This is a story about a couple that wanted to make better use of their hard earned money by leaving a significant legacy to the Alzheimers Society. They came to us for advice on how to execute their charitable contribution strategy, so we devised a plan. Let’s call them Joe and Susan.

As the retirement phase approached, Joe and Susan had some concerns to consider. They traveled frequently and wanted to maintain their lifestyle in retirement without fear of running out of money. At the same time, they wanted to pay as little tax as possible and help advance Alzheimer’s research to rid the world of this cruel disease.

We told them:

• They have lots of financial flexibility to travel.
• They will not outlive their money, but would likely have a $2 million Estate and a lifetime tax bill of $530k.
• The $530k in taxes can be cut significantly with proper planning.
• A good part of the tax savings can go towards charitable causes like the Alzheimer’s Society with the right strategy.
• They can even afford to retire earlier, and potentially spend more time volunteering.

The strategy:

Joe & Susan already contributed $5,000 a year to charity, but after learning how efficient we could structure their situation, they felt they could afford to give more, and wanted to. We showed how they could substantially increase donations without it costing them much more than they had already been contributing. The Alzheimer’s Society would benefit greatly from this decision.

What we did:

1. We set up a joint insurance policy that will pay out when they both pass away.
2. Fund the policy with $11,000/year for 20 years. After 20 years, the policy will be fully paid for and their favourite charity will be the beneficiary of the policy.
3. Because of the structure, Joe and Susan will receive a full donation tax credit every year of $4,400, so their net cost is just under $6,600 a year.
4. As a result, the charity will receive a $1 million benefit!
5. Essentially, Joe and Susan put $6,600/year in for 20 years, a total of $132,000, and the total benefit to their favourite charity will be $1 million.
6. If Joe and Susan live to full life expectancy, the AFTER TAX rate of return on this charitable investment will be over 10%, guaranteed. There is not likely a better investment return available – especially given the low level of risk.

Joe and Susan can still give roughly $9,000 a year to charity – either through cash or stock – and help make a more immediate impact. You don’t need to donate $11,000 for this to work for you. The strategy is scalable and can be structured to match your particular situation.

To get a quick sense of your financial possibilities and what you can afford to give, use our free online calculator. Be sure to connect with us on Facebook or Twitter. This article was written by Brad Mol, Senior Financial Planer

That salesman may seem nice but take some precautions before signing away your savings (Thinkstock/Getty Images)

Bernie Madoff got our attention. We wondered: could it happen to us?

The reality is that these scams are as old as time, and are going on right now. There are also ways to avoid them. Here’s how:

“We truly, truly believed this man.”

This was a quote from a recent victim of a 38-year-old real estate entrepreneur from Oakville, Ontario. Trusting someone takes time and is an important thing. The problem is that all victims seem to say the same thing. If someone seems honest and respected in the community, they probably are. However, don’t invest your money based on that. It has cost people billions of dollars. There needs to be something much more tangible beyond personal trust.

“The rates of return are so good.”

One of my clients made a comment about the GIC rates at Stanford International Bank in Antigua. They wondered if they should put some of their safe money there because they could get 5% and 6% rates on short-term GICs. The questions that need to be answered fully are always, ‘why such a good return? What is the investment in? What is so special about how the underlying investment is to achieve this extra return?’  If you keep asking questions and get clear answers, then it might very well be a good investment. The problem is if you are not in a position to know what questions to ask, it can be difficult to discern between a real investment and a not-so-real one. The other obvious sign to run is when you ask questions about the investment or its structure and you don’t really get straight answers.

“Can I see the value of my investments?”

This is another warning sign. In most Ponzi schemes, the value shown on a statement was a made-up number. The value behind the number was not entirely clear. Anytime you invest in something that isn’t publicly traded or held at a large financial institution, you are taking greater risk.

For example, if you own 100 shares of Royal Bank according to your custodian at TD Bank Financial Group, you can be pretty certain you actually own 100 shares of Royal Bank. You can then look on the public and open stock market and see the value of those 100 shares. If you have money in Stanford Bank (even though it was very large) in Antigua, you will get a statement showing a balance of dollars. You had better be confident in the banking regulator in Antigua that they have a strong enough system to ensure those dollars are actually there.

“First I put in $20,000. It did well, so I put in $50,000. It did well, so I put in $250,000.”

Humans are greedy by nature and it’s tough to overcome. When something appears to perform well, it is natural to want to have more money invested in it. If the investment is growing on paper, how certain are you that it represents a real number? The toughest scenario is when you put money in and take it out before making further investments. It is then real cash. It instills confidence. It builds trust. This is why Ponzi schemes are so successful. Unless there is a run on the money, as long as new money is going in, most investors can get their funds out. Don’t be fooled by an initial good investment by betting the farm.

“I trusted my gut feelings that this was a good investment.”

Don’t trust your gut. Trust your brain and do your homework. Your life savings are too important to risk on “liking the guy” or “they seemed honest.”At the end of the day, investment is always a balance of risk and reward. Always understand the true risks you are taking. If the cheque is written out to a small entity or person — please do a triple check before handing the money over. The next Ponzi scheme is being set up right now.

Do you have an additional tip for avoiding a scam? Leave a comment below or message us on Twitter or Facebook!

Ted Rechtshaffen is president and CEO of TriDelta Financial, a firm that provides independent financial planning and investment advice. This article was originally published in National Post.

There is a common misconception about the security of an investors’ money when it is trusted to a private firm. People often ask, “what happens to my money if your investment firm goes bankrupt?”

Our answer to that is easy: meet our custodians.

Custodians are what boutique planning and investment firms like TriDelta Investment Counsel use to hold their client’s money. For example, we hold or custody our client’s money at TD Waterhouse Institutional Services, part of the TD Financial Group, and National Bank Correspondent Network, part of National Bank of Canada.  Both of which happen to be on Bloomberg’s list of the strongest banks in the world so you know your money is safe.

Our relationship with them is simple: we have total independence from them in terms of investment management, but our clients’ assets are effectively held with one of the largest financial institutions in Canada. If something happens to our firm, the clients’ money is still as safe at those institutions as if they were working directly with TD Waterhouse from the beginning. Their accounts are either transferred directly or a cheque is written out to National Bank.

Custody of Assets

It is very important to remember that if you trust someone with an investment cheque that is not written out to one of the most stable firms in the world, you are putting yourself at some risk. If that entity shuts down, likely so does your money.

This doesn’t mean investing in such things as a private company or a private mortgage fund or some other real estate deal is a bad investment. It simply means you have to work significantly harder on understanding the investment and its risks before investing, and there is a higher risk of your money disappearing.

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Ted Rechtshaffen is president and CEO of TriDelta Financial, a firm that provides independent financial planning and investment advice. This article was originally published in the Financial Post.

As 2011 winds down, we have seen something that has been quite rare of late. 2011 marks just the second time in the past 10 years that the S&P 500 (US markets) will have outperformed the TSX (Toronto markets) in Canadian dollars. We believe that this is a significant shift for Canadian investors. Quite frankly, after many poor years, the US market is today, simply better valued than Canada, and as a result, there represents greater opportunities to find ‘cheap’ companies in the United States. This doesn’t mean a wholesale shift in investments, but simply a meaningful return to the largest investment market in the world. Of key importance, this is not driven by any great belief in the American economy, but rather a focus on large, global companies that generate sizable revenues from Asia and emerging markets. We believe that many of these US based global companies have not seen appropriate valuations of late, in large part because of a negative view on the United States.

The next big theme is Europe. The only questions about Europe is “How bad will it be?”. The range of options go from a worst case scenario of significant bank failures and a freeze in global credit, to a best case scenario, with no bank failures but a period of recession and high unemployment and rising taxes. Neither sounds like much fun. While this will continue to put pressure on markets around the world, a ‘best case scenario’ will actually help North American markets in two ways. The first is that the market is pricing in very bad news from Europe, and only bad news is a positive. The second is that capital must flow somewhere. As money leaves Europe, some of it will support stock markets closer to home.

The other focus for 2012 is the search for income. In a world of GICs and government bonds paying 1% to 2%, the search for income, especially among retirees will only grow. 2012 looks like another year of very low interest rates. The good news is that dividend yields on stocks have improved over the past year as corporate earnings have been strong, and as some stock prices have declined. Corporate bonds and preferred shares continue to pay reasonable income in the 3% to 5% range for good quality companies. An added income opportunity that we will be using more in 2012, is covered call options. This strategy allows for added income that is treated as capital gains for tax purposes. In times of market volatility but low market growth, covered call options along with bond interest and dividends can provide for portfolio returns of 5%+ even when there is no growth in stock prices.

Overall, 2012 looks like a year that will start with continuing volatility and risk stemming from Europe, but we believe that it will also represent some exceptional entry points for great quality companies with growing dividends. These companies can form the foundation of portfolios for many years to come. We look forward to taking advantage of these entry points – in particular with Canadian bank stocks, US tech stocks and US health care stocks.

The global economy and stock market remains fragile. To make some sense of it all we have compiled comments and thoughts from some of the smartest economists, analysts and other so called experts.

All eyes seem to be on Europe right now as they struggle with seemingly insurmountable debt.

Appearing live on CNBC’s “Squawk Box” on Monday morning, Warren Buffett said he’s not sure Europe can or will do “whatever it takes” to resolve the debt crisis.

He said Europe isn’t “going away” and that the European economy will be stronger in a decade regardless, but he warned on CNBC that getting from here, in the midst of the crisis without resolve, to that point in 10 years may prove difficult.

Debt threatens to bankrupt several Southern European countries. Investors hoped a solution could be found, but when the stark reality sunk in that a quick deal was unlikely, stock markets plunged.

The many reasons for optimism or pessimism remain. Let’s consider both arguements:

Reasons to be (mildly) bullish

• Central banks will stimulate economies with printed money at the slightest hint of trouble, and this has the side-effect of increasing demand for assets such as shares
• Economists are already talking about a third round of quantitative easing to boost the market
• Europeans appear somewhat united in averting a full blown credit crisis
• Corporate earnings appear to be very solid across the board
• Shares look very cheap versus bonds
• Inflation is on the rise and a period of gentle price pressure can be good for equities
• The emerging market boom might continue, keeping the West out of recession

Here are a few specific investment guru comments.

Firstly, let’s consider some recent optimistic business outlooks from top company CEO’s:

Caterpillar just raised its dividend and reiterated its possitive guidance.

Cummins says that domestic demand is increasing for their trucks.

3M reiterated its bullish outlook and raised its growth targets.

Eaton CEO Sandy Cutler is optimistic and she is the one who predicted the slowdown in 2008 before the market crashed.

Honeywell says its business segments are going strong.

United Technologies – says it’s seeing no slowdown in business, if anything it’s accelerating.

A number of top investment pundits see reason to be upbeat….

Bill Miller of Legg Mason remains bullish. His outlook is that despite fears of another recession, Miller pointed out that the economy continues to expand. In addition, by and large companies are reporting good numbers and retail sales have been solid.

J. Kyle Bass, portfolio manager at Dallas-based Hayman Capital Management LP believes that the US housing market’s losses had largely been absorbed. “You can see that the pig has moved through the python in terms of U.S. housing losses,” he said.

Fifth wisest investor in the world according to a Bloomberg poll, Dr Marc Faber is bullish about the outlook for the US dollar because of current global liquidity tightening (although he believes global growth itself will stagnate).

Warren Buffett confirmed that his investment company Berkshire has been buying aggressively during the recent market turmoil. He said on Monday that his company has spent $10.7 billion to buy more than 5 percent of IBM’s stock this year, a surprising move by the billionaire investor who has long shied away from investing in high technology companies.

Twenty-one of 22 analysts surveyed by Bloomberg expect bullion to rise on the Comex in New York next week, the third consecutive increase and the highest proportion in data going back to April 2004.

Sandler O’Neill principal Jeffery Harte said the market has hit its low point and that means risk assets, including the banks he covers, will do well into early next year.

Bearish signs

• The good news is all factored into prices
• A fresh boom in China helped pull the world economy back from the brink. That economic charge may be slowing – the jury is out
• A recovery in house prices has ended. A second wave of falls, leading to more bad debts, could spark another waves of bank failures or another credit crunch
• Governments took on too much debt in the boom years, and bad debt from banks, and some could fail to meet repayments
• Spending cuts in the UK could hamper demand, particularly if it creates greater unemployment
• Deflation may take hold, leading to a falling spiral of consumer and asset prices, including shares.

Some guru’s remain cautious:

China Vice Premier Wong offered uncommon candour this weekend: “The one thing that we can be certain of, among all the uncertainties, is that the global economic recession caused by the international financial crisis will be chronic,” Wang was quoted by the official Xinhua news agency.

Dylan Grice and ultra bear Albert Edwards from SocGen suggested the US stock market was 50 per cent to 60 per cent overvalued.

Money Week’s Merryn Somerset Webb says shares are overpriced based on ‘the only reliable indicator of market performance’… ‘cyclically-adjusted price-to-earnings ratio’ (CAPE)

The highly regarded economist Robert Shiller, who came up with the concept of CAPE, estimated in September 2011 that the US market was 21 per cent too expensive, based on CAPE.

Our take:

At TriDelta we remain concerned at the crippling government debt and weak economic prospects due to slowing global growth, elevated unemployment, US housing market concerns (also Australian and European) and ageing populations that will hamper recovery.

This suggests that developed nations are likely to see wealth stagnate for a few years. Rates will likely remain low and assets such as property and shares will not generate the wealth we have come to expect in previous decades.

As such we have significantly reduced risk in our portfolios and remain focused on protecting clients capital by maintaining a prudent and conservative investment strategy.

Having said this, we believe there are certain sectors of the Global market that are getting very cheap by historical standards. Technology and Drug companies are now trading at historically low levels and paying solid dividends. This will be one of the areas that we initially focus on when putting some of that cash back to work.

It is important to remember that the market always works in cycles, and the best time to invest is when things look the worst. We think that there is worse to come, but that also means that we believe that the time to put cash to work is getting closer as well – especially where strong companies are available at 4%+ dividend yields.

Prepared by Anton Tucker – TriDelta Financial