Book Anniversary and 1000 Sales!

November 30th, 2015 by Potato

The anniversary of the release of The Value of Simple is tomorrow, and I’m excited to say that it has just rolled past 1000 sales!

I honestly didn’t think it would hit that point and hadn’t written anything ahead of time, so in brief: hurray! I can’t believe it’s come this far, especially given how much I suck at marketing. I love seeing all those positive reviews and people referring it to their friends, and that even after a few months it’s still fully checked out at the various library systems that have it across the country, with a backlog of holds in Toronto and Vancouver!

In the meantime, I’ve been working on something that I knew would take forever and is taking even longer — I thought maybe if I pulled a few all-nighters I could get it out for the close of Financial Literacy Month (today), and now I see it’s going so slow I may have to re-think the whole idea.

Speaking of Financial Literacy Month: hey, if you’ve just learned how to budget and save your money, why not check out The Value of Simple, a really easy-to-use guide that will help you take the next step to investing that money you’re now saving?

And speaking of holidays, it also makes a great gift. So many people out there could use a little more financial literacy and investing how-to, but may not even know to look for it themselves. And it’s slightly more exciting than socks (there’s a bunny in it!). If you’re just looking to pick up a copy for a gift then there are lots of ways to do that. Both Amazon and Indigo have been discounting it online (if you buy enough other things to qualify for free shipping, it’s actually cheaper for you than buying from me directly), so that may be the way to go as long as those price cuts hold. If you want a signed copy though you’ll have to order directly from me. The last day to order and expect Canada Post regular delivery* in time for xmas is December 16 (December 17 for Ontario addresses) — the retailers will have their own shipping cut-off deadlines.

* – XPressPost cut-off would be Dec 21, but that will cost $17 extra — more than the book itself!

On Robo-advisors

November 19th, 2015 by Potato

One of my main focuses these days is helping people to get their money invested in a way that works for them for the long term. That’s why I started coaching people, and why I wrote The Value of Simple, to teach people how to do that on their own. Lots and lots of people have found it really useful and I’m very proud of that. Many can and should go the DIY route, but not everyone will want to or be well-suited to that method.

The robo-advisors sound like an excellent alternative, especially when combined with a fee-for-service planner for the complex bits that fall outside investing. I really like the idea of robo-advisors, but I had some reservations when they first came out. I’m glad to say that they are by and large knocking down my objections (in particular, moving from esoteric high-cost underlying funds to lower-cost broadly diversified portfolios, lower minimums, etc., though all-in pricing remains a challenge).

So far when someone has needed a hands-off DIY-ish solution like this, I’ve mostly been pointing them to Tangerine (covered in the book) in large part because Tangerine is a known quantity. A “known-known” if you would. I know first-hand that Tangerine is easy and smooth and painless, and what the tax statements will look like, that it minimizes analysis paralysis, and that all four asset classes are held in a single fund structure so rebalancing doesn’t lead to realized capital gains/losses in non-registered accounts1. Even just a few months ago, for people with smaller accounts Tangerine was really not any more expensive so it was an easy recommendation. As the robos have started using cheaper underlying funds and offering free passes to really small accounts, the cost difference has grown and the robos look more attractive. For people with larger accounts it was often a temporary recommendation, like “go with Tangerine for now and see what shakes out next year — you can switch then when there’s more clarity.” Note that I’m not trying to fear-monger with statements like that: I’m concerned with the customer experience rather than the safety of the money (which is held by reputable custodians covered by CIPF). Rest assured that even if the plethora of firms start to consolidate, or get swallowed by the big banks, or whatever, your investments there will be safe2.

There are still a few minor questions and quibbles3, but I’m the kind of person who will always have minor quibbles so at this point there’s no point in holding back from recommending them for investors who see value in their services. The main thing that’s missing is that first-hand experience, because no matter how easy they are to use it’s always handy to have a third-party walk-through to reassure people that it will all be ok, that the real-world situation lives up to the marketing4.

I wanted to make a grand guide to robo-advisors, kind of like a supplement to the book to compare them, including first-hand experience. I pitched it as a multi-part blog post guide as well as a flashy PDF summary. But I haven’t been able to secure the support to make that happen, and it’s too late in the year to include anything about tax reporting even if I was able to make that happen today. I still think a head-to-head mystery shop comparison would be really valuable, and I hope someone puts in the time and capital to do it (especially to do it in a way that includes challenging the services/concierges with dumb questions)… but it doesn’t look like I’m the right person to do it5.

Good behaviour is an essential part of long-term investing success, and is one area where I’m still not quite sure where the robo-advisors fall. On the one hand they largely use best practices to create broadly diversified portfolios and take away all the performance-chasing and what-not that individual investors and active managers are equally guilty of. Set it, forget it, automate it — they sound awesome. When markets roiled at the end of the summer they send out reassuring emails and had their staff standing by the phones. However, they also offer smartphone apps. At CPFC15, the CEO of one robo-advisor proudly proclaimed that a third of their clients check their smartphone app daily.

A third? Every day? I threw up in my mouth a bit.

That is just not a good thing for investor behaviour (but great for “engagement”). Even if there isn’t a big “panic sell” button in the app, frequently checking on a portfolio makes people feel the market ups and downs more vividly, which might lead them to do something drastic down the road (indeed, attempting to panic or alter my risk profile on the fly was something I wanted to check in the robo-advisor review/mystery shop to see how they handled the situation). Yes, Tangerine has an app, but it’s designed for your chequing account and it takes a few taps to get down to see your investments, and even there they only show you the balance in your investment account, with no flashy graphs of recent market drops or big red daily change numbers, and no individual segment reporting so you have to work a bit harder to activate your lizard brain.

But whatever, there’s nothing to do but see how things shake out, and with how fast things are moving those could be totally redesigned by next week.

So if you’re looking for a lower-cost way to get the investment implementation part of your finances handled — and don’t want to do a full DIY implementation — go ahead and check out the robo-advisors, and let me know how it goes. Remember that getting your savings invested is just part of the personal finance and planning challenge. A big, scary one to be sure, but just a part — your plan will be important for creating the context for those investments (like risk tolerance) and will be important for a bunch of other stuff unrelated to investing (like sleeping at night).

1 – and that they’re not playing silly buggers with esoteric asset classes and slicing-and-dicing, which I personally dislike but which I suppose I have to admit is not inherently evil.
2 – well, safe as can be expected: you may be inconvenienced, and still subject to the risks of the investments themselves — you’ll get your share of the ETF units back (or their market value at the time), but your principal is not guaranteed, just like investing anywhere else.
3 – like this post from WealthSimple. I’m not sure such expertise exists at all — and given that the fund in question under-performed a vanilla bond index when managed by the so-called professionals, I’m highly skeptical that if such expertise does exist that a small firm like WS will suddenly possess it in-house… and Eric Kirzner has been there since the beginning, which I should stop ranting about in the footnote. I will always find quibbles.
4 – to spot the unknown unknowns.
5 – in large part because I’m cheap and while the robo-advisors are relatively inexpensive, they’re still going to cost me a few hundred bucks more than DIY costs, on top of the PITA factor of actually doing it and then dealing with all these open accounts everywhere (which would all be non-registered accounts as my TFSA is full). And apparently I’m not persuasive enough to get them to sponsor an editorially independent comparison. [note to the footnote: I had not yet asked WealthSimple, in case they’re reading this and are all like “what, we never got such a request from Potato.” I figured the other rejections were enough to kill the idea.] {note to the note to the footnote: I had thought about trying to do a really small kickstarter, but as much as I think this sort of thing would be useful to the community, I don’t think anyone wants to fund it.}

Exciting Book and Podcast Updates

November 5th, 2015 by Potato

First off, I had two recent podcast appearances:

Over at Because Money, we talked about who should be a do-it-yourself investor, related to this post. Interestingly, after we recorded this we got to hear more about the importance of behaviour at the Canadian Personal Finance Conference, where the final talk by Dan Bortolotti indicated that because of self-defeating behaviour he doesn’t think many investors should be do-it-yourselfers. I tried to emphasize behaviour and processes in the book to make sure that people didn’t fall into those traps, and I plan to focus my efforts for the rest of the year on solving that problem so that more DIYers will be successful.

Then, I was on the Mo’ Money Podcast, talking about the book and my history with money.

If this is your first time finding out about the book, or if you have someone you think should pick up a copy to learn about investing, then be sure to head on over to Amazon — it’s on sale at the moment for an incredible price. I’m not sure if it’s a financial literacy month thing (aka “November”), or if it’s a flash sale that will be over tomorrow.

I also want to excitedly say that my October sales numbers are in and the Value of Simple now sits at 956 sales. It’s totally feasible to get 44 sales in November (the financial literacy-est month of the year!) to manage to roll over 1000 the sales mark by the 1-year anniversary of the book’s release in December! Totally feasible with your help that is. Remember that most people you know and love likely don’t know anything about investing or a lot of other financial topics — Kyle called it the “Canadian emperor has no clothes” phenomenon in the podcast, where everyone assumes everyone else has this all figured out and doesn’t want to talk about it. So be sure to whisper it in their ear, or send them a link to buy the book (or at least check out the reading guide), or just buy a copy for them now for Christmas to help me reach my completely arbitrary goal!

Finally, if you’re interested in a bulk order (for instance if you want to get your clients or employees something awesome and educational for the holidays), the printer has reminded me of the various ordering cut-offs for shipping in time for Christmas, as well as an extra discount for orders (over 10) placed before Nov 22. Contact me for details about bulk orders.

Door-to-Door Realtors

October 28th, 2015 by Potato

In what I have to assume is a world first, I had a door-to-door solicitation from a pair of realtors flogging pre-construction condos last night.

In true door-to-door salesman style‎, I had just taken the first bite of dinner when the knock on the door came. I jumped to answer the door, thinking it was the landlord stopping by to chat, only to be faced by a pair of ladies lugging glossy brochures of the new Tridel development coming down the street.

I had hot food waiting so I brushed aside their sales pitch and wished them good night, but I have so many questions‎ that I wish I had asked at the time.

  • Do people, who already live in detached homes, actually buy pre-construction condos from an unsolicited visit?
  • Has anyone ever made a major six-figure purchase from a door-to-door solicitation ever? Do you think it likely to happen?
  • Why does the sales literature promote shopping at Bayview Village (more than anything else about the development) when Fairview is the larger mall and closer to the development?
  • ‎Doesn’t it hurt the image of the development to flog the units this hard? Hasn’t the traditional approach been to hold “VIP” and “exclusive” sales events?
  • Is door-to-door condo sales really a thing Torontonians can look forward to, or were you just trolling me in particular?
  • And then the first few questions like twenty more times because seriously WTF.

I know I’m a blogger, prone to introspection and constantly amazed by the impulsiveness of people in this city when it comes to real estate, but do people really make half-million-dollar decisions by door-to-door sales?

National Trust

October 25th, 2015 by Potato

In today’s post at TRB David Fleming casually mentioned visiting National Trust as a kid. I had an account there too when I was younger, so it brought back some memories. I decided to dig up some historical statements for National Trust (which was taken over by Scotia in 1997).

The late 80’s were a wild time for Toronto real estate. National Trust, despite the name, was heavily concentrated in Ontario: about 75% of its business was there, with about 25% in Toronto alone. From ’87 to ’88, mortgage growth for NT was 13%, then 18% the year after, and another 9.8% into 1990 (as things were peaking in TO). Return on equity was 13.8%, 12.9%, and 13.4%. The provision for loan losses was peanuts in ’87, and they actually wrote some loans back up (a negative provision) in ’88. In ’89 the provision for loan losses was 3.4 basis points (0.034%) of the mortgage portfolio.

By 1992 the mortgage portfolio was shrinking, with provisions for loan losses at 85 basis points. Return on equity was down to 5.5%, and they had laid off 12% of their employees (by the time Scotia took them over, 25% of those who worked there in the 1989 peak were out of work).

I’ve made my bear case on real estate so many times I don’t want to go too crazy here. But this week I was once again hearing the meme that Canadian banks are invincible, that real estate will never correct and even if it does it won’t hurt them. National Trust came out more-or-less unscathed from the 1989 Toronto crash, and the dividend was never cut (though it also never increased from 1990 on). However, if you were a buyer in the late ’80s I’m not sure you’d be happy with the performance through the next half decade.