special educational conference call that was so powerful and thought provoking, I thought I would make it available to all subscribers of my blog. I interviewed a professional in the financial industry who agreed to tell the truth of what really happens in the financial community, and why so many investors end up getting the short end of the stick. The feedback that I got from clients was incredible. As a result, I thought I would give you the opportunity to listen into this call as well, in the interest of increasing the level of financial literacy out there. Since this person is currently involved in the financial industry, we could not disclose him, and I referred to him simply as “Mr. X“. But if you own mutual funds, use a financial planner, or ever wondered about how the financial industry really works, you cannot miss out in hearing this call. After the call, Mr. X was so amazed by the positive response we got, that he agreed to do a second follow-up call, where he is going to answer specific questions from you. So once you listen to this call, if you’re interested in getting notification about the second call that will reveal even more details and secrets, make sure that you’ve subscribed to this blog. Only my blog subscribers will receive the notice about the next call, so get on the list if you’re interested. All you have to do is plug your name and email address into the box on the top right hand corner of the main page of my blog. Don’t worry, I don’t send out crap or spam to this list. It simply sends out every post that I make on the blog, to make sure you don’t miss out on any of my posts. So without further adue, here’s where you can access the call I held recently with Mr. X, entitled “The Dirty Little Secrets of the Financial Industry“. Go to this link: Mr. X Confidential Conference Call NOTE: Once you’ve listened to the call, PLEASE come back to the blog and post a comment of what you thought about the call, and what you learned!]]>
3 Responses
Dear Greg and Mr”X”, I need you to keep going! I was there on the 6th @8PM EST. I took notes. I consider myself knowledgeable. I knew about FE’s and DSC’s but did not know how it worked exactly. The call answered the “why” things work the way they do. It opens my eyes to understand the bigger picture. Imagine these details going out to the person that really does not understand any of this in the first place… forget talking about IPO’s…which I had heard the term as I am trying to secure my children’s RESP in something other then mutual funds…I am trying to learn about the stock market’s. I wait patiently to learn more from the arm’s length program before I make any moves. You both had great stories as examples. The best part is about asking your “financial person” to show you what they have in their portfolio!!!”UNAWARE” people will cringe at that. You even said it yourself. I think that it’s the best thing to show people that they have to take control. The call has allowed me to find my theme for 2009. It’s about TRUST and taking ACTION! Now that I have this focus in hand I have a great platform to introduce “unaware” people about alternatives choices which will require TRUST and them taking ACTION! This call must be part of your RRSP program. Looking forward to call #2.
Diane
PS: I took action a year ago this month with the support of my husband to open our self-directed RRSP as the first step of taking control. I was made aware of alternative choices. By April we were out of the mutual fund market. When the first BAILOUT failed, and the markets started to fall, I felt like an outsider looking in. How did we manage to avoid these losses? Today, I understand very well that it was about trusting the people around me and taking action. I was that unaware person. I like to shown my portfolio as I try to build TRUST. Your conference calls will help people take ACTION and I will have their TRUST!
1. I have 4 properties right now but all are leveraged to 75-80% LTV and a 4th is high-ratio. I was wondering how can I invest someone else’s RRSP money in a low risk environment for them if I don’t have any properties that will provide that “risk mitigation”?
2. My parents own their home (mortgage free) and it’s worth $350-$500k. Can I work out a deal with them where I can use their home to write RRSP second mortgages for someone else and also pay them a “fee” for providing me with access to the mortgage on their
property?
You didn’t mention property values, so it’s hard to know what kind of equity we’re talking about. However, it’s not uncommon to do a 2nd mortgage for 85%, or 90% of LTV. The trustees typically allow up to 90% of appraisaed value. If you have a property worth $600,000 and you have it leveraged 75% LTV, that means you have $150,000 of equity, and you could do a 2nd of $60,000 and that would only take it to 85% LTV.
You need to be careful when you’re using related party RRSPs to benefit yourself. The risk is that the CRA comes in and deems a loan to be non-arm’s length, which triggers tax consequences.
The best approach with your parents having existing equity would be, if possible, to have them obtain a secured Line of Credit (HELOC) on their property instead of using someone’s RRSP funds. The primary reason is that this is going to be the lowest interest rates that they can get (ie: likely at prime, or just over), and there are no restrictions involved like there would be with RRSPs. Legally, you cannot be paid for arranging a mortgage for someone as I assume you are not a licensed mortgage broker, which is required for you to be paid for services of arranging mortgages for a third party.
However, going the LOC route is the simplest option here. They simply go to a chartered back, get a 50% LTV line of credit (or whatever they decide is reasonable), lend you those funds, and you pay them whatever interest rate you decide upon. Ideally, you invest that money at a strong return, and then pay your parents their payment at a rate which would be higher than their cost of funds.
Ie: You invest the funds at a 15% return, you pay your parents 8%, and they are paying 4.5% on their underlying line of credit. That way, everyone’s making money, your parents don’t need to do anything active, and you have funds to go out and invest.
That’s just one example, but that is the direction I’d suggest with your parents equity. Obviously, I’ll give you the regular caveats about borrowing against a principal residence, as that always need to be done with attention and care. The funds should not be invested in anything high risk. They should be requiring you to provide them security, ie: if you use the funds to purchase another property, they should get a caveat or mortgage registered on that property in case something goes sideways.
This is just some thinking out loud, but hopefully that helps.