Advice and The New Model

February 25th, 2017 by Potato

There are many elements to a successful financial life. You’ve got to live within (below) your means, which means developing an ability to budget and deal with cash flow. Create some savings and disaster-proof your life. Then come up with a long-term plan, and get some investments going to make it happen. So a successful financial life looks something like this:

Elements of a successful financial life: saving/budgeting, planning, long-term savings. Picture of text in boxes spread across a life trajectory.

These are all important. How they get done though is different for everyone. Some people find that things comes more-or-less automatically. Other people need help to sort out some or all of this. For example, budgeting and matching up cashflows is really intuitive for me, I barely needed to read anything before I was off handling it on my own, whereas some people need help from a money coach to sort out their budgeting, cash flow, and basic relationship with money.

And at various points, you may need help with something. There’s no shame in that, we’re not all personal finance bloggers obsessing over this stuff, or people with the time to read books and take courses to try to build up the skills to DIY.

But when you go to look for help, a successful financial life may look more like this:

Elements of a successful financial life: saving/budgeting, planning, long-term savings. Picture of text in boxes spread across a life trajectory, with investment products and insurance over-sized.

Traditionally, many advisors only made money if they sold you a product of some sort, especially investments (mutual funds, etc.). So their view of your situation was focused in on that part of the problem they could solve. Planning became less about clarity, goals, and trade-offs than about coming up with a bare framework to support investment purchases.

And that’s not to mention the conflicts-of-interest, such as that some advisors might not even ask you about your debt or budget, and look to invest any cash you have, even if paying off your debt may be a better use for the money. Or that so much of the focus is on investment selection (i.e., active management), which is where you will get little to no value for your money.

Advice — good advice — can be extremely valuable. Lousy advice — distressingly common — can be extremely expensive. If you’re paying your advisor through commissions on mutual funds that you buy, and you’re getting good service and value for those fees, then that’s totally fine. But I don’t see that being the case all that often, and those high fees really eat away at your long-term worth.

Instead, a new model is emerging that I like a lot better: paying for advice in a transparent way, for any part of your life that needs it, then figuring out the products to fit that advice separately, whether through DIY investing in low-cost index funds or using a robo-advisor to handle the investment management part.

In addition to getting value for your money and having transparency, this model lets you put the focus where you need it. If you need a money coach to help you sort out your cashflow and budgeting, you can now find one fairly easily — it’s not a side discussion you cram in while shopping for insurance or mutual funds. If you need to talk more about planning and clarity to figure out what direction your life is going in and how you meet your goals, you can do that.

Do you have confidence in your plan? Wait, that’s backwards: does your plan help inspire confidence in you and where you’re going? It doesn’t have to be a 30-page printed report: a good sketch on a napkin can be really illuminating. But if your plan is really just a few “know your client” bullet points to support some sales goals, you may want to work to figure it out yourself, or find a planner to help get that clarity.

So roughly speaking, here’s how I see the industry in the near future:

Elements of a successful financial life: saving/budgeting, planning, long-term savings. Picture of text in boxes spread across a life trajectory, with money coaches, planners, and robo-advisors to help at each stage.

Each part that makes your financial life tick, you can find some support to help. From a full-service coach/planner/advisor, to semi-automated solutions and support for DIY methods. And for each of those, you’ll pay a transparent fee so you’ll know if you’re getting value for your money.

And this is already happening. Nest Wealth, Wealthsimple, and ModernAdvisor each offer planner dashboards, to allow collaboration with unlicensed (which here means not-salespeople) planners. The planner does the planning and coaching, the robo-advisor does the investment planning, and each can charge for their component of it independently.

For people with larger portfolios, this new model is likely going to lead to better advice at a lower cost. For people with smaller portfolios who are just starting out, paying an hourly rate may cost more than they’d pay even with super-high 3% MERs… however, many people aren’t getting the planning support they want or need anyway, and this way they can get help with the elements that may be more important to them at that life stage, like figuring out their budgeting, or coming to an understanding of what their money is for.

Resources to do this:

Directory of Fee-Only [Fee-for-Service] Planners

Money Coaches Canada

Our robo-advisor comparison tool to find a robo-advisor that fits your needs and situation

My course on DIY investing to learn how to do the investment management part yourself

A reading list to help you get started

Plus loads of other resources out there for financial literacy. Chris at Rags to Reasonable has a free email course on getting a handle on your money (left side of the figure). Cait Flanders has her budgeting system. Bridget Casey has her build a budget course. And all the blogs.

Value Proposition for Investing Course

January 12th, 2017 by Potato

Since finishing the DIY investing course, I’ve had a few questions about what the value of the course is.

The course focuses on behaviour and processes for success, which is important — it’s not just about introducing the concepts and setting you free, but helping you to understand that investor behaviour is a huge factor, and something a lot of investors get wrong.

Everything is also explained clearly, in plain language — that’s my specialty and what I bring to the table. Some ways of explaining and framing things are unique and are not available outside of the course. There’s also a Q&A section so if anything isn’t clear, you can ask me a question and I’ll answer.

Another point of value that the course delivers is inherent to the format: rather than just text or just a person speaking at the front of a lecture hall, the course uses mixed media: text, video, presentations, spreadsheets, tools, templates, as well as active elements like exercises and quizzes. Not everyone learns the same way, and having variety and different approaches will help keep a student’s focus and improve their ability to learn. The material is also available on your schedule, whenever you need it, so you’ll never miss a line.

Finally, the course represents a huge value in time savings as well as the peace of mind in knowing that I’ve curated the vast amount of material out there for you — so you’ll also know when you’ve learned enough and can reduce the information overload. Some have commented that all the information needed to become an investor is available online or in the library, much of it for free. Yes, many people have figured out how to become successful DIY investors before I created the course, and many will continue to do so without the course. However, at this point there are millions of words written on the subject out there. Canadian Couch Potato alone has roughly 1,000 posts in his archives. And while there’s a ton of great material on that blog, it’s not the only one and it still doesn’t cover everything — you’ll definitely want to peruse the archives of Michael James on Money, Blessed by the Potato, Canadian Capitalist, oh and don’t forget Young & Thrifty, Canadian Portfolio Manager, and many more. Plus there are many magazine articles, newspaper articles, podcasts, whitepapers, and a few books. All told, you’re looking at something like one or two hundred hours of reading and having to determine what to follow because some of that freely available information is now out-of-date or just plain wrong.

For comparison, this course from UofT’s School of Continuing Studies will run you $325 (BTW, I’ll be popping in as a guest speaker for that one), but if you don’t happen to live near Toronto and have Thursday evenings free, you’ll likely appreciate the anytime, anywhere nature of an online course. PWL (Dan Bortolotti and Justin Bender) used to help teach people to be DIYers — a service that also included some personalized planning and the creation of a specific portfolio, so not apples-to-apples — for $2500-5000. Many investment coaches will help teach you from scratch, or answer specific questions to get you over any remaining hurdles after reading about it, but unless you can figure it all out in a single short session, that’s going to cost more than the course, too.

The course is not going to be for everyone, and that’s ok. Some people will figure this stuff out on their own, using free resources or a few books, filtering and addressing the conflicting information on their own. Some people are not interested in DIY investing, and will pay someone to handle it for them. For a fair number of people though, I believe the course will provide them with a lot of value in time saved, ease of understanding, and ongoing success.

Send in Your Investing Questions Now

January 12th, 2017 by Potato

The online Canadian Investor’s Conference is coming up, and I’ll have a presentation there. I’ll be recording early next week, so send in any questions you may have about DIY investing now. The conference is free if you can watch it right away, but to see the material later you’ll have to buy a premium pass — click here to enter a draw for a free premium pass (this draw is exclusive to BbtP/VoS readers so your odds should be pretty good).

Practical Index Investing Course is Complete

January 2nd, 2017 by Potato

My online course to guide you through becoming a do-it-yourself investor is now complete. Click here to download the final syllabus.

I want to thank everyone who signed up for the early access period, some of whom signed up over half a year before expected completion on little more than an outline and a promise (and a clever quote from the Hitchhiker’s Guide to the Galaxy). I ended up a month late on delivering the completed course, with some entirely reasonable extenuating circumstances. Having those paying customers patiently waiting was hugely motivating, and kept me going even as the work ballooned.

About the Course

The course is your complete guide to all the practicalties involved in becoming a do-it-yourself investor with index funds or ETFs, including:

  • Coming up with a basic plan to guide your investing.
  • Assessing your risk tolerance, and understanding the risk involved in investing.
  • Creating an account and purchasing an investment.
  • Choosing between your TFSA and RRSP.
  • Tracking your gains and reporting your investment income on your taxes.
  • Managing your behaviour and setting up good processes for long-term success.

What Does Complete Mean?

I say the course is complete, but what exactly does that mean? Well, I’ve delivered on all the essential modules in the syllabus, and what I had originally envisioned1. That doesn’t mean that now I’m going to unplug and ignore it. I’m a strong believer in continuous improvement, and will keep tweaking the course to refine the content that’s there, and add material to address questions as they come up. The course platform has a discussion section, which will help identify areas that people may be having trouble with. I also plan on running a few webinars through the year — a feature other courses charge extra for — in case people want more chances for discussion and Q&A.

1. Note that a few minor changes were made to the structure since the original outline, in particular much more information in the middle sections, and I realized that there was a lot of overlap between sections 5 and 9, so those were streamlined.

Never Weight

January 2nd, 2017 by Potato

I’ve gained a crapload of weight in my life. I started undergrad as skinny and ended a touch on the pudgy side. But the final year of my MSc was the worst — I was depressed, my experiments failed so I had to repeat a number of experimental runs, and my nominal two-year master’s took over three to finish. Plus I got a kidney stone and was bed-ridden for over a week, and had trouble even making the 20-minute walk to work for several months afterward. In that short span of time I gained so much weight I blew right through fat to obese. Over half that weight was packed on in a span of just a few months, weight gain so rapid it left me with stretchmarks.

But I had work to do — thesis to write, experiments to science, thorium to mine. Losing weight takes willpower and mental energy (and moreover, can’t be done while also powering through consecutive all-nighters on the power of caffeine and refined carbohydrates).

After I defended my MSc, I managed to lose a tiny bit of that weight (not much) and get in a bit better shape (not much). As my PhD was coming to an end, I knew that I might backslide a bit, but set a “never weight” for myself so that I wouldn’t go through another round of that kind of damage to myself as I finished my PhD, especially because at that point I had (somewhat) figured out that I wasn’t destined for an academic career and science wasn’t worth the sacrifice. If at any point I hit my never weight, I made a deal with myself to miss deadlines or whatever it took to keep that under control. I managed to finish my thesis with minimal weight gain, and lost that and then some after Blueberry was born (having a kid is a great impetus for changing bad habits). I figured ok, this is just my life now: I’m overweight but have held steady here for a few years running.

Then I hit a few busy periods at work, and again all-nighters and 100-hour weeks became a central part of my life. Here’s a hot bio-hacking tip: you can survive on just 3-6 hours of sleep per night for up to 2-3 weeks of insanity if you just keep eating. Can’t fall asleep while you’re mid-chew!

I gained 10 pounds in just a few weeks for one big project (my “Discovery Frontiers” weight), managed to hold the line for a year, and then gained another 10 lbs over a few weeks (the “CFI Innovation Fund” bonus gift). By then I let some bad habits form (esp. eating at my desk at work), and got really run down from chronic sleep deprivation (many causes), so even holding the line became hard, let alone losing that weight after the crises passed. But as long as I had shown I could work so intensely for someone else, I decided that rather than simply throttle back after those busy periods and focus on recovery, I would keep it up and work for myself. I wrote The Value of Simple. I started developing the Practical Index Investing for Canadians Course, both brought to you by the letter C for chocolate, chips, coke, and caffeine, and the number 5, for the hours of sleep I averaged most nights.

Then in the last big project (that ended in early October) I gained some more weight and hit my never weight. I was about to put up this post and commit to focusing on my health as soon as the investing course was done, but then Wayfare got sick, which was not exactly a stress-free time. But now it’s a new year, and the course is done, so this seems like a good time to commit to making this year all about improving my health. I started already, skipping any bound-to-be-disappointing New Year’s Eve stuff to just get to bed by 8 last night :)

I don’t have a diet/exercise plan sorted out precisely yet, but I’ve got some ideas. My first priority is to fix my sleep schedule, as that alone will close some positive feedback loops.

And that’s it for the year’s goals: I’m not writing another book, I’m hoping that now that the course is done I’ll have put myself out of the investment coaching business, and I don’t have plans to take on many freelancing projects. A few speaking gigs will likely be the extent of my non-daddy, non-day-job stress-inducing activities.