Compass Newsletter April 2019
INDIVIDUAL PENSION PLANS – INVESTING BEYOND YOUR RRSP LIMITS
Pinnacle Wealth Brokers Inc. (Pinnacle) is pleased to announce that we have entered into a relationship with DickinsonCarr Inc. to provide certain eligible investors [e.g., business owners or professionals] with a cost-effective individual pension plan (“IPP”) that permits investments in both public and private market securities.
An IPP is a corporate sponsored defined benefit pension plan created on behalf of one individual. The object of the IPP is to fund the maximum lifetime pension benefit permitted under the Canada Income Tax Act.
The IPP is an excellent tool for individuals wanting more retirement savings than is available through an RRSP.
IPP advantages include:
- Significant contributions for service prior to IPP implementation
- Assets within the IPP are creditor proof
- Monies borrowed to fund the IPP, set-up costs and ongoing administration expenses are tax deductible to the employer
- IPP assets may be topped-up in the event investment returns are inadequate to fund
- Early retirement can be funded by a lumpsum tax deductible contribution
- Retirement benefits can be paid in various forms specifically tailored to the individual
- The corporation has 120 days after its year end to make an IPP contribution.
The IPP is most beneficial for the executive, incorporated professional or business owner who:
- Has attained age 40
- Receives employment (T4) income from the company
- Has service with the company or a related employer prior to plan implementation
- Requires more tax sheltering than is available under an RRSP.
For more information about Pinnacle’s IPP offering, please contact your Pinnacle Dealing Representative.
PRIVATE MARKET INVESTMENTS WITH PINNACLE WEALTH BROKERS
“Continuing to seek unique investment opportunities to increase wealth”
By Brian Koscak, President, Chief Compliance Officer and General Counsel
Whether it is pre or post RRSP season, investors need to consider where they should invest their money. As the public market indexes continue to change, the case for private market investments becomes more compelling and so do investments offered by Pinnacle.
The Private Markets
Pinnacles Dealing Representatives exclusively offer private market investment opportunities to qualified investors. We do not sell mutual funds or public market securities, like the banks and traditional brokerages. In fact, many investment dealers do not offer private market investment opportunities and, those that do, generally only sell to accredited investors [i.e., wealthy individuals].
Privates versus Publics
The private markets involve investing in private as opposed to public companies. In legal jargon, public companies are called “reporting issuers” whose securities generally trade on a stock exchange, such as the Toronto Stock Exchange. They are called “reporting issuers” since they are subject to a continuous disclosure regime that requires them to make various public filings, such as annual and interim financial statements, management information circulars for annual and/or special meetings of shareholders, and material change reports. An investor can find a reporting issuer’s publicly available information on a website maintained by the Canadian Securities Administrators called SEDAR at: https://www.sedar.com.
In contrast, a private issuer (i.e., a non-reporting issuer) generally has less disclosure about its business and affairs (although they have to file audited annual financial statements, offering memorandum and related marketing materials on SEDAR when selling securities under the offering memorandum prospectus exemption), and their securities do not trade on a public stock exchange.
Although the securities of a private issuer are generally illiquid, in certain circumstances they can be redeemed by an investor directly from the issuer subject to various terms and conditions. However, many investors seek private market investments since they are seeking higher returns than those offered by mutual funds or public market investments, and are willing to accept the risk. As with any investment, there is a risk/reward ratio and generally the higher the return, the higher the risk of loss that investors must be willing to accept.
Pinnacles’ Current Offerings
Although Pinnacle has sold over 120 offerings since inception, we typically have at any given time, between 18 – 20 investment choices, comprised of multi-residential, commercial, industrial, land, agricultural, self-storage, and senior housing real estate investment trusts, as well as private equity and debt securities that pay target distributions to investors. Certain Pinnacle clients seek to receive monthly/quarterly target distributions from private investments which are generally much higher than those in the public markets, reflecting a premium for their illiquidity.
Pinnacle believes that well-selected private market investments, with competent and qualified management teams, can potentially provide higher returns for our investors. In addition, the blend of traditional and alternative asset classes, including private equity investments, helps manage individual risk factors and provides investors with a broader range of diversification choices for their investment portfolio.
Diversifying an investment portfolio across public and private markets creates resiliency by helping your portfolio withstand the full impact of public market corrections, which is prudent when constructing a long-term investment portfolio.
Our Due Diligence Process
Pinnacle undertakes an extensive due diligence process before entering into a distribution agreement with an issuer to raise capital from investors. Pinnacle’s investment review process involves business, legal and financial due diligence.
- Business due diligence involves understanding the business of the issuer and its business model.
- Legal due diligence considers various legal matters including reviewing and revising any offering documents and marketing materials prepared by a company and their lawyer, undertaking various searches such as litigation and corporate searches, as well as bankruptcy and criminal checks on an issuer’s officers and directors.
- Financial due diligence involves reviewing and analyzing historical and/or pro forma financial statements of an issuer as well as any financial information included in any offering document.
Pinnacle needs to be satisfied with all three due diligence components before distributing a private market investment to our investors. Pinnacle works closely with an issuer’s deal team in getting the company “ready for market”. Pinnacle’s experienced Corporate Finance Team has degrees, designations and experience to reduce (not eliminate) the risk of a failed offering and works closely with an issuer’s management team and legal counsel in preparing the issuer’s offering documents for distribution to investors. It is important to understand that Pinnacle has no control over these investments and the facts and circumstances reviewed during our due diligence review can change after you make your investment. Although Pinnacle undertakes periodic reviews of issuers whose securities we have sold, during and after they are on Pinnacle’s product shelf, it is important that investors understand the risks of investing that are clearly detailed in an issuer’s offering memorandum.
Pinnacle Referrals to Portfolio Managers
For investors seeking public market investments, Pinnacle has a number of referral arrangements with reputable and experienced portfolio managers. For those tech-savvy investors, we also have new relationship with a robo-advisor that allows you to make low cost public market investments. Contact Your Pinnacle Dealing Representative for more information.
Take Action Now to Invest
If you are interested in learning more about Pinnacle’s current product offerings, or referrals to third-party portfolio managers, please contact your Pinnacle Dealing Representative who can help you.