To Clients: The year in review

As we near the end of 2008, it’s a good idea to touch base with your clients, review the events of the year, thank them for their business and send along your warm wishes for the holiday season. To help you get started, we’ve created this customizable letter.

Dear [Client’s name],

As 2008 draws to a close, I want to thank you for choosing me as your financial advisor. I appreciate your trust and the business that comes with it. The end of the year is a time to be with family and friends, but it’s also a good opportunity to look back and put things into context. Here’s a quick review of the more important financial events

The Markets

As you surely already know, 2008 — particularity the last few months — has been one of the most volatile years on record. The S&P/TSX Composite Index had strong numbers at the beginning of the year, sitting at 13,926.76 points on January 2.

There was some worry that the credit crunch would affect markets in February when the S&P/TSX Composite was hovering around the 12,000 point mark, but the index rebounded, breaking through the 15,000-point mark for the first time in its history, on May 20.

Things began to falter in August, as credit fears mounted and investors started to worry about the state of the U.S. economy, but the markets took a major turn for the worst between September 26 and October 8, falling 2716.96 points during that time.

Since then, the markets have bounced around, jumping hundreds of points one day and falling even further the next. As of close on October 27, the S&P/TSX Composite was at 8,537.34 — numbers we haven’t seen in about four years.

It’s hard to say what 2009 will hold, but economists are predicting a rough ride, to say the least. In times like these it’s important to think long term with your investments, as market downturns, even hard-to-stomach ones like this, always turn around.

Budget 2008

In March, Federal Finance Minister Jim Flaherty presented the government’s annual budget. For the most part, this year was a reserved one with little spending, as the Conservatives were trying to pay $10 billion toward the country’s debt. That doesn’t mean there weren’t big changes in the budget. In fact, the most significant part of Flaherty’s announcement was the introduction of a new Tax-Free Savings Account.

The account, which comes into effect January 1, allows people to save up to $5,000 a year, tax free, in an easy access savings account. Unlike an RRSP, the TFSA allows people to withdraw money at their leisure without being hit by the taxman. But, like a registered savings account, you can invest your money in a variety of mutual fund and stock options.

One of the more useful aspects of the TFSA is that you can accumulate room if you don’t invest the full amount in a given year. So, for example, if you choose not to put $5,000 into an account in 2009, you’ll be able to save $10,000 in 2010.

Other changes to the budget include an extension for RESP contributions — parents can now contribute to an education savings account until their child is 31, instead of 21, and RESPs can stay open for 35 years.

As well, the GIS earnings clawback now kicks in at $3,500 instead of $500.

Should you have any questions about how these or other recent events might affect you, I’d be happy to schedule a time to either speak with you on the telephone or sit down with you in person. If you have friends or colleagues who you think might benefit from my advice, I would also be pleased to meet with them. A referral is a wonderful present, and I’d like to thank everyone who gave me one over the past twelve months.

Best wishes for health, happiness and continued financial success in the New Year!

[Your signature]

[Your name]

(11/04/08)