Clients in all age groups remain leery of long-range strategies for their RRSPs, still concerned about losses.

But this should not be the case, as an RRSP is designed to provide returns over extended periods, says Warren Baldwin, regional vice president with T.E. Wealth in Toronto. Clients who are properly invested for the long term, he says, should not have to make “any magic tweaks or aggressive changes in asset mix” when market or interest rate conditions change.

So, where should clients put their money to maximize returns? There is a range of options, of course, but Baldwin and other experienced advisors agree that what is important to appreciate in the current climate is that many clients continue to take a highly conservative stance. Clients often are opting for dividend-paying stocks or striving to eke out whatever yield they can get from low-yielding fixed-income securities.

But clients can do better.

Baldwin, whose firm works primarily with high net-worth clients, suggests choosing an asset mix that can weather a wide range of market conditions. For the average client, Baldwin recommends a standard 60% equities/40% fixed-income asset mix.

Within the equities component of the portfolio, Baldwin advises holding one-third in each of Canadian, U.S. and international equities issued by good-quality, world-class companies. The fixed-income portion of the portfolio should be heavily weighted in bonds with a shorter duration to protect clients from losses when interest rates rise.

In exceptional circumstances, Baldwin adds, he also might blend in a higher-income investment vehicle, such as a dividend fund, depending on the client’s cash-flow requirements.

This is a “tried and true” asset mix, says Baldwin, which should provide a consistent return greater than 6%, thus meeting the expectations of most long-term investors.

On the other hand, Kevin Sullivan, vice president and portfolio manager in Toronto with Montreal-based MacDougall MacDougall & MacTier Inc., contends that it is necessary to do a little fine-tuning to a portfolio in this unsettled economic environment.

Bearing in mind that the asset mix for clients closer to retirement, who might need some more liquidity in their portfolios, must be adjusted, Sullivan recommends an asset mix of 20%-25% in fixed income, 10% in gold, and the remainder in equities.

Sullivan suggests that the fixed-income investments should not be confined to bonds, so he also recommends high-quality real estate investment trusts (REITs). He also considers blue-chip, dividend-paying stocks with good dividend growth potential to be part of the fixed-income mix, which is preferable to using junk bonds for higher income.

Finding good-quality Canadian equities is more of a challenge, Sullivan says. He recommends exploring options south of the border for growth opportunities.

Sullivan’s preference for gold is not just based on rising bullion prices. He sees gold as a safe haven amid the doubts about central banks and global political forces.

Sullivan also suggests that exchange-traded funds (ETFs) can be used effectively as part of the asset mix to provide exposure to specific sectors or markets.

Heather Holjevac, a certified financial planner with TriDelta Financial Partners Inc. in Oakville, Ont., takes a somewhat different approach. She typically rebalances her clients’ RRSP portfolios at least twice a year, if necessary. Although interest rates are low, she recommends a basic asset allocation of 60% fixed-income/40% equities, a reversal of the usual asset mix.

However, Holjevac’s approach to the fixed-income component is heavily weighted toward higher-yielding corporate and infrastructure bonds, with only 5% exposure to government issues.

In the equities component of the asset mix, she prefers dividend-paying stocks. Holjevac’s more cautious approach – which is aimed at capital preservation – is complemented by a 10% cash position in the event that there is a pullback in the market.

And apart from any particular portfolio mix, it’s helpful to ensure that your clients make their RRSP contributions in a timely fashion, not in a rush during the two-month period prior to the deadline for doing so. When this happens, clients seldom have the time to review their options with you and then make considered choices about last-minute RRSP-contribution investments.

And whether your clients take a strategic long-term approach or have a shorter-term outlook, their decisions always should be based on clear investment objectives, the time horizon to retirement and risk tolerance, says Richa Hingorani, regional financial planning consultant with Royal Bank of Canada in Toronto.

To avoid ad hoc decisions, Hingorani recommends that clients invest regularly rather than at the contribution deadline, thereby also benefiting from both ongoing compounding and dollar-cost averaging. IE

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