It’s Spring Cleaning Time for Your Insurance and Investment Portfolios


While you are spring cleaning this year, take a few moments to review your insurance and investment portfolios. Look for financial cobwebs that may be hindering the performance of your portfolios or making them inefficient, including the following items.

No Plan or Strategy

Without a financial plan, you won’t know if you can afford to purchase that new practice, send your children to university or retire comfortably. At each life stage, having a financial plan can help you feel confident about your financial situation. The recent “Value of Financial Planning Study”1 confirms that Canadians who have a “comprehensive/integrated financial plan” tend to be significantly better off emotionally, financially and more content overall than those without one.

A good financial plan identifies your financial goals for the short, medium and long term and prioritizes them. It also integrates your personal and business financial goals and insurance and estate planning needs. Review your financial plan regularly, as your personal and professional goals can change.

As a dentist, you can obtain a comprehensive financial plan at no cost from the licensed insurance advisors and certified financial planners at CDSPI Advisory Services Inc. (see contact information at end of article). They work exclusively with dentists and their families and have an in-depth understanding of the financial challenges facing dental professionals.

Poor Risk Management

Investment Objectives and Tolerance to Risk

There are risks associated with all investments, even those generally considered safe such as GICs offering guaranteed returns. The risk with guaranteed investments is that inflation could erode the purchasing power of your savings over time. Meanwhile, stocks and equity funds can be volatile in the short term, but equities traditionally outperform other asset categories over the long term.

Manage your investment risk by ensuring that your portfolio has a mix of investments from the various asset categories, and reflects your risk tolerance and investment time frame. If you have short-term objectives, such as paying for your children’s post-secondary education within the next 5 years, you have a lower risk tolerance and should hold a greater percentage of cash and income investments in your education savings portfolio. With a long investment time frame and sufficient time to withstand short-term volatility, you may be able to hold more equities. Always consult your financial advisor to ensure your asset selection reflects your risk tolerance.

Insurance Coverage

Your insurance portfolio may be considered risky if it lacks necessary coverage. As a result, you could jeopardize your financial well-being. Your insurance advisor can help you determine exactly how much insurance is appropriate for your situation. In the meantime, here are some guidelines.

For disability insurance, aim for the highest amount of coverage available for your income level, to help maintain your standard of living during a disability. Update your coverage when your income increases. Statistics show that you have about a 50% chance2 of becoming disabled for an extended period during your working life.

When you add or upgrade equipment in your office or make improvements, remember to increase your office contents insurance. This will ensure that you are protected for the higher amounts of these improvements in the event of theft, fire, flood or other office mishaps. You should take out a life insurance policy for both you and your spouse, to help your family cope if you die prematurely. Make sure to have sufficient life insurance to cover mortgage payments, childcare expenses, tuition and other expenses that your family could find burdensome.

Duplication of Type of Funds and Insurance

Optimize the performance of your investment portfolio by reducing the number of investment funds, should you discover that you have invested in many of the same types of funds. For example, holding two conservatively managed Canadian bond funds is unnecessary. Overall, about 7 to 9 funds in your portfolio will generally be sufficient for good diversification. Keep in mind that the more funds you have, the easier it is to lose track of the performance of your portfolio.

There may be duplication in your insurance portfolio if you have life insurance and mortgage insurance. Using an existing life insurance policy (or increasing its amount) can offer greater control and flexibility compared to purchasing the mortgage insurance offered by your lender. You’ll be able to keep the insurance in place after the loan is repaid, or if you move your mortgage to another lender.

Portfolio Rebalancing

Your portfolio is also vulnerable to changes that occur over time. For example, your investment portfolio can shift from its ideal asset mix, either due to underperformance or over performance of some assets over time. Failing to rebalance your portfolio can increase your investment risk and potentially lower your returns. Rebalancing involves taking your profits and applying them to the underrepresented areas in your portfolio. Your financial advisor can provide guidance to help you identify when rebalancing your portfolio is appropriate.

Also take a look at the beneficiary designations for your insurance and investment portfolios. They may need to be updated if changes have occurred in your personal or professional situation, such as marriage, divorce or new business partnerships.

Excessive Costs

Account set-up fees and front- and back-end loads or commissions can shrink your investment returns, so examine your investment portfolio for these extra charges. Let’s say you have a $20,000 annual investment* earning an average return of 6% annually. Over 25 years, your portfolio could grow by $160,000 more if you pay a fee that is 1 percentage point lower. The median MER (management expense ratio) for CDSPI funds is 1.27%, while the median MER for all Canadian mutual funds is 2.5%3. Other sources have indicated the average MER for Canadian funds as 1.93%4 and 2.56%5. In comparison, the average MER for CDSPI funds is 1.27%.

Overpaying for insurance can also make your insurance portfolio inefficient. When buying insurance, consider obtaining several quotes and ensure you receive accurate comparisons. As well, take advantage of any opportunities for potential savings, such as preferred group insurance rates that may be offered as membership benefits by your dental association.

By selecting a higher deductible for your home or auto insurance, you can reduce your insurance premiums. However, be sure you can afford to pay the higher deductible amount. The deductible is a set amount that you, the insured party, are responsible for paying in the event of an insured loss.

Over Taxation

For tax efficiency, consider including corporate class funds in your non-registered investment portfolio. These funds can provide the tax efficiency of capital gains, irrespective of how the income is earned, effectively lowering the taxation rate or deferring taxes into the future.

To reduce the amount of taxable investment gains, you may want to hold riskier equity investments outside your RRSP (registered retirement savings plan), so you’ll be able to apply any capital losses against your gains.

If your insurance portfolio doesn’t include permanent life insurance, think about adding this type of policy as you get older and your taxable assets increase. Permanent insurance is useful for estate planning purposes such as paying taxes due on assets at your death. With this coverage, your loved ones won’t have to sell the family cottage or other property they inherited, in order to pay the taxes owing.

You can obtain personalized advice for your specific personal and practice situation, by contacting a licensed advisor at CDSPI Advisory Services Inc. Call 1-877-293-9455, ext. 5002 (insurance) or ext. 5023 (investment).

*Calculation assumes that the $20,000 investment ismade at the beginning of each year.



Susan Roberts, BA, FLMI, ACS, AIAA, CHS™, is the vice-president of Insurance Advisory Services and deputy principal broker at CDSPI Advisory Services Inc.


Ron Haik, MBA, CFP, FMA, FCSI, CSWP™, TEP, is the vice-president of Investment Advisory Services at CDSPI Advisory Services Inc.


  1. Commissioned by the Financial Planning Standards Council (FPSC).
  2. 1985 Commissioner’s IDA Morbidity and Commissioner’s SO Mortality Tables, Society of Actuaries.
  4. Regulators Eye Crackdown on Soaring Mutual Fund Fees, The Globe and Mail, December 13, 2012.
  5. Mackenzie Study Claims Canada’s Mutual Funds No Costlier Than America’s, Financial Post, September 10, 2010.