Mentioned here yesterday that a guy from BC had called Esther with a tale of income trust woe. The blog trolls, naysayers, Harpies and Garth-bashers moved in to discredit the left coaster before I’d even had a chance to talk to him. So I fixed that. Herewith, his tale.
Chris is a locksmith. His own guy – small businessman. “Got no pension,” he told me. “No sick days. No holidays. I’ve got nothing, bud, except my house and this.”
“This” is his RRSP, and Chris and his wife have managed over the course of years to salt away almost $300,000 for their retirement. He had hoped it would happen this year, at age 55, but that plan went haywire. So the next retirement goal was 58, and things looked like they might actually work – until last Tuesday night when he turned on the news and heard Jim Flaherty had just done a number on income trusts.
“I never said I wanted to invest in income trust,” Chris tells me, “but it was my financial planner who put me in a few of them, because they were safe and gave us some growth. So I just never imagined this could happen.”
Chris is with ScotiaMcLeod. His advisor got his client to borrow $100,000 against the equity in his home to invest in what Chris says was “low-risk stuff.” That included some index funds, a few growth mutual funds, some straight income trusts and some paper issued by two major automotive companies. After he watched the stock market gyrate for two days he tried to call his advisor on Friday, but couldn’t get through. He worried a lot for another day, and then he called me.
“You’ve been in the financial business,” he told me, “and I know you just fell out of favour or got demoted or something, but you always say what’s on your mind. Mostly I called you because I read your website and you talked about income trusts and you said you were sorry, and that’s something.”
Checking his portfolio online, Chris has learned that his RRSP has lost 20% of its value, or about $60,000. This loss is magnified, of course, by the fact he used leverage to build his portfolio – a highly questionable strategy since money borrowed for an RRSP investment does not have tax-deductible interest.
“This is just a terrible thing,” he says, “and it’s eating me up. This is absolutely all that I have – no corporate pension like office workers – and I am feeling absolutely screwed. Can I say that? Well I am. Screwed.
“I’m not a member of any political party, but I have always voted Conservative all my life because I am a fiscal Conservative. And I am a Christian – not a right wing Christian – and I thought a Christian guy like Harper would be straight up, but he lied, and I just can’t take this loss. Here I am, a conservative guy in a conservative investment, and there must be a million other guys out there right now just like me.”
Chris asked me if, as a member of Parliament, I can change the legislation, or filibuster it or convince Jim Flaherty that it would have been better just to stop any more companies from becoming income trusts, instead of destroying all those which had already made the move. Doesn’t work that way, I said. But I’ll write about you. And I told him not to sell any assets for a couple of months because markets are likely to gain back at least some ground. We plan to speak again in January.
Now, you can criticize Chris for not policing his investments or for using an equity loan to buy mutual funds with an income trust component. You can run him down for wanting to stop driving around and installing deadbolts at the unrealistic age of 55. And you can call him naïve for thinking one Indie MP can stand in the tank tracks of the Harper machine.
But he’s right – there are a million other guys out there just like that. Self-employed, pensionless, hard-working, trusting of advisors and prime ministers, trying to do the right thing, not being greedy or hasty, walking on the beaten path. Unglamorous and steadfast, paying bills and taxes, voting for the most decent candidate. And for this man, sixty thousand dollars is a huge amount of money, as is thirty grand, or ten. All he knows is that last Monday he had it, and this Sunday he does not. And in between, he did nothing.
So when we speak about Mr. Flaherty doing something bold for the good of the country, maybe we should reflect on what the country is.
http://www.garth.ca/weblog/page/7/
The investment dealers should take a lot of heat for the income trust fiasco. These are the most misunderstood investment products of all time.
