Lazy money

Don’t let lazy money just hang around

Financial Post July 25, 2009

The client: A woman in her 50s, a mid-income earner and widow. She has two adult children, both employed and self-sufficient.

The portfolio: The client inherited money from her husband’s RRSPs, pension and life insurance, in addition to her own small RRSP and insurance. In total, she has a $1-million. Half of that is held entirely in stocks with a broker. The rest isn’t doing much of anything.

The problem: The client is ultra-conservative and because her money is all over the place, she is afraid to spend for fear of running out. She and her husband both lived modestly: They were saving for what they hoped would be a nice retirement packed with travel. That was not to be. Although she now has enough money to go places, she doesn’t want to do the same things without him. She has no immediate plans to retire and despite having ample savings she continues to live frugally. She intends to preserve her money to pass on to her children when she dies. She won’t give it to them now; she wants to see them earn their own way and not spoil them.

The fix: Diane Koven, a certified financial planner with SunLife Financial in Ottawa, took control of the $500,000 the client hadn’t done anything with. “She had money from here, there and everywhere,” she says. “Because she doesn’t know anything about markets or investing, we placed it all in one pot.” She chose to split the money between a registered plan (CI Portfolio Series Balanced Fund) and non-registered plan (CI Portfolio Series Conservative Fund). Since the other half of her portfolio is in equities managed by a broker, Ms. Koven chose to balance things off with more conservative assets. In the RRSP the mix is 35% fixed income, 65% equities; in the non-registered account, it is 55% fixed income, 45% equities.

The outcome: All the money in both accounts are in segregated funds, which are similar to mutual funds but also have insurance. Now, the client receives one statement and knows exactly how much money she has. “We chose balanced and conservative funds so the client doesn’t have to watch 10 different funds and worry she has too much of this or not enough of that.” This gives the client a sense of control, and leaves the decision-making to more qualified people. “She may not need to have 100% guarantee on her portfolio financially, but that guarantee helps her sleep at night,” Ms. Koven says. “She knows the fees are slightly higher, but the peace of mind is worth it to her.” Now, Ms. Koven has taken on the much larger task of convincing her client to spend a little on herself.

———

THE NEW PORTFOLIO

CI FINANCIAL PORTFOLIO SERIES BALANCED FUND

Fixed income: 35%

Canadian equities: 26%

U.S. equities: 24%

International equities: 15%

Top holdings as at June 30

CI Signature Canadian Bond, 15.87%

CI Signature High Income, 11.35%

CI Canadian Investment, 9.51%

CI Signature Corporate Bond, 8.14%

CI Signature Select Canadian, 7.98%

CI International Value, 7.23%

CI International, 5.72%

CI Synergy Canadian Corporate Class, 5.05%

CI American Value Corporate Class, 5.03%

CI Global Bond, 4.39%

TOTAL 80.27%

CI FINANCIAL PORTFOLIO SERIES CONSERVATIVE FUND

Fixed income: 55%

Canadian equities: 20%

U.S. equities: 16%

International equities: 9%

Top Holdings as at June 30

CI Signature High Income, 17.02%

CI Knight Bain Canadian Bond-Cl A, 12.32%

CI Signature Corporate Bond, 11.85%

CI Signature Canadian Bond, 11.84%

CI Global Bond, 6.44%

CI Canadian Investment, 6.29%

CI Signature Select Canadian, 5.96%

CI Synergy Canadian Corporate Class, 5.90%

CI International Value, 5.23%

CI American Value Corporate Class, 5.03%

TOTAL 87.88%

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