Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

8 Administrative tasks to sort out before Moving Abroad

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Image by Pexels

By John Moran

For the Financial Independence Hub

Moving abroad as an expat is a huge decision and it can be a little daunting. With so many big decisions ahead of you, it can feel tough to stay on top of everything that there is to do.

Here’s a list that you can use as a guideline for some of the most important things you’ll need to plan before you move abroad.

Insurance

Do some research and find out what your options are in terms of travel insurance, as well as health and medical insurance once you’ve moved over. In most cases, IMG Global is a good option for any expatriates since its available to all nationalities and offers worldwide service.

You’ll also need to consider travel insurance for your luggage and any other travel-related emergencies, as well as home or contents insurance once you arrive, life insurance and other necessary policies.

Bank Accounts

Opening an international bank account is a good start, especially if you’re planning on moving money, but there are also specifically designed expat bank accounts.

Do some research and spend time asking questions to those in the know. Fortunately, this isn’t a make-or-break decision, since you can always change over to a different bank at a later stage. However, to avoid unnecessary spending, try to make the right decision early on.

You’ll also want to make sure that this is sorted out before you make the move, which should be manageable since creating a bank account online has become easier than ever.

Transport

 Once you’ve landed in your new home, you’re going to need a way of getting around. Consider the area you’re in, how far you’ll be living from your place of work, what the public transport is like, etc.

If you’re planning on using public transport to get around, make sure to factor that into your budget and your search for a new home. If you’re looking to purchase a vehicle, start doing research on what’s available, what fits into your budget and what documents you’d need to do so as a foreigner.

Accommodation

Where you live is not only important for practical reasons, but this will play a major role in how you and your family adjust and settle down. Moving abroad is a big life change, and feeling unsettled or uncomfortable in your own house is a sure-fire way to feel the effects of homesickness as soon as you arrive.

Choosing a home that everyone in your family likes and feels comfortable in is important for this reason. You’ll also want to make sure that it’s in a good location and fits easily into your budget.

Moving Companies

When you move abroad, you have the option to sell all your possessions and use the money you get to start fresh, from scratch in your new home. Many people find this to be the easiest option and even find great joy in being able to create their dream home from the ground up.

However, many people have established entire homes and don’t want to give up what they own, due to sentimental reasons, financial reasons, or various other factors. Continue Reading…

Perfect storm of challenges awaits Canadians this RRSP season, survey finds

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Photo credit Wes Tyrell

A “perfect storm” of challenges faces Canadian investors this RRSP season, according to a a national online study conducted on the Angus Reid Forum Panel for Co-operators, released Tuesday. Jan. 25.

After surveying financial professionals across the banking and wealth management sectors, the panel believes this  “perfect storm” can be attributed to the uncertainty of this past year and to DIY [Do It Yourself] investing strategies.

2022 is poised to be a unique RRSP season because of multiple unique market conditions, the study finds: 58 per cent agree that in the face of rising consumer debt, natural disasters (climate change), Omicron, and looming hikes in interest rates, we are approaching a “perfect storm” of challenges, a figure that jumps to 65 per cent in Quebec.

Key findings

  • 80 per cent percent of respondents say that when people experience financial mishaps or losses, many feel overcome with doubt, which leads to indecision and in-action.
  • 76 per cent hypothesize that for many Canadians living in urban centres, home ownership is increasingly feeling out of reach, and because of this, many are looking for DIY investment strategies.
  • 93 per cent say the majority of Canadians have unleveraged opportunities in that they haven’t maximized their RRSP planning and TFSAs.

“By initiating a much-needed national conversation around financial literacy, the hope is that more Canadians will feel empowered to seek counsel from a financial advisor and develop a strategic financial plan to help achieve their goals,” Co-operators said in a press release.

Conducted in January 2021, “Canadian Attitudes on RRSPs” was designed to examine the state of RRSPs, TFSAs and retirement planning strategies that Canadians are using to secure their financial futures – all from the perspective of industry professionals with their ears to the ground across the country.

Consumer confusion appears to be rampant when it comes to understanding the different roles of RRSPs and TFSAs. 90 per cent of financial professionals believe most Canadians” have a lot of confusion” about those two key retirement savings vehicles.

This is reflected in similar confusion about Saving versus Investing: 70 per cent say they see Canadians declining in their ability to differentiate between saving and investing.

The study also sees what it calls “unleveraged opportunities”: 93 per cent think the majority of Canadians haven’t yet maximized their opportunities with RRSP planning, TFSAs, and other programs.

A majority (85%) of  industry pros attribute the influence of today’s “culture of now” as hindering people from seeing retirement planning as a priority.

The venerable Registered Retirement Savings Plan (RRSP) also seems to be suffering from the challenge of an “old school image”: 57 per cent say too many Canadians today see RRSPs as “an investing tool of the past” that is no longer as attractive today.

Adding to the angst is the continuing decline of availability of Defined Pension [DB] plans offered by employers: 85 per cent think defined benefit pension plans are going extinct. They too are viewed as a thing of the past: something Canadians don’t expect to have when they retire.

No surprise then that Early Retirement is largely regarded as a myth:  92 per cent of advisors believe that because most Canadians aren’t saving enough for retirement, concepts like “early retirement” are becoming more elusive.

What’s holding Canadians back

When it comes to identifying the causes for Canadians holding back on retirement saving, the survey found financial losses generally contribute to indecision: 80 per cent of advisors say when Canadians experience financial mishaps or losses, many become overcome with doubt, which then leads to indecision and in-action. In addition, 73 per cent see a stigma of shame among many Canadians around financial mishaps or losses.

Just the fact they feel they are not saving added to their stress: 80 per cent see many Canadians feeling paralyzed from the stress of not having enough savings to meet their long-term needs. And many also feel pressure to be perceived as  “financially in-the-know.” 65 per cent think there is social pressure among Canadians to appear “financially savvy.” Continue Reading…

The True Liquidity of an ETF

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By Danielle Neziol, Vice President, BMO ETFs

(Sponsor Content)

One of the most common questions we get from investors is, “If a certain ETF doesn’t trade often, or it has a low ETF trading volume, will I be able to sell the ETF when I need to?” The quick answer is yes you can, and I’ll explain why.

This liquidity concern makes sense when we think about trading stocks. A stock which is thinly traded will be much less liquid than a large cap, blue chip stock. Therefore, the less liquid stock could be difficult to sell if there is not demand for it.

However, ETFs work differently than stocks in this way. The true liquidity of an ETF has three layers. These three layers are something we can’t easily see. In fact, most volume data available to investors online is only showing the tip of the liquidity iceberg.

1.) Natural Liquidity: Buyer/Seller

The first layer that most investors are familiar with is between the natural buyer and the natural seller, who get matched on the exchange. Think of this like going to Facebook Marketplace or Kijjiji to sell your car. These marketplaces will match a buyer with a seller. Both will agree on a predetermined price and the transaction is made. This layer of liquidity is mostly present among the largest and most liquid ETFs in the market (usually those with a billion or more in assets).

2.) Market Makers: Buyer/Market Maker/Seller

The second layer of liquidity uses market makers. Marker makers are dealers or brokers who hold an inventory of ETFs and will either buy ETFs or sell ETFs depending on supply and demand. A market maker is trade agnostic which means they are always willing to buy and sell; they make their money in trading volumes (earning commissions on each trade). This trading strategy would be like going to a car dealership to buy or sell a car. The dealer acts as a market maker, who will buy your car and sell to someone else, and they usually earn a spread on this transaction. Market makers are often who you will “meet” on the other end of your ETF trades and they play a huge part in a healthy and liquid ETF ecosystem!

3.) Creations & Redemptions: ETF Provider/Buyer or Seller/ETF Provider

The third layer of liquidity is called the Creation and Redemption Process. ETFs have this ability because they are open-ended funds. The process occurs when there is an imbalance in supply or demand for a specific ETF. If demand is high, there will be more creations. This means the ETF provider (for example, BMO ETFs) will create more shares of an ETF to match demand. This is simply done by purchasing the stocks that the ETF holds, turning it into an ETF, and then passing it on to the buyer. If supply is high and demand is low, there will be more redemptions. This means that the seller will send their ETF back to the ETF provider, the provider will disassemble it and sell the underlying stocks in the market, sending cash back to the ETF seller. Think of this trading strategy like ordering a car directly from the auto manufacturer; they will go and buy all the parts for the vehicle, build it, and deliver you the car. A redemption would be the opposite where a car would be sold back to the auto plant and disassembled and sold off for parts (this is of course not how things are done in the auto world but a good example to visualize the process!). This last layer of liquidity is important to understand because it demonstrates that an ETF is as liquid as its underlying holdings of stocks or bonds.

Because of these three layers of liquidity, an ETF can sometimes be more liquid than its underlying holdings. We typically see this in less liquid asset classes such as preferred shares and fixed income, where the ETF will be easier to trade than the underlying holdings. Therefore, the increased liquidity of an ETF is just another of the many benefits of using ETFs in your portfolio!

To watch our webinar on ETF Liquidity and Market Makers please visit www.etfmarketinsights.com to register or catch the replay on our YouTube channel www.youtube.com/etfmarketinsights ”

Danielle Neziol has been part of the BMO ETF Team for over five years working in ETF product development, strategy, and most recently in ETF education for direct investors. In the past she has been engaged with with the exchanges, capital markets desks, index providers and portfolio managers to bring ETFs to market and today she is focused mostly on applying her expertise in the ETF business to support and educate investors.

Why you need to focus on providing Great Customer Service

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By Sia Hasan

Special to the Financial Independence Hub

Now more than ever, offering the best customer service that you can is essential. Even though most business owners are aware that it is important to provide quality service, they still may not understand how big of a difference it can make for their business, or just why it is so necessary.

The reality is that over time, customers’ opinions and thoughts about businesses have become increasingly important. Not only that, but because the internet makes it so easy for them to share their thoughts, business owners need to find more ways to make sure that their thoughts about their companies are positive. If you are looking for some ways to help ensure you are building a strong connection with your customers that will help your business flourish, here are some things to think about:

Doing Research is Key

When it comes to offering great service, research should be your first step. From making sure that you have a solid knowledge of CDP [Customer Data Platform] to taking the time to look deeply into your analytics, doing your research will help guide you in the right direction when you are looking to offer better service. Not only will it help you to get to know your customers better, but it will also allow you to know what areas your business needs the most work in. The more research you do at the beginning of the process, the less work you will have to do later on.

Use your Social Media wisely

If you are looking to improve customer service, then social media is your best friend. Social media isn’t just a great way to spread information about your company, it is also great for getting to know your customers better, and for offering them service in a way that works for them. More and more, customers are spending their time on social media and looking to connect with businesses and brands there, as well. This means that you need to be active on social media, and make sure that you are there to connect with them, too. Continue Reading…

MoneySense Retired Money: Are Asset Allocation ETFs truly diversified?

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OptimizedPortfolio.com

My latest MoneySense Retired Money column looks at the dilemma many retirees and would-be retirees face these days: that with sky-high stock prices and interest rates seemingly bottoming and headed up, there’s no such thing as a truly “safe” investment. Click on the highlighted headline for full column: Is the All-Weather portfolio the answer to the shortage of “safe” investments? 

Even supposedly safe bonds, bond funds or ETFs largely suffered losses in 2021 as interest rates seemed poised to rise: now that various central banks are starting to hike rates, such pain seems destined to continue in 2022 and beyond.

Yes, short-term bank savings accounts and GICs seem relatively safe from both stock market meltdowns and precipitous rises in interest rates, but then there’s the scourge of inflation. Even if you can get 2% annually from a GIC, if inflation is running at 4%, you’re actually losing 2% a year in real terms.

But what about those Asset Allocation ETFs that have become so popular in recent years. This site and many like it are constantly looking at products like Vanguard’s VBAL (60% stocks to 40% bonds) or similar ETFs from rivals: iShares’ XBAL or BMO’s ZBAL.

The nice feature of Asset Allocation ETFs is the automatic regular rebalancing. If stocks get too elevated, they will eventually plough back some of the gains into the bond allocation, which indeed may be cheaper as rates rise. Conversely, if stocks plummet and the bonds rise in value, the ETFs will snap up more stocks at cheaper prices.

But are these ETFs truly diversified?

True, any one of the above products will own thousands of stocks and bonds from around the world. They are geographically diversified but I’d argue that from an asset class perspective, the focus on stocks and bonds means they are lacking many other possibly non-correlated asset classes: commodities, gold and precious metals, real estate, cryptocurrencies, and inflation-linked bonds to name the major ones.

The Permanent Portfolio and the All-Weather Portfolio

I’ve always kept in mind Harry Browne’s famous Permanent Portfolio, which advocated just four asset classes in four 25% amounts: stocks for prosperity, long-term bonds for deflation, gold for inflation and cash for recessions.

A bit more complicated is the more recent All-Weather portfolio, from American billionaire and author Ray Dalio, founder of Bridgewater Associates. You can find any number of variants of this by googling those words, or videos on YouTube.com.  There’s a good book on this, Balanced Asset Allocation (by Alex Shahidi, Wiley), which makes the All-Weather portfolio its starting point. Continue Reading…