Guaranteed Deposits

A Guaranteed Investment Certificate (GIC) is a secured debt instrument offered by financial institutions such as a Bank or Trust company, a Life Insurance company or a Credit Union. This instrument offers a guaranteed rate of return over a fixed period of time and is considered a conservative investment. These instruments may be insured by the Canada Deposit Insurance Corporation (CDIC) for Bank and Trust companies, Assuris for Life Insurance and Deposit Insurance Corporation of Ontario (DICO) for Credit Unions in Ontario in case of a financial institution’s failure. The best way to obtain a GIC is through a Deposit Broker as they have access to many financial institutions and can provide competitive rates. All of our branches are staffed by Registered Affiliate Deposit Brokers who can provide you with our most current rates.

Do interest rates vary?

The interest rate is generally lower for short terms such as 30-364 days and increases for long term deposits of 1-5 years. The interest can be compounded (added to the principal) or paid out in monthly, quarterly, semi-annual or annual installments.

There are many different types of GICs available today. For example, some are indexed to a stock market such as the Toronto Stock Exchange (TSX) or have escalating rates for each year. Cashable GICs are available but usually at a lower interest rate than a 1 year term.

Is there a minimum amount required to purchase a GIC?

The minimum amount required is affordable and can be as low as $1,000.00 for long term certificates and higher for short term deposits. The long term deposits can be purchased with non-tax sheltered savings or registered funds such as a Registered Retirement Savings Plan (RRSP).

Is there an investment strategy that can be used with GICs?

Staggering your maturities is a strategy that helps avoid having “all of your eggs in one basket”. It limits your exposure to interest rate fluctuations. Invest only 20% of your funds to come due (mature) each year for 5 years. At each maturity you will then always select the 5 year rate, which is usually the highest and still have access to 20 % of your funds annually if needed. This strategy is called a laddered GIC plan.

Benefits of guaranteed deposits issued by Insurance Companies:

Potential Creditor Protection – This feature is of primary concern for business owners or professionals as their assets may be exposed to creditors. You may be able to achieve potential creditor protection by naming a “preferred” or “irrevocable” beneficiary. The key relationship is between the life insured (the annuitant) and the beneficiary. There are exceptions to this and it is recommended that you consult independent legal counsel.

Estate Planning Made Easy – Proceeds of your contract are paid directly to your beneficiary, avoiding the time and expense of probate. Also, probate is a public process and information associated with it is accessible to the public. By helping your heirs bypass probate, these contracts can ensure that your personal decisions and information remain the way they are meant to be… personal.

Consumer Protection – contracts are eligible for coverage by Assuris. This plan protects Canadian policyholders, within limits, from loss of benefits in the event of the insolvency of the insurance company.

An annuity is a simple but extremely effective method of guaranteeing an income for life. If you want the comfort of knowing you’ll always have steady predictable and guaranteed income for your retirement under all conditions, consider a life annuity.

When you purchase a life annuity, your principal is permanently converted into regular income payments for as long as you live. These income payments can be thought of as the reverse of a mortgage; they are a combination of a return of principal plus interest over the term of the annuity, and in the case of life annuities the term is for the rest of your life. For estate planning purposes you can choose to have your income payments guaranteed for a certain period to ensure that all of your principal is returned to you or your beneficiaries over a specific time frame whether you are alive or not.

Another kind of annuity, a term certain annuity, is available if you want a guaranteed income for a specific period of time rather than for the rest of your life. While term certain annuities are available from several financial institutions, life annuities are only sold by insurance companies.

For a more in-depth look at annuities, speak to your insurance advisor to understand which kind of annuity is right for you.

A segregated fund is an investment fund that you hold within an insurance contract. The term “segregated” refers to the fact that your investment is separated from the general assets of the insurance company. Your insurance contract dictates the insurance protection you receive. Segregated funds are an insurance contract that provides you with investment management plus protection.

Segregated funds are similar to mutual funds in many respects but provide a number of additional features and benefits.

What are the similarities between segregated funds and mutual funds?

Professional Money Management – Like mutual funds, segregated funds are run by professional money managers who have the experience and skills necessary to effectively manage your money. They also have access to economic data, company research reports and technology that may not generally be available to you.

Diversification – Like mutual funds, segregated funds provide you with access to diversified investment portfolios. Diversification – or spreading your assets among a variety of different investments is an investment strategy designed to lower a portfolio’s overall risk while enhancing returns over time.

Additional Benefits found with segregated funds:

Maturity and Death Guarantees – Depending on the contract, an investor can choose from a number of options that guarantee a minimum of 75% of the total amount you paid to the contract upon death or contract maturity date. Up to 100% can be guaranteed with some insurance companies.

Potential Creditor Protection – This feature is of primary concern for business owners or professionals as their assets may be exposed to creditors. You may be able to achieve potential creditor protection by naming a “preferred” or “irrevocable” beneficiary. The key relationship is between the life insured (the annuitant) and the beneficiary. There are exceptions to this and it is recommended that you consult independent legal counsel.

Estate Planning Made Easy – Proceeds of your contract are paid directly to your beneficiary, avoiding the time and expense of probate. Also, probate is a public process and information associated with it is accessible to the public. By helping your heirs bypass probate, segregated funds can ensure that your personal decisions and information remain the way they are meant to be… personal.

Consumer Protection – Segregated funds are eligible for coverage by Assuris. This plan protects Canadian policyholders, within limits, from loss of benefits in the event of the insolvency of the insurance company.

Mutual Funds are a collection of securities that are professionally managed according to the mandate assigned to each fund.

They can be purchased with low minimums (such as $500.00) which make them ideal for beginning investors.  They also have the ability to have monthly pre-authorized payments setup so that an investor can utilize the dollar-cost averaging method to investing.

Many mutual funds are organized in families meaning that a number of different funds are managed by the same organization. In most cases, investors will be permitted to transfer their investment from one fund to another fund within the same family at little or no charge. An investor can thus, cost effectively modify their mutual fund portfolio as their needs change.

There are various risks associated with different types of mutual funds. Some of the risks are interest rate risk, market risk, currency risk, style risk and lack of liquidity. Not all funds are exposed to all risks. An Investor Questionnaire can assist in determining the suitable asset allocation based on an investors risk profile and time horizon. Mutual funds are considered a long term investment, with the exception of Money Market funds.

Types of Mutual Funds

There are many different types of funds. They are listed below, in order of increasing risk. This list is in no way exhaustive.

Money Markets are a mix of short term bonds, GIC, government T-Bills, bank notes, commercial papers and cash. It is the only mutual fund recommended for a short term investment (less than 3 years).

Bond Funds are comprised primarily of government bonds of various durations and are mid to long term investments (5 to 30 years).

Dividend Funds are usually a mix of preferred shares from various large cap corporations and generally are purchased to produce a stream of income over a mid to long term time horizon.

Income Funds are usually composed of high quality corporate bonds, income trusts and dividend paying preferred shares. The purpose is to produce preferred income over the mid-term.

Conservative Portfolio Funds consist of a number of funds assembled to reduce volatility and still take advantage of the market opportunities. Generally they are professionally rebalanced on a regular basis and the mandate is to preserve capital.

Balanced Funds are a mixture of both bonds and stocks with a defined minimum and maximum percentage for each asset class, for example, 50% each bonds and stocks.

Equity Funds are composed of stocks only and have no fixed income or bond component. They are considered a long term investment.

Moderate Portfolio Funds strive to achieve a greater rate of return with reduced volatility by diversifying within the fund itself and professionally rebalancing on a regular basis. They are a mix of bond and stocks as well as cash. The mandate is often preservation of capital and income.

Growth Portfolio Funds are focused more on growth and a proportionately higher portion of these portfolios are invested in common stocks, both Canadian and foreign. They achieve a greater rate of return with reduced volatility by diversifying within the fund itself and professionally rebalancing on a regular basis. The mandate is commonly growth and a long term horizon is required.

Foreign Equity Funds purchase stocks outside of Canada and can be either geographically specific such as a European fund or invested globally with no specific geographic mandate.

Specialty Funds are the riskiest in the market due to lack of diversification. They are sector or geographic specific such as technology or telecommunications or resources. They are the most volatile and are definitely a long term investment.

Aggressive Portfolio Funds may consist of various equities form specific countries and sectors. They are long term and generally volatile, however, the diversification and regular rebalancing does help reduce both factors somewhat.

What are the advantages of mutual funds?

Liquidity – Mutual funds can be redeemed at any time at their current NAV along with any fees or charges at redemption

Professional Management – The most respected money managers are available to the average person who could not afford to hire such professionals themselves.

Preferred taxation – Dividends and capital gains are taxed at lower rates or have tax credits applied.

Low minimums – Large sums are not required to set up an account and that allows the ordinary individual to participate in a normally costly market.

Investor Protection – This is available in the case of fraud.

Diversification – One mutual can hold many different types of stocks and/or bonds from various sectors such as financial services, consumer goods, resources, etc. This is an investment strategy that is designed to lower a portfolio’s overall risk while enhancing returns over time.

Who is Hub Capital Inc.?

HUB Capital Inc. is the Mutual Fund Dealership with whom your advisor is associated. HUB Capital is registered across Canada as a Mutual Fund dealership and is a member firm of the Mutual Fund Dealers Association (MFDA), which regulates the operations, business conduct, and standards of practice of all of its member firms. Its mandate is to enhance investor protection and maintain investor and public confidence in the Mutual Fund Industry. Having been registered as a Mutual Fund Dealership since 2002, HUB Capital has maintained an unblemished track record of the highest standards of business practices and ethics. Demanding nothing less than absolute compliance and professional business conduct from all of its representatives and associates, HUB Capital strives to ensure that all practices are well within prescribed industry regulation and standards. HUB Capital is a subsidiary of HUB International Limited, a global brokerage company ranked 9 amongst the world’s top Insurance brokerage firms. HUB International has over 330 offices and 7,000 employees across North America, with HUB Capital specifically managing over $5 Billion in client capital, which is invested in over 20 Mutual Fund companies, including Fidelity, CI, Franklin Templeton, Mackenzie Investments, Invesco, and many more household Mutual Fund company brands. HUB Capital is a “client name” Mutual Fund Dealership, which, in essence, means the client (investor) owns the investment in his or her own name directly with the underlying Mutual Fund Company, with HUB Capital acting in the capacity of dealership as the clearing house and trustee to ensure efficient and timely trading with the fund companies on behalf of the advisor and their clients (the investor). Acting as trustee, HUB Capital allows for increased convenience and efficiencies, enabling clients to invest across multiple fund companies and investment options and providing options for the advisor to provide optimum advice when it comes to product selection and diversification. HUB Capital’s primary objective is to ensure that its advisors are educated, resourced, and supported in a way that equips them to provide the best service, advice, and investment solutions to their clients.

Mutual Funds are provided through Hub Capital Inc. and sold only through prospectus. For more information on mutual funds contact one of our branches and we will setup an meeting with a licensed mutual fund representative.