unbiased-financial-services

THE EXCHANGE NEWSLETTER - SEPTEMBER 30, 2025

Tue, 30 Sep 2025 19:15:50 GMT

Retirement Planning for a 100 Year Life

In this issue of the Exchange, we aim to explore the healthcare revolution fueled by artificial intelligence and what the likelihood of living longer means for client portfolios.

We've seen it in the news, and there's no denying that artificial intelligence and machine learning are transforming healthcare. AI is accelerating drug discovery by reducing costs and speeding up development timelines, while identifying new uses for existing medications and expanding treatment options more quickly than ever before. This healthcare revolution supports the trend toward longer, healthier lives.

And while Canadians are set to live longer, they are not typically looking to postpone their target retirement dates by a corresponding amount.

Traditional retirement planning models, which have historically projected life expectancy in the range of 90-95 years, are at risk of underestimating the length of time your assets will be required to support you, assuming advances in medical technology drive life expectancy to >100.

Historically, investors have associated portfolio volatility with risk; the larger the peaks and troughs, the greater the risk. As the world we live in continues to evolve, there emerges a new hybrid risk - one that can seem paradoxically at odds with our traditional understanding. Increased life expectancy, together with relentless debasement of fiat money, become a potentially critical risk that must be monitored acutely.

�� The Risk That Feels Big: Market Volatility

A sudden market drop is loud and immediate. You see red numbers, read doom and gloom headlines in the news, and feel a gut-level reaction. It’s normal. In fact, during these moments, your brain is flooded with stress hormones like cortisol and adrenaline. These are the same chemicals triggered by physical threats—our ancestors felt this way when fleeing predators.

So, when your portfolio drops, even temporarily, your body treats it like an emergency. It can push you toward impulsive decisions like selling at a low point or abandoning your long-term plan.

�� The Risk That’s Often Ignored: Inflation & Loss of Purchasing Power

Now think about your last grocery run. Prices are up—maybe noticeably—but you didn’t panic. You may have been frustrated, even annoyed, but not fearful.

That’s the problem.

Inflation creeps in slowly and quietly. Over time, it erodes what your money can buy—often without setting off alarm bells. But the compounding effect can be devastating. Here’s how the two risks compare:

Market Crash Rising Costs / Inflation

Feels urgent and scary Feels frustrating, but not alarming

Triggers fight-or-flight Often met with resignation

Usually short-term Long-term, compounding effect

Easy to track daily Harder to measure, often ignored

�� So What Can We Do?

The key is to recognize and prepare for a trend towards longer life expectancies by:

Exchanging one type of risk; the constant erosion of purchasing power - for another type of risk; in the form of individual security volatility.

While we can't eliminate risk, we can be thoughtful about how best to mitigate risk in the context of financial planning & portfolio management. We will continue to have these conversations with clients during our fall meetings and welcome your thoughts as we discuss strategies that will support your 100-year life.

THE EXCHANGE NEWSLETTER - JUNE 30, 2025

Mon, 30 Jun 2025 18:53:53 GMT

Economic Updates and Market Insights

In a year marked by geopolitical uncertainty and market volatility, we have witnessed one of the most hated rallies ever. Immediately following April 2nd, fear and panic led retail investors - and even professional money managers - to liquidate their holdings and move to cash.

At Unbiased Portfolio Management Inc., we work to maximize client preparedness ahead of time and ensure our portfolios are well-positioned to withstand unforeseen drawdowns, such as what we experienced in April. As markets can recover just as quickly as they can decline, we can understand why April is defined by many as the Most Hated V-shaped Rally. Those who panicked and sold have suffered a permanent loss of capital. Those who held fast are rewarded with the S&P 500 reaching all-time highs.

During external turmoil, we understand that one of our primary roles is to ensure our clients are confident in their plan and that portfolios are well-positioned in shifting landscapes.

We feel it is important to reiterate that volatility is normal – and that your plan is built to handle it. Included above is a visual covering the performance of the bear market, bull market, and S&P 500 price index over periods ranging from 1926 to 2022.

Overall, bull markets tend to last longer and deliver substantial returns, when compared to bear markets that are comprised of shorter periods of negative performance. The notable resilience and upward trajectory of the stock market showcases the case for wealth accumulation by long-term holding strategies, despite periodic downturns.

Proactive Risk Management:

We are reassessing the traditional tools used to measure asset class volatility as assumptions applied to investment risk aversion become increasingly outdated. Those assets traditionally categorized as being “safe” are very slowly, but very steadily, taking on the characteristics historically attributed to risky assets. Our methodology is designed to address and mitigate potential risks before they can have a materially negative impact on your portfolio.

Expanded Client-Centric Solutions:

We are increasingly taking a holistic, multi-generational approach to wealth management that integrates financial and non-financial services tailored to each client’s evolving needs. Financial planning throughout retirement, gifting strategies, and digital asset inheritance planning are some of the ways we aim to support your family.

Alternative Asset Education:

As the world around us continues to evolve, we must always keep our head on a swivel to identify emerging investment risks and opportunities. With alternative assets becoming an increasingly important component of our portfolios, we are committed to the ongoing education process around the particular and unique characteristics associated with alternative investments.

Our objective is that by implementing the above-noted approaches, among others, we increase client preparedness and confidence in anticipation of unexpected future events.

THE EXCHANGE NEWSLETTER - MARCH 31, 2025

Mon, 31 Mar 2025 12:48:47 GMT

Economic Update and Market Insights

We understand many people are experiencing concerns regarding the state-of-the-market. It is difficult to watch the news lately and not feel some sense of trepidation. Shifting economic policies, tariff impositions, inflation concerns, and geopolitical uncertainty are all contributing to market volatility.

While it doesn’t feel good in the moment, market corrections are a natural part of the investing cycle, as is their eventual uptick. History reveals the pattern of market recovery is remarkably consistent, with long-term market performance trending upwards over time.

We have been through these times in the past; think of the 2001 dot-com bubble, 2008-09 financial crisis, 2014-15 Canadian energy collapse, 2020 Covid stock market crash. In each of these instances together we have stuck to our long term goals and policy targets, coming out in good shape on the other side.

It would be prudent to address some of these concerns by asserting that year-to-date investment performance does not necessarily correlate with the spirit of present-day major news outlet reporting. We have ensured our portfolios are very well diversified, meaning that when some asset classes are under performing, other asset classes are there to provide ballast, and smooth out volatility.

Having said that, when markets are off, it’s generally not a bad time to add to the portfolio, should circumstances permit. With the timing of market recoveries being notoriously difficult to predict, it is important to capitalize on opportunities where they exist.

Several of the key policies recently implemented by President Trump could very well have the combined effect of reducing economic activity, decreasing the rate of inflation, and increasing the likelihood of a recessionary environment. Should inflation decrease and the economy cool, bond yields - particularly for U.S. Treasuries - will likely fall. Many investors, worried about economic uncertainty and stock market volatility, would flock to these government bonds, ultimately fulfilling two key objectives of the U.S. Government: reducing their own borrowing costs, and attracting buyers of government debt. The following are key Republican policy objectives that might contribute to such an outcome:

Deporting 1 million people: Removing a significant portion of the American population means fewer people to pay rent, buy groceries, etc. As less people participate in the economy the aggregate demand for goods and services declines. Less demand means lower prices, leading to a slower rate of economic growth, disinflationary pressures, and lower bond yields.

Reducing government waste and fraud through DOGE: Limiting government inefficiencies would ultimately reduce aggregate public sector spending. As the number of government jobs and services shrink, unemployment rises, and consumption decreases. This contributes to lower demand, leading to disinflation, and driving bond yields down.

Tariffs on imports: Imposing tariffs will increase the price on foreign goods, and the average household will need to reduce consumption in other areas to adjust for higher prices. This would lead to lower overall demand in the economy as consumers think of delaying the purchase of a new car or home due to economic uncertainty.

In summary, the U.S. Government is looking to reduce its overall cost of borrowing, and attract buyers of U.S. Treasuries. One way to achieve this objective is to scare investors - for lack of a better word - into buying more bonds, by disrupting the status-quo.

On a positive note, looking forward, several key players including Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Energy Secretary Chris Wright,

have repeated the metaphor of a “detox” - that is to prepare for short term pain in exchange for long term gain. Ultimately, the U.S. Government is looking to refinance their debt at lower interest rates, while simultaneously decreasing industry regulation and lowering income taxes. The hope is that these elements will combine to create a more productive economy, allowing for private business to achieve more growth using less inputs.

THE EXCHANGE NEWSLETTER - DECEMBER 31, 2024

Tue, 31 Dec 2024 17:09:47 GMT

The Hidden Risks of a Crash Up

When contemplating financial risks, people will often reference downside indicators such as recession, job loss, decreasing housing prices, and declining stock markets. In these scenarios, the implication for those most affected is that they cannot afford to maintain their quality of life moving forward. Mark Moss refers to this as a "Crash Down." He then goes on to mention a unique term, or "Crash Up" scenario, where prices rise so quickly that people can't afford the same quality of life.

Two different risk scenarios result in the same outcome.

One example of the Crash up scenario can be observed when analyzing the housing markets of Toronto and Vancouver. For over a decade, many have predicted that housing prices were "too high" and would undoubtedly crash. In hindsight, we can see that although the housing market did indeed experience a crash, it was a "crash up," not down.

Let's consider a young professional in his 20s living in Toronto, enjoying an annual salary of $100,000. Under a conventional "Crash" narrative example, this person might lose his job and immediately become reliant on Employment Insurance (EI) while searching for a new source of gainful employment. Consequently, his income would drop materially, and maintaining his previous lifestyle would become exceptionally difficult.

While the above-noted example is often considered as part of a risk-management analysis, not many individuals dive into the risks of a "Crash Up." In this scenario, the young professional remains employed, and likely earns a higher salary over time, consistent with good work and corresponding promotions. However, all the while, housing prices soar from the equivalent of 4 X his income to 10 X his income (rising from $400,000 to $1,000,000)). Ultimately, although he now earns well over $100,000, he has been demonstrably priced out of the Toronto housing market. This situation represents a "Crash Up" as he can no longer sustain his former lifestyle as a tenant (rents being tied closer to the value of real estate than to salary increases) and most certainly cannot make ends meet should even qualify for an outrageously sized mortgage.

The distinction here is significant; our young professional has experienced a crash, not not in the traditional sense - as it has been a very real "crash up." Too often, people are so fixated on the prospect of a crash down that they completely overlook the hidden dangers posed by a "Crash Up."

On a positive note, there are ways to manage the risk of a crash up! The first and most important part is to identify this type of scenario as a possibility. From there, it becomes easier to contemplate various - and sometimes unorthodox - methods to address.

THE EXCHANGE NEWSLETTER - SEPTEMBER 30, 2024

Mon, 30 Sep 2024 16:56:24 GMT

25 Years of Financial Planning for Canadians

With another pleasant summer season behind us , we welcome the cooler fall temperatures and a return to more structured routines. Ours was a summer filled with the priceless, screeching laughter of our kids swimming at the Lake, a total of 10 nights camped out in a tent, and many, perhaps too many ice cream cones! Having fully recharged, September was a month in which to renew and refocus our dedication to work, with a sense of optimism and purpose very much directed towards the last Quarter of the year. We hope your summer was spent doing things you love with people who fill your bucket - and look forward to connecting in the fall!

CELEBRATING 25 YEARS IN BUSINESS

This November marks the 25th Anniversary of Unbiased Financial Services , and it is with immense gratitude towards our wonderful clients that we celebrate this milestone. Your trust and support have been instrumental in our growth and commitment to family-focused financial services.

John started Unbiased in 1999 after becoming increasingly uncomfortable with how product-focused the financial industry had become. He wanted to advise families, not sell them products. And so, he exchanged his cushy office in Banker’s Hall for the bungalow basement on Oakcliffe Drive.

Shortly thereafter, one night at the dinner table, Taylor and his sister Morgan were told they would be playing a new game over the next few years – called “The Savings Game”. It was when John came home one night after selling his beloved Westphalia to raise additional monies for computer hardware that we all recognized how very real the game was.

It took John many years to accomplish what we think should be common place; for advisors to guide clients on what’s best for their family, and to think beyond their investment portfolios. He has spent a career rallying against industry norms to develop a family-focused, net worth planning model. 25 years later, the story has come full circle as John and his wife Nancy recently re-purchased a mint condition, 1989 Westphalia van , and can often be found on the road, travelling to their next campsite.

FINANCIAL SERVICES TECHNOLOGY SOLUTIONS FOR THE MODERN INVESTOR

Unbiased is fully committed to a chieving sustainable competitive advantage for the next 25 years. To that end, we recently made a significant capital investment in our data solutions software, moving from Captools to NDEX .

You will recognize Captools as the software we historically utilized to generate Net Worth Reports. Captools served us very well over the years, but as the industry landscape continues to evolve, we find ourselves needing more technological horsepower, particularly with respect to data aggregation, security-centric applications, and portfolio analytics. We are currently running both programs in parallel with each other as we work towards migrating historical data over to the new platform.

CONTINUING EDUCATION

Consistent with an emphasis on maintaining the highest level of competency an professionalism in our field, we recently flew to Gatineau, QC to attend the 2024 Institute of Advanced Financial Planners Symposium.

Throughout the course of the week, we digested a well-rounded program delivered by exemplary speakers. Topics included, but were certainly not limited to; “ Planning Implications of the 2024 Federal Budget” and “Observations about the Enhanced Canada Pension Plan”. Perhaps most important, all participants worked diligently each day on a Case Study, implementing knowledge gained in real time from the Symposium to fully optimize modern planning outcomes.

THE EXCHANGE NEWSLETTER - JUNE 28, 2024

Fri, 28 Jun 2024 16:42:04 GMT

The First Systematic Exchange of Securities in London

Our endeavor in rolling out this new medium of communication is intended to foster

anexchange of ideas, by way of providing economic updates, market opportunities, noteworthy articles, and from time to time, a little bit about our firm.

The image above details the scene of an English coffee house in the 17th century.

In that era, English coffeehouses were places where people gathered to discuss current events,political affairs, and the natural sciences. For the price of a penny, customers were able to gain admission, and a hot “bowl” of coffee. The absence of alcohol fostered an environment that enabled more serious discourse and debate, when compared to the traditional setting of an alehouse. Indeed, English coffeehouses are now widely recognized as having played a crucial role in the chronicles of the Ageof Enlightenment. In 1698, the prices of stocks and commodities began to be “posted” in one suchcoffeehouse -Jonathan’s - located in Change [or Exchange] Alley, thereby becoming the first systematic exchange of securities in London.

Economic Updates and Portfolio Changes

We recently implemented two noteworthy trades within our model portfolios.

The first was replacing ZEM BMO MSCI Emerging Markets Index ETF with XMA iShares

S&P/TSX Capped Materials Index ETF. One opportunity that we see in the XMA buy, is thatgold mining stocks make up over 56% of the fund, and we’ve noted the gap that exists between current gold prices and current gold mining stock.

The secondary rationale for holding XMA is our ongoing endeavor to offset the ever-increasing government deficits, with gold being a particularly effective response to fiat debasement. Yan’s research indicated a slow, steady, continual increase in risk associatedwith emerging markets, particularly as it relates to China potentially becoming “the nextRussia”, in terms of international sanctions and freezing of assets, where China could wellbecome“un-investible” in the mid-term should a particular set of geo-political scenariosunfold, and so we made the decision to exit ZEM.

The other trade recently executed was replacing XEG iShares S&P/TSX Capped Energy ETFwith ZEO BMO Equal Weight Oil & Gas Invest ETF. Since purchasing XEG in December 2021, we have enjoyed a 107% total return on the position, including dividends. With moderate potential for downside risk [Based on RBC Capital Markets Research Report] we took the decision to capture the gains appreciated through holding XEG, but not exitCanadian energy entirely.

And so we bought ZEO, the core intention being to

continue our investment in Canadian energy, albeit with less downside risk. The

increased stability associated with ZEO, whencompared to XEG, is derived both

from its exposure to pipelines, but also via the equal weight methodology of the index itself (as opposed to market capitalization weight methodology).

Crypto Investor Spotlight: Unbiased Portfolio Management’s Journey into Cryptocurrency

Sun, 24 Mar 2024 15:07:10 GMT

In the ever-evolving world of cryptocurrency, it’s always insightful to hear from those deeply involved in the industry. Today, we spotlight Unbiased Portfolio Management Inc., which has made significant strides in crypto investing. We had the pleasure of speaking with John Amonson, the CEO, and Yan Li, the company’s Chief Investment Officer and Portfolio Manager.

Meet the Leaders

John Amonson, with his German ancestry, has a unique perspective on the value of currency, shaped by his grandparents’ stories of hyperinflation in Germany. Outside of his professional life, he enjoys restoring vintage cars and playing drums in a rock band.

On the other hand, Yan Li hails from northern China, bordering North Korea. His rich cultural heritage blends Han, Mongolian, and Manchurian. With over a decade of experience in portfolio management and a Ch artered Financial Analyst (CFA) designation, Yan brings a wealth of knowledge.

The Crypto Journey

John’s introduction to Bitcoin came in 2013 when a client proposed the idea. Despite his initial interest, he was outvoted by his investment committee and had to put his professional interest in Bitcoin on hold. However, he kept an eye on cryptocurrency, and when it gained popularity, he advocated for its inclusion in Unbiased’s product offerings.

Yan’s crypto journey started a bit later, in 2021, with the launch of the first ETF. He began allocating crypto ETFs in his TFSA/RRSP accounts.

Portfolio Insights

For most of Unbiased’s client portfolios, Bitcoin is held through an ETF. After careful consideration, they decided on an initial target allocation of 3%. However, some clients have chosen to go beyond this percentage. John explains that the risk is less than a year’s portfolio income even if Bitcoin plummeted to zero. At the same time, the potential upside is significant if Bitcoin fulfills its promise as a transformative technology.

The Crypto Investment Thesis

Yan’s investment thesis on Bitcoin is four-fold:

Self-Sovereign Asset: Bitcoin is independent of any external entity, providing individual self-sovereignty. It’s akin to burying gold in one’s backyard, ensuring security. Bitcoin also offers high divisibility, mobility, and verifiability benefits.

Debasement Hedge: Bitcoin safeguards against debasement in the face of growing global debt. The risk of sanctions discourages foreign buyers from investing in US debt, leaving the Federal Reserve as the primary purch aser relying on printed money.

Disruptive Technology: Bitcoin’s Lightning network offers efficient payment solutions that outperform traditional payment methods. It also provides faster, cheaper, and safer international wire transfers.

Apex Investment: Bitcoin has a favourable risk-reward profile. It has shown an annualized return of 55% since 2014, providing leveraged-like returns without actual leverage. Today, Bitcoin is a compelling investment option for many young people due to its potential returns and no minimum upfront cost.

Misunderstandings in the Crypto Space

Yan believes replacing the current fiat system with Bitcoin is unnecessary in the developed world. However, in regions like El Salvador, Africa, and parts of Asia, where there are no properly functioning fiat currency systems, Bitcoin could be a viable alternative.

On the other hand, John feels that the energy consumption associated with Bitcoin mining needs to be more understood. The energy used in mining contributes to the security of the Bitcoin network, its proof of work status, and its inherent value.

For those interested in deepening their understanding of Bitcoin, John recommends two books: “The Bitcoin Standard” by Saifedean Ammous and “Softwar” by Major Jason P. Lowery.

Unbiased Portfolio Management Inc. is a testament to the potential of cryptocurrency in the world of investment. Their journey into the crypto space, led by John Amonson and Yan Li, offers valuable insights into the opportunities and challenges of crypto investing. Their perspectives will undoubtedly remain relevant and insightful as the crypto landscape evolves.

About the Author: Taylor Amonson

Taylor comes to Unbiased Financial Services Inc. from the banking industry where he spent 3 years with RBC, leaving as Senior Account Manager. During his time with the Royal Bank he obtained his Certified Financial Planner (CFP) designation. His formal education includes a BA from the University of Victoria, which involved a one year exchange at the University of East Anglia. He also holds an MBA with Distinction from Edinburgh Business School, Heriot-Watt University.

The Downturn That No One’s Talking About

Sat, 24 Feb 2024 16:22:36 GMT

A few of the recent headline subjects pushed out on the wire include “Wall Street is in a Bear Market”, “The Crypto Bear Market Could Last Two Years”, and “When Will the Nasdaq Bear Market End?”. None of these topics address the severe damage incurred within the average “Boomer” portfolio year-to-date by what one might normally think of as an unsuspecting menace: Bonds.

Bonds, otherwise known as Fixed Income, have been a mainstay of retail investor portfolio makeup over the past 100 years. Often touted as “risk-free”, the investor would traditionally receive a coupon payment each year, and the promise that their principal investment would be repaid on maturity. When the asset was a government bond, these promises are historically all but guaranteed as the government can simply print money to make the coupon payments, and print more money, if need be, to repay the principal on maturity.

Cracks begin to show as money printing becomes more egregious. First, investors pick up on the fact that when their bonds yield 2%, and inflation is at 5%, the “real” rate of return on their investment -3%. That’s before fees, and before taxes. Then, as governments around the world attempt to reel in soaring inflation caused by unprecedented spending throughout the pandemic, central banks have no choice but to raise interest rates.

Remember, there’s an inverse relationship between interest rates and the price of bonds. When interest rates go up, the price of bonds go down. Not only has the investor lost “real” purchasing power for the past several years, now the actual market value of their bonds has been hammered.

Looking at historical US 10-Year Treasury Bond total returns, 2022 is the worst year ever for bonds (data goes back to 1928). Reviewing the performance of a 60% Equity/40% Bonds portfolio (standard baby-boomer asset mix) you need to go back to 1937 before you will find a worse year than 2022.

How could some of this damage have been mitigated? First, by shortening the duration (term) of the fixed income component to the portfolio. The shorter the term of the bond, the less susceptible it is to change in interest rate. Second, by increasing the quality of the bonds themselves. All else being equal, high-quality bonds will perform better than their less credit-worthy cousins during times of turmoil. Third, by diversifying outside of the traditional 60/40 split. This might include a disciplined exposure to preferred shares, and alternative asset classes.

The key point here is that times are changing. The idea that bonds are a “safe” asset class is rightfully being called into question. The noteworthy challenge is how best to effectively structure a portfolio while considering one’s individual tolerance for risk, liquidity requirements, income tax considerations, compliance obligations, and of course return expectations.

Moving forward, retail investors may have to choose between a steady erosion of purchasing power from the bond side of their portfolio, or the increased volatility of marketable alternative assets.

About the Author: Taylor Amonson

How the Modern Pentathlon compares to Post-Modern Portfolio Theory

Wed, 24 Jan 2024 16:22:34 GMT

The spirit of the Olympics has us contemplating how the modern Pentathlon compares to post-modern Portfolio Theory. On the surface they seem quite diverse, but they actually have several things in common.

1. Both are Evolutions of an Earlier Historical Benchmark

The modern pentathlon, allegedly founded by Baron Pierre de Coubertin (Viktor Black has also claimed authorship) was introduced to the 1912 Olympic Games to simulate the skillsets required of a cavalry officer engaged behind enemy lines. These skillsets consisted of Fencing, Shooting, Show Jumping, Running, and Swimming. This modern pentathlon is an iteration of the ancient version, which consisted of javelin, discus, wrestling, long jump, and running.

Post-modern portfolio theory (PMPT) is a methodology used for portfolio optimization that limits the downside of risk. In 1991, two software engineers named Brian M. Rom and Kathleen W. Ferguson, created PMPT after noting what they perceived to be two significant limitations of Modern Portfolio Theory (MPT). MPT was originally published by Harry Markowitz in 1952, which detailed how best to construct a portfolio that maximized expected return based on a given level of market risk. Markowitz would ultimately be awarded a Nobel Prize for his contributions.

2. Both Involve a Dogmatic Focus on Diversification

When training for the Games, the modern pentathlete must distribute their total available amount of training time across the five disciplines in a way that maximizes the outcome of the competition. The allocation of time becomes particularly challenging with the theory that a skilled cavalry officer should be proficient on an unfamiliar horse. Consistent with the spirit of the last century, the pentathlete is paired with a horse in a draw only 20 minutes before the competition.

Both MPT and PMPT place tremendous emphasis on the benefits of diversification; creating portfolios with assets that are non-correlated. The key differentiator is that while MPT uses the standard deviation of all returns as a measure of risk, PMPT uses the standard deviation of negative returns as a measure of risk.

3. Both Involve Accepting Some Degree of Risk

Victory in the show jumping discipline must necessarily involve the taking of risk, particularly while riding an unfamiliar horse. Competitors wear helmets for a very good reason.

Similarly, an investor must accept a certain degree of risk to generate a positive rate of return after fees, taxes, and inflation. This might involve geo-political risk, market risk, interest rate risk, liquidity risk, etc.

The key for both is to take smart risks, particularly when riding an unfamiliar horse.

Evolution of historical benchmarks, dogmatic focus on diversification and acceptance of risk are interesting common threads shared by the modern Pentathlon and post-modern Portfolio Theory.

About the Author: Taylor Amonson

Avoid These 3 Common Power of Attorney Mistakes

Wed, 20 Dec 2023 16:26:14 GMT

Over my years of experience with a wide range of clients and families, I have observed three common Power of Attorney (POA) mistakes made by clients. These three mistakes can result in unnecessary confusion and expense, as well as unfortunate family squabbles.

Mistake #1:

Getting a Bank Power of Attorney or a Joint Account

My banking friends will give me a hard time on this one, but the first mistake many clients make in their POA planning is listening to their local bank branch representative. Often the local bank rep will suggest clients use a Bank POA or a Joint Account when the Power of Attorney discussion is raised at a bank. A Bank POA, or conversely a Joint Account, is often the incorrect tool to use, and here’s why:

Most clients expect the POA to be effective if they lose capacity; however, many bank POAs are not effective in the event of incapacity. That’s right, they are not effective.
The Bank POA will only deal with bank assets. In that sense, it’s an incomplete Power of Attorney. Assets outside the bank will not be covered.
Another tool often recommended by banks is the Joint Account. Joint Accounts are powerful, but often too powerful. Joint Accounts can easily dilute a good estate plan or good family relationships. Just ask two sisters, one who lives in the same city as mom and has helped her out for the last ten years, and the other who lives out of town. Did Mom intend for the Joint Account’s proceeds to flow by right of survivorship to the in-town sister, or are the Joint Account proceeds meant to form part of Mom’s estate? Often, a Joint Account muddies the waters and contributes to family troubles.

Be aware that from a pure efficiency perspective, banks like their own POA documents, or Joint Accounts. They are easy and no one in the bank has to review and approve that pesky POA document prepared by an outside lawyer.

Mistake #2:

Choosing the Wrong Attorney

The second common POA mistake that clients make is picking the wrong (POA) Attorney. Clients should appoint a (POA) Attorney that:

They trust absolutely.
Has the required skill.
Is interested in the job, not just the power.
Understands what it means to be a Fiduciary.

If the (POA) Attorney does not have the above attributes, think about utilizing someone who does, or perhaps a Trust company.

Think carefully before appointing a (POA) Attorney who has a conflict of interest and who does not understand what a fiduciary duty is.

To help you think about conflict of interest, think about the following scenario:

Imagine your eldest son is your (POA) Attorney, and you need to receive greater care. Your son must now decide from the following three alternatives:

Approving in-home care services that will likely deplete 70% of your net worth (his estate) over your lifetime, or
Authorizing the high fees for very comfortable retirement care at home, which will likely deplete 50% of your net worth (his estate), or
Moving you into the local retirement home that has recently recovered from a COVID outbreak, which will likely only deplete 20% of your net worth (his estate).

Which alternative will the son, who has a conflict of interest, choose? I often see choices being made that include the (POA)’s interest rather than what is best for the parent.

One alternative in the above situation would be to appoint an independent Attorney who has no interest in the parent’s remaining estate’s size. Another alternative is to name an Enduring Power of Attorney (EPA) who may have a conflict of interest but clearly understands their fiduciary duty is to look after you, regardless of the impact on your estate.

Mistake #3:

Using a Trigger in the Power of Attorney

About 90% of the Enduring Power of Attorneys I see in my planning practice include an embedded trigger. A trigger is something that must occur before the Enduring Power of Attorney (EPA) becomes effective. A common example is a clause that requires two doctors to sign off on the Donor’s incompetence.

In my view, a triggered EPA is often a mistake when viewed in context of a traditional long-term couple relationship. Why, in most cases, would you want your loving spouse to have you declared incompetent before they could help with your finances?

Contrast the following two scenarios. In both scenarios, a 68-year-old male has a debilitating stroke, leaving his wife of 45 years to look after the finances.

Scenario 1

In the first scenario, the couple created POA documents several years ago, appointing each other as EPA immediately, with no requirement to have the donor declared incompetent before acting.

After completion, the POA documents were distributed to various financial institutions, brokers, banks, the CRA and other financial entities to enable the institutions to learn of the POA and to act on the spouse’s direction.

Next, the spouses required the various institutions to complete a transaction based on the instructions of the Attorney named in the POA. The institutions pushed back, but the spouse insisted, forcing the financial institutions to recognize the POA. This process took about a year to complete.

When the spouse had a stroke, the surviving spouse seamlessly assumed responsibility for managing the various financial assets.

Scenario 2

Now compare that to the second scenario where a spouse could not do any of the work noted above in advance because the POA required a medical determination of incompetence before acting. This is not a great situation. After the spouse had a stroke, the remaining healthy spouse is forced to go through the same (often year-long) frustrating, institutional run-a-round while coping with the stress of caring for a partner who just had a stroke.

Don’t let a Joint Account lull you into a state of complacency. A Joint Bank Account can work when one party is incapacitated; however, just try selling a home that is in Joint Tenancy when one of the Joint Tenants has had a stroke… a court order will likely be required.

Conclusion

If you need to create a Power of Attorney, avoid these three mistakes. Don’t listen to your bank about getting a Bank POA or Joint Account. When a proper Enduring Power of Attorney is required, appoint someone to act for you that you trust and who understands what it means to be a Fiduciary.

Lastly, in a long-standing, trusting relationship, consider appointing your spouse as an Enduring Power of Attorney without a trigger so that you can ease the burden for each other if the unthinkable happens.

About the Author: John Amonson

John Amonson is the President of Unbiased Financial Services. He received his Bachelor of Commerce degree in 1980, his MBA in 1986 and completed his Chartered Financial Planner designation in 1990, the Registered Financial Planner designation in 1997, and his Trust and Estate Practitioner designation in 2004. John also sat on several boards and spent 13 years in the Trust industry.

Joint Partner Trusts

Mon, 20 Nov 2023 16:29:30 GMT

Their Benefits Are Not Well Understood

I recently received an email from a respected CPA with the following content, “I don’t see many of my clients in Alberta using a Joint Partner Trust (JPT hereafter) as there is minimal tax benefit of doing so, and because the probate fees in Alberta are so low”.

Based on this comment, it is not surprising that JPT’s are somewhat rare in Alberta.

Why is this?

Well, generally speaking, financial structures are sold, not bought. Historically, it has been easiest for financial professionals to recommend or sell financial arrangements that either reduce tax or increase returns.

But what if the “returns” of a financial arrangement are more nuanced? What if the benefits of a structure include the following?

A dramatic reduction of the time it takes to settle an estate.
A proactive engagement and financial education of adult children, without the emotional burden of losing a parent.
A reduced likelihood of family conflict.
A gradual and successful transition to financial administration support.

How do you measure the benefit of these things relative to reducing tax or increasing returns?

I don’t know for sure, but when I speak to my mature clients, who are long since past the point of worrying about financial independence and ask them, “would you rather increase your investment returns or reduce the chance your kids will scrap about the estate?”. Their answer is not about increasing returns.

It is about simplification, easing the burden, and reducing potential conflict.

So, if there is little tax or probate benefit in Alberta to have a Joint Partner Trust, who recommends these structures to clients for consideration?

Does the lawyer initiate the discussion? Rarely.

Does the CPA begin the conversation? Not that I have seen.

Does a professional insurance person start the talk? Nope.

I propose that the person in the best position to initiate a discussion with clients about the potential benefits of a Joint Partner Trust is the family Financial Planner (think CFP or R.F.P). The planner’s job (Fiduciary Duty for the R.F.P.) is to understand the full scope of a client’s objectives and bring alternative solutions to the table to help the client family meet their goals.

Too often, the extra work involved in setting up a JPT for a family is considered extraneous to the planning role. I hope this trend reverses itself as JPTs become more widely recognized for the non-tax, non-return benefits that they can bring to families.

About the Author: John Amonson

Gap Year For The Non-Professional Hobo

Wed, 18 Oct 2023 15:31:12 GMT

After graduation, personally, the dream of a year abroad in Spain became Quixotic in a way. When reviewing some of the concepts brought to light in this article, in particular the “flat swap” arrangement, the idea somehow becomes refreshingly feasible once again.

You’ve always wanted to do it. But never actually considered how it might happen. A practical, and financial, guide to getting realistic about the fantasy of a year away.

Avoiding the Custom House

Fri, 15 Sep 2023 15:32:29 GMT

Walking past the old Custom House during a recent trip to Victoria I was taken back 200 years, and looking through the lens of a merchant, thought how they might have endeavoured to avoid the Custom House. Charting parallels to the present day, there are in fact approaches that allow today’s investor to go about the same business.

Through the implementation of an indexing strategy, that is the use of low cost, well diversified Exchange Traded Funds, as opposed to attempting to beat the market by picking stocks, the investor of today can avoid what merchants of old went to great lengths to circumvent; the payment of taxes, commissions, and other transaction costs. Here’s how:

Limiting the turnover of investments via the implementation of an indexing strategy will, ceteris paribus, defer taxable capital gains when compared to a similar risk-adjusted actively managed portfolio.
The purchase of an ETF allows the investor to have a diversified portfolio according to the mandate of the fund/ makeup of the index. This enables exposure to a broad base of holdings which can be constructed with a limited number of trades, reducing commissions when compared to building and maintaining a portfolio via individual security selection.
Tracking the index will reduce transaction costs, such as the markup typically built into bond prices for retail investors. While bonds are not typically sold with a commission, there is a cost associated with their purchase or sale, though not particularly transparent.

Today the Custom House can be viewed as a symbol for where many of the traditional brick and mortar investment firms are headed. The emergence of efficient, low cost investment vehicles such as ETF’s is what the steam engine was to the tall ship. The investor of today can now motor into the wind, avoid the entrenched costs associated with the old guard, and have enough time left over for tea at the Empress.

About the Author: Taylor Amonson