Terry, “You Are a Genius” – Understanding Investor Personal Sleepability

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My most conservative client came in to renew his August GIC maturities. He has insisted on renewing for only one-year every time his GICs have come due ($200,000 in January and $400,000 in August). He works with me since we shop the market to get him much higher rates. When he comes in twice a year, I have always gone over the advantages of Laddering his portfolio; having 20% of his GIC portfolio due each year and renewing each year’s maturity for 5 more years.

This would allow him to renew at the highest rate most of the time*.

*Once in a while interest rates will invert (longer term rates are lower than shorter term rates). While this does happen from time to time, since the peak of interest rates in the early 80’s we have only inverted 3 times, for very short periods of time. There is a strategy to this scenario.

He is pro-active and called me to set up our twice a year appointment as he always does. He stated that he wanted to talk to me on the phone the day before we met. A family member agreed that I was giving him good advice to ladder his maturities.

The Advantage of the Personal Service of an Independent Advisor

There was still concern in his voice so I investigated further and he asked the following: “What if I need $250,000 to $300,000 in a given year”? He noted that the chances were more than slim, but this “What If” bothers him and causes him to lose sleep. I told him I would put together a plan for the next day. No pre-conceived checklist would have picked this up like a caring person.

When he came in I proposed we ladder his August maturities and renew his January maturities for one year at a time. At least 2/3rds of his investments would be at the higher rate with plenty of liquidity annually.

This was exactly what he was looking for and we enacted the plan.

5 days later, he called to tell me “I was a genius with this plan”. For the first time since his retirement, he feels that he can sleep at night. He is ultra conservative and was at odds with current interest rates, his conservatism and liquidity. This is "Sleepability"

You can do much, much better if you shop

I went online today and got the rates for the first major bank on my Google Search for Canadian Bank GICs. I used the rates this firm posted for clients with $100,000. I compared this to the shopping I can do and found the following:

  • Rate differential between this bank’s posted rates compared to my shopping:

                                     1 year     2 years     3 years     4 years     5 years
Shopping (best rate)    1.50%       1.65%        1.76%       1.81%       1.95%
Bank                               0.55%        0.65%        0.85%      1.05%       1.25%
Client Gain per year    0.95%       1.00%        0.91%      0.76%      0.70%

These high rates were from 5 different financial institutions on August 22, 2016, allowing an investor to stay under any CDIC threshold needs.

  • The next offering I found was BONUS GICs

          12 Months    24 Months     36 Months    48 Months    60 Months
                  0.70%           1.05%             1.00%            1.10%            1.55%

BONUS GICs were reported in months instead of years, further confusing a reader.

  • They had a 5-year escalating rate GIC:

          Year 1    Year 2    Year 3    Year 4    Year 5    Effective Yield
            1.00%     1.10%      1.15%     1.25%     3.00%          1.50%

Many of their clients will be excited about getting 3% in year five and don’t pay attention to the fact the they have to hold this for the whole 5 years and will only receive the equivalent of 1.5% GIC over the 5 years (they do report this, but don’t explain it). While this is higher than their 1.25% regular GIC offering, this 5 year GIC only matches the 1 year term I shopped for.

Misleading Mutual Fund return link on Guaranteed Rate page

On this page of their interest rates, this bank had 14 different categories in which they have split their GICs and at the bottom of the page they further added to their offering with the following links: TFSA Rates, RRSP Rates, Mutual Fund Rates, RRIF/LIF Rates (I disabled these links in this piece).


I can not believe they placed their Mutual Funds Returns link on a guaranteed rate page and called these past returns “RATES”. I imagine they are as close to the reality line as possible. If you know where to look and how to read these “RATES” and disclaimers, you will find that these “RATES” are from the past and not guaranteed into the future. You have to work hard to find this information, let alone understand it.

Your Independence Matters

Terry McIntyre is an independent investment advisor with Manulife Securities and can be reached at: 905-846-9060, ext.3838, email: Terry.McIntyre@manulifesecurities.ca or website: www.terrymcintyre.ca

This material is not to be construed as an offer or solicitation. The securities mentioned may not necessarily be considered suitable investments for all clients. Contact your Investment Advisor to discuss your individual investment needs.