Secrets to Wealth: Real Estate and Entrepreneurship

According to the 2016 Survey of Financial Security, released in December of 2017, median net worth increased in Canada by 14.7 percent since 2012. The big ticket to success? Turns out, it’s real estate, pensions and according to other studies, entrepreneurship.

Here’s what Stats Canada found in its study:

• The principal residence is the largest asset, with values increasing 10.3 percent since 2012
• Private pension holding were the second-largest category, with the most significant growth coming from employer-sponsored Registered Pension Plans, which increased 17.4 percent in 2016
• The third biggest category was other real estate – cottages, timeshares, rental properties, and commercial real estate, owned by just under 20 percent of Canadians.

However, according to Parisa Mahboubi, PhD, is a Senior Policy Analyst at the C.D. Howe Institute, who wrote in the Globe and Mail about this survey after its release, “surveys of financial security ignore wealth accumulated in public plans such as the Canada Pension Plan or Old Age Security. These programs reduce the need for low-income households to save privately for their retirement, and thus exacerbate the perceived private-wealth inequality.”

And, because real estate ownership is such an important component of wealth building, income levels and affordable housing opportunities are an important indicator of future wealth, says the author, who advocates for the need to remove barriers to quality education and affordable housing. “Another approach to reducing the wealth gap is increasing financial literacy, since people with greater financial knowledge are more likely to make better decisions with their money. Such a multifaceted approach can reduce inequality by removing barriers to upward mobility for those at the lower end of the wealth scale.”

Another big opportunity for wealth creation is entrepreneurship. The Capgemini 2017 World Wealth Report notes that in 2016 in Canada the HNW category of households, indicating $1 Million or more in assets, numbered close to 360,000. 

Often, entrepreneurs dominate the high-net-worth category of wealth accumulators. Here is some interesting information about them*:

• 40 percent of entrepreneurs use specialized investment strategies
• 30 percent participate in family trusts and holding companies
• 49 percent own their businesses entirely on their own
• 72 percent of households with annual income over $400,000 own their own businesses

What does this tell us? Investing in your own future, and diversifying your asset base can be incredibly profitable for the right individual with the right skills.

*Investor Insights (2008)

Additional educational resources:

1. Help clients achieve greater wealth – looking at the big picture – by becoming a Real Wealth Manager.
2. Knowledge Bureau has developed the new Executive Business Builder Program, with a curriculum that focuses on both functional and holistic skills that can help you make the transition from company employee to an industry leader. Learn how to establish a business, how to structure your operations departments, the essentials of business law, marketing, business valuation, and aligning your company culture with your business goals.
3. We have also introduced an exciting new component – the Business Builder Retreat. Taking place in November as an extension of the Distinguished Advisor Conference, this exciting session is open to current and aspiring leaders from any industry ready to make the investment in themselves. Registration is complimentary for students already enrolled in the program, but anyone can attend. Learn about the agenda and how to enroll here.
4. Starting a business? Many start with an unincorporated enterprise. Increasing your understanding of business taxation and overseeing the functions in your tax preparation and accounting departments will be beneficial to your long-term success. T1 Professional Tax Preparation – Proprietorships has been recently updated to guide you in enhancing your knowledge. A free trial of this course is available, and course previews are available in the Executive Business Builder Program, too.

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