Week in review: November 17-21, 2008

By Kate McCaffery | November 21, 2008 | Last updated on November 21, 2008
6 min read

Welcome to the weekly roundup of news affecting you, as covered by Advisor.ca and our sister publication, Conseiller.ca. Read this section every week to catch up on the news you missed, or click here and subscribe to get regular updates sent to your inbox or BlackBerry.

Give your clients a call. The economic and market news remained brutal this week; the only bright spot seems to be the tax planning opportunities (seriously?) that selling at a loss might afford. And if some company reports are to be believed, more Canadians than ever are talking about postponing their retirement.

Skip to: Quick links, stories this week. Or click here to get regular updates sent to your in-box or blackberry.

Consumer, business and client sentiment Desjardins Financial Security and Russell Investments are two of the latest companies to weigh in with surveys about how Canadians are responding to current economic and market downturns. Desjardins invoked the image of Wal-Mart greeters when discussing its results, which suggested a large number of people, including almost half the women they surveyed, plan to postpone retirement by an average of 5.9 years.

Russell’s approach was a little different — the company said it found nearly two-thirds of Canadian pre-retirees are worried about outliving their money. Once they’re well into retirement, though, that fear subsides. Within three to five years after retirement, optimism and confidence about their financial circumstances seem to take hold.

Regular surveys of small business owners and CEOs, though, are turning up more pessimistic opinions. The Canadian Federation of Independent Business released results from its regular survey of small business owners this week. Ontario business owners seem to be feeling the worst about the current economic situation, but the decline in optimism about economic projections for 2009 is widespread.

Even more disheartening is a quarterly survey of chief executive officers, conducted by PricewaterhouseCoopers, that shows only 17% have a positive outlook on the U.S. economy over the next 12 months. Although fewer of those surveyed are actually pessimistic about the economy, the optimism level dropped 24 percentage points compared to the last quarter, and is the lowest the survey has measured in 16 years.

While this is happening, Ernst and Young reports chief financial officers and audit committees are saying they’ll spend more time and money on tax-related issues over the next three years, thanks to changing tax laws, regulations and accounting standards. They say stakeholders are demanding transparency, but senior management also wants to know more about how tax risks are managed. Globally, a look at the highest tax rates in 87 countries found that 33 have cut rates, while only seven increased them, this according to a new study from KPMG.

Economy If you’re in the market to buy a house, things might finally be tilting back in your favour, according to the latest real estate trend numbers reported by Scotiabank.

Deflation concerns, meanwhile, are also on the radar this week after the Bank of Canada’s governor, Mark Carney, warned that Canada is likely to see productivity and income decline as the global recession gets deeper.

Despite this and repeated comparisons to the Great Depression, however, some experts are saying such comparisons are unwarranted, and that it is unlikely the current financial crisis will result in anything so dramatic.

Products The product manufacturing industry is certainly feeling the effects of soft markets — Financial Research Corporation in Boston says mutual funds are going to continue to lose market share in the average retail portfolio to alternative investments; the Investment Funds Institute of Canada says October was the worst month on record for mutual fund redemptions in Canada, with total industry assets declining 18.1% YTD as investors pull their money out of long-term assets.

Meanwhile, new equity financing hit the skids in the third quarter, down 44% from the second quarter, according to the Investment Industry Association of Canada.

That said, it’s been an active week for new product launches. Standard Life, Franklin Templeton Investments, AIC and Manulife all launched their tax-free savings account offerings.

New funds launched this week include the Destination+ 2018 Fund from Mackenzie, an open-ended target date mutual fund, and the Franklin Templeton Middle East North Africa Fund that invests in equities and fixed income securities of companies located in Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain, Oman, Egypt, Jordan and Morocco.

Barclays Global has come out with four fund-of-funds, ETFs they call "portfolio builder funds."

In fact, the only company-specific, product-related news this week that reveals hints of economic pressure is an announcement from Putnam Investment that it plans to lay off 2% of its workforce. Great-West Lifeco’s Boston-based asset management firm plans to cut 47 jobs – 12 portfolio managers and 35 staff positions, including positions in quantitative research.

News from Quebec In Quebec, the Caisse de dépôt et placement du Québec announced its president and chief executive officer, Richard Guay, is on medical leave from the pension fund. Guay is expected to resume his activities on December 10, 2008.

Although experts are divided over whether the province will fall into a recession, more than 90% of workers surveyed by L’Ordre des CRHA et CRIA du Québec meanwhile, believe the current economic environment will have a negative impact on employment in Quebec.

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Quick links: Advisor.ca news, November 17-21, 2008.

New features this week:

Minimize RRSP tax with proper planning When RRSPs were introduced in 1957, no one expected to see Canada’s investing landscape become as diverse as it has. With T-Series funds, corporate class options and now the new tax-free savings account -not to mention all the various tax strategies that have come into play over the last 50 years -helping a client ease into retirement isn’t so easy anymore. Full story.

Institutional replication could smooth returns One of the key highlights from this downturn may very well be the performance difference between portfolios modelled after a traditional asset allocation mix, and those that emulate an institutional asset mix. Advisors may have to take a hard look at their client asset allocation and consider emulating institutional portfolios. Full story.

Legally speaking: OSC states the obvious In a recent decision, the OSC made a definitive statement about advisor obligations, laying to rest the notion and common legal defence that clients are responsible for their own unsuitable investments. The duty of care is on the advisor. This may seem obvious to anyone familiar with professional association rules, but it’s worth noting that a new, clear line has been drawn for advisory, compliance and dispute-resolution purposes. Full story.

Practice Lab: Exceptional communication in volatile times If there has ever been a key time to go above and beyond in reaching out to your clients, it’s right now. Clients want to know that you know what you are doing and that you understand their unique situations. Here are some communication strategies that have worked best for advisors that we coach. Full story.

Ahead of the pack: Tax tips for 2008 The focus for investors this time of the year should be on tax — realizing capital gains, filing tax returns, donating to charity — but the volatile markets have probably forced your clients to worry about their stocks. Even though your client might be wondering whether to buy or sell, it’s important to remind them that tax season is coming regardless of how well the country’s economy is faring. With that in mind, Advisor.ca has compiled its annual tax package, where we outline everything you need to know about the 2008 tax year. Full story.

Filed by Kate McCaffery, Advisor.ca. kate.mccaffery@advisor.rogers.com


Kate McCaffery