Investing for the New Retirement Realities Dino Bourdos, CFA, Managing Director
Geoff Wilson, CFA, Managing Director
TD Asset Management Inc.
TD Asset Management Inc.
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What we’re talking about… n
Looking at Retirement in a New Light
n
TD Retirement Portfolios
n
Product Positioning
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Looking at Retirement in a New Light TD Asset Management l For Advisor Use Only
What are retirees looking for… n
Cashflow in retirement
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Potential for modest growth
n
Protection of capital
Will traditional retirement solutions deliver?
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Demographic Trends
25%
Greater need for retirement income
20%
15%
10%
5%
0%
1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035
Population aged 65 years and older (%)
30%
Demographics source: Statistics Canada, 2005, Population Projections for Canada, Provinces and Territories, 2005-2031, Statistics Canada Catalogue number 91-520-XIE. TD Asset Management l For Advisor Use Only
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The Role of Fixed Income has Changed 18%# 16%#
n
14%#
Yield#
12%# 10%#
n
8%#
Interest rates are at generation lows and may rise Fixed Income returns may be lower than in the past
6%# 4%#
0%#
1955# 1958# 1961# 1964# 1967# 1970# 1973# 1976# 1979# 1982# 1985# 1988# 1991# 1994# 1997# 2000# 2003# 2006# 2009# 2012# 2015# 2018# 2021# 2024# 2027# 2030# 2033# 2036#
2%#
More retirees and less income
Yields source: Statistics Canada, as at March 31, 2013. Yields are an average of the 5 and 10-year Government of Canada bond yields. TD Asset Management l For Advisor Use Only
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Sequence of returns: Does it matter? Avoiding negative returns early in retirement is critical
$500,000 Kim
$400,000
Dan
Kim’s average annual return* = 1993 - 2002
10%
$300,000
$293,028 $200,000
$200,000
$100,000
$0
$143,000 Dan’s average annual return** = 2001-2010
Year 1
For illustrative purposes only.
Year 2
Year 3
Year 4
Year 5
Year 6
9% Year 7
Year 8
Year 9
Year 10
Assumption: Kim and Dan have an annual withdrawal of $15,000 per year. *Kim’s returns reflect the S&P/TSX annual return between 1993 and 2002. **Dan’s returns reflect the S&P/TSX annual return between 2001 and 2010.
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Product allocation life map: Transitioning into the Retirement Portfolios Accumulation
Decumulation Opportunity
Age
Retirement Accumulation
Pre-Retirement
Objective
• Saving • Long term growth
• Limit volatility • Capital preservation
Investment Vehicles
• Mutual Funds • Fund-of-Funds
• No target vehicle
Opportunity
Retirement
• Saving • Consolidating assets
• Regular income • Inflation protection • Capital preservation
• Stability of legacy • Asset longevity
• Fixed income • GICs • Insurance products (Annuities/GMWBs)
TD Retirement Portfolios For illustrative purposes only.
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TD Retirement Portfolios TD Asset Management l For Advisor Use Only
Which Retirement Portfolio may be right for your client TD Retirement Conservative Portfolio
TD Retirement Balanced Portfolio
n Clients
n
For clients who have the flexibility to consider discretionary spending/ legacy
n Classified
n
Classified as low to medium risk, the Portfolio can be an alternative to balanced funds to complement a client’s broader investment portfolio
needing cash flow from their investments to cover essential expenses as low risk, the Portfolio can be an alternative to fixed income to complement a client’s broader investment portfolio
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TD Retirement Portfolios - Composition
Integrated solution: Income, Growth and Risk Reduction
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Composition
Fixed Income n
Income generation
n
Global diversification
n
Core, credit focused portfolio with tactical allocations
Strives to provide yield, stability and diversification TD Asset Management l For Advisor Use Only
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Composition
Low Volatility Equities n
Growth potential helps mitigate longevity risk
n
Equity exposure within a prudent risk framework
n
Strategy leverages TD Asset Management’s (TDAM’s) institutional expertise
Aims to provide growth in a risk controlled manner TD Asset Management l For Advisor Use Only
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Composition
TD Risk Reduction Pool n
A core component of TD Retirement Portfolios
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Capital preservation focus; uses options to manage portfolio volatility
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Proprietary process adaptable to market conditions
Seeks to provide capital preservation, modest growth and diversification TD Asset Management l For Advisor Use Only
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TD Retirement Portfolios: Allocations TD Retirement Conservative Portfolio Cash 5%
TD Risk Reduction Pool 55%
Low Volatility Equities 10% Flexible Fixed Income 30%
TD Retirement Balanced Portfolio Cash 5% TD Risk Reduction Pool 40%
Flexible Fixed Income 30%
Low Volatility Equities
0% - 25%
10% - 40%
Flexible Fixed Income Strategy
15% - 45%
15% - 45%
TD Risk Reduction Pool
40% - 70%
25% - 55%
0% - 20%
0% - 20%
Cash
Low Volatility Equities 25%
Provides flexibility to exploit benefits of each component Source: TD Asset Management. As at September 30, 2013. TD Asset Management l For Advisor Use Only
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Asset Allocation in Action: TD Retirement Balanced Portfolio Composition of the TD Retirement Balanced Portfolio (September 2013 to April 2014) 50% 45% 40%
Weight'
35% 30% 25% 20% 15% 10% 5% 0%
Sep$13'
Oct$13' Nov$13' Cash' EquiFes' TD'Cdn'Core'Plus'Strategic'Weight'
Dec$13' Jan$14' TD'Risk'Red'Pool' Cash'Stretegic'Weight' EquiFes'Strategic'Weight'
Feb$14'
Mar$14' Apr$14' TD'Cdn'Core'Plus'Bond' TD'Risk'Red'Strategic'Weight' 1
Source: TD Asset Management. As at April 30, 2014. TD Asset Management l For Advisor Use Only
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Responding to the New Realities n TD
Retirement Portfolios are flexible and cost effective solutions designed specifically for the unique needs of retirees and pre-retirees.
n Using
some of TDAM’s most innovative strategies, the Portfolios seek to deliver a mix of regular cash flow, some growth and most importantly, capital preservation.
n TDAM
remains focused on providing solutions to meet evolving investor needs. Our goal is to deliver a positive client experience TD Asset Management l For Advisor Use Only
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TD Retirement Portfolios: Overview Fund Type Series Portfolio Adviser Risk
TD Retirement Conservative Portfolio
TD Retirement Balanced Portfolio
Conservative Balanced
Balanced
Investor, Advisor, H, T, and S
Investor, Advisor, H, T, and S
TDAM
TDAM
Low
Low to Medium
Management Fee
1.50% Mgt fee. (F series: 0.75%)
Administration Fee
0.08%
0.08%
Trailer Fee
0.75%
1.00%
5%
5%
T-Series Payout
11.75%
Mgt fee (F series: 0.85%)
Solutions that have the potential to provide modest capital appreciation while seeking to protect against adverse market events 1Effective
Sept 10, 2013, TDAM will waive a portion of the management fee to ensure the annualized daily rate will be 1.75% for the Investor, Advisor, H and T series units of the Portfolio. The maximum management fee as stated in the prospectus remains unchanged at 1.85%. This waiver may be suspended or terminated by TDAM at any time without notice to unitholders. TD Asset Management l For Advisor Use Only
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Disclaimer The information contained in this presentation has been provided by TD Asset Management Inc. (“TDAM”) and is for information purposes only. The information has been drawn from sources believed to be reliable. Where such statements are based in whole or in part on information provided by third parties, they are not guaranteed to be accurate or complete. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any fund. The information does not provide financial, legal, tax or investment advice. Particular investment or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. TDAM, The Toronto-Dominion Bank (“TD Bank”) and its affiliates and related entities are not liable for any errors or omissions in the information or for any loss or damage suffered. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus, which contains detailed investment information, before investing. Simulated Overlay Strategy returns are back-tested results based on a disciplined investment thesis that was rigorously implemented using data from Bloomberg beginning in September 2008. All historical performance was calculated using actual end of day securities prices and implied volatility at the time, incorporating conservative transactions costs, and did not involve any forward looking bias or data mining. The Black Scholes options pricing model was used to derive the price of the options that were used in the performance calculations. The analysis assumed no cash inflows or outflows during the period. Rebalancing occurred regularly to keep the portfolio fully invested. The synthetic performance information is shown for illustration purposes only and is not based on actual results, which may vary. Synthetic performance information is hypothetical and subject to inherent risks and limitations, and is shown gross of fees and are calculated in US dollars. No representations are being made that any proposal will achieve returns similar to the hypothetical information shown. Investors should not take this example or the data included as an indication, assurance, estimate or forecast of future or actual results. The actual performance returns may differ materially from the information shown for reasons including, but not limited to investment restrictions and guidelines, fees, timing of trade execution, investment/reinvestment of cash flows, treatment of dividends, interest fees charged including performance fees, portfolio rebalancing, borrowing fees on shorts, swap fees, the extent of leverage used, any use of derivatives, and fluctuations in the market. The index returns are shown for comparative purposes only. Indexes are unmanaged and their returns do not include any sales charges or fees as such costs would lower performance. It is not possible to invest directly in an index. Standard deviation is a statistical measure of the range of a fund’s performance. When a fund has a high standard deviation, its range of performance has been very wide, indicating that there is a greater potential for volatility than those with low standard deviations. Mutual funds are not guaranteed or insured, their values change frequently and past performance may not be repeated. TD Mutual Funds are managed by TDAM, a wholly owned subsidiary of The Toronto-Dominion Bank (“TD Bank”) and are available through authorized dealers. Certain statements in this document may contain forward-looking statements (“FLS”) that are predictive in nature and may include words such as “expects”, “anticipates”, “intends”, “believes”, “estimates” and similar forward-looking expressions or negative versions thereof. FLS are based on current expectations and projections about future general economic, political and relevant market factors, such as interest and foreign exchange rates, equity and capital markets, the general business environment, assuming no changes to tax or other laws or government regulation or catastrophic events. Expectations and projections about future events are inherently subject to risks and uncertainties, which may be unforeseeable and may be incorrect in the future. FLS are not guarantees of future performance. Actual events could differ materially from those expressed or implied in any FLS. A number of important factors including those factors set out above can contribute to these digressions. You should avoid placing any reliance on FLS. TDAM may not update any FLS. Mutual funds, unlike GICs, are not insured by the Canada Deposit Insurance Corporation (CDIC) or any other deposit insurer nor guaranteed by any entity. ®/ The TD logo and other trade-marks are the property of TD Bank or a wholly-owned subsidiary, in Canada and/or other countries. TD Asset Management l For Advisor Use Only
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