Review By ELAINE WILTSHIRE, Editor of The Bottom Line, Continued....
"When I really looked at it . . . I said "Oh my gosh, I can't believe this is sitting in the Income Tax Act and no one has even looked at it."
In his book, The Essential Individual Pension Plan, Merrick breaks down this retirement planning structure from set-up to maintenance to wind-up by tapping into some of the industry's most knowledgeable contributors.
The unique and collaborative structure of the book will be useful for anyone wanting to know more about this money-making opportunity, he said. The potential for payout is there, one just needs to know the facts and how to utilize the structure properly.
In the first chapter, Merrick clearly illustrates the benefits of an IPP by looking at the example of a 45-year-old owner/executive making a T4 income of $100,000.
According to Merrick, by combining IPP and RRSP contributions using a yearly rate of return of 7.5 per cent, she would accumulate over $1.5 million more in tax-sheltered assets in her registered retirement plan by the time she's 69 than by only utilizing her RRSP option.
Even with the $5,000 set-up fee for an IPP the opportunity costassociated with ignoring the idea is going to be significant", Merrick said.
Merrick said this book is going to be of particular interest to brokerage firms because right now they don't know where to start in terms of setting up an IPP something they should be very interested in due to the potential direct fees generated from managing the assets.
Although the book is targeted at any financial professional, accountants will find it especially useful because they will want to know what brokers are selling their clients. Sales of this book are going to be driven primarily by the mutual fund companies and the large bank-owned brokerage firms",
Merrick said. "But I'd say for public accountants, they should be buying it because they should know what these guys are telling their clients."
He also notes that the book is set up to appeal to a wide range of interests in the IPP process. "If you have someone who wants to just get the karate punch boom the first two chapters deliver that . . . But if you've got someone who wants to get more
technical . . . this is going to tell you exactly the technical aspects of it."
Merrick has called upon many heavy hitters of the financial world to contribute their own expertise, saying "these people who are in the book helped with my journey of understanding how my own practice has to change."
Contributors include Cary List, the newlyappointed president and CEO of the Financial Planner Standards Council of Canada. The forward was written by Mort Shapiro, president of Morden S. Shapiro & Associates Inc.
In his forward, Shapiro states, "his publication should serve as a primer for practising accountants who are interested in knowing what this 'financial services' world is all about. Public accountants owe it to themselves and to their clients to become knowledgeable of the broad range of products and strategies available to their clients."
Merrick is the president of Merrick Wealth Management in Toronto and the author of the Individual Pension Plan course for the Canadian Securities Institute.
He is also a regular columnist for The Bottom Line."
Review by CMA Management Magazine
New takes on personal investing, value creation and middle managers
"In recent years individual pension plans, or IPPs, have become a popular
retirement savings tool for many executives. This is partly because of changes
in provincial pension benefits legislation, and to the active promotion of the potential advantages of IPPs by
insurance companies and financial institutions. They are considered an RRSP upgrade for
high earners. The primary candidates for IPPs are business owners, company executives and
incorporated professionals over the age of 45 with an annual income greater than $100,000 per year.
The Essential Individual Pension Plan is a useful guide to IPPs for financial advisors,
accountants and other consultants who want to fully understand the value of IPPs. Sections of the
book include the history of IPPs, the features, benefits and limitations of IPPs, as well as laws,
regulations and industry standards that affect such a structure.
A thorough text, the book also covers IPP investment considerations, and advanced IPP applications,
like using employee profit-sharing plans, and maximizing IPPs with Investment Management Fees and additional voluntary contributions."
A useful guide to RRSPs on steroids
Engaging book about individual pension plans highlights their advantages, both for advisors and clients
By George Hartman
"At one point in my career, I worked alongside an actuary, who astounded me with his range of knowledge. He
could contribute to virtually any discussion with an amazing amount of detail.
One particular strength was his familiarity with the Income Tax Act. He claimed it read like a novel,
with main characters (various finance ministers) influencing the plot (their government's fiscal objectives) and
suspenseful outcomes (unexpected and sometimes illogical clauses and amendments).
I got that same sense reading The Essential Individual Pension Plan. Author Peter J. Merrick,
president of MerrickWealth.com in Toronto, tells the story of individual pension plans in an
engaging yet informative way, from their beginnings as an obscure section of the Income Tax Act to their
vastly underutilized market potential today. Along the way, we are informed, coached and inspired to consider
seriously becoming experts in the field and accessing the largely untapped market as a way to enhance wealth at
two levels for qualified clients through the IPPs themselves and for advisors through the significant revenue
that can be generated from their sale.
Let's begin with a definition. IPPs have been called "RRSPs on steroids" because they offer beefed-up tax-sheltered
retirement savings for successful entrepreneurs and others associated with them. IPPs are defined-benefit pension
plans, each typically for one person or a very select group of employees. When you sort through all the qualifications
and benefits, Merrick says, "IPPs offer the best tax and retirement solution plan for individuals 40 years of age
and older who have T4 incomes of more than $105,600, who work for an incorporated business and who have historically
maximized their RRSP and pension contributions."
How do IPPs stack up against RRSPs alone? Consider the example of a 45-year-old executive with 15 years service and
a $100,000-plus income. Maximizing both an IPP and an RRSP, assuming 7.5% returns, would accumulate more than $5 million
by age 69, yielding an annual income of about $380,000. An RRSP alone would grow to about $3.5 million and an income of
slightly less than $265,000. The additional $1.5 million of assets and $115,000 a year in income would make a significant
difference in lifestyle and inheritance.
On the advisor side, Merrick estimates a 49-year-old IPP client acquired today will generate more than $300,000 in commission
and fee income over the next 15 years. And the number of plans is expected to grow to 300,000 over the same period, from 8,500
in 2006. Advisors may be looking at $300 billion of new investible assets up for grabs.
The book is divided into five parts and 28 chapters, each of the latter beginning with a brief overview and a statement of
the chapter's learning objectives, so you can determine what sections you want to read individually or in various combinations,
depending on your interests. The five parts are:
> Part I: IPP Essentials. This part explains the nuts and bolts of establishing, maintaining and winding up IPPs. It describes
the features, benefits, funding, limitations and restrictions. The governing regulations, pension plan standards, accounting
re-quirements, and roles and responsibilities are also detailed.
> Part II: IPP Investment Considerations. This section covers the fine points of permitted investments and discusses investment
philosophy: in particular asset allocation, rebalancing and socially responsible investing.
> Part III: Advanced IPP Applications. This deals with integrating IPPs with other employee benefits and also contains an extensive
chapter on how retirement compensation agreements can be used to provide additional benefits over and above an IPP.
> Part IV: The 21st-Century Financial Consultant's IPP Concept Presentation Kit. This part goes beyond an academic treatment of
the subject matter. Herein you will find the current implications of being an advisor, as well as ways to amplify your value proposition
for clients and position yourself as an IPP expert.
> Part V: Epilogue. With the exception of a "pensionspeak" glossary, this is a hodgepodge of things the author couldn't fit in elsewhere.
The book is a surprisingly easy read. A financial advisor himself, Merrick has enlisted other "subject matter experts" to add credibility
and insight to certain areas. There are numerous caveats and cautions in the book about the challenges of dealing with IPPs."