We make a point in our discussions with clients to always think of the long term. While many decisions should be made sooner rather than later, there are very rarely any “limited-time offers” or “one-day only” sales when it comes to insurance and financial planning.

That being said, we are in a rather unfortunate time where the major financial institutions in Canada are reacting to the global economy and need to make some adjustments to their products. Nearly all major insurance carriers have announced that they will be increasing premiums on their life insurance products (especially Universal Life policies) within the next few weeks.

If you are considering purchasing Permanent or Universal Life insurance, or if you have Term insurance and wish to convert some or all of it to Permanent insurance in the future, I encourage you to get in touch with us soon so we can take advantage of the current pricing structure and lock in the lower premiums.

The time to buy life insurance is now, by Garry Marr – Financial Post | Personal Finance

You probably don’t want to hear this, but poor investment returns are delivering a new casualty – rising insurance premiums.

Rates on universal life policies are set to increase in the coming weeks on top of increases in November 2010, as insurance companies attempt to better match their funding commitments.

I’m a huge bull on this country… we won’t have a double dip recession. I see our businesses coming back almost across the board…

Warren Buffett, September 13, 2010

I’m writing to share some thoughts on today’s economic outlook, looking beyond the headlines and to bring you up to speed on stock markets.

First a short summary of stock market performance in 2010 to date. Markets in the last three months saw a continuation of the roller-coaster like turbulence of the past couple of years.

After a strong first quarter and a big pullback in the second quarter, July saw a solid recovery in global markets.

This was followed by weak performance in August, and September (historically a troublesome month for markets) saw a big bounce back (the U.S. market experienced the best September since 1939). As a whole, global markets were up 9% for the third quarter and are up 2% in 2010 to date.

Here’s how markets have performed in the last quarter and so far this year:

Source: MCSI index. All returns are in local currency.

The importance of a balanced perspective

One of the keys to success for investors is maintaining emotional equilibrium, preventing the highs from being too high and the lows from being too low.

Today, many Canadians are pessimistic about the American and global economies driven by daunting headlines about slow economic growth, depressed housing prices, high unemployment and deficit problems in the U.S. and Europe. This pessimism is amplified by the media coverage given to voices of gloom such as Nouriel Roubini and David Rosenberg.

As a result, it’s easy to miss some of the good news beyond the headlines.

The Big Sky Conference: Looking past short term issues

That’s why a conference that took place in mid September is important, as it provided some offsetting perspective on the mid and long term positives for the United States and globally.

Speaking to 2000 business and political leaders at “The Big Sky Conference” in Montana, here are comments from Warren Buffett, Steve Ballmer of Microsoft and GE’s Jeff Immelt.

Warren Buffett:

“I’m a huge bull on this country… we won’t have a double dip recession. I see our businesses coming back almost across the board… it’s night and day from a year ago.”

“I’ve seen sentiment turn sour in the last three months or so, generally in the media. I don’t see that in our businesses. I see we’re employing more people than a month ago, two months ago.”

“The things that worked for the country through a century of two world wars, a depression and more – all while increasing the standard of living – will work again.”

Steve Ballmer, Microsoft:

“There soon will be more technological advancement and invention than there was during the Internet era and that will help drive business growth.”

“I am very enthusiastic what the future holds for our industry and what our industry will mean for growth in other industries.”

“We will see new technologies that move beyond the Internet to tie together computers, phones, televisions and data centers to create amazing new products. And the pace of innovation will increase as technology makes workers more productive.”

Jeff Immelt, GE:

“Angry political rhetoric is not helpful and headlines are too focused on finding negative indicators.”

“Business at GE is improving. Signs across the world show growth improving as evidenced by a rise in GE’s orders.”

“GE is now finding it profitable to build manufacturing and service centers in the United States rather than overseas, because it is more competitive to do so.”

The path ahead

Of note, these positive views are supported by recent research from McKinsey & Company, a leading strategy consulting firm. McKinsey surveyed 2000 executives around the world in early September:

• Almost 60% said their country’s economy is in recovery.
• Most expect profits to rise from last year.
• And nearly 40% expect to hire employees by the end of 2010.

It’s not realistic to suggest there won’t be challenges ahead, both for global economies and for stock markets. Overall, we remain positive on the long-term outlook for the equity market. Concerns about the economy have caused many investors to make large allocations to cash and bonds. If you are in that category, I believe now is a good time to reexamine your strategy.

As always, should you have any questions on this post or any other matter, my team and I are always happy to take your calls.

More information on the Montana conference:

Buffett Rules Out Double-Dip Recession Amid Growth: http://www.bloomberg.com/news/2010-09-13/buffett-rules-out-double-dip-u-s-recession-says-berkshire-units-growing.html

Buffett, Ballmer predict bright economic future: http://news.yahoo.com/s/ap/20100913/ap_on_bi_ge/us_economy_leaders

If your boss walked up to you and offered you a raise, would you say no?

That’s exactly what many Canadians are doing every year.

How much money would you give me if I told you I could double it instantly? Probably as much as you could get your hands on. You put 5% of your paycheque into your own personal RRSP, and your company just gives you the same amount… I’m not a math whiz, but I think I know a good deal when I see it!

There isn’t a lot of financial advice one can give that applies as nearly universally as this: if your company is offering you free money, you should take it. For some younger workers, it’s hard to think of the benefits of putting money away today that you won’t use for 30 or 40 years, but believe me when I say that you will be very happy you did. If you are just entering the workforce now, odds are good that you will be retired for nearly as long as you will be working full time. Decisions you make today will have a huge impact on what kind of life you’ll have.

More and more companies have stopped offering their own internally managed pension funds for their employees. They have seen the consequences of massive financial liabilities of their aging workforce; a 2007 report by the UAW showed General Motors had nearly 270,000 retired members collecting pensions and health benefits, and only 74,000 active employees working to generate the money needed to fund those commitments. Some estimates say that every car GM makes has to add $1,600 to the cost just to pay for their current retired employees. People are living, and collecting benefits, longer than ever before, and these “legacy benefits” are becoming a major issue for companies.

In Canada, it is becoming far more common for businesses to offer “defined contributions” to an employee’s RRSP, instead of a “defined benefit” guaranteeing a certain income level in retirement. Not only does this remove the risk of market performance from the employer (“We gave you the money, you picked the investments!”), but in many cases if the employee chooses not to contribute to his own retirement savings, the company doesn’t have to either! Now the employee has lost out twice.

Canadians are being left in charge of far more of their own retirement savings and lifestyle than ever before, and this rejection of the most effective method of planning for retirement is a serious cause for concern. Perhaps it is a lingering belief of “the company/government will take care of me,” perhaps it’s the feeling of needing to hold on to every penny on the paycheque, that makes employees turn down these offered contributions. Some people only listen as far as “you contribute 5% of your salary…” and they don’t think about what they are giving up in return for that little bit of extra cash in their pocket right now.

If you are working for a company that offers RRSP contributions, and for some reason you aren’t taking every penny available, then I implore you: right now, call your boss/manager/HR department or whomever you need to contact, and get it started. If you don’t understand how it works, then ask them to explain, or give us a call. If you run or manage a company that is considering starting an employee contribution plan (or having problems with your current one), then give us a call. It can be set up and managed very easily, and one of our advisors would be happy to show you.

Photo credit: “Money Hand” by Neubie