It has often been said that a good small company can outperform a good big company any day. There are a number of reasons for this belief. For a comparative look let’s take the financial services industry.

Large brokerage firms have historically experienced conflicts of interests within their operations due to the underwriting process. Investment offerings are often their own internal material and very standard in nature. It can become common to think ‘products’ instead of ‘solutions’. Information on costs and returns can be vague. Their Advisors are only employees, not owners.

On the other hand, there are the smaller independent brokerages. Because there isn’t any underwriting there isn’t any conflict of interest. Instead of standard products, niche offerings are discovered through personal research. They are free to choose the best solutions from any source. Measurement of costs and returns must be accurate. Business doesn’t tend to walk in the front door, Advisors have to earn it. And finally, they own their businesses so they need to dig a little deeper.

Planning for the future and thinking years ahead is the key to success in many facets of life, and managing your taxes is no different. However, most people think in the short term and employ a tax strategy based solely around their annual income. This is often the main focus of accountants as well. What happens is that when people concentrate just on controlling cash flows and incomes to try and save taxes, they can end up neglecting growing their core assets in the process.

Let’s look at your taxes from a different angle. What if you took a holistic view based on asset growth instead of a narrow view based on income reduction? The typical core basket of assets for the small business owner is real estate, corporate holdings, and market investments. Some of the many factors influencing the growth of these assets are unexpected fees, sales tax, complicated dividend and capital gain tax issues, underestimating lost opportunity costs, and overestimating actual values.

What should be considered as your measure of progress is the ratio of total tax paid on total asset growth. After all, the end goal is accumulation and protection of wealth. My ‘Return-on-Life’ planning model encourages clients to segregate and measure the growth of each individual asset. This tool tells us if we are really winning the game. If your overarching goal is simply to pay less income tax than the year before, then you may be missing the boat.

In my never ending quest to increase overall investment returns, one of the most important areas that gets studied is the reduction of cost and tax. Nothing puts small business owners in an early grave faster than high costs and taxes. They continuously find ways to lower these through close examination of their company books. Unfortunately they fight an uphill battle to get similar results in the investment world. Here are the four most profitable ways to ensure you are winning this game.

1) The nature of some expenses is not easily detectable. This is part of the ‘don’t ask – don’t tell’ relationship that sometimes exists within the financial services industry. First step is ensure that there aren’t any hidden costs or unanswered questions.

2) Costs incurred through commissions and funds are sunk costs. However when you pay through a fee-based agreement everything becomes tax deductible.

3) Purchase individual investments like stocks and indexes directly instead of inside mutual funds. This will reduce or eliminate any third party management fees.

4) By having your investments pro-actively managed (isn’t this what you pay for), opportunities to increase net returns will be uncovered. Examples are tax loss selling to cancel capital gains, keeping money in motion, and dodging admin fees.

Implementing these cost and tax saving strategies can potentially increase both annual and longer term net returns by a lot more than people realize. You would be amazed by the power of compounding.

Remember: Problem solving is not near as important as problem finding.

The tax-free savings account (TFSA), the latest government program to entice Canadians to save more of their money, has got off to a fast start. Perhaps too fast. We can’t resist the magic words ‘tax free’.

I am by no means against the concept, but be sure you are using them wisely. In the rush to utilize these accounts many people are simply going to their bank and parking their cash. How can you save tax if you don’t make a return?

I encourage you to be sure these accounts are part of your financial strategy. They should have their own purpose and be a participating component of your overall portfolio that includes the RSP, non-registered accounts, and corporate investments. Make a firm allocation decision on what investments these new vehicles will hold.

There have been a few recent changes to both federal and provincial locked-in accounts (known as the LIRA) that are worth considering. If you are over 55 years of age there are now various options to withdraw or transfer up to 50% of the total to either a regular RSP or to a non-registered account. In the latter case taxes will apply. In both cases this unlocking frees up your money so you can use it when you want to.

Also if you are 55 years of age or older with locked-in RRSPs and LIFs worth less than the current government stated ‘small balance limit’, you can wind up your accounts and take the cash (fully taxable) or transfer the funds to another tax-deferred vehicle, such as an RRSP or RRIF.  This change allows individuals with small holdings to consolidate their assets into a single registered vehicle, thereby minimizing administrative costs or other burdens associated with multiple small accounts.