CIFPsCIFPs

The Smith ManoeuvreThe Smith Manoeuvre as a New as a New Business Prospecting Tool for Business Prospecting Tool for

Financial PlannersFinancial Planners

THE SMITH MANOEUVRETHE SMITH MANOEUVRE

Is your mortgage tax Is your mortgage tax deductible?deductible?

Tonight you will learn how Tonight you will learn how to:to:

1.1. Get FREE tax refunds from the CRAGet FREE tax refunds from the CRA

2.2. Pay off your mortgage fasterPay off your mortgage faster

3.3. Build an investment portfolioBuild an investment portfolio

Tonight you will learn how Tonight you will learn how to:to:

1.1. Get FREE tax refunds from the CRAGet FREE tax refunds from the CRA

2.2. Pay off your mortgage fasterPay off your mortgage faster

3.3. Build an investment portfolioBuild an investment portfolio

SIMULTANEOUSLYSIMULTANEOUSLY

The problemThe problem

The solutionThe solution

History of The Smith History of The Smith ManoeuvreManoeuvre

What is The Smith What is The Smith Manoeuvre?Manoeuvre?

The Smith Manoeuvre is a financial The Smith Manoeuvre is a financial strategy designed to convert the strategy designed to convert the non-deductible interest debt of a non-deductible interest debt of a house mortgage to the deductible-house mortgage to the deductible-interest debt of an investment loan, interest debt of an investment loan, which simultaneously ensures the which simultaneously ensures the building of a free and clear building of a free and clear investment portfolio.investment portfolio.

A picture’s worth a thousand A picture’s worth a thousand wordswords

Ten thousand words…Ten thousand words…

0

50,000

100,000

150,000

200,000

Bad Debt Good Debt Total Debt

25% Equity

75% Debt

Reduce Bad Debt

Increase Good Debt

THE SMITH MANOEUVRE

Appraised Value

Is your mortgage tax deductible?

75% Lending Value

The left bar chart will represent the fate of the bad debt, the middle chart will show good prevailing over evil, and the right chart will confirm that debt does not increase.

0

50,000

100,000

150,000

200,000

Bad Debt Good Debt Total Debt

25% Equity

Reduce Bad Debt

75% Debt

Increase Good Debt

THE SMITH MANOEUVRE

Appraised Value

75% Lending Value

Is your mortgage tax deductible?

You win $30,000 in the lottery and having read the book, you use it to pay down your mortgage by the same amount, so your total debt drops by the same amount.

0

50,000

100,000

150,000

200,000

Bad Debt Good Debt Total Debt

25% Equity

Reduce Bad Debt

75% Debt

Increase Good Debt

THE SMITH MANOEUVRE

Appraised Value

75% Lending Value

Is your mortgage tax deductible?

Having increased your equity in your house by $30,000 you are immediately able to borrow back $30,000 to purchase investments of your choice. Good debt rises by $30,000 such that your total debt is back to $150,000.

0

50,000

100,000

150,000

200,000

Bad Debt Good Debt Total Debt

25% Equity

Reduce Bad Debt

75% Debt

Increase Good Debt

THE SMITH MANOEUVRE

Appraised Value

75% Lending Value

Is your mortgage tax deductible?

Let’s say you inherit $20,000 a few months later. You repeat the process again. You have paid down a total of $50,000 of bad debt, but you have immediately borrowed it back to invest it. Total debt is still $150,000.

0

50,000

100,000

150,000

200,000

Bad Debt Good Debt Total Debt

25% Equity

Reduce Bad Debt

75% Debt

Increase Good Debt

THE SMITH MANOEUVRE

Appraised Value

75% Lending Value

Is your mortgage tax deductible?

You pay down and immediately reborrow and invest another $20,000.

0

50,000

100,000

150,000

200,000

Bad Debt Good Debt Total Debt

25% Equity

Reduce Bad Debt

75% Debt

Increase Good Debt

THE SMITH MANOEUVRE

Appraised Value

75% Lending Value

Is your mortgage tax deductible?

We are winning.

0

50,000

100,000

150,000

200,000

Bad Debt Good Debt Total Debt

25% Equity

Reduce Bad Debt

75% Debt

Increase Good Debt

THE SMITH MANOEUVRE

Appraised Value

75% Lending Value

Is your mortgage tax deductible?

0

50,000

100,000

150,000

200,000

Bad Debt Good Debt Total Debt

25% Equity

Reduce Bad Debt

75% Debt

Increase Good Debt

THE SMITH MANOEUVRE

Appraised Value

75% Lending Value

Is your mortgage tax deductible?

0

50,000

100,000

150,000

200,000

Bad Debt Good Debt Total Debt

25% Equity

Reduce Bad Debt

75% Debt

Increase Good Debt

THE SMITH MANOEUVRE

Appraised Value

75% Lending Value

Is your mortgage tax deductible?

The end is in sight.

0

50,000

100,000

150,000

200,000

Bad Debt Good Debt Total Debt

25% Equity

Reduce Bad Debt

75% Debt

Increase Good Debt

THE SMITH MANOEUVRE

Appraised Value

75% Lending Value

Is your mortgage tax deductible?

The conversion is complete. The original bad debt is now all good debt. All of the interest is now deductible. Why not leave the loan in place for another 50 years and claim a tax deduction of $10,500 every year for the rest of our life?

I. Another thousand I. Another thousand words…words…

THE SMITH MANOEUVRE

-$100

$0

$100

$200

$300

$400

$500

$600

0 5 10 15 20 25

YEARS

DO

LL

AR

S (

$1,0

00'S

)

Original Mortgage Portfolio Total Deductible Loan

SM Mortgage Paydown Total Debt Turner's Method

Tidbit – how much do you have Tidbit – how much do you have to earn to pay off a $200,000 to earn to pay off a $200,000 loan?loan?

Read it and weep…Read it and weep…

SummarySummary

$700,402 - you need to earn this much$700,402 - you need to earn this much

40% - at this tax bracket40% - at this tax bracket

$280,161 - to pay this much income tax$280,161 - to pay this much income tax

$420,241 - to have this much left$420,241 - to have this much left

$220,241 - to pay this much bank interest$220,241 - to pay this much bank interest

$200,000 - to pay back the original loan$200,000 - to pay back the original loan

$700,402 !!!!!!$700,402 !!!!!!

Is this legal?Is this legal?

During the past 20 years, The Smith During the past 20 years, The Smith Manoeuvre has not been challenged Manoeuvre has not been challenged by any tax authority, by any lawyer, by any tax authority, by any lawyer, by any accountant, by any financial by any accountant, by any financial planner or by any financial guru as planner or by any financial guru as regards the theory, the strategy, the regards the theory, the strategy, the mechanics, the arithmetic or the mechanics, the arithmetic or the projected outcomesprojected outcomes

Quantify the value of The Quantify the value of The Smith Manoeuvre for the Smith Manoeuvre for the BlacksBlacks

The BlacksThe Blacks

• $200,000 at 7% for 25 years$200,000 at 7% for 25 years

• Both work, $100,000 per yearBoth work, $100,000 per year

• 40% tax bracket40% tax bracket

• $50,000 rainy day fund$50,000 rainy day fund

• Adding $500 per monthAdding $500 per month

• 40 years of age, 2 kids and a dog40 years of age, 2 kids and a dog

Future value for the Black’s Future value for the Black’s current investment program?current investment program?

$1,205,152$1,205,152

What if they did The Smith What if they did The Smith Manoeuvre?Manoeuvre?

$1,962,770$1,962,770

Smith Manoeuvre way: 1,962,770Smith Manoeuvre way: 1,962,770

The Black’s way: 1,205,152The Black’s way: 1,205,152

The difference: 757,618The difference: 757,618

For the Black’s, this is a For the Black’s, this is a decision worth three quarters decision worth three quarters of a million dollars.of a million dollars.

The Smithman CalculatorThe Smithman Calculator

Go to page 35 of your bookGo to page 35 of your book

Who is doing the financing?Who is doing the financing?

Who’s paying for this?Who’s paying for this?

Let’s summarizeLet’s summarize

Your next stepYour next step

Procrastination is the enemy Procrastination is the enemy of of your financial success. your financial success.

Thank you for your friendly Thank you for your friendly welcome, and thank you to welcome, and thank you to Bick Financial Security for Bick Financial Security for hosting me tonight.hosting me tonight.

BICK FINANCIALBICK FINANCIAL

Toll free - 1 888 777-2425Toll free - 1 888 777-2425

www.bickfinancial.comwww.bickfinancial.com

NEW BUSINESS IS THE NEW BUSINESS IS THE LIFEBLOOD OF ANY LIFEBLOOD OF ANY

BUSINESS, INCLUDING YOUR BUSINESS, INCLUDING YOUR OWNOWN

Where do planners go forWhere do planners go for their new business? their new business?

Wealthy peopleWealthy people

The Wealth Pyramid

Who’s looking after the Who’s looking after the not-wealthy people?not-wealthy people?

How many not–wealthy How many not–wealthy families are there in families are there in

Canada?Canada?

Approximately:Approximately:

32.0 million Canadians32.0 million Canadians10.5 million families10.5 million families 3.5 million in rented homes 3.5 million in rented homes 3.5 million in mortgaged 3.5 million in mortgaged homeshomes 3.5 million in free and clear 3.5 million in free and clear homeshomes

There are 7 million families There are 7 million families that need your help starting that need your help starting

todaytoday

How much investment How much investment needs to be done?needs to be done?

Half a trillion in mortgagesHalf a trillion in mortgages

$500,000,000,000 !!!$500,000,000,000 !!!

That $500 billion in non-That $500 billion in non-deductible interest deductible interest

mortgages needs to be mortgages needs to be converted to $500 billion in converted to $500 billion in

deductible interest deductible interest investment loans, starting investment loans, starting

now.now.

A mortgage is not a A mortgage is not a drag for the client or drag for the client or

the planner – it is a big the planner – it is a big opportunity for you opportunity for you

both.both.

How do most planners react How do most planners react to finding a $200,000 to finding a $200,000 mortgage in that new mortgage in that new

client’s net worth client’s net worth statement?statement?

PROSPECTINGPROSPECTING

1. Existing clients1. Existing clients2. Former prospects2. Former prospects3. Friends and neighbours3. Friends and neighbours4. Former clients4. Former clients5. Mortgage lists5. Mortgage lists6. Realtors6. Realtors7. Mortgage brokers7. Mortgage brokers8. Seminars8. Seminars

Which homeowners are Which homeowners are prospects?prospects?

1.1. Zero equity?Zero equity?

2.2. 25% equity?25% equity?

3.3. 50% equity?50% equity?

4.4. 100% equity?100% equity?

Long or short?Long or short?

• MilevskyMilevsky

• HELOC’sHELOC’s

• Readvanceable mortgagesReadvanceable mortgages

• Creditline mortgagesCreditline mortgages

• Austrailian mortgagesAustrailian mortgages

Proposed legislationProposed legislation

Next stepNext step

Thank you for listening, Thank you for listening, thanks to the folks at thanks to the folks at CIFPs, and thanks to Lloyd CIFPs, and thanks to Lloyd Snyder, CFP for his Snyder, CFP for his support.support.

The Smith ManoeuvreThe Smith Manoeuvre

www.smithman.netwww.smithman.net

(250) 652-0825(250) 652-0825