for 4 or 5 dollars a day, would you be interested?
some points to address
Some Points To Address
  • What do think of the current state of the Canadian Health Care System?
  • This is as good as it is going to get.
  • There is a two-tier system already in place. Get care here or go the U.S.
slide60

Providing You With A Choice

When Critical Illness Strikes

Your Only Choices to Cover Expenses May Be:

1. Use retirement asset (RRSP’s, Savings etc.)

2. Sell fixed assets ( House, Cottage, Valuables)

3. Settle for what treatment is available and when it is available

4. Impact other family members financially and emotionally

slide61

Critical Illness Coverage

1. Allows people to make choices

2. Protects lifestyle of you and spouse

3. Refunds all premiums at death if no prior claim has been paid

The Canadian Health Care System is not going to get any better !

slide62
Always be nice to your children …

… because they are the ones who will choose your rest home

Phyllis Diller

do the following reflect your feelings and priorities
Do The Following Reflect Your Feelings and Priorities?

I DO WANT TO

  • Continue to enjoy a certain quality of lifestyle
  • Ensure my spouse can enjoy retirement
  • Be able to make choices
  • Maintain my independence and dignity
  • Be able to have access to the amount of care and the type of care that I will need
do the following reflect your feelings and priorities64
Do The Following Reflect Your Feelings and Priorities?

I DON’T WANT TO

  • Be a burden to my spouse or on my family
  • Be forced to accept the lowest form of care / facility
  • Have to go on long waiting lists
  • Reduce or exhaust my retirement assets by paying for my long-term care
  • See my children’s/grandchildren’s inheritance reduce
  • Create emotional and financial hardship for my spouse or family
who is buying ltc
Who Is Buying LTC ?
  • Average age is 65
  • 75% of buyers are between 55 and 74
  • Approximately 60% male, 40% female
  • Average premium is $1,400 / year

Source: Munich Re Canada

we need to communicate
We Need To Communicate
  • Health risk does not mean dying
  • May not result in you losing your life but in losing your life savings
  • What is and what is not covered by government programs
slide67

The True Cost For Coverage

- A claim validates purchase decision

- Refund of premium options

- Give up the net, after-tax return

Is it better to give up potential investment returns or lose capital?

Using insurance vehicles to cover “risks” allows

you to have greater discretion with your capital

two excellent reports
Two Excellent Reports
  • Will The Baby Boomers Bust the Health Care System - C.D. Howe Institue
  • Home Care

What We Have, What We Need

- Canadian Healthcare Coalition

slide70

Insurance Company

Let the Insurance Company pay Revenue Canada

Pass FULL Estate Value to Family

Preparing For The RRIF Tax

slide71

Insurance Company

Let the Insurance Company Provide the Inheritance

Spend What You Have Saved

OR . . . . . . . . . . . . . . . . . . . . .

taxation of registered assets
Taxation of Registered Assets

Remember …

This is not a potential tax,

it is an ultimate tax

Any taxable residue could be directed to

a church or charity

slide73

We’re spending our childrens’

inheritance

But replacing it with joint, last-to-die insurance

slide74
We do not inherit the world from our ancestors …

We borrow it from our children

Chief Seattle

what line completes these client sentences
What Line Completes These Client Sentences ?

I wish I would have known that …

I wish I would have met you ...

I wish I would have done that …

TEN YEARS AGO !

slide76

The Marketing Shift

Customer

Needs

Satisfied

1:1 Marketing

Mass Marketing

Customers

Reached

Martha Rodgers

the future markets
The Future Markets
  • Critical Illness
  • Health Insurance
  • Long Term Health Care
  • Elective Procedure Coverage
  • Wealth Management
  • Estate Transfer
  • Tailored Planning and Advice
institutional benefits
Institutional Benefits
  • Name recognition
  • Instant credibility
  • Consistency of service and services
  • Succession planning / continuity
  • Alliance with other specialists
  • Not customers but members
advantages for you
Advantages For You
  • Training
  • Development and promotion from within
  • An existing client base with which to work
  • Delivery of a financial planning service consistent with credit union culture
  • MemberCare resources
  • Investment research / Portfolio Selector
  • A total team effort
what are you selling
What Are You Selling?
  • Yourself
  • Your systems
  • Your services
  • The relationship

Products are simply the commodities that follow

more knowledgeable consumers require
More Knowledgeable Consumers Require
  • Access to the best products
  • Focus on insight vs information
  • Greater emphasis on “The Total Picture”
  • Greater commitment to communication

and education

  • Higher standard of service
  • Clear focus on value
why we are worth 1 year
Why We Are Worth 1% / Year
  • Increase investment returns by 1%
  • Save people at least 1% from mistakes
  • Save them time, stress, worry
  • Save them $______ yr in income taxes
  • Preserve 10’s - 100’s of thousands of $ in estate value through conservation
  • We can manage the risks for them
  • Provide continuity for spouse and heirs
opportunity knocks
Opportunity Knocks
  • Demonstrate your value as an advisor
  • People DO want to hear from you
  • Pick up existing accounts by having

a process

  • A great time to ask for referrals
  • Get more money into the market
  • While everyone else is hiding, get going
controlling your own destiny
Controlling Your Own Destiny
  • Know the competition
  • Focus on a market and continue to grow
  • Show your clients that you truly do care
  • Be planning driven not product driven
  • Combine “High Tech” with “High Teach” and “High Touch”
  • Pursue your work with a passion
aegon mission statement85
AEGON Mission Statement

Make

Money

Respect

Others

Have

Fun

Respect

Yourself

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