John Manage-your-money: Hi X, I noticed you will no longer be contributing to your employer-sponsored program, are you switching to a new employer?

You: I’ve actually incorporated myself and will be working as an IT contractor, so I will no longer be contributing to that Registered Retirement Savings Plan.

John Manage-your-money: Well first of all, X, Congratulations on the new opportunity. Exciting times! Please know that we can continue to manage your money of course and can accommodate contributions even if not directly through payroll so you continue pursuing your long-term plan.

You: Thanks, but I think I will be leaving most of my money in the corporation so the RRSP is not an option that is interesting to me.

John Manage-your-money: No problem, I understand that. However there’s something that I can propose to you that’s an incredible product to keep your hard-earned dollars in a tax-sheltered vehicle that will help you tremendously towards achieving a sound retirement plan. X, how about you tell me when can I meet you at The Keg or a steakhouse (on us) so we can go over the details?

You: Thinking (Tax sheltered, help me tremendously towards me goal) and invitation to a steakhouse! Sure.

So you go to the steakhouse like you would go to meet a friend, but the wealth-manager aka sales person has a very different plan for you.

Of course they will pay for your meal even if it costs $200 because they will get thousands off of you in commissions if you bite the bait, and you will. Why? Because they are professionals at selling and you have no idea about the inner workings of what they’re selling. They will tell you that you will be a millionaire if you stick to the plan of contributing 60-80k a year for roughly 10 years and then you can withdraw the funds in a tax-advantaged manner. You have no idea about how to optimize taxes, but anything that sounds like saving taxes and becoming a millionaire sounds like music to your ears.

At no point will they cover the real cost of their Insured Retirement plan, and any questions that you ask related to that, will be promptly swept under the rug by telling you that the plan’s ROI includes the cost which is small compared to the gains you will make even while being conservative with the stock-market growth assumptions.

John Manage-your-money: This product blends an insurance contract with an investment product. It’s best in class, put together one of our countries’ foremost tax and insurance experts, Mark I-have-no-idea-who-you-are. Mark is just a really smart guy with 30 years of experience and BMO was able to convince him to structure this Retired insurance program for them.

What they don’t tell you is the following:

A) You’re locked into a 10 year plan, structured in a way that you’ll pay insurance premiums high enough to cover the tax-structured plan under it’s 10 year cumulative deposits, and from day 1. You’ll be paying insurance premiums with a death benefit as high as $3.5 million on the assumption of a $50 thousand yearly contribution. If you decide to stop contributing, you will still pay the sky-high insurance premiums and the bank (BMO in my case) has very steep penalties for cash surrenders should you decide close the plan.

B) You have no say over the insurance premiums increases. Because you’re stuck under the 10 year plan, the banks are no fools, and can force higher premiums on you knowing you can’t jump ship, unlike a term-life insurance program where you pay the same amount year after year.

C) You can access tax-sheltered options that are comparable without paying the high-insurance fees by leaving your money within the corporation and buying ETF’s or stocks, and holding for years and then only paying taxes when you liquidate those investments and withdraw money from the corporation. If you’re doing so when you’re no longer working, you’ll pay little to no taxes anyway, if you’re selling to cover your financial needs for the year.