Posts

Can Anyone Invest in Canada’s Exempt Market?

That’s a good question – and the answer is no.  Not everyone is allowed to invest there.

That usually surprises people a little as they think, “hmmm… it’s my money, I should be able to invest it however and wherever I want.”  That is not the case in Canada’s private investment markets as there are restrictions when it comes to who can invest there – and also how much.  There are also very good reasons for these restrictions though, which I will explain a little further in this post.

Overall, in order to invest in the Exempt Market, you have to be either “eligible” or “accredited”.

You can read a previous post here to refresh yourself about these two terms and see where you fall. (The post will also tell you about investing possibilities if you are not eligible).  What it boils down to though, is that the majority of investors fall into the same category…

Eligible Investors

Here is a summary of an eligible investor in Canada:

  • Net worth of $400,000 or more
  • Annual income $75,000+ for the last 2 years and/or
  • Household annual income $125,000+ for the last 2 years

If you are “eligible”, it means that you can’t invest more than $100,000 in a 12-month period in the Exempt Market.

(Now, there are all kinds of caveats here because we would need to determine many things before you ever invested in the private markets, just to make sure it’s “suitable” for you.  There are also recommendations as far as your overall allocation – but I will touch on these items a bit more later.)

For now, and for illustrative purposes though, those are the requirements to be an eligible investor and if you fit the bill, you can (likely) invest.

Accredited Investors

“Accredited” investors have an interesting history in the Exempt Market – and particularly over the last 20 years when the private markets became a little more mainstream and retail.

Once again, you can refresh yourself about the terms in a previous post but suffice it to say that “accredited” investors have a higher net worth than “eligible” investors and have no restrictions regarding how much they can invest in the Exempt Market or how often.  The general premise being that they have the financial knowledge necessary to make wise investment decisions and can evaluate a private investment offering accordingly.

The truth of the matter is though, that just because someone has reached accredited status, doesn’t necessarily mean that they know anything at all about the Exempt Market or have any experience there.

Over the last decade, I would venture to say that there were many accredited investors that were over allocated into private investments – because they didn’t fully understand the Exempt Market itself or the higher level of risk involved. 

It is only through time and experience, particularly because the Exempt Market is still so new to the majority of investors, that we can see the best recommendations to make when it comes to private investing.  That’s also why it’s important to find an experienced Dealing Representative to work with.  They will understand the importance of treating an accredited investor, with little or no private investing experience, with care.

Are Private Investments Suitable for You?

If you are eligible or accredited, you can invest in the Exempt Market but that leads to the next step in the process which is – determining if these types of investments are “suitable” for you.  This would involve some discussion of course but I’ll give you a general sense of the information I would be gathering, including things like:

  • Your age
  • Your time horizon to retirement (or maybe you’re already there)
  • Your risk tolerance
  • Your financial objectives overall

All of these things help me determine if higher risk, private investments are suitable for you and your portfolio and – if they are – how much you should invest there.

How Much Should You Invest in the Exempt Market?

For eligible investors there are strong recommendations that you not invest more than 30% of your overall investment portfolio in the Exempt Market, and of that 30%, no more than 10% with one private issuer.

This can vary though depending on your own circumstances and you might find that, once you understand the higher risk nature of the private markets, these percentages are much lower, and a private investment might not be suitable at all for your portfolio.

You may also find that, if you have many years left until retirement, these investments can be an excellent choice to fill the higher risk/(potentially) higher return portion of your portfolio.

To Sum Up

I’m sure there are times when you reach the end of my posts and feel a little trepidation about making a private investment.  And that’s okay because my goal is to educate investors about the Exempt Market and it’s always best to start the conversation with absolute clarity about the risks involved.

It’s higher risk, it is difficult to get your money back before the end of the term because there is no secondary market to sell your securities and private companies do go through restructures and some fail all together.

There are definitely losses that have happened and there will be losses again in the future.

 

BUT…

 

Always Leave on a Positive Note…

There are also excellent private investment opportunities in the Exempt Market, with well above average returns and profit-sharing opportunities available.  With higher risk comes the potential for higher returns and there have been many successful projects and funds that have done very well for investors. 

The most important thing is to work with an experienced professional in the industry that works for a very reputable Exempt Market Dealer.  This will go a long way to helping you understand the private markets, helping you find excellent investment opportunities, helping you find strong issuers that offer the investments and having a high level of diligence done on these issuers.

All of these items plus a strong understanding of the private markets will go a long way to ensuring your own success in investing!

 

I appreciate you reading my post and please contact me anytime.  I would welcome the opportunity to talk further.

 

Shannon Pineau
Exempt Market Dealing Rep
E: shannon@whitehaven.ca C: 403-872-4010 TF: 1-855-872-4010

Facebook Twitter LinkedIn Instagram

shannonpineau.com

P.S. “Who Can Invest in Canada’s Exempt Market” is a big topic and I didn’t touch on:

  • Eligibility requirements by province.
  • Foreign persons that live outside of Canada wanting to invest.

I will cover these topics in upcoming posts but you can always contact me to find out more.

 

Wondering what’s available for private investment opportunities?  Here is a current list.

Looking for private Portfolio Management options?  I can help.

What Is One Of Your Best Options To Make Higher Returns?

Almost everyone, at some point in time, wants to make higher returns on their investments.

The Usual Suspects

For most average or “eligible” investors, investing generally involves one or more of the following:

• Setting up a RRSP or TFSA account at a bank and investing in mutual funds
• Investing in stocks through a broker
• Setting up a discount trading account and buying and selling your own stocks
• Having a pension at work
• Having a RRSP savings program through work

There is nothing wrong with any of these strategies. They all have pros and cons but ultimately, they are helping you save money towards your goal of a great retirement. That is excellent in my books.

With employer plans, they generally hold the reins and their goal is to do well for you, so you can likely just sit back and let that happen. For personal registered accounts, you have a lot of choices for what you can invest in and generally, at some point in time, investors go looking for higher returns if they are not achieving the results they are hoping for with mainstream investment products.

Starting The Search

When you start looking for higher returns on your money – and by higher returns, I generally mean in the 7% + range – there are all kinds of different options that you can pursue. Things like:

Stock related opportunities like day-trading, options, futures, penny stocks etc. There is nothing wrong with this it just takes time to learn about and more often than not, novice investors lose money based on emotion or speculations that don’t pan out.

Investment real estate. I really like this strategy because I think it’s an excellent one that can generate some great wealth over time. There is a big learning curve here though and being a landlord comes with challenges so there is a lot to consider. A sound strategy though if you can take the time to learn.

Investments in real estate projects found in other countries. There is a lot of opportunity to be found in some of these places, but things can change in a hurry as regulation can be sparse and plans can be difficult to execute.

Investing with close family, friends or business associates. This can often work out well for accredited investors that are in the know and have larger sums to invest in sound projects. For the average investor though, investing with a smaller player, these often do not go as planned. Rather than the double digit returns that were promised, there are often strained relations instead.

Multi-level marketing. This usually works out well for the person at the top and the super social. For most people though, it’s hard to make it off the bottom rung and easy to alienate friends and family.

Get rich quicker scenarios. These come in all shapes and sizes and are always lurking out there for anyone that is searching out ways to make more money. Investors always need to be wary – particularly if something seems too good to be true.

So then what should you invest in that can possibly give you higher returns?

In my opinion – you should look straight to Canada’s Exempt Market and here are the reasons why:

• From a risk reward perspective – it is higher risk and that’s why the prospective returns are so much higher. But here, those risks are very transparent and well explained.

• It’s very well regulated and within a safe country that takes its regulations very seriously. To learn more about this and how the market has evolved through years to get to this point – click here.

• In order to offer an investment to clients, issuers have to be accepted by an Exempt Market Dealer. The EMD conducts a rigorous diligence process on the issuer to ensure they are a strong company with a sound plan and a great likelihood of success.

• Coming out of the downturn, there have been fewer investment dollars and therefore fewer issuers available offering private investments. In general, the ones that are available are top quality and, while there are always exceptions, they are the issuers that investors want to work with because of their experience, their track record, and their results.

• Issuers that I have offered in the past that have paid out their investors have averaged 8-10% annual return over the life of the investment.

• I am here for you. I’ve worked in the private investment markets for 12+ years – I will make sure you understand everything there is to know about private investing and then help you decide if it is the right fit for you.

But is it Guaranteed?

So with all of these benefits – there must be some guarantee of success right?

NO!

There is absolutely no guarantee. It is a higher risk market and even with all of these safeguards, things can and do go wrong and investors can definitely lose money. It’s important to discuss all of this in the beginning to ensure that private investing is a good fit and also ensure you allocate the proper amount here.

On the other side of the coin though (and the reason investors continue to invest in the private markets), if you are well diversified across a few quality issuers, there is excellent opportunity for you to achieve the returns you are searching for. When we meet in the future, we’ll look at issuer results to date which will help to illustrate all of this for you.

There you have it. There are a lot of options out there to try and make higher returns on your investment but if you are looking for one of the most regulated, easiest to understand and safest (in a high risk space) places, along with a Dealing Rep that will help you every step of the way – you should definitely consider Canada’s private capital markets.

Shannon Pineau
Exempt Market Dealing Rep
E: shannon@whitehaven.ca C: 403-872-4010 TF: 1-855-872-4010

Facebook Twitter LinkedIn Instagram

shannonpineau.com

 

Wondering what’s available for private investment opportunities?  Here is a current list.

Looking for private Portfolio Management options?  I can help.

Would you like to contact me to learn more?  Please do!

Welcome to Private Investing

Hello, I’m Shannon Pineau…

and I’m a Dealing Representative with WhiteHaven Securities Inc. – an Exempt Market Dealer.

Now if that just made sense to you, you can likely jump ahead in my blog posts a little but if you’re like most – you may not know a lot about private investing in Canada. And that’s just fine because that’s what I’m here for – to tell you all about it.

There are two things that I have learned from my years in the financial industry – that people want to make higher returns on their money and that they don’t have a lot of extra time to learn about how to do that. That’s why most people stay in mainstream, lower interest investments or, if they do decide to branch out, sometimes lose money in “get rich quicker” scenarios.

There is a much better alternative though and that is the Exempt Market.

Throughout my blog, I will cover all kinds of topics to explain private investing – in layman’s terms – and I will try to keep it short, sweet and interesting.

Depending on your level of investing experience, you can decide how much time you want to spend in Exempt Market 101. For those that are new to private investing, I really think this will give you a great introduction and for those who are more experienced, there will be lots of other topics to follow.

My goal is to make sure my clients have a great understanding of the private investment markets.

Armed with this information:

a) they can find those higher returns
b) they can clearly see the risks and rewards involved in achieving those higher returns

And back to my “most people don’t have a lot of time” point – I also want to make sure you can find everything you need in one place.

Canada’s Exempt Market can be a great place to find those excellent investment opportunities that haven’t always been available to the average investor – BUT – there’s more to the story!

 

Shannon Pineau
Exempt Market Dealing Rep
E: shannon@whitehaven.ca C: 403-872-4010 TF: 1-855-872-4010

Facebook Twitter LinkedIn Instagram

shannonpineau.com

 

Wondering what’s available for private investment opportunities?  Here is a current list.

Would you like to contact me to learn more?  Please do!