From the Editor: Off-Kilter

Q3 | September 2020

Laptop, notebook, Tablet and coffee on work desk

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Dianne C. White, CPA, CA, CFP, TEP

September 30, 2020

Image used with permission: iStock/PRImageFactory


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From the Editor: Off-Kilter

Q3 | September 2020

Fall is usually my favourite season. It feels more like the start of a new year than does the start of a calendar year. I look forward to setting new resolutions and starting fresh. This fall, however, feels slightly off-kilter.

We enter the fall with a volatile stock market, ultra low interest rates, a red-hot housing and renovation market (just try and find a contractor), high unemployment and a rising tide of COVID-19 infections. Our neighbours to the south are preparing for what is sure to be a circus of an election. There is legitimate concern about the fragile state of the economy and there is still a lot more of 2020 to come!

These challenging times are driven by uncertainty. As you will learn from Alex Jemetz’s article in this issue of Nexus Notes, uncertainty manifests itself as volatility for investors, and uncertainty absolutely increases risk. The good news, however, is that time reduces risk. Alex goes on to say that in theory investors should be able to handle short-term volatility because they should be confident that equities will have positive returns over the long term. It turns out that uncertainty is the reason to build a portfolio that has both growth potential but also defensive characteristics. Uncertainty is the reason to focus on one’s strategic asset allocation and not try to time the markets.

Of course, I have been spending a lot of time thinking about the concerns and challenges that our clients face in this environment. One that is top of mind is the persistence of low interest rates. Clients’ desire to flee to safety in times like these can have real risks. Low returns on cash and bonds mean zero or negative real return after inflation and taxes. There will also be capital losses if interest rates rise. Cash and bonds may have little or no return right now, but that does not mean they do not have a place in an investor’s portfolio. The question becomes how much do you need?  Cash and bonds provide short-term liquidity and stability. Depending on your short-term needs from your portfolio, it might make sense to increase your equity allocation. At Nexus, we are well positioned to help clients work through what asset allocation makes the most sense for their circumstances and help them navigate these uncertain times.

A client’s portfolio is only one part of retirement planning.  Another is the different income sources available. Most working Canadians will be eligible to collect income from the Canada Pension Plan at some point in their lives. We are often asked “When should I start my CPP payments?” which just happens to be the title of an article by Brad Weber in this issue of Nexus Notes.

The final article featured in this issue focuses on one aspect of a raft of increasingly penetrating and personal questions that financial providers like Nexus must ask in the guise of “knowing our client”, but which in reality arise because of a legal or regulatory obligation. If you want to have a better understanding of the long arm of the IRS, then read Denys Calvin’s article about the foreign tax compliance requirements we face.

In closing, I would like to welcome Preethi Khatri Chetri to the Nexus team. Preehti joined us in September as our Pooled Fund Portfolio Administrator and we are thrilled to have her on board. While these are strange times to hire and train a new employee, Preethi is up for the challenge! You can read more about Preethi inside this issue. Happy Thanksgiving to all.

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