In This Week’s JMRD Market Observer
INVESTMENT MANAGEMENT CONSULTANTS ASSOCIATION (IMCA) Toronto Conference
JMRD Basket Corner
Reads of the Week
INVESTMENT MANAGEMENT CONSULTANTS ASSOCIATION (IMCA) Toronto Conference
On Monday of this week, Paul and Reg spent the day in Toronto at the IMCA Conference on the topic of Decumulation. Paul and Reg are both CIMA holders which is the Certified Investment Management Analyst designation from Wharton School of Business. For more information see www.imca.org.
These events are important for members of JMRD to attend because the information provided and the calibre of presenters is second to none in the investment world. This event was no exception to others that JMRD has attended over the years and it once again provides an opportunity to share with you what we learned.
The closing remarks from this session resonated with us and deserve comment. One of the hosts of the event wrapped things up by asking the group: “Why should investment professionals attend these events?” He then listed a number of reasons, all of which made sense and all of which are why we attend on your behalf:
- To stay on top of recent changes in the financial industry.
- To hear from top educational professionals from around the world.
- To stay up to date on current events and trends.
- To learn in advance about leading edge technologies and how to use them (or avoid them!).
- To bring this expertise back to the Team to be introduced into the JMRD process, all of which is used to enhance your experience.
The main topic discussed at the conference was DECUMULATION, which is a part of the retirement planning process that isn’t discussed in much detail. Let’s look into this further.
What is Decumulation?
Most investors focus on accumulation, which is quite simply saving for retirement in its’ simplest form. Decumulation is the opposite. Now that I am retired or close to retirement, how do I utilize my savings to generate a tax efficient and sustainable retirement income?
All clients need to have a financial plan and as retirement nears, the decumulation conversation must take centre stage. Below is a basic introduction to this very important topic so let’s take a closer look at the sessions.
Session #1: Decumulation Concerns In Light of Today’s Low Return Environment
Jim Otar, from Retirementoptimizer.com was the first speaker and his talk on how to calculate retirement cash flows was very informative. Our take-away here can be summarized in the following list of sub-topics:
- What is and is not important when considering the math of retirement?
- How much luck is involved in returns?
- Investors must focus on lifelong income. Plan for the long term!
- A portion of future income must be guaranteed wherever possible.
- Run retirement projections early and review periodically.
JMRD is here to assist with answers to these questions and encourage you to regularly review your financial plans. If you want to review or start a financial plan (retirement projection) please let us know. We have an internal system that tracks all financial plans and JMRD will keep you posted with reminders and anniversary dates. JMRD Team member, Matt Aalbers, is our internal specialist and is always happy to discuss these topics.
The Team has a number of retirement planning options based on complexity. The weekly ‘Market Observer’ also has timely articles in the ‘Retirement Corner’ for your review and consideration.
Session #2: The Psychology of Decumulation
Daniel Crosby, from Nocturne Capital was the second speaker and in addition to his enthusiasm, he provided a number of thoughtful themes around behavioural finance.
In what was a very interactive session, the audience examined the sociological, psychological and neurological foundations of financial decision-making as well as learning how to apply these concepts to the specific challenges of decumulation.
What does that mean for you and JMRD? It means that we must have those hard conversations about future cash flows to ensure that realistic expectations are in place.
Another way of asking this question is: Will I run out of money? Again, JMRD can help with these difficult questions and putting in place a financial plan is the first step. A second step is asking, “how do I save more today to increase the likelihood of not running out of money in the future?” One simple answer is to automate savings – ask us about this!
Session #3: Equity Glide-Paths in Decumulation: Rising, Falling or Level?
Don Ezra gave a comprehensive presentation on how to build up a sustainable retirement income. This chat was a perfect extension of the first two sessions and really went into how to keep the cash flow coming once retirement is reached.
A case-study was used to provide real life examples of how things can go right or wrong based on the implementation of various strategies or lack thereof.
This presentation provided us with much to think about when putting in place retirement projections. More to come on this topic in future Market Observers.
Session #4: Retirement Income Planning: Risk Management and Efficiency
What a way to finish! York University’s Moshe Milevsky was the final speaker and he did not disappoint. JMRD has had the pleasure to hear him speak many times before and his message and knowledge always impresses.
The main theme here was how do investors who have focused on accumulation their entire working lives switch to one of decumulation? The change can be daunting and the challenges will be many.
A list of other discussion points included:
- Learning about new tools to manage personal longevity risk, the risk of lasting longer than your money does.
- New products and strategies.
- How to solve the dilemma of providing a sustainable income stream during retirement.
This was by far the most entertaining and thought provoking session. There is much more to be taken from this final presentation. Ideally we would love to get Moshe out to a client event – leave that with us for now!
So, to wrap up, JMRD attends these functions to ensure that we are on top of industry standards and changes and to bring new tools to our practice that can enhance and improve your financial plans. Please let us know if you have any comments or questions and we’ll share the Q&A in up-coming Market Observers.
JMRD is pleased to let you know that we have retirement income specialists and additional expertise to assist in all your financial planning.
Remember……….have a plan and stick to the plan!
JMRD Basket Corner
Northland Power (NPI) – Nordsee One tracking well to completion of construction. The project has 53 of 54 turbines installed and is generating power and recognizing revenue at the FiT rate for the turbines currently online. However, similar to Gemini, we believe NPI may choose to reach COD at a later date to maximize returns. NPI has been active in the offshore wind market in Taiwan for a couple of years and recently passed an important environmental review phase which gives it a lead on its larger competitors (DONG and Macquarie). Taiwan is an attractive market with an installed capacity target of 4 GW by 2030E. As the market is immature, it has less competition. It also has a FiT program with contracts up to 20 years in length which we believe could provide attractive returns (>10% IRR’s). NPI is also considering Mexico as another area of growth. It has long term demand for power and is auctioning 14 GW of renewable capacity through 2030E
Pembina Pipeline (PPL) – Veresen Inc. announced that it has entered into a 20-year take-or-pay transportation agreement for ~95% of existing capacity on the Alberta Ethane Gathering System (“AEGS”), effective January 1, 2019, which includes increased tolls to account for the value of the service provided to customers while continuing to provide for the recovery of operating costs. The company also highlighted the potential to increase system capacity (currently 320,000 bbl/d) should there be sufficient demand in the future. Recall, Pembina is expected to close the acquisition of Veresen by late Q3 / early Q4. As such, we would view the re-contracting of AEGS as a positive sign surrounding customer support and ultimate regulatory approval of the deal – namely the Competition Bureau’s approval of combining AEGS (VSN) and the Vantage pipeline (PPL).
All-Cap Growth Basket
North American Energy Partners (NOA) – The company was awarded 2 significant winter earthworks contracts (2 separate oil sands mines) with a combined value of $90 mln (our 2017E revenue forecast is $289 mln). With the cancelled earthworks project in Q2/17 and inclement weather fully behind us, the contract announcements should change the sentiment pace on the name. Overburden removal demand appears to be strong for the winter season (Q4/17E / Q1/18E), backfilling expectations for the remainder of 2017E and into early 2018E. In addition to the earthworks contracts, NOA also won a 3-year mine support services contract (with 2 year extension option) on Highland Valley Copper Mine in BC; the revenue contribution is not significant at the moment but is expected to grow over the life of the contract. While not as material as the earthworks contracts in terms of revenue contribution, the non-oil sands related work keeps the company’s diversification goals on track; Red Chris copper mine won in Q2/16 was extended further into 2017 and a coal excavation project in BC is expected to contribute to H2/17E.
Premium Brands Holdings (PBH) – PBH announced that it has acquired ON-based Leadbetter Foods Inc. for an undisclosed amount. Leadbetter is a leading manufacturer of specialty bacon, burgers and portion-cut steaks. We expect it to add $55 million in sales, which translates into $5.5-$6.6 million in EBITDA assuming a margin of 10%-12%, consistent with PBH’s Specialty Foods segment. (Full report attached)
Reads of the Week
- Emerging Markets May Be Due for Their Comeback
- RESPs are like TFSAs for clients’ children – Inside Track
- Investing Hot Shots Can’t Time, Either
- How Toys ‘R’ Us Collapsed so Quickly
- Silicon Meets Steel as Pipeline Operators Try Fiber Optics
- Tax Cuts on the Horizon for Canada’s New Fiscal Champion
- Goodfood Bets Canada Meal Kits Can Beat Blue Apron, Amazon
- Bet With Buffett, Not Against Him
- Thirst for Oil Returns to Wealthy Nations
- Well-to-do investors plow cash into Canadian farmland
- There’s Nothing Old About This Bull Market
Monday September 25th – Chicago fed national activity index (US)
Tuesday September 26th – New home sales (US)
Wednesday September 27th – Pending home sales index (US)
Thursday September 28th – GDP 2Q (US), Average weekly earnings (CAD)
Friday September 29th – Personal Income (US), Industrial product and raw materials price indexes (CAD)
Monday September 25th – None
Tuesday September 26th – Micron Technology Inc., Nike Inc.
Wednesday September 27th – None
Thursday September 28th – BlackBerry Limited, Vail Resorts Inc.
Friday September 29th – None
Enjoy the weekend!