Retirement Planning - The Opportunity and Responsibility

1. Retirement Planning - The Opportunity and Responsibility Credential Group Sales Skills Development - Spring 2001 Daryl Diamond CFP CLU CHFC Diamond Retirement Planning Ltd.

2. THE POST-LUNCH DIP

3. www.personalfinanceseries.com Monday of next week

4. AEGON Mission Statement Make Money Respect Others Have Fun

5. Five Areas To Cover • THE OPPORTUNITY AHEAD • ILLUSTRATE OUR RESPONSIBILITY • THE CRITICAL ROLE OF PLANNING • THE VALUE OF WHAT WE DO • THE POWER OF “TEAM WORK”

6. Booming OpportunityNumber Of Retirements / Year Currently 225,000 By 2005 265,000 2005 - 2020 320,000 2020 - 2029 425,000 Source: Toronto Star, Aug. 1999

7. Keys To Success • Understand and focus on their chosen market • Develop systems and procedures for that market • Possess conviction in the value of their work and love what they do • Become recognized for the work they do

8. Processes That Focus On Issues that are important and unique to them • Client education and awareness • Comprehensive planning • Investment portfolios • Risk management • Service

9. Five Stages of Retirement Planning • Accumulation • Positioning • Income Structure • Disposition • Distribution

10. Five Stages of Retirement Planning • Accumulation • Positioning • Income Structure • Disposition • Distribution

11. I DECIDED NOT TO LEARN HOW TO PLAY THE PIANO … BECAUSE I HEARD IT TOOK TEN YEARS TO LEARN TO PLAY IT WELL … UNFORTUNATLEY, I MADE THAT DECISION TEN YEARS AGO

12. How Inflation Erodes Your Income Future Purchasing Power of $1,000 at 2% inflation at 4% inflation

13. Inflation And Its Impact On Prices MENU ITEM 1967 TODAY Hamburger $0.20 $1.15 Cheeseburger $0.25 $1.25 French Fries $0.20 $0.95 Milkshake $0.20 $1.45 Soft Drinks $0.10 $0.99 Coffee $0.10 $0.75 Smiles Free Still Free

14. Canada’s Demographic Reality Number of Births in Canada By Year 1994 Year

15. Provincial Health Care Spending by Age and Sex Canadian Average, 2000 current dollars age group Sources: Canadian Institute for Health Information 2000

16. Inflation and Political Issues As all levels of government search for revenues Utilities Property Taxes Income Taxes Estate Taxes Dental and Medical Costs

17. Inflation and Political Issues As all levels of government search for revenues Utilities Property Taxes Income Taxes Estate Taxes Dental and Medical Costs Prescription Drugs

18. Inflation and Political Issues As all levels of government search for revenues Utilities Property Taxes Income Taxes Estate Taxes Dental and Medical Costs Prescription Drugs Health Care “Premiums” Long Term Health Care Costs

19. Two Key Contentions The Baby Boomers will use retirement assets to pay for those services that, today, we take for granted The government will move to a system of taxing assets as well as income

20. Advisor Opportunity • Diversify assets by type, geography and tax treatment • Shelter taxable growth through Unrealized capital gains Investment funds set up as corporations Cash value life insurance • Position to receive varying types of taxable income

21. The Quality of Personal Financial Advice Dalbar Inc Market Research • 85% Want investment advice • 80% Want advice on minimizing taxes • 70% Want the highest investment returns • 64% Want a complete financial plan • 63% Want help in defining their goals

22. In 1996, fewer than 35% of tax filers made an RRSP contribution of any kind • There is over $216,000,000,000 in unused RRSP contributions Source: Revenue Canada Source: KPMG Consulting 1998

23. The Reality Arecent survey of over 1,200 Canadians , by a major financial institution, revealed the following; • 21 % have not started to save for retirement • 51% have saved less than $30,000 • 33% have saved more than $100,000 • 7% have saved more than $400,000 • 62% expect to work to age 65 out of necessity • 72 % do not have a financial plan even though 48% use a “financial advisor” Source: The Financial Post

24. Five Stages of Retirement Planning • Accumulation • Positioning • Income Structure • Disposition • Distribution

25. What Is Different About This Market? • Planning driven • Money driven • People are seeking our services • Client loyalty / retention is exceptional AND …

26. According To The Globe and Mail $700,000,000,000 of investable assets are in the hands of Canadians over the age of 55

27. 1. Income Structure 2. Investment Portfolio 3. Health Risk Management 4. Wealth Transfer 5. People The Retirement Income Market,Areas of Specialized Knowledge

28. Year Life Expectancy Income Factors 1965 1975 1985 Today 17.5 Yrs 2010 20 + Yrs Changing Factors Male Age 65 7.5 Yrs Only a few retirement years to fund CPP commences 10 Yrs Appreciating real estate values High nominal interest rates 14 Yrs Excessive taxation Excessive Government borrowing None of the above apply in the same manner

29. Retirement Income Sources

30. Opportunity • Concern over viability of CPP / OAS • Rarity of pension plans • There is an increased need for planned saving through RRSP and Non-RRSP vehicles … • This money MUST be intelligently invested if targets are to be reached

31. The Two Factors… From Two Perspectives Accumulation Retirement Income Return Risk Risk Return In the retirement market, there is an incredible opportunity in risk analysis / risk management

32. Becoming A Risk Manager Capital Loss Investment Loss Purchasing Power Loss Health Related Loss Tax Loss

33. Investment Results Investment returns Investor behaviour +

34. Our Consulting Role • It is the same for investment portfolios as it is for structural planning … • We are simply trying to help the client reduce the number of “unknowns” • Involve them so they will understand

35. Most Common and Costly Mistakes Made by Investors • More time spent “picking funds” than on asset allocation • Lack of discipline / impatience • Unrealistic expectations • Trying to time the market

36. Investor Vs. Investment Returns • Mutual Fund Investors earn far less than reported returns, due to their behaviour • S&P return 1984-1997 = 17% • Fund investor returns = 6.7% • Average fund retention = 3 years • Conclusion • -In their attempt to cash in on impressive market gains, investors jump on the bandwagon too late and switch in and out of funds trying to time the market • -By not remaining invested for the entire period, investors do not benefit from the majority of market appreciation • Dalbar Inc. Investor Behaviour Study, 1997

37. Most Common and Costly Mistakes Made by Investors • More time spent “picking funds” than on asset allocation • Lack of discipline / impatience • Unrealistic expectations • Trying to time the market • Chasing returns, buy high and sell low

38. Advisors Are No Better ! January 01 2001 - July 31, 2001 AGF Mutual Funds $2,000,000,000 net sales International Value 70% Fidelity Mutual Funds$1,000,000,000net sales

39. Most Common and Costly Mistakes Made by Investors • More time spent “picking funds” than on asset allocation • Lack of discipline / impatience • Unrealistic expectations • Trying to time the market • Chasing returns, buy high and sell low • Expecting all investments to perform positively at the same time

40. Insight Pool Performance1 Year Returns To June 30, 2000 Canadian Value 49.57 % Global Equity -3.1% Canadian Growth 21.54 % Global Equity RSP 2.82 % Canadian Dividend 27.85 % Global Small Cap 24.37 % Canadian Small Cap 19.84 % Cdn High Yield Inc -0.67 % U.S.Value - 12.56 % Cdn Fixed Income 3.30 % U.S. Growth 10.86 % Global Fixed Inc - 0.46 % International Value 20.28 % Money Market 4.72 % International Growth 37.51 % Source: C.I. Mutual Funds

41. Most Common and Costly Mistakes Made by Investors • More time spent “picking funds” than on asset allocation • Lack of discipline / impatience • Unrealistic expectations • Trying to time the market • Chasing returns, buy high and sell low • Expecting all investments to perform positively at the same time • Expecting a manager’s investment approach to work all the time • Not enough proper diversification

42. True Diversification Includes ... • Different Asset Classes • Different Assets • Different Geographical Content • Different Management Styles

43. High Return Low Return Low Volatility Exploring the Efficient Frontier You are not here ! High Volatility

44. The Three Most Difficult Things To Do • Climb a fence that is leaning toward you • Kiss a person who is leaning away from you • Buy an investment fund that is flat or negative in recent performance

45. Investment Returns Assuming capital of $200,000 Years before account is exhausted Monthly 5.5%7.0%8.5% Income $1,500 16.8 20.5 28.5 $1,500 @ 2.5% 13.5 15.3 17.8

46. How Long Will Your Investments Last? 5%6%7%8%9%10%11% 12% 6% 37 * * * * * * * 7% 25 33 * * * * * * 8% 20 23 30 * * * * * 9% 16 18 22 29 * * * * 10% 14 15 17 20 27 * * * Rate of Return Rate ofWithdrawal Years * Capital will never be exhausted

47. What Are Clients Really Seeking? • A Trust Relationship • Security and Safety • Peace of Mind • Care For Loved Ones • Remembrance / Legacy • Insight

48. Use Our Expertise Most people plan only one retirement How many things do people do well that they do only once?

49. Use Our Expertise Most people plan only one retirement How many things do people do well that they do only once? We plan 2.5 retirements each week

50. Five Stages of Retirement Planning • Accumulation • Positioning • Income Structure • Disposition • Distribution