2022 Q3 Newsletter

In this newsletter we would like to focus on:

Interest Rates, Inflation and the Markets
US Dealer
Mobile App
Wills and Beneficiaries

Interest Rates, Inflation and the Markets

After the credit crisis of 2008-9, interest rates around the world were lowered to essentially zero to keep economies working. By the end of 2019, the central banks in Canada and the US had raised their rates to 1.75% and 2.5% respectively. When the pandemic hit in early 2020, interest rates were again reduced to effectively zero. Governments sent out massive amounts of money directly to individuals and businesses to support them during the lock downs. Contrary to company’s expectations, orders for many items stayed strong but supply chains were unable to cope.

While supply chains are getting better, consumers have moved spending habits to services such as dining out, travel and the like. This has led to another side effect of the pandemic - labour participation rates have gone down and companies cannot fill jobs. In the US, about 12 million jobs are available. In recessionary environments, this is not a trend that is normally seen.

Government stimulus, supply chains, low interest rates, and a lack of people to fill jobs has caused inflation to rise. Central banks are especially worried about the increase of spiraling wage rates and the expectations they can cause. This is led to them moving aggressively to raise interest rates to slow the economy.

All of this has caused both fixed income (bonds) and equity (shares of companies ) markets to drop. Markets do not like change and uncertainty.

But let’s put things into perspective and look at the long term history of some of the companies we hold for clients in our managed (discretionary) accounts. We continue to focus on companies that have an established track record of growth. As you can see from the chart below, overtime these companies have demonstrated this.

We are also screening their balance sheets to ensure companies have a manageable level of debt.

When we take a deeper dive into the financials of companies to include in our client’s portfolio’s we review a number of factors such as return on capital, sales and earnings per share growth. We use these metrics to see how well a company is operating to then determine its growth potential.

For most of our clients, this is too much detail, but we wanted to highlight parts of our investment process to illustrate how we select, monitor and make changes to the investments.

Over the last 5 years, the companies illustrated above had the following:

The share prices of all these companies have struggled this year. Over time we have no doubt that they will be able to grow their businesses, either by developing new products or services or acquiring businesses. Yes, there will be periods of turmoil, and the growth figures shown may not occur in the next 5 years. But even if it is half, your wealth will compound significantly.

While the examples given refer to some of the holdings in our managed portfolios, mutual fund managers will also screen for well run, growing companies.

US Dealer

We are pleased to announce that iA Private Wealth has launched an investment advisory firm in the US. Every now and then we run across people who have pension assets in the US that can be difficult to move, but they would like someone locally to help with those accounts, and now we are in a position to do so. We can also help people who are full time residents in the US.

Mobile App

Over the last number of years, iA Private Wealth has been improving the technology available to you to review your account holdings and access such things as tax documents. This is an ongoing process and new options will continue to be added. The most recent iteration has been the development of a mobile app, which is available on the Apple and Google stores.

Wills and Beneficiaries

We recently attended a presentation by two estate lawyers on some of the issues that can arise in drafting and settling wills.

In your will they recommended against naming specific beneficiaries of accounts such as RRSPs/RRIFs and TFSAs. If you do wish to create specific designations, it is best do it on the account or insurance policy. The lawyers also highlighted situations where a child had been added as a joint owner on a bank account. Sometimes this is done so a child can assist the parent, but the expectation of the parent is that it would then become part of the estate to be divided amongst all the children. If that is not the goal, then a Letter of Intent should be drafted confirming the gift. Open communication with your family will also help reduce frictions and other problems once you are gone. Having all children date a sign the letter of intent would remove the possibility that one could claim they were never informed.

Most of us find it difficult to discuss estate issues openly which can lead to problems once a parent is gone and there is no explanation of why assets are being allocated in the way they are.

Jack and Travis recommend clients speak with a professional lawyer when drafting and reviewing your will.

We know this has been a difficult year to remain confident in the markets, the investments we hold for you are part of your financial future. But we also know that the share prices and dividends of well run companies will grow, allowing you to fulfill your financial goals.

We wish you a Happy Thanksgiving.

Jack Fournier B.Sc, FMA, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency
700-609 Granville St. Vancouver, BC
p: 604 895 3348
jack@beaconwealthpartners.ca

Travis Kidson, B.Sc, CFP®, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency
700-609 Granville St. Vancouver, BC
p: 604 895 3486
travis@beaconwealthpartners.ca

This information has been prepared by Travis Kidson and Jack Fournier who are Portfolio Managers for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Managers can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

Insurance products are provided through iA Private Wealth Insurance Agency which is a trade name of PPI Management Inc. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investors Protection Fund.

Beacon Wealth Partners is a personal trade name of Jack Fournier and Travis Kidson.