What kind of investor are you? With the advent of technology and the emergence of low cost discount brokerages, more Canadian investors are taking a DIY approach with their money. Does that mean that financial advice no longer matters? Sheldon Brow is the founder and CEO of fintech platform, Pocket Finance. He’s passionate about empowering clients with full and fair disclosure, inclusion and bridging gaps to financial guidance and deeper client engagement. He’s also an open-banking enthusiast and finance futurist. I sat down with Sheldon recently to discuss why it’s still important to seek the advice of various experts when it comes to your money. 

 

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. Do you prefer to invest in socially responsible companies? If so, our sponsor, Wealthsimple, will help you build a portfolio that focuses on low carbon, clean tech, human rights and the environment. To get started with socially responsible investing, head over to maplemoney.com/wealthsimple today. Now, let’s chat with Sheldon…

 

Tom: Hi, Sheldon. Welcome to the Maple Money Show. 

 

Sheldon: Thank you so much for having me, Tom. 

 

Tom: I wanted to have you on because you have an app, Pocket Finance. One of the interesting things we’ve discussed before the show was that we should be improving our collaboration in where we get our help. And this is something I’ve seen before. If you go into a bank, you might have one person that’ll get you a mutual fund and another person who will get you a mortgage, and even those people may not be the best choices. But there’s not really anything that ties it all together perfectly. I would think you could see a financial advisor, but a lot of times they don’t talk about everything else. Just give us a broad picture of this, how do you see this problem? Is this something we can make kind of interconnect? Or do we just have to handle it ourselves and keep track of these different sub topics? 

 

Sheldon: Well, there’s different ways you can do it with or without technology. Of course, as you mentioned, the technology that we’ve created adds a lot of value to collaborating for clients with their finances and with their financial advice. It also offers a better way for financial advisors to engage with clients. But really, the focus today, as you mentioned, is collaborating with financial professionals. And again, as I’ve mentioned to you, there’s other aspects of collaboration. You want to make sure that you’re collaborating with your household. It’s very hard for a financial advisor to give you advice when you’re trying to conceal a debt or something from your spouse. Let’s say it’s not even something like that, if there’s only one person championing the finances of a household, if anything ever happens to that person, then the other person’s left in a shambles trying to piece everything together and understand what’s happening. So collaboration with your household, I assume, is important. Collaboration of professionals-to-professionals when we’re dealing with a client… Typically, unfortunately, that means that usually it’s only high, net worth, clients that are receiving that. There’s a mass market of younger generations that is just starting out the more serious part of their financial life. We’re trying to discover and implement more ways where that can be given out to the mass market so they’re getting more holistic advice. Because there’s a huge opportunity cost that comes with getting half advice, as you can imagine. And when financial professionals collaborate, the best results, therefore, emerge. If you’re just having one side of a conversation, especially when you have more going on financially and more complexity to your situation, especially for business owners, there can be a lot of stuff that you’re then trying to fix later that can be pretty problematic. 

 

Tom: It’s interesting you brought up even within your household that you have to collaborate and certainly communicate too. Because if you’re trying to hide something from your spouse, financial advisor, accountant or anything, they’re not getting the real picture. I guess even if you aren’t trying to hide something from a spouse, maybe you’re just not telling your adviser or accountant about something because you’re embarrassed of it or whatever the case is. Making sure you communicate properly on the family side or the professional side, if you’re not willing to lay it all out there and give them all the information, they can’t really make great decisions. 

 

Sheldon: And it comes in kind of two forms. Like you said, it could be concealing something because you can’t really intelligently work towards the same goal (as a household) if not everybody’s on the same page. And then the other part is, if I’m being honest, is something I’ve kind of struggle with sometimes. Because I have 15 years in banking I sometimes think to myself, “Well, my wife works in health care. You worry about keeping an eye on the health stuff in the household and I’ll run things financially.” So for one, it’s concealing or not giving disclosure to your advisor or spouse, or both. And then the one where somebody is really trying to be that champion of the financial household. You can have roles but there should always be some overlap of understanding. I’ll give you a quick example. My first year in banking, something that really was a catalyst to me in creating Pocket Finance, is to highlight those key components in fine print of financial advice for people I care about and then trying to add components for the financial professionals as well. I was in telephone banking. I used to work at one of the five big banks. Telephone banking is kind of like a teller. It’s one of those entry level positions. People call the number on the back of their bank card to reset their password, do a transaction, ask it about a balance or apply for a product. And I had a 93 year old woman call in— we were often getting this type of call at the end of month to see if their pension was in because they’re on a fixed income. After I answered her question, I saw that she had a $33,000 balance on a credit card. And the first thing that kind of struck me was to scroll back and see how long had she been making the minimum payment on this card. Doesn’t really make sense for someone that’s calling in (what seems like monthly) to check when their pension is coming into have a $33,000 balance on a credit card. I kept scrolling back to see the minimum payments, then stopped scrolling and asked, “How long have you been making the minimum payment on this card?” She said about six or seven years. This is great for the bank. The research shows that the more complex banking products are, the more profitable they are for banks. A lot of people don’t understand even simple nuances, and most people with any meaningful banking are making donations to their bank every year. But the thing that made my stomach sink was, how could this ever happen? In my mind, this was a simple algorithm. If a user has a credit card balance of $10,000 or more and makes the minimum payment for six months or longer, populate a notification that they can change this to any interest rate or into a line of credit or loan to drop the interest rate in half. She wasn’t aware of it so she wasn’t ever engaging with any financial advisor. Again, she is part of that mid-market or lower income problem. And then there’s clearly nobody in her household that knows about this. Or the people in their household also don’t understand that that’s an opportunity. Seeing those types of situations… and there’s a long list of these types of things. Even recently, I did a mortgage about eight months ago for a client that had a $1.3 million mortgage, and they had a complex situation where they were making a pit stop in a holding and then into a family trust and then paying it out themselves. And the mortgage underwriter really wasn’t able to wrap their head around what was happening. They ended up getting the rate that really wasn’t good. I asked the client if I can have a chance to get them a lower rate because they were in an open term. I collaborated with their accountants and their financial advisor, and said, “I want to make more intelligent notes than the last mortgage broker. What insight can you guys provide me?” They gave me amazing insight. I made great notes and he was able to save $70,000 in interest over the next five years of his mortgage. So, collaboration comes in many forms and the benefits and opportunity costs are nothing to scoff at. 

 

Tom: I just had this experience in the past, when I was buying a house, it felt like I was the middle part of all that. You’ve got your mortgage broker, your real estate agent and the real estate lawyer. You’re trying to piece this all together. And not necessarily out of my own doing, they just kind of did it, but they were all actually working together, on their own. They started connecting and making sure that everybody had the information they needed to get the mortgage approved at a good rates. And from the realtor side, they’re happy because they’re getting this deal closed. Just across the board, I saw a better example there of the benefit of everybody working together while kind of leaving me out of it, almost.  

 

Sheldon: Yeah. Keeping you informed, keeping you copied in the communications at the right times. And you’re lucky that you had that joint experience because again, there’s a lot of people out here working in silos where they’ll tell the client. “We’re over here.” I think a signifier of somebody that really takes what they’re doing seriously is saying, “Let me take that off your hands. Introduce me to the people that you have involved in this. We’re going to keep you apprized at all the right times, of all the right communications, and we’re going to make sure that we’re managing everything in the background,” because otherwise it’s like a plain broken telephone. And there’s a lot of situations where clients are left in the middle and they’re trying to go back and explain something to somebody else, and they don’t really have the full picture because this is not their specialty. They might be a welder or some other type of business owner, and they don’t remember everything that you told them to go back and have a conversation about. So it seems pretty obvious. It’s encouraging to hear that you had that experience, but it’s not nearly common enough, unfortunately. 

 

Tom: Yeah, for sure. I definitely had past experiences where I certainly had to be the one in the middle of everything instead of just letting the people that know what they’re doing better, handle that. 

 

Sheldon: That made it this much more satisfying for you then?

 

Tom: Yeah.

 

Sheldon: This time you were able to sit back with a sigh of relief knowing these guys are good. They’ve got everything under control. If they need me for anything, they’ll tap me and let me know. 

 

Tom: Yes, exactly. Another example I can think of with this, but we’re heading into tax season right now. When I use an accountant, I just sort of hand them my information and they take care of the taxes and everything. What about things like tax advice? Should this be coming from a financial adviser or a certain type of accountant? And how does how does that piece together? Because it’s one thing to have an accountant that takes care of the “end result” for you. But if they’re not doing something with the planning and such to make sure you’re getting these credits and everything in advance, it’s too late by the time you hand the shoe box over. 

 

Sheldon: Well, I’d say that’s the most important aspect that you’ve mentioned, the tax implication. You don’t want to necessarily deal with accountants, financial advisers, mortgage brokers, or whoever else, that are transactional. People that want to give you holistic advice and want to be able to collaborate. The tax implications is something that your investment adviser, financial planner, and insurance advisor is going to have some opinions on. They should always be checking in with an accountant. Now, one weird thing that does happen sometimes, unfortunately, that’s a good test of how seriously your advisor takes holistic planning is, sometimes when you’re trying to introduce your professionals to each other, they can be a little bit standoffish. They say, “Well, I already gave them this advice, why are you telling them something different?” If you see that type of standoffishness with your advisers, then that should be a bit of a red flag. Is this the right person for you? They should be excited to collaborate, excited to add more value, to build that type of relationship, to offer more brilliant, overall advice. So the tax implications is one that, even for some mortgages that we’ve done recently, just working with an accountant locally here in Halifax, if we hadn’t gone to their accountant, the tax implications for what he would have done (and what he would have had to pay for the government) was pretty substantial to the tune of about $20,000. So it really builds trust with the client too. If you went into one doctor because you had some type of issue,  and the doctor said, “No, as far as I can tell, you’re good,” as opposed to you seeing another doctor go through a process where he’s checking in with others, giving them his opinion and looking for theirs—collaborating with other people, you’re going to have more trust for him and you’re probably going to be more comfortable taking your health to him. We need to treat wealth in the same way. 

 

Tom: I definitely like that. You see they’re putting some time and thought into this. One thing you mentioned was introducing one professional to another professional, and it made me wonder. With my real estate experience, it just kind of happened, but are there certain steps you have to take to build this team? How do you do that? Do you truly just introduce them or just tell them to get the information from that person? What’s the best way to put this together? 

 

Sheldon: In the future, hopefully, platforms like Pocket Finance will make it a lot easier where they can see each other naturally. But in the current state of things, I usually just type up a template for my clients because you always want to make things as easy as possible for the people you’re dealing with. Like this podcast, we want to make it as easy as possible by discussing things in advance—what’s the topic? What’s the timeline going to be? You gave me some great information in the email about what type of microphone and camera and stuff to use. We want to be able to do the same things with clients. When you see an advisor is able to collaborate well with others, you should almost demand that your advisor is meeting with your other people, especially if you’re a business owner. You should be demanding that they’re having some level of awareness and collaboration with your other professionals. I have a template that I actually send over to my clients and say, “Send this over to your accountant. Copy me. It pretty much says everything they need to know such as, I’m dealing with this current situation and this is the person I’m dealing with. This is his specialization and I’d really like to make sure you guys are in a little bit of contact to make sure I get the best outcome for my situation.” I send them over this little template to make life easier so they’re not sitting there trying to figure out what to send over to those other professionals. And not just setting it up for that transaction. You want to remind them that maybe they should be touching base a couple of times a year so everyone is kind of in the same room once in a while to check and make sure you’re on the right path and you haven’t got any “siloed” advice that is deviating from the goal that everybody should understand. 

 

Tom: Speaking solid advice, how do you handle that when it happens? How do you handle it as an adviser, and also, how would that individual handle it as well if they’re getting conflicting advice when these two sides should be talking and presenting something a little more singular? 

 

Sheldon: One of the things that can unfortunately happen, and this is where we’ve all got to check our ego at the door and be inquisitive and want to be collaborative. Let’s say that somebody has an investment adviser and an insurance adviser. The investment adviser is giving advice that the person should only do term and shouldn’t do whole life. Instead of just disagreeing and saying, “He doesn’t know what he’s talking about,” which is often what will happen, they should say, “Okay, I’d love to have a chat with your investment advisor to better understand why they’re recommending that.” To be able to have that conversation, maybe directly and confidentially because you don’t know what’s going to come out of that conversation. You don’t necessarily want to do that in front of the client. Then agree on what you’re going to go back to the client with, because you’re both on the same page. Again, demand that your advisors chat with each other. And advisors really should be taking that initiative as often as possible.

 

Tom: Is there sometimes a case where it could be bias based on things like commissions and stuff? If insurance agents are promoting a certain thing and you’ve got someone on the investment side promoting a certain thing… And let’s say they’re both commissioned and not fee-only, would you ever actually get a chance to get agreement between them? Because one side would basically be giving up their ability to earn on that decision. 

 

Sheldon: Well, I think that’s a good pulse check, though. A lot of what will happen in realty, investment and mortgages is that you don’t have the right person that you’ve really vetted and trust. If you feel they’re not giving the same advice they would give to their own mother, then they may be driving something based on a commission. The conversation I’ve always had with my business partner on the mortgage side is, don’t even look at the compensation for the mortgage product because I don’t want that to influence our decision. Don’t even look at that chart that they send out. Give the same advice that you’d give your mom. Whatever it pays, it pays. The difference in commission is not so gargantuan, at least not on mortgage products. Now, on some things like term versus whole life insurance and stuff like that is just another benefit to getting that holistic advice because you’re reducing the potential bias you’re going to get from one person. And you’re going to have these people challenging each other. You’ll be able to weed out the ones that maybe seem like they’re more transactional and commission focused. And you’ll be able to focus in on those ones that really are interested in being challenged, collaborative and making sure the client gets the absolute best result. 

 

Tom: If you had this team put together and you’re seeing some kind of friction there—maybe you’re starting to get that feeling where this person is maybe more interested in their commission instead of looking at it all, how do you break up with that person, keep the team together and bring in someone else? 

 

Sheldon: Well, for me, what I’d recommend to a friend or family member if they were in that situation is, take the advisor that you see as truly caring, truly being holistic, truly demonstrating a desire to be collaborative and ask them to recommend people in their ecosystem because they’re only going to work with people that have those same values around collaboration and holistic planning. That’s going to be a great opportunity as well to let this other advisor know, “Hey, listen, I appreciate the work we’ve done together. I’m really looking for a collaborative team, people that are going to work together to make sure that my greatest benefit’s there. That’s going to leave the financial adviser you’re breaking up with needs to take this more seriously as opposed to just reading it in an article. There are tons of studies and articles out there that talk about the benefit of getting this type of collaboration. Now you’re giving them the sober reminder that you’re an educated client. You understand there’s a great benefit to collaboration and you demand collaboration. Getting that recommendation from someone in the ecosystem of the ones that are working well and breaking out of those relationships that are not showing a clear intent to collaborate, is just such a huge difference in the outcome at the end of your life with the savings, the risk you’ve mitigated and the taxes you’ve avoided and everything else. Investment advisors are a dime a dozen and robo advisors always out-compete them on cost. But there’s always going to be a very special place for human advisors. We need to put them at their highest, best use. And one of their highest best uses is collaborating with other financial professionals. 

 

Tom: And that’s what I like about this idea, it’s exactly that. You’re paying them to, in a way, manage a team. Whereas, if all they’re going to do is recommend a handful of ETFs, that’s not that complicated… Anyone could do that. 

 

Sheldon: And an algorithm certainly can kill it. 

 

Tom: To have someone as a sort of middleman between everything, I do see a lot more benefit, too. You mentioned how they could go for referrals when you’re trying to fill in that missing piece again. If someone’s new to all this and they just want to start from scratch, would it make sense to find a certain advisor and specifically interview them around the idea of whether they know about these other pieces that could help and how they could put that together? If it was completely from scratch and you’re looking for an advisor and an account and insurance and everything else, maybe it would make more sense just to talk to an advisor with that goal in mind? 

 

Sheldon: I personally wouldn’t want to leave people with the lottery that is, Google. The person that pays the most for the ad doesn’t mean they’re the most ethical and most holistic advisor. I would always recommend asking somebody that they know and trust. Ask a few people that they know and trust for ideas on who’ve they’ve dealt with that have been exceptional. The new standard, unfortunately, in 2022 is, if you ask people if they’re happy with their bank, they’ll typically say, “Well, I haven’t had any bad experiences.” If you haven’t had a crappy experience with a person, cell phone service or whatever else, it’s a good experience. But we need to start demanding a “truly good” experience, not just an absence of hiccups and a bad experience. Ask people, then make sure you interview a couple. There’s a there’s a number of great articles out there of questions you can ask financial advisers. Google it. Look through the ones you think are more important to as questions, and make sure you’re interviewing two or three financial advisers. You’d be surprised. You might think the first one is great, a real charmer. They seem like they know what they’re talking about, then they don’t sound at all like they know what they’re talking about when you speak to that second one. Competence is good, but the mind and the heart have to be combined. And presumably that’s typically what we should be looking for in a lot of people, professionally and personally in our lives. It’s not just getting a sense that they clearly understand what they’re supposed to be certified in and have credentials in but getting a sense that this person genuinely cares about their clients. They don’t just see it as a number and a widget in their business. The other part of collaboration that we really should touch on is the clients, which kind of Segways from what you mentioned. Clients more often interacting with their advisors. But that’s part of that psychology you mentioned earlier, where sometimes clients either don’t know or they’re too embarrassed. I more deeply engage with my clients, even as a mortgage advisor. I give lots of other advice like going through their budgets and stuff like that. I’ve sometimes had clients call me saying, “Should I do this? I’m thinking about buying a new vehicle,” which, thankfully, they did call me because this is the number one mortgage killer, taking out a big car payment. They always start out with the same thing, “I’m not calling to ask your permission, but…” They feel weird because they feel like they’re calling to ask your permission when really they’re just calling to get your advice and your guidance. Advisors are not certified with Jojo Psychic Alliance, so I don’t know… I just refinanced your mortgage and got off rid of all your debt. You paid off your truck. The car company where you got your truck got the check to pay it off. They don’t know that we’ve done this restructuring. All they know is you’ve paid off your car, so they should sell you another car. Now they’re getting on the phone, calling you to now give you another payment. The client calls me asking if they should take this new vehicle they’re offering? I say, “Is there anything wrong with your current truck?” They say, “No, it works great.” And I say, “Run it into the ground!” I always encourage them and applaud them for calling because they need that encouragement to make sure they continue to do it in the future. You know that if somebody is calling and starting off with, “Well, I’m not asking for permission, but…” they don’t have the right psychology around engaging you and you want to encourage them and say, “It’s so awesome that you called me. Not enough people do. Now I can give you this advice,” and they can kind of run with it. Clients taking more opportunities to be proactive rather than reactive is the same opportunities I think advisers can often have as well. 

 

Tom: I like that a lot because if they’re calling—they may be feeling awkward about even making the call, but they obviously have some kind of doubts and just need someone to bounce something off of, even if it’s relatively obvious. If you just paid off your loan because you’re trying to buy a house, getting another one, obviously isn’t a great decision.  

 

Sheldon: But those things don’t occur to people. Those things don’t occur to people. Like I told you before we started the podcast, the average financial literacy score for North American countries and the G20 countries is 48 percent out of 100 so we’re not equipped. A lot of do-it-yourselfers think they understand a lot more about products. But that’s why people are specialized. That’s why there are certifications. There’s just too much that can be missed within the financial world, especially when things are getting more and more complex all the time because institutions want to make more money. You need both planners and advisors that are going to give you some of those insights into the fine print, at least again, until technology starts to indulge in that a bit more for us. 

 

Tom: I like what you said earlier, too, about getting a personal referral from someone and then interviewing. Personal referrals are great but I have seen some cases where you’re asking me who’s good, but I really only have the experience with one person. Take this real estate agent because they’re the ones I used. But it’s not like they’ve used multiple real estate agents. Or picking a financial advisor because they’re a friend of yours. It can be a bad decision. You’ve just got to see if that person will match. Just because someone you know, happens to be using that person doesn’t mean they did any research. 

 

Sheldon: So that’s a great point. Ask the person you’re asking for the recommendation, why are you recommending that? They could just be recommending them because they’re their cousin and they want their cousin to be able to build their book of business. Or they might just be referring them because they’re a good fit for them. But advisors operate very differently. I know advisors across the country that will curse left and right during a meeting and are just very direct. And there are others who are more kind. There’s all kinds of different approaches. It’s not just about finding a “good” one because good is not an objective kind of “absolute” statement you can make about many things. It’s what’s good for you. What specialization do they have? Are you self-employed? You have a U.S. income? What’s their style of communication? How often are they checking in? Are they more hands off or hands on? You really want to understand the profile of somebody that would be a good fit for you based on good advice and the types of conversations we’re having now, hopefully. You want them to be competent in what they do, and to know they are a good fit for you. I come from a fishing village where, when I go on the fishing boat with one of my uncles, it’s not the way a lot of people would want to be spoken to. I’ve grew up hearing, “Go grab this f’ing rope and put it on this…” They’re not using delicate language. It’s just very, very direct. And because I grew up that way, I’m okay with that but a lot of people wouldn’t be. There’s a lot of different nuances to choosing someone. I think the point you made is a good one. Make sure you’re not just taking the referral at face value. Probe a little bit deeper. Even if it’s someone that’s referring it to you is someone you trust a lot, like your brother or your mother. They still may not know what a great experience should look like. 

 

Tom: Yeah, exactly. Nobody’s going to “not” answer you. They’re just going to tell you the one name they know. And that’s not necessarily the full picture. I definitely like the idea of interviewing them and trying to avoid those issues before they crop up—before you get this team together where everyone’s supposed to be collaborating and you find out that the whole center of that team isn’t going to work for you. 

 

Sheldon: That’s a good point you made, too. Usually the quarterback, the champion, is the financial planner or financial advisor. They can come on the investment and insurance side too. Let’s be clear, there is a difference between insurance advisors, investment advisors and financial planners, which is a whole different certification. You’d be surprised how much you can ask somebody for a referral and the best thing they have to say about them is, “Well, I haven’t had a bad experience with them.” That’s really not what the goal should be. Just imagine if you’re getting married and the vows that somebody is reading to you is, “Well, you meet what I’m willing to take as a minimum. I haven’t had any bad experiences with you yet, so you might work out, all right.” That’s not the way. 

 

Tom: Thanks for giving us some ideas on how to piece this together and make all these separate forms of advice fit together better. Can you tell people about Pocket Finance and let people know where they can find you online? 

 

Sheldon: So Pocket Finance is going to be launching on April 1st. They will be able to download it from the App Store. You can go to pocketfinance.com and check it out. It’s going to allow consumers to aggregate all of their banking data into one place and be able to brilliantly navigate finance. We will highlight key components of fine prints so you’ll be smarter than your banker. And, if you don’t have a financial adviser, it allows you to get some financial guidance through some of these great notifications like that one I mentioned with the woman that had the high balance on the credit card. And if you do have financial advisers, you’re able to collaborate with them much more intelligently. It’s really a great tool for financial advisers to be able to deepen their engagement with clients, both on quality of communication frequency and the quality of the information exchanged and the quickness of that exchange of information. I really appreciate you having me on. I think the need for financial services has greatly increased and it’s going to continue to greatly increase over the next decade with this many trillions of dollars greatest wealth transfer in history. I’m glad to be on your podcast and I appreciate you taking the moment. 

 

Thank you, Sheldon, for explaining the problems with one sided financial advice and why a collaborative approach is better. You can find the show notes for this episode at maplemoney.com/187. If you have a moment, head over to our YouTube channel and subscribe there as we’ll be getting back to releasing never-before-seen content soon. You can search for Maple Money or go to maplemoney.com/youtube and subscribe today. I look forward to seeing back here next week when Michelle Arpin Begina

joins us to discuss why talking about money is easy once you know how. See you next week.