Connect Wealth | 13-2970 King George Blvd. | South Surrey, BC V4P 0E6, Canada
Phone: 604.542.4298 | Toll Free: 877.542.4298 | Fax: 604.542.4289
In order to properly plan your finances for your future, you need to understand the different types of financial products, instruments and terms that help you save, invest, get insurance or get a mortgage. Financial products differ in terms of their underlying asset class, volatility, risk and return. Our financial advisors or planners can help you determine which products make the most sense for your unique situation.
Here’s a list to help you get started.
Bond – When you lend money to a government or company you are issued a bond which is a promise to pay back your loan with interest over a period of time. Bonds may be liquid and traded prior to the maturity of the loan.
Critical Illness Insurance (CI) – Provides a lump sum of money if the person insured is diagnosed with one of the illnesses per the policy (cancer, heart attack, stroke, etc.) and survives for 30 days from diagnosis.
Disability Insurance (DI) – Provides a monthly income for the person insured if they are unable to work. The income continues for a set time (2yrs, 5yrs, age 65), until they pass away or until they return to work. There are different definitions of inability to work (any occupation, regular occupation, own occupation).
ETF – Exchange-traded fund – an investment fund that owns large swaths of investments (stocks, bonds, real estate, etc.) that are selected and managed by a fund manager; those investments are then sliced up into millions of pieces and sold to individual investors on exchanges.
GIC – Guaranteed Investment Certificate – Essentially the name says it all. It is an investment vehicle which guarantees a rate of return for a fixed term (usually 1 – 5 years). Guarantee limits vary by the institution.
ICPM – Investment Counsel/Portfolio Manager – A classification of registration with the provincial securities commissions that allows for discretionary portfolio management for wealthy clients, pension funds, endowments.
IPP – Individual Pension Plan – a Defined Benefit plan for one person. Often beneficial for business owners who own more than 10.1% of a company and are over the age of 40.
Life Insurance – Provides a lump sum of money if the person insured passes away while the policy is in force.
LIF – Locked in Fund – Where Defined Contribution Pension Funds (DCRPP) or LIRA funds are transferred when you want to start withdrawing money. There are minimum and maximum withdrawal rules based on the province of registration that the pension was with.
LIRA – Locked In Retirement Account – Where funds from a pension can be transferred after you leave the employment of the company that had the pension.
LRSP – Locked in Registered Savings Plan – Where funds from a pension can be transferred after you leave the employment of the company that had the pension.
Mutual Fund – A fund that pools many people’s money to buy a basket of investments cheaper than it may cost them to buy a similar basket of investments on their own. These basket of investments can be stocks, bonds, other funds, real estate.
RESP – Registered Education Savings Plan – A tax shelter to help Canadians save for their child’s education. After tax money into the account. Tax deferred while in the account. Grant and growth are taxed to the child in school when pulled out. Initial deposits come out tax free.
RDSP – Registered Disability Savings Plan – A tax sheltered account for Canadians who have a disability recognized by the government. Income tested grant money is available. There are restrictions on withdrawal of funds and grants.
RRIF – Registered Retirement Income Fund – When you turn 65 or older and want to draw funds from an RRSP it is often beneficial to transfer the funds to a RRIF. At the age of 71, RRSP must be transferred to a RRIF. There are minimum withdrawal amounts for a RRIF.
RRSP – Registered Retirement Savings Plan. A tax shelter set up by the federal government to help Canadians save for their retirement. Money goes into an RRSP pre-tax, remains tax sheltered (taxation is deferred) while in the RRSP and taxable as income when funds are withdrawn from the RRSP plan.
Seg Fund – Segregated Fund – A fund that pools many people’s money to buy a basket of investments cheaper than it may cost them to buy a similar basket of investments on their own. These basket of investments can be stocks, bonds, other funds, real estate. Segregated Funds also usually have a principal guarantee for death and maturity (usually 10 years from the initial investment). The guarantees vary from 75% to 100%. It also has the ability for the investor to assign beneficiaries (similar to life insurance) so funds bypass the estate and go straight to the beneficiaries.
SRIF – Spousal Retirement Income Fund – where SRSP funds are transferred when you turn 65 or older and want to withdraw funds from an RRSP. Mandatory transfer at age 71.
SRSP – Spousal Retirement Savings Plan. This is similar to an RRSP with one exception, The spouse receives funds from his/her partner. The partner gets the tax break but the funds go into the name of the spouse.
Stock – a fractional percentage of ownership in a company. Also called a share. When you buy a share/stock you become a business owner…or at least a fractional owner of the business.
Term Insurance – Guarantees the premiums payable on life insurance for a set period of time (e.g. 10 years, 20 years, to age 100). Most term policies expire at around age 80 or 85 but does vary by policy. Term insurance is similar to renting.
TFSA – Tax Free Savings Account – an additional tax efficient investment vehicle for Canadians. After-tax money going in, tax free on growth and withdrawals.
Universal Life Insurance – An insurance policy that does not expire (an ownership policy) and allows the policy owner to invest in a tax-sheltered account while it is in force. Also, provides a lump sum of money if the person insured passes away while the policy is in force.
Whole Life Insurance – Provides a lump sum of money if the person insured passes away while the policy is in force. An insurance policy that does not expire (an ownership policy) and will pay dividends to the policy owner while it is in force. Also, provides a lump sum of money if the person insured passes away while the policy is in force.