Re: “Planned merger of SROs a study in contrasts,” by James Langton (IE, January 2007).

This article on self-regulatory organizations, contrasting the allegedly “dynamic U.S. system and the sleepy Canadian one” misses these several interesting points:

> The National Association of Securities Dealersand NYSE Regulation Inc. currently regulate the financial condition and business conduct of the same 200 large broker dealers. The proposed NASD-NYSER merged organization will eliminate this duplicative member regulation. In contrast, such duplication does not exist in Canada and, to my knowledge, never did.

> Because the NASD-NYSER merger is eliminating duplicative regulation, the new organization can generate substantial cost savings, which will be passed on to member firms. Although there is some duplication in Canada, it relates to different functional activities and so is considerably smaller.

The new U.S. SRO will regulate broker-dealer activity on Nasdaq but not on the New York Stock Exchange, meaning it will not consolidate market regulation. In contrast, the proposed Investment Dealers Association of Canada/Market Regulation Services Inc. merged SRO will comprehensively regulate all listed and over-the-counter trading activity.

So, the happy conclusion is that we are ahead of the U.S. Although they are finally addressing a problem that we never had (duplicative member regulation), they are not dealing with another issue (fragmented market regulation) that we will soon have resolved.

Even though we can learn a lot from the dynamism of the U.S. capital markets, in this instance, it’s Canada that has done the trailblazing.

Joe Oliver

President and CEO

Investment Dealers Association of Canada

Toronto

It’s déjà vu all over again

Re: “Couple needs growth to reach estate goals,” by Catherine Harris (IE, December 2006).

Well, it looks like this is a case of déjà vu all over again. In Catherine Harris’ Mid-October 2006 Portfolios column, she looked at a couple, both aged 50 years old, with $6 million in net worth (including real estate), who wanted a net income of $125,000 a year to travel. They also had a great desire to leave an estate of $5 million to their children. Now, in the December 2006 issue, we have a 65 year-old couple in a similar situation who want to do pretty much the same thing.

Investment Executive contacted three more experts and, again, they all had excellent suggestions when it came to the asset mix. The couple would do well to have any of these three advisors handling their investments.

But, predictably, all were in agreement that a $5 million joint/last-to-die life insurance policy would not be needed. Cost was a major consideration, and Randall Takasaki was close with his estimate of $85,000 annually for the life insurance premium. (It is actually about $70,000. They could have a $5 million guaranteed universal life policy with return of premiums for an annual payment of $82,000.)

Takasaki said that this would take away from their desired income, which is true. But if they are investing the $82,000 to achieve their estate goal instead, an after-tax return of 5.5% would give them roughly $6.27 million at age 95. Meanwhile, the life insurance policy has a $5-million death benefit from Day 1 and would have grown to a tax-free $7.46 million by the time they are 95.

But I digress.

In their haste to dismiss life insurance, Don Fraser, Pamela Russell and Takasaki all ignored the fact that it would be possible to buy a lower amount of coverage — a $2.5-million policy would cost roughly $41,000 annually and the death benefit at age 95 would be $3.73 million. Combined with the projected value of their house and adjusting for inflation at 2%, these two things alone would just about take care of the couple’s estate goals.

Everyone has different needs, wants, goals and means. For this reason, each case requires individual attention. Although I would agree that a life insurance policy is not the best vehicle for accumulating money to spend during one’s lifetime, when it comes to the goal of maximizing estate value, life insurance really has no equal.

Mike Matheson

Associate broker

DMR Financial Services Group Inc.

Oakville, Ont.



A question of calculation

Re: “The benefits of reinvesting dividends,” by Carlyle Dunbar (IE, January 2007).

I was interested in this article, which focused on the benefits of reinvesting dividends — something I am always recommending. But I am interested to know where one of the results came from.

@page_break@When I go on Yahoo! Finance, I find that the S&P/TSX composite index closed at 10,824.1396 on Nov. 30, 2005, while it closed at 12,752.3799 on Nov. 30, 2006. That is a 17.81% return, not the 21.6% mentioned in the article.

Carolyn Williams

Financial Fitness

St. John’s



Writer’s response: The article referred to the “equity composite index,” which began in December 2005 and comprises the S&P/TSX composite index without income trusts.

In 2006, the TSX equity composite index performed better than the S&P/TSX composite index, which includes income trusts, even before the income trust sector massacre that happened after the Oct. 31 announcement.