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Why Has Your Advisor NOT Offered Labour Sponsored Investment Funds?

by Todd McLay

December 27, 2019

So many advisors do not discuss Labour Sponsored Investment Funds (LSIFs) with their clients, and this always puzzles me...especially if you're from Saskatchewan. Saskatchewan Labour Sponsored Investment Funds have an amazing track record in comparison to their peers nationally, and most importantly, gives Saskatchewan investors the ability to recapture as much as $3,575 in tax refunds from a $5,000 investment!

I don’t care what age, demographic, culture, or background you are….that math just makes sense.

And yet still so many advisors don't offer LSIFs to their clients.  Here may be a few reasons why:

1.  They simply don’t understand.

Believe it or not, advisors are stubborn.   And often, once a particular stereotype enters their brain it's game over. It's very difficult for them to overcome and to be convinced otherwise.

Also, unfortunately, the lack of education may play a significant role in this as well.  Other times it may just simply be the discomfort of the unknown.

Advisors continuously overstate their abilities to provide consistent returns.  Tax refunds and tax credits are guaranteed ways to save and build wealth. Investment returns often are NOT.  So, be sure to reach out and pick the low-hanging fruit first.  It’s far easier in the long run…trust me.

2.  They misunderstand the fee structure.

Some advisors often criticize Labour Funds for their higher-than-average fees.  But higher than what?  In comparison to other mutual funds?  They're not the same as mutual funds.  So again, this is an apples-to-oranges comparison.

Private investments take MORE time to analyze and perform due diligence, and there's no easy way to obtain information and purchase them.  

This differs from a standard mutual fund that buys only publicly traded securities such as stocks and bonds.  There are legal fees, appraisal costs and other expenses that are very necessary when assessing the viability and quality of a private investment.  Secondly, the execution of purchasing private investments are not as straightforward and efficient as those within public markets.

However, obviously the effect that these investments have on growing investment assets and net worth should always be considered after fees.  For example, SaskWorks Venture Fund has not had a single negative return within the last 10 years.  (Source: Morningstar.ca & Saskworks.ca)

And, yes, this is after fees.  

3.  They don't have access.

Many advisors, banks and credit unions are not offering these products on their shelves anymore.  This is unfortunate but the push towards more and more proprietary management is the recurring theme in Canada and throughout the world.

Full-service brokers and portfolio managers are no longer able to carry these types of investments in client name accounts and, unfortunately have begun to not even recommend them to clients.

4.  There's proprietary pressure from their company or firm.

Most banks, credit unions, insurance companies and non-independent mutual fund firms cannot even recommend this to their clients. Why? Because the particular company did not “manufacture” the product.  

There is HUGE profit margin within internally structured investment products and every bank and company is moving further and further toward these types of solutions.

Quite simply, if their name is not on it they often aren’t interested in providing it as a solution to their clients.

Again, the client loses out.

It’s like walking into a Ford car dealership and asking them if they recommend a Chrysler product. We all know what the answer would be!

All in all, Labour Funds truly are an excellent way to leverage against the highest expense that we, as Canadians, have:  INCOME TAX.

And, although they have very specific risks that must be clearly understood by every investor, they still should at least be considered as a solution to building wealth.

Because, the math never lies.

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Any views or opinions expressed on this website are solely those of the representative, and do not necessarily represent those of Gravitas Securities Inc. (GSI).   The information contained herein was obtained from sources believed to be reliable, however, the accuracy is not guaranteed. This site is not deemed to be used as a solicitation in a jurisdiction where this representative is not registered.

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Todd McLay is currently licensed in: British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Todd Bergstresser is currently licensed in Saskatchewan, Alberta British Comlumbia.  Mike McKague is currently licensed in Saskatchewan.

GSI advisors are currently licensed to sell equity securities, bonds, mutual funds, GICs and other securities that are subject to available regulatory exemptions. Your advisor may also offer insurance-related products and/or financial planning services. These services are not offered through Gravitas Securities Inc., however, your advisor is duly registered to provide these services under applicable insurance legislation and the dealer approves such activity to be conducted outside of the dealer.

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