Chilton to bloggers: Public-sector retirements in far better shape than private sector

David Chilton at #CPFC15. Photo Krystal Yee

The Wealthy Barber, aka David Chilton, didn’t disappoint financial bloggers when he gave the keynote address Saturday to the Canadian Personal Finance Conference 2015.

In his own circle in his native Kitchener, Chilton says that when friends in their mid 50s and up compare their financial readiness for retirement, there is a great divide between those in the public sector and those in the private sector.

I dare say most of us could report the same thing: teachers and government workers may well already be retired by their mid 50s to early 60s while the rest of us: not so much. People who have good pension income also tend to be better savers, Chilton said, and there are many couples in which both spouses enjoy public-sector Defined Benefit pension plans. Late-life divorce and job loss are common but again, this is somewhat less common in the public sector.

Speaking financially across the general population, there are “still too many people in trouble.”  In the real world, “People suck at investing … People don’t know what mutual funds are, let alone MERs,” Chilton said, telling financial bloggers it’s up to them to educate their readers.

PF Bloggers are “freaks”

On Sunday, one of those bloggers, Dan Bortolotti of Canadian Couch Potato reinforced that message, saying that compared to the general population, “you’re freaks.”  Bortolotti, now a financial advisor with PWL Capital, also told the audience that when he started writing about index investing eight years ago, he believed it was easy and that anybody could do it if they applied themselves. Today, he says investing is hard and believes most people need good financial advice.

Thousands of investors send Chilton their financial plans and most are unhappy with their returns. The amount of money lost from high fees and poor performance is huge, he said.  He said he struggles with “nonsense” from economists about personal finance, on both sides of the border, but exempted former BMO chief economist Sherry Cooper from his assessment.

The financial services industry is in trouble, he said: “Margins will fall as people won’t pay high fees in the next 10 years.” He didn’t spell it out but my take on that is he was referring to high-fee retail mutual funds, which continue to lose business to lower-cost index funds or exchange-traded funds (ETFs). Robo advisers bundling ETFs together at about a fifth of the cost of mutual funds is more evidence of this trend.

However, Chilton said margins will come down for robo advisers too, so he’s “a bit worried for them.” Robo advisers have a particular appeal to younger “Millennial” investors just starting on their investing journeys but Chilton said “Millennials are figuring out that it’s important to keep costs down.”

Fin-Tech a bubble?

Certainly the biggest buzzword at the conference was “FinTech,” short for Financial Technology. There was no shortage of demonstrations of cloud-based accounting software, robo adviser and online lending technology, most of it available through millennial-friendly smartphones.  However, Chilton said most of the 40-odd  fin-tech deals he encountered over his three years on Dragon’s Den and elsewhere were “really stupid. I’d say fin tech is a bubble.  Few have done well.”

The author of one of the biggest bestselling books anywhere said he pulled the The Wealthy Barber off the shelves five years ago because he was concerned about the content getting stale. (All attendees at the conference got copies of his second book, The Wealthy Barber Returns).

He never allowed returns of The Wealthy Barber. “Not knowing what I’m doing was a help.”

When he self published the book, to print the first edition he had to cash out his RRSP, in contrast to his advice in the book. He said  paid his sister 10% of The Wealthy Barber to be his first editor, making her one of the highest paid book editors anywhere.

He urged prospector authors to test their target market. He almost quite himself after the first few chapters but believed in the project again after getting feedback from his slow pitch team.

Chilton is worried about jobs in future, saying that within ten years Artificial Intelligence could have a real impact on jobs. Similarly 3D printing is going to be a very disruptive technology, he said, describing the cost saving of such bizarre developments as printable urinals.  All this is positive for consumers but may be deflationary for the economy. So for interest rates,  the new normal maybe that they continue to be low. Rates will stay “surprisingly low for surprisingly long.

All in all, a very good conference. This was the third time the conference was held, after a hiatus in 2014. As organizer Krystal Yee tweeted, Chilton’s keynote may turn out to be a “defining moment” for this group.

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