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( October 27, 2008) Fear of a housing market correction is driving Canadians to hold a larger than usual portion of their wealth in cash and fixed income, as they seek stability in their investments, according to a survey by Manulife Financial.

The principal residence remains the most popular investment, but support for that investment has fallen 10 points in the 39th quarterly Manulife Investor Sentiment Index. The overall investor sentiment reading fell 16 points, remaining positive at +8, the lowest level since the survey began in 1999.

Cash was the only investment category to gain ground in the survey, climbing three points to +26. The popularity of fixed income fell three points, and is tied with cash.

While Canadians still think their own home is a good place to invest, with a reading of +43, the same cannot be said for investment real estate, which saw a 26-point decline, to -9.

Interest in balanced funds plummeted 33 points, to -8, where they now rank fourth in terms of popularity. Straight equity investments have seen a 27-point collapse and now sit at -28. Fifty-one percent of survey respondents said it was a bad time to invest in equities, either directly or through funds.

“Overall market volatility is unsettling for many Canadians, and the tendency is to seek a safe haven,” said Paul Rooney, president and CEO, Manulife Canada. “But we always encourage investors to work closely with their own advisors, particularly given short-term changes in the economy and markets.”

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Desjardins given access to federal guarantee

(October 27, 2008) The federal government has agreed to allow Caisse centrale Desjardins access to the Canadian Lenders Assurance Facility, the program announced last week to guarantee interbank loans between federally regulated deposit-takers.

The initial version of the program applied to the big banks and to the credit unions that operate in most provinces, leaving Desjardins at a competitive disadvantage.

“I appreciate that the federal government has extended the Canadian Lenders Assurance Facility to cover Desjardins,” said Monique Jérôme-Forget, Minister of Finance for Quebec. “This will ensure that it can continue to compete in raising funds in wholesale markets to lend to Quebec consumers, households and businesses and speaks to the tangible benefits that can be realized when governments work together with a common purpose to support the Canadian financial sector.”

According to a press release from the federal Ministry of Finance, the Government of Quebec will assume responsibility for any potential losses incurred by the Government of Canada through this facility.

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Business owners need tax advice

(October 27, 2008) Small business owners appear to need a lot of help with their tax-planning, according to results of a quiz conducted for Mackenzie Investments. The average score on the test of 10 true-or-false questions was a dismal 30%. Only 8% were able to score correctly on seven or more questions.

“A small business owner might have a team of accountants and financial advisors working for them, but tax knowledge helps them play with that team, not just sit on the sidelines,” said Sandy Cardy, senior vice-president, tax and estate planning, Mackenzie Investments. “Both the company’s and the entrepreneur’s future depends on his or her ability to help develop workable tax, estate, and succession plans for the business.”

Forty-two percent of respondents knew that assets in an operating company are not creditor protected. But only 11% knew that some provinces allowed a secondary will to address the transfer of private corporation shares upon the death of the shareholder in order to reduce probate taxes.

Owners of businesses with revenues in excess of $500,000 were more likely to know that a family trust could hold 100% of common shares (37%), compared to 10% of those with revenues under $500,000.

But smaller business owners were more likely to know that investment income is not taxed at a lower rate for a private corporation than for an individual (34%), compared to 17% of larger business owners.

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Consumer debt soaring

(October 27, 2008) If your clients are anywhere near average, odds are they carry a hefty burden of consumer debt. According to one expert, the average household debt stands at 131% of disposable income, and household credit now averages $37,467.

“Canadians have more debt than ever before, and with the economic slowdown, they are finding it increasingly difficult to make their debt payments,” said bankruptcy trustee Douglas Hoyes, speaking at the recent annual fall conference of the Ontario Association of Credit Counselling Services (OACCS).

The cost of servicing rising debt is pushing many Canadians to their financial limits. Even a lower-interest line of credit, charging 6% per annum, at $37,000 will cost a consumer $185 in interest each month.

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Jovian undertakes rebranding

(October 27, 2008) Jovian Capital has announced name changes for its subsidiaries, Jovian Wealth Management and Rice Financial Group.

Jovian Wealth is being rebranded as MGI Wealth Inc. Its wholly owned subsidiary, Rice Financial, will become MGI Financial Inc. The two components will be co-branded under the banner of MGI Wealth.

“The MGI name is well known in Ontario, and we feel that this change will assist our ongoing expansion into that market,” said Dave Velanoff, president and CEO of Rice Financial Group Inc.

The combined operations include 200 advisors, nearly 80,000 clients and $5.2 billion in assets under administration. All name changes require regulatory approval.

(10/27/08)