Investors Group 1.99% 3-year Mortgage Interest Rate

Investors Group is offering up to 1.01% off prime for its 3 year variable rate mortgage as well as a series of highly competitive short and long term limited-time mortgage offers :

Variable-rate mortgage
(Prime – 1.01%)
36 month closed variable-rate mortgage or adjustable rate, adjustable payment mortgage
(Prime – 0.60%)
49 month closed variable-rate mortgage or adjustable rate, adjustable payment mortgage
(Prime – 0.25%)
60 month closed variable-rate mortgage or adjustable rate, adjustable payment mortgage
 Rates as of May 12, 2014 and are subject to change or withdrawal at any time without prior notice.

Investors Group fixed-rate, closed mortgage rates and terms are as follows: 2.39% for 18 month, 2.49 for 30 month, 2.59 for 36 month and 3.35 for 60 month (5 year) terms.

Best RESP Savings Interest Rate - Meridian Credit Union 2%

Aye laddie, Meridian has a
 Fergus Ont. office
I'm learning more about Meridian Credit Union going through some estate administration.  One thing that popped out was Meridian's nice RESP savings rate offered of 2%.  You could consider this as the fruit of your loins (your kids) approach university age and you transition into something safe to preserve capital and earn a little to counter inflation.

Meridian has branches across Ontario.  Being Ontario chartered, deposits are protected through The Deposit Insurance Corporation of Ontario (DICO).  It insures Canadian currency deposits, including interest, to a maximum of $100,000  per customer.   Unlike CDIC which has an insured limit, deposits held in RSP, RIF, LIRA , LIF, RESP, and TFSA accounts are fully insured with no maximum amount.   Unique trust or joint accounts are insured separately from those in your own name, to a maximum of $100,000 per account.

Meridian Index-Linked GICs - 100% upside .. but what about dividends?

At first glance, what's not to like with Meridian's Index-Linked GICs ? With their S&P/TSX 60 and S&P 500 products you benefit from the Canadian or US equity markets with exposure to the largest companies across several business sectors.  While the upside is capped for some Meridian Index-Linked GICs and those from most banks (CIBC Market-Linked GIC, RBC SmartMarket GIC, TD Security GIC Plus), these give you 100% upside participation in the index.  All the Index-Linked GICs have 100% principal guarantee at maturity.  Here are the deets:

Key Benefits per Meridian:
• Unlimited upside potential
• No management fees or commissions (see below)
100% participation rate – you receive the full gains made on the index over the term
• Principal completely guaranteed at maturity
• Deposits insured by Deposit Insurance Corporation of Ontario (DICO)

Highlights & Features:
• $500 minimum investment for registered accounts
• $1000 minimum investment for non-registered accounts
• Earned Interest paid at maturity
• 5-year term

This investment might be ideal for you:
• It offers 100% principal protection
• It offers exposure to the Canadian stock market
• If you have an investment horizon of at least 5 years
• If you don’t plan to withdraw your investment prior to maturity higher potential return than that
offered by term savings.

You have to question the "No management fees or commissions" part.  While an index ETF like XIU, iShares S&P/TSX 60 Index ETF, let's you participate in the market, it also pays you a 2.6% distribution (largely eligible dividends with favourable tax treatment).  In contrast, Meridian is pocketing that dividend.  Take note: with Meridian's GICs you are participating in the index only not the total return of the index.

You have to consider taxes.  The GIC distributions you receive from Meridian are taxed as other income each year.  In contrast the appreciation in XIU shares are not taxed each year which is better tax deferral.  It's only when you sell your XIU shares any upside is tax but as a capital gain of which only half is taxable.  Your upside in the Meridian GIC is fully taxed (100%).

So when could these products make sense?  Only in a registered account because of tax implications.  Only for those who are papasan pickles (lazier than couch potato investors who buy index ETFs).  Only for those who think the market is getting frothy, and so they want to give up a 2.6% dividend to guarantee principal in a market crash.

Pension Crisis? What me worry?

What Pension Crisis?
A recent MoneySense article reviewing the federal “target-benefit” pension scheme suggests that Defined Benefit (DB) pension plans put employers on the hook when the pension fund under-performs.  Maybe that is the case for some (Canada Post?) but it's not so for all.

1 on 20 Ontarians are members of OMERS, the $64B municipal employee plan. Employee contributions are currently jacked up to cover the current unfunded liability of over $8B, thus making up for financial crisis under-performance, previous contribution holidays, etc..  True, young and new workers are getting hosed since only 75% of today's contributions are funding their retirements and 25% is making up the gap - but it is not municipalities/employers on the hook.  Today a healthy 14.6% of employee earnings over $52k go into the plan and this will continue until the liability is wiped out - these are significant contributions.

Most people are lazier than couch potatoes when it comes to their finances and are more like papasan pickles - so even after boosting financial literacy they need simple alternatives for investing:

Papasan Pickle investing

But unfortunately, even with simple alternatives, humans discount future risks in many areas (health, finances, building in Calgary's Bow River  flood plain...) and may be destined to make bad decisions not their their future self interest. Canadians are bombarded daily with "Your Richer Than You Think" and "It's Worth  a Talk" bait to make them pay attention and use some of the existing savings vehicles.  While the cornucopia of resources is there, like on the Money Sense site, it's not working.

So maybe the only alternative (and only need) is mandatory benefit programs targeting the real gaps (like single or widowed elderly women who have never worked and who are shown to be at risk).

Rob Ford Resigns, Gets Professional Help - The Value of Advice (Financial or otherwise)

Don't Stay THIS Course
(new Rob Ford crack video)
(subtitle: polishing a turd)

So Rob Ford is finally getting professional help for his alleged (admitted?) drug abuse. So we ask: What is the value of professsional advice?  Does it help?  With the new Rob Ford crack video images and drunken rant tapes posted, for Rob Ford, we can hope it helps break bad personal habits.  What about the value of financial advisors? Are financial advisors worth it too?

Ride the investing Gravy Train !
According to a groundbreaking research study, Mackenzie Investments says the answer is a resounding Yes (or as Rob Ford would say in drunken patois "Ya Mon!"). Advised households have approximately twice the level of financial assets as their non-advised counterparts, and this advantage grows over time. Canadians who rely on a financial advisor to guide their financial decisions are wealthier, more confident and better prepared for the financial implications of marriage, a new child, their children’s education, retirement and other life events.

The study, carried out by the Montréal-based Center for Interuniversity Research and Analysis on Organizations (CIRANO), shows that advisors positively affect the level of wealth of Canadian households.

Their analysis showed that financial advisors contribute significantly to the accumulation of financial wealth. The study considered a list of other socio-economic, demographic, and attitudinal variables that can affect wealth, the research indicates that the advice advantage is largely attributed to a greater savings discipline.

So stay disciplined! Stay the course as Bob and Doug Ford say in the above video.  Get good advice and you could be riding the investing gravy train!

P.S. - we have to wonder cause and effect here.  Are successful, wealthy investors just parking their money with advisors while they make more money in their day jobs? Or are the advisors contributing to the wealth?  Similarly, do high-priced BMW car dealer mechanics make the drivers wealthy and help them afford the high-end car (not really) or is it just a service?