I am absolutely new to this forum. I desperately need your advice. I'm 53 years old professional [physician] with practically no knowledge about the financial planning and hence have to rely on a financial advisor. I have incorporated my practice for the last four years or so. My gross income is 350 – 400 K, which gets deposited to my corporate account. From this I withdraw about 100 K as my annual salary. My wife does not work and we have two kids 21 and 14 years of age. Now here comes the role of my financial advisor. Over the last about four years, he somehow convinced me about his planning for me.
Personal investment –
This advisor advised me that as I come in the higher tax bracket, I should try to save as much as possible on the tax by taking investment loan. He told me that interest on the investment loan would be tax deductible and this will be one advantage. On top of that the investment would grow and he told me that by and large he would be able to get the returns at minimum 10% and it could be even 15 to 20%. Accordingly, I took huge investment loan [about 640 K] and for this I pay approximately $20,000 annually as interest. The investment for this loan amount is as follows –
1. 400,000 – Manulife. [Minilab dividend growth, Manulife fidelity Canadian, Manulife growth opportunities. Manulife Canadian investment GIF]
2. 100,000 – Canada life various funds.
3. 140,000 – global Maxfin - fidelity – 508
The market value of all these funds is very low. [Loss of approximately 60,000]
Corporate funds investment –
1. He has purchased for me universal life insurance for about 1.9 million. He has advised me to invest about 100,000 in the insurance investment fund every year. He says that even with the conservative growth plan these funds will grow at the rate of 6%. I was told that when I retire at the age of 65, he would issue a line of credit against this amount and this way there would be tax savings. So far I have invested about 260,000 as the insurance investment fund.
2. For the last many years, he has been telling me that the Corporation retained funds are sitting idle and I should think of investing it. I was avoiding it until last year when I allowed him to invest $200,000. This he invested in Manulife. This fund is down by 28,000 as of May 12, 2012.
When I saw my corporate fund down by 28,000, I got the shock of my life. I started getting a terrible feeling that I was in deep trouble.
I want to come out of this but do not understand how. I'm feeling like in the middle of an ocean without any support. At this point of time I started exploring on the Internet when I came across this forum. I went through some of the posts and realized that there are very knowledgeable people around. I would appreciate your advice and am extremely thankful to you for that. Some of the postings here suggested that fee for service types of advisors are always better than the commission-based advisors. I was thinking of taking that route, but again only after the advice on this forum. I would also appreciate if you would recommend some fee for service type of advisors.
Sorry for the long mail and thanks a lot in advance for your advice.