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When her husband died three years ago, Liza was left with a sizable investment portfolio that she put aside until recently because she didn't know what to do about it.

"I am not a sophisticated investor," Liza writes in an e-mail. Now, at 68, she has the same concerns as people of more modest means. Her defined-benefit pension plan plus a small widow's pension from her husband's employer provide her with a comfortable living.

But are her investments - mainly in equity-type mutual funds - suitable? Is she paying too much in management fees? Are her holdings arranged in a tax-efficient way?

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"How can I protect my retirement income to allow for continued travel and entertainment such as theatre and ballet?" Liza writes. She'd also like to preserve enough money "to provide care for me at the end of life."

Finally, she wants to pass on some of her wealth. "I want to be generous to our five children and their families within my means, and if possible, have a financial legacy to leave them on my death."

Liza's income comprises $65,540 in private pensions, $10,945 in Canada Pension Plan benefits, $6,290 from Old Age Security (partly clawed back), $3,070 in interest, and $8,600 in dividends and capital gains, for a total of $94,445 a year. Her investment portfolio - registered and non-registered - totals about $1.3-million, and her home in Toronto is mortgage-free.

We asked Gordon Stockman, vice-president of financial planning at Efficient Wealth Management Inc. in Toronto, to look at Liza's situation.

What the expert says

When it comes to financial security, Liza "is in that wondrous zone where just concentrating on capital preservation instead of growth and income will yield the result needed," Mr. Stockman says. Her pension income is high enough that she needs to draw on only 1 per cent of her assets each year to pay for her extra travels, which means her portfolio will continue to grow. If she needs assisted living or nursing care in her old age, she has plenty of money to pay for them. But her holdings need a little tweaking.

Liza's assets are not organized for tax efficiency, the planner says. Her guaranteed investment certificates, bonds and fixed-income or balanced mutual funds should be held in her registered retirement savings plan (or registered retirement income fund) and her tax-free savings account. Equity funds and stocks are best held in non-registered accounts to take advantage of preferential tax treatment for dividends and capital gains.

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Mr. Stockman also has some concerns about Liza's 25 mutual funds, "a hard number to keep tabs on and evaluate," he says. Of greater concern is their high cost. He estimates Liza is paying at least 0.65 percentage points more for her funds than she would pay an investment counsellor or other professional money manager. While that may not sound like a lot in percentage terms, in Liza's case it adds up to more than $8,000 a year.

"I certainly believe it is possible to save $8,000 to $10,000 per year and still obtain a more tax-efficient and better diversified portfolio with equal or better performance and risk profiles," he says.

The portfolio's heavy weighting in stocks and stock mutual funds should be reined in a bit, Mr. Stockman advises. Excluding cash in the bank, Liza's investment accounts are more than 80 per cent in equities.

"If 2008 taught us anything, it was that few individuals, even the most seasoned, can truly stomach a swift [stock market]correction." A better balance, he suggests, would be 23 per cent each in Canadian and U.S. equities, 17 per cent international and 2 per cent emerging markets. The fixed-income portion would be beefed up from 8.8 per cent to 29 per cent, while cash and money market would be pared from 18.4 per cent to 6 per cent. The fixed-income component would be a blend of corporate, high-yield, inflation-protected and government bonds laddered in maturities from one to five years.

When it comes to passing it on, Liza might want to give some thought over the next year or two to "gifting" a portion of her assets to her children or grandchildren while she is still alive and able to enjoy helping them - and they are still young enough to need it, Mr. Stockman says.


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The person

Liza, 68

The problem

How to take control of her financial destiny and properly invest the large portfolio that had been managed by her late husband, taking care to leave a financial legacy for their five children.

The plan

Switch from high-cost mutual funds to a more balanced portfolio managed by a professional investment counsellor for a set fee.

The payoff

A worry-free retirement with all the financial security she needs now and in future - and money to spare.

Monthly net income



Cash in the bank $121,800; non-registered portfolio $563,023; timeshare condo $10,000; RRSP $596,029; spousal RRSP $28,123; TFSA $10,000; home $1-million. Total: $2.33-million.

Monthly disbursements

Groceries and dining out $370; clothing $100; personal, cleaning $640; property tax $570; house insurance $65; heat, hydro, water $245; telephone, cable, Internet $145; house repairs $135; furniture, appliances $335; vacation - ongoing $590; special travel $600; entertainment $170; hobbies $20; vehicle insurance, maintenance $275; transit $20; gasoline $150; gifts $355; uninsured medical $10; charitable donations $430; life insurance $10. Total: $5,235.



Special to The Globe and Mail

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