Tag Archives: financial advisors

Retired Money: A Canadian immigration success story

My latest MoneySense Retired Money column is a bit of a departure in that its focus is on 57-year old blogger and YouTuber Alain Guillot, who came to Canada from Columbia with nothing but entrepreneurial gumption and a dream of being part of the North America depicted on TV at home.

For the full MoneySense column, click on this headline: The first $100,000 is the hardest to save for newcomers.  

The re-election of Donald Trump is almost certain to make Immigration an even more contentious issue. However, as I am myself the child of (British) immigrants I am naturally sympathetic to those who are brave or desperate enough to leave the land of their births to find opportunities in North America.

Which is one reason that over the past year, I’ve been corresponding with an interesting blogger and former financial advisor, Alain Guillot, and occasionally republish his blogs on my site, Findependence Hub. It’s called simply AlainGuillot.com

           He aims to write at least one blog a week and has 600 subscribers on his YouTube channel,  where he is more than half way to being able to monetize it. Now Guillot has just self-published a short e-book entitled The Wealth Paradox: Navigating Money, Free will, and Success, which you can find on Kindle for a very reasonable price. The subtitle explains more: How unconventional thinking influences your Financial and Personal Life.

Side hustles and Entrepreneurism

           One reason Guillot got my attention in the first place was that he emigrated to Canada from Colombia, a place I once visited (San Andres). He soon discovered he was almost forced to become an entrepreneur in Canada. Continue Reading…

I Will Teach You to be Rich (Review)

Amazon.ca

By Michael J. Wiener

Special to Financial Independence Hub

 

There aren’t many financial gurus willing to call out financial companies by name for their bad behaviour, but Ramit Sethi is one of them.  In his book I Will Teach You to be Rich, he promises “a 6-week program that works,” and he includes advice on which banks to use and which to avoid.

The book is aimed at American Millennials; Canadians will learn useful lessons as well, but much of the specific advice would have to be translated to Canadian laws, banking system, and account types.  The book’s style is irreverent, which helps to keep the pages turning.

It may seem impossible to fix a person’s finances in only 6 weeks, but this is how long Sethi says it will take to lay the groundwork for a solid plan and automate it with the right bank accounts and periodic transfers.  The execution of the plan (e.g., eliminating debt or building savings) will take much longer.

Sethi is rare in the financial world because he will say what he really thinks about banks.  “I hate Wells Fargo and Bank of America.”  “These banks are pieces of shit.  They rip you off, charge near-extortionate fees, and use deceptive practices to beat down the average consumer.  Nobody will speak up against them because everyone in the financial world wants to strike a deal with them.  I have zero interest in deals with these banks.”  For the banks he does recommend, “I make no money from these recommendations.  I just want you to avoid getting ripped off.”

People have many reasons why they can’t save and are in debt, but Sethi sees them as just excuses in most cases.  “I don’t have a lot of sympathy for people who complain about their situation in life but do nothing about it.”  “Cynics don’t want results; they want an excuse to not take action.”  He urges readers to “put the excuses aside” and get on with the business of making positive changes.

The Program

The first step in the program is to “Optimize Your Credit Cards.”  I found it interesting that Sethi focused on credit card perks before he covered eliminating credit card debt.  He wants readers to “play offense by using credit cards responsibly and getting as many benefits out of them as possible” instead of “playing defense and avoiding credit cards altogether.”  This approach sets him apart from many other experts on getting out of debt.  While he does teach methods of eliminating debt, his focus is more on building wealth steadily.

The second step is to open “high-interest, low-hassle accounts.”  Interestingly, he wants readers to open a chequing account at one bank and a savings account at another bank.  Among his reasons are that the psychology of a separation between accounts makes us less likely to raid savings.  Some might think opening a savings account is pointless if they have no money to deposit, but Sethi insists that you need to lay the groundwork now for a better future, even if you’ve only got $50 to deposit.

The third step is opening investment accounts.  The author favours very simple investments, such as a Vanguard mutual fund account invested in a target date fund.  “Don’t get fooled by smooth-talking salespeople: You can easily manage your investment account by yourself.”  Unfortunately, Vanguard mutual funds are only available to Americans.  Canadians can find one-fund solutions with certain Exchange-Traded Funds (ETFs).

To create the cash flow to reduce debt and invest, the fourth step is about “conscious spending,” which is “cutting costs mercilessly on the things you don’t love, but spending extravagantly on the things you do.”  Achieving this involves tracking spending in different categories, but not traditional budgeting. Continue Reading…

Those TV ads about financial advisors

By Darren Coleman

Special to the Financial Independence Hub

There is an Oscar Wilde quote that goes like this: “A cynic knows the price of everything and the value of nothing.” I think of it every time I see one of those Questrade TV commercials where the client meets with their wealth-management advisor so they can tell the person they are fired. Why? The fees are too high.

The commercials drive home the point that advice costs more than doing things yourself, which is no surprise. I’m also flattered because in one of the ads, the character has my name – Darren – and it makes me think I might be in that seat. But that’s as far as the similarity goes because in all the years I have been in this business no client has ever told me they are leaving because of my fees. Not one.

This is where I think those TV ads miss the point. The issue at hand should not be about price. It should be about Value.

All those ads focus on the price of advice and the implication is clear: that advisors are gouging their clients. The advisor gets to retire early because of fat fees while the client, according to the ads, loses up to 30% of their retirement savings to fees. While the math in these ads may be  questionable, the ads also ignore any benefit that the Advisor’s advice may bring.

The ads showcase clients not experiencing true value

Let’s explore what these ads are really about. What they showcase is that the client is not experiencing true value in the relationship. So, the client decides to go it alone and hire Questrade’s robot to do things for them. Questrade, and ‘robo-advisors’ as they are called in the industry, offer a discounted trading commission to do-it-yourself traders, along with pre-built portfolios for more passive investors. As there is no personalized advice on any financial matters for the client, the fees are much lower. Which is as it should be.

I, for one, would never use such a service. I don’t even like those robot vacuum cleaners; the one my wife bought always gets caught under the couch because it can’t find its own way out, which is annoying. I also dislike those robot attendants which more and more companies are using for navigating their telephone systems. And I use these analogies for good reason.

As far as handling your investments and financial matters, does going it alone or going with a pre-built model portfolio actually work? The evidence shows this is not the best solution for most people.

Behavioural mistakes rob people of bulk of their returns

Every year Dalbar, North America’s leading independent expert for evaluating, auditing and rating business practices, produces its annual Quantitative Analysis of Investor Behaviourstudy, which shows that most investors underperform their own investment portfolios. Year after year, investors buy and sell at the wrong times. They do this because they allow their emotions to get in the way. Consider it part of the human condition. Believe me, professional advisors know all about these tendencies: that behavioural mistakes rob people of the bulk of their returns.

For example, in March 2019, Dalbar calculated that the average investor lost more than twice as much as the market in the previous year! The average investor saw their portfolio drop by more than 9% while the market was down only 4%. And this was no fluke. Over a 20-year time period, these mistakes have continued and investors, on average, underperformed the broad market by about 4% annually. Continue Reading…

Regulating professional designations for financial planners and advisors

By Darren Coleman

Special to the Financial Independence Hub

If you want to practice law you must graduate from law school. If you want to be a doctor you need a degree in medicine. But what if you want to be a financial advisor who counsels people on how to handle their money and their investments? Until now, pretty well anyone could hang a shingle, but thankfully, those times appear to be changing which is good for the consumer/investor.

The recent 2019 Ontario Budget had a proposal to formally regulate the terms ‘financial adviser’ and ‘financial planner.’

What’s the difference? The adviser helps clients manage their investments, but the planner is a bit different. A financial planner helps you identify and meet your goals. That may be paying for your child’s post-secondary education, paying off your mortgage, or just getting everything in place so you can retire comfortably.

While one needs a professional license to offer advice on the purchase or sale of a stock, insurance policy, or mutual fund, until now pretty well anyone could claim to be a financial planner or wealth management adviser who dishes out general advice for the masses.

Forensic financial planning

But bad or erroneous financial advice from one who isn’t properly qualified can be disastrous for the client/investor, and I have seen it happen all too often. Those of us in the industry call this ‘forensic financial planning’ and the key word there is forensic.

What exactly am I talking about? It might be putting too much weight into something like whole life insurance or high-risk securities. It might be not taking a prudent look at leverage in your investments. Or buying expensive mutual funds that don’t pan out. Continue Reading…

Sh*it my advisor says

Some investors eventually leave their commission-based advisors and opt to set up a simple portfolio of index funds or ETFs on their own. There are plenty of compelling reasons to do so; the reduction in fees alone can save investors thousands of dollars a year, and academic research shows that the lower your costs, the greater your share of an investment’s return.

Related: Steak Knives, Yes. Financial Advice, Maybe Not

In my fee-only planning service, many clients end up doing exactly that. I always enjoy hearing the rebuttals from bank and investment firm advisors whenever they hear their clients want to move to a lower-cost portfolio. Here I’ve tried to capture some of that conversation with sh*t my advisor says:

SexismWhen my husband told him we’re choosing simple index investing and that I handle the family finances he smirked and said to my husband, “What credentials does your wife have to manage money?”

The real enemy: Our investment company is being vilified when the true villains are credit card companies with their interest rates.

Proof of concept: I have tons of clients with assets over $500,000 so I must be doing something right.

Working for free: My advisor told me she basically worked for me for free for the past eight years and accused me of dumping her just as my assets were growing.

It takes a professional: People think they can trade mutual funds or ETFs on their own but it’s not as easy as you think. Plus, you don’t have anyone like me to call up and ask if you’re doing the right thing. Re-balancing a portfolio is easy if you have the background, but doing it like you’re thinking about (indexing) is very tough without the training and knowledge.

What’s in a fee?: The fees are at 2 per cent (Ed. Note: actually, 2.76 per cent) because this isn’t just about buying and selling. We created a complete portfolio with you for your tolerance in the market and deal in actively traded mutual funds that most of the time outperform the market.

Nortel: ETFs aren’t all that great. When you buy an ETF you buy the whole fund. In the late 90s when Nortel owned 30 per cent of the TSX it crashed. If you purchased that ETF you’d be down 30 per cent too! But with a mutual fund you can’t buy that much. You are only able to purchase up to 10 per cent of any one company. So you would have been fairly safe with the crash of Nortel.

Downside protection: If the market goes down 20 per cent your ETFs will too. You are much more protected with mutual funds.

Apples-to-apples: All of our fees are wrapped up together in our MER. We do not charge account fees, transaction fees, advisory fees, admin fees or fees for our service. It is just the MER.

Clairvoyance: The bond market has likely reached its peak and appears to moving in a different direction. The equity markets are very risky at this time. In my mind the only safe place left is guaranteed deposits. Continue Reading…