10/8: A counter point of view to Advisor.ca

Advisor.ca has just published a very one sided text regarding the 10/8 arrangement.

http://www.advisor.ca/news/industry-news/should-clients-drop-108s-112572?goback=%2Egde_1869364_member_228946716

The 10/8 arrangement were Tax Avoidance strategies pure and simple. The 10 percent investment rate and 8% loan were purely artificial. These were not the actual rates available in the market.

The only reason that the 10% and 8% were offered and guaranteed was to create a tax benefit. As a result the purpose was not for investing. It was a gimmick pure and simple.
Half of the insurers have refused in the past to market this 10/8 strategy. There have also been many advisors I have known that I have refused to sell this strategy to their clients despite the request from their clients. These advisors have walked away from hundreds of thousands of commission on principle because they believe you have to do the right thing.

The advisors who have sold this concept, the insurance companies which have offered this concept and the wealthy consumers who bought this concept have cheated the Canadian government of taxes. They have cheated the system to avoid paying taxes.

What is the message from the government?

The message of the government is simple.

1 .You can cheat if you are wealthy enough. We won’t hold responsible for your actions and not only you can keep your illicit gains but we will provide you with a way out at the expense of the consumer.

2. For the advisor who has done the right thing believing you should not promote tax avoidance at the cost of losing commission, the government is telling them well you should have done the wrong thing.

3. To the pubic the government is telling like banks that you can be too wealthy and too powerful to fail and a government bailout will always be there to save you.

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