All posts by Financial Independence Hub

The waiting is the hardest part, and the most profitable times for investors


By Dale Roberts

Special to Financial Independence Hub

Investors are starting to notice that their portfolios have been treading water for a couple of years. Over the last two years, a global balanced growth portfolio would essentially be flat. Of course, move out to 3-year, 5-year and 10-year time horizons and we have very solid to generous returns.

At times investors have to wait. We build and springload the portfolio waiting for the next aggressive move higher. In fact, these holding periods can be beneficial: we are loading up on stocks at stagnating or lower prices. We’re able to buy more shares. The waiting is the hardest part for investors. But it is essential that we understand the benefits to sticking to our investment plan.

In January of 2021 I wondered aloud in a MoneySense post if the markets might not like what they see when we get to the other side of the pandemic. That’s an interesting post that looks back at the year 2020, the year the world changed with the first modern day pandemic. That suspicion is ‘kinda’ playing out as the markets stall and try to figure things out.

That’s not to suggest that my hunch was an investable idea. We have to stay invested.

Stick to your plan when the market gets stuck

Patience is the most important practice when it comes to wealth building. When done correctly, building life-changing wealth happens in slow motion and it is VERY boring.

Boring is good.

Waiting can be boring. But maybe it can look and feel more ‘exciting’ if we know what usually happens after the wait. Stock markets work like evolution. There are long periods of stagnation and status quo and then rapid moves and change.

Instead of boring, maybe it should feel like a kid waiting for Christmas. The good stuff is on its way.

Here’s an example of a waiting period, from 1999. The chart is from iShares, for the TSX 60 (XIU/TSX). The returns include dividend reinvestment.

And here’s the stock market ‘explosion’ after the wait.

That’s more than a double from the beginning of the waiting period.

And here’s the wait from 2007, moving through the financial crisis. Ya, that’s a 7-year wait. Talk about the 7-year itch, many investors filed for divorce from the markets.

It was a costly divorce.

Markets went on a very nice run for several years. Continue Reading…

Before you Retire: 5 things to do before Pursuing a Conservatorship

Conservatorships can be a great tool for protecting finances in the right situations. Learn about some vital things to do before pursuing a conservatorship.

Adobe Image by contrastwerkstatt, via Logical Position

By Dan Coconate

Special to Financial Independence Hub

As you approach retirement, you want to accelerate your planning for the future, and one crucial consideration might be a conservatorship.

A conservatorship is a legal arrangement that provides a responsible adult (the conservator) with the authority to make decisions for another person (the conservatee) incapable of making them on their own.

This not only affects individuals within the United States, but it can be done throughout the world.

If you’re considering pursuing a conservatorship, you should be as prepared and informed as possible. We’ll discuss five things you should do before pursuing a conservatorship so you can make the best decision for your loved one or for yourself.

Learn all you can

The first step in conservatorship planning should always be to learn as much as you can about the process, requirements, and potential pitfalls. Start by asking some important questions, such as what are the different types of conservatorships, how they function, and whether you even need one. You should also consider consulting an attorney with experience in conservatorship law, who can help answer these questions and provide further guidance.

Assess the Need

Next, carefully assess whether a conservatorship is the best option for your situation. Consider alternatives like power of attorney, living trusts, or other legal arrangements that may be less restrictive. If possible, involve the person who may be the subject of the conservatorship in discussions about their needs and desires. This can help ensure you hear and respect their wishes in your decision.

Evaluate your own Capability

Before pursuing a conservatorship, another thing you should do is think hard about your own capabilities. Remember that these legal bindings involve significant responsibility. Ask yourself whether you’re able and willing to dedicate the necessary time and effort to managing someone else’s affairs. Do you possess the knowledge and skills to make sound decisions about their financial, legal, and personal matters? It may feel daunting, but honestly assessing your readiness can help ensure you’re making the right choice.

Understand the Costs

Additionally, prepare yourself for the financial implications of pursuing a conservatorship. Pursuing a conservatorship can be expensive, from court fees to ongoing legal, accounting, and fiduciary costs. Factor these expenses into your decision-making and explore ways to reduce costs if necessary, such as seeking pro bono legal assistance. Continue Reading…

Half of new Canadian families targeted by financial fraud

A survey by Interac Corp. (Interac) released Wednesday (Nov. 8) on Canada Newswire found 70 per cent of  new Canadians polled believe they are more susceptible to financial scams than the general population.

53 per cent of newcomers say they and/or immediate family members have been targeted by fraud, while 55% are very concerned about becoming a victim in the future.

Scammers appear to be preying on a record number of immigrants arriving in Canada, who have to navigate an unfamiliar financial landscape. The top scams they face include fake job postings (witnessed by 40% of new Canadians surveyed), phishing attempts (37%) and scammers disguising themselves as representatives of official government institutions (34%)

“Being targeted for financial scams is an all-too-common experience for newcomers. We all have a role to play in providing advice to help build their financial literacy and spot scams before it’s too late,” says Rachel Jolicoeur, Director, Cybermarket Intelligence and Financial Crime at Interac. “Newcomers want to feel in control and most prefer to spend their own money versus borrowing. As they get used to life in Canada, we need to build their trust when transacting in new ways – such as using Interac e-Transfer or Interac Debit for the first time.”

The Interac survey reinforces that high scam rates are taking a toll on the financial fortitude of newcomers. Only 22% of newcomers polled strongly agree they would know what to do if they were the victim of a financial scam. 56% say being targeted makes them feel less financially confident, compared with 36% of all respondents polled.

New digital learning program helps arm against fraud

73% of these newcomers to Canada want to learn more about how to protect themselves from fraud, and 83% see the value of having access to tools that help manage their spending. Seeing as November is Financial Literacy Month, Interac and Conscious Economics have teamed up to offer Mindfulness & Money for Newcomers and International Students, a digital learning program that teaches financial literacy and fraud prevention techniques. Continue Reading…

Timeless Financial Tip #9: Beware Conflicted Financial Advice

Lowrie Financial: Canva Custom Creation

By Steve Lowrie, CFA

Special to Financial Independence Hub

There’s only so much you and I can do about life’s many surprises. Some things just happen, beyond our control. Fortunately, to make the most of your hard-earned wealth, there is one huge and timeless best practice you can control: You can (and should) avoid seeking unbiased financial advice from biased sales staff.

How do you separate solid investment advice from self-interested promotions in disguise? Here’s a handy shortcut: Are the investments coming from your friendly neighborhood banker? If so, please read the fine print — twice — before buying in. Due to inherently conflicting compensation incentives, most banks’ investment offerings are optimized to feed their profit margin, at your expense.

Compensation Incentives Matter … a Lot

I’ve been covering the conflicted compensation beat for years, like in On Big Banks, Conflicting Compensation and Bad Behaviour, and my message has remained the same, for all the same reasons:

Compensation drives behaviour.

It’s human nature.  It’s true for Canadian bankers and their investment offerings. It’s also true in the U.S. and around the globe.

For example, a 2017 Consumer Federation of America report, “Financial Advisor or Investment Salesperson?” reflects on this very conflict:

“After all, people expect salespeople to look out for their own interests and maximize profits, but advisors are expected to meet a higher standard. … Investors who unknowingly rely on biased salespeople as if they were trusted advisors can suffer real financial harm as a result.”

Let’s imagine I’m a banker, on a bank’s payroll. Pick a bank, any bank. Assume I’m at any level, from teller to VP. Here’s how my compensation package is likely structured:

  1. I can expect to earn more if I promote my employer’s proprietary Widget X products over any comparable, but generic Gadget Y offerings. Sure, Widget X will cost my customers more. But by helping me and my bank thrive, aren’t we both better off?
  2. I and my team may even score special perks if we exceed our Widget X sales quotas. There may be contests, celebrations, or at least positive performance reviews.
  3. In fact, if I don’t sell enough Widget X’s (or if I sell too many Gadget Ys), my performance reviews may suffer. I could lose my job, or at least not rise in the ranks.

Under these sales-oriented conditions, guess which investment product I’m going to recommend as often as I can? As a bank employee, I may well care about my customers. But the bottom line is that they don’t determine how much or little I am paid for my efforts. When my bank’s profits rise or fall, so does my career.

“Our Way or the Highway” Investments

In theory, banks have plenty of flexibility to structure their investment lineup however they please. They could promote the same low-cost, globally diversified, evidence-based mutual funds and ETFs that independent, fee-based, evidence-based financial advisors typically deploy.

Instead, most banks tend to heavily promote their own, proprietary investment products: built, managed, and priced in-house.

In its title alone, a 2023 The Globe and Mail report speaks volumes about this approach: “Pervasive sales culture at Canadian banks designed to push customers into high-fee products.” Its authors observe:

“The commission earned from selling the bank’s products may be five times higher than on a GIC, for example. In this way, the system incentivizes the sale of funds with higher fees, even when a GIC might be a better fit for the client.”

Suitable vs. Fiduciary Advice

At best, your bank’s compensation conundrums may leave you paying more than necessary for sound investments. Worst-case (and from what I’ve seen, more likely), you’ll end up overpaying for the “privilege” of holding investments that fail to fit your short and long-term personal financial goals.

That’s because your banker may be required to offer products that are broadly “suitable” for you, but as I’ve described before, like in What is the Cost of a Financial Advisor?, they don’t have to be the best choice for you.

There’s a big difference between suitable versus fiduciary advice. Your banker’s role as an “adviser” may sound comforting. But make no mistake. Regardless of their title or compensation, they are not in a fully fiduciary relationship with you; they don’t have to always place your highest, best interests ahead of their own. Continue Reading…

How to find your likely estate value and lifetime tax bill (for free!)

By Ted Rechtshaffen, CFP

Special to Financial Independence Hub

In my role as a Portfolio Manager, Financial Planner and President at TriDelta Private Wealth, the number one question that people ask is “Will I run out of money?”

This question comes from people with a $10 million net worth, a $3 million net worth, and a $300,000 net worth.  There may be different levels of angst involved but they still wonder.

The fundamental issue is fear.  Even if it isn’t rational, there is always a bit of fear about running out of money.  Even if running out may mean different things to different people.

Of course, for those with more wealth, the related question is almost always “Am I paying too much in tax?” and “Is there tax smart things that I should be doing that I am not?”

While we do a lot of work in each area with Canadians, we decided to build a free tool to help answer that number one question.  We have done this through our TriDelta My Estate Value calculator.  By someone entering in several core pieces of financial information, the calculator does some pretty heavy lifting.  Behind the scenes are actuarial tables to show life expectancy, tax tables, and a variety of stated assumptions around inflation, real estate and investment growth expectations.

The output is an estimate of your likely estate value in future dollars, along with a lifetime estimate of your income taxes paid.

You will find the calculator here:

My Estate Value Calculator – TriDelta Private Wealth

Donation Calculator

One other tool we have put together is a donation calculator.  It takes the information from the My Estate Value calculator and provides some ability to see the impact of annual charitable giving.  What if you gave $5,000 a year?  What would be the impact to your likely estate value and to your lifetime tax bill?  What if you gave $10,000 or $20,000 a year?  One of the reasons that we put this together is that many Canadians would give more to charity of they felt confident that they could afford to do so.  This calculator helps to show in real time the impact of higher levels of giving.  The link is here: Donation Planner – TriDelta Private Wealth

We have found that even among the free tools online, most are focused on retirement savings, and deliver a monthly savings target.  The My Estate Planner calculator is focused on the years after retirement, and what potential estate you will be leaving to your family and/or charity. Continue Reading…