Briefly:

(January 23, 2004) AGF Trust and Vancouver-based Canadian Western Trust (CWT) are joining forces to promote each other’s RSP products.

Under the terms of a partnership announced today, AGF Trust’s product line will include CWT’s self-directed RSP account. CWT expands its line-up to offer AGF Trust’s RSP loan program and RSP match no-margin loan.

“This is an ideal partnership between two advisor-focused, customer-centric organizations that delivers maximum flexibility to customers of both AGF and CWT,” said AGF Trust president Mario Causarano.

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Central bank lowers economic growth forecast

(January 22, 2004) The Bank of Canada says economic growth will likely be around 2.75% in 2004, down from its previous forecast of 3.25%. Private economists have predicted 3% growth this year.

Governor David Dodge says three developments have led the central bank to modify its outlook: stronger than expected world economic activity, the continued sharp depreciation of the U.S. dollar and a larger output gap in Canada at the end of 2003.

The bank expects growth to rise to 3.75% in 2005, as inflation remains under control.

Statistics Canada today reported 2% inflation for the month of December, the Bank of Canada’s target rate. “We project that core inflation will fall below 1.5% in early 2004, before gradually moving back to the 2% target by the end of 2005,” Dodge said in a prepared statement.

“The main uncertainties in the outlook relate to the adjustment of the Canadian economy to global changes.”

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AIMR calls for increased disclosure of “directed brokerage” arrangements

(January 22, 2004) The Association for Investment Management and Research (AIMR) wants to see more disclosure of “directed brokerage” arrangements, where fund companies direct their trading business to brokerage firms to reward them for selling their funds.

The U.S. Securities and Exchange Commission recently launched an investigation into the controversial practice.

In a statement released today, AIMR said that mutual fund unitholders should know how their commissions are being spent and should be asked to approve any directed brokerage arrangements.

A survey conducted earlier this month in the U.S. and Canada by AIMR found that 61% of investment professionals supported mandatory disclosure of any directed brokerage arrangements between mutual funds and the brokerage firms that sell them. Nearly one-third said they believed that such arrangement should be prohibited.

AIMR, with 70,000 members worldwide, administers the chartered financial analyst designation.

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Canadian social index outperforming benchmark

(January 22, 2004) An index of 60 socially and environmentally screened Canadian stocks outperformed the S&P/TSX 60 in 2003, increasing in value by nearly 30%. The TSX 60 added 25% last year.

The Jantzi Social Index was created by Michael Jantzi Research Associates on January 1, 2000. Over that period, the index has gained 7% and the TSX 60 has fallen 2%.

“Companies that practice good governance and that integrate social and environmental parameters into business decision making are better long-term investments than their industry counterparts that ignore the realities of the new marketplace,” said company founder Michael Jantzi.

“The performance numbers mean that the investment community needs to take a closer look at the links between social and environmental risks and financial performance,” added pension consultant Damon Williams.

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Pension plans show improvement in 2003

(January 21, 2004) Canada’s large corporate defined benefit (DB) pension plans were on average 87% funded at the end of last year, after dropping as low as 81% in mid-2003. Watson Wyatt Canada today released its annual pension barometer, showing the effects of changing economic conditions on pension funding levels.

“Many plans will have enjoyed investment returns in 2003 that exceeded the rate of return assumed in their actuarial valuations, leading to hopes of at least a partial recovery from deficits,” the report says.

Still, there’s a long way to go for DB pensions to reach fully funded levels, adds Ian Markham, Watson Wyatt Canada’s senior actuary.

“Looking forward, if bond yields remain at their December 31, 2003, level, equities will have to return a whopping 35% in 2004 to get the 87% funded ratio up to 100%, barring extra contributions,” said Markham.

“If bond yields were to increase by 1%, the typical plan could achieve a 100% funded ratio with a 25% equity return in 2004 — still far above the predictions of the most optimistic of economists.”

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IPC returns to profitability

(January 21, 2004) IPC Financial Network today reported its first quarterly profit in three years. The advisory firm had net earnings of $200,000 in Q4, compared to a $1 million loss during the same three-month period the previous year.

Revenues were also higher, rising to $23.1 million from $20.4 million, IPC said, citing improving equity markets, growing investor confidence and new product initiatives.

“Management is very pleased with our results”, said IPC CEO Steve Meehan in a statement. “The effects of our restructuring are being felt in a manner greater than we expected and our first-quarter results are perhaps the strongest we have ever had.”

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National Bank rolls out new platform

(January 20, 2004) National Bank Financial has rolled out PlanPlus Wealth Enhancement Solution to their 1,400 advisors and assistants across the country.

The integrated planning, advice and portfolio management application includes Web-based, goal-driven client assessment and investment policy statement generation.

“This tool allows us to enhance both our professionalism and productivity,” says Gordon Gibson, senior vice-president and managing director of National Bank Financial. “We feel strongly that by doing a client financial assessment at the outset of the relationship and ensuring that investment policy statements are at the heart of the investment process, the financial solutions we propose will be even more closely aligned with our clients’ needs.”

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DC sponsors say they expect suits

(January 20, 2004) Sponsors of defined-contribution pension plans might be setting themselves up for a lawsuit down the road, as most admit they have not done enough to educate their plan participants, according to a survey by SEI Investments Canada.

“Existing educational efforts have fallen short of improving the capability and confidence of pension plan members to make the right investment decisions,” said Patrick Walsh, president and CEO of SEI Investments Canada. “Sponsors are only beginning to realize the importance of tying their existing, in-house educational efforts with credible, third-party investment advice.”

Only 11% of plan sponsors said they had done “extremely well” in educating their participants. On the other side of the coin, 24% expected to be sued within the next two years.

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Foreign investment rises

(January 19, 2004) Foreign investors continued to buy Canadian securities in November, buying up $5.6 billion in stocks and bonds. Canadians returned the favour, in part, buying $1.2 billion in foreign equities while shying away from their bonds.

Canadian bonds were the more popular investment, accounting for $3.8 billion in foreign purchases, with corporate bonds making up about two-thirds of the purchases. Equities accounted for $2 billion in foreign sales, with a small net decrease in foreign holdings of money market paper.

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CAPSA releases model pension law proposal

(January 19, 2004) The Canadian Association of Pension Supervisory Authorities (CAPSA) has released proposed regulatory principles for a model pension law. Such a law would lead to a unified set of rules governing pensions across the country, rather than the patchwork of federal and provincial regulations in place today.

“The proposed principles seek to balance the protection of pension plan members’ rights and benefits with the need to simplify the administrative requirements for multi-jurisdictional pension plans in Canada,” said Nancy MacNeill Smith, chair of CAPSA.

CAPSA is seeking stakeholder input on the proposal.

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Empire Financial offers new UL product

(January 19, 2004) Empire Financial Group has launched a new universal life (UL) product called Trilogy Plus, which it says is the only UL product offering “the triple benefits of optional surrender charges, low cost of insurance and significantly higher potential for tax sheltering.”

“In contrast, Trilogy Plus will appeal to the client who is ready to focus more heavily on wealth accumulation,” says Owen Rhoden, manager of life and health product marketing. “It’s upscale and investment-oriented, designed to compete with non-registered investment alternatives.”

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(01/19/04)