Do you ever feel overwhelmed by choices you have when it come to managing your investments in addition to the multitudes of financial advisers vying for attention? There are dozens of online brokers and robo-advisers. No wonder it’s hard to know what to do with your portfolio. Thankfully, my guest this week is here to help sort things out. Jim Yih is the founder of retirehappy.ca, best selling author and financial speaker on wealth, retirement and personal finance. Jim takes us through a history of financial advice in Canada and explains where things stand today. By the end of the episode, you should have more confidence about where and how to invest your money.

 

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. This episode of the Maple Money Show is brought to you by Willful. Do you know that 57 percent of Canadian adults don’t have a will? Willful has made it more affordable, convenient and easy for Canadians to create a legal will and power of attorney documents online from the comfort of home. In less than 20 minutes, and for a fraction of the price of visiting a lawyer, you can gain peace of mind knowing you’ve put a plan in place to protect your children, pets and loved ones in the event of an emergency. Get started for free at maplemoney.com/willful and use promo code Maple Money to save 15 percent. Now, let’s chat with Jim…

 

Tom: Hi, Jim, welcome to the Maple Money Show. 

 

Jim: Hey, Tom. Good to see you, buddy. 

 

Tom: It’s great to have you on. For those that don’t know, Jim and I have been working together since 2010. I had started blog in 2009 so you’ve really been with me through most of this journey. 

 

Jim: It’s been fun ride. 

 

Tom: It’s great that we finally connected to get you on the podcast. The reason I wanted to have you on is, one of the topics I found interesting was your ideas on financial advisers and who might need them, who might not. If we can just start with the basics, can you explain what a financial advisor is and what service they provide? 

 

Jim: I came into the business in 1991 so we’ve seen a lot of changes in 30 years in terms of how you can get advice, where you can get advice. Man, has it ever changed. But I think the traditional financial advisor—and I know a lot of them won’t like this, but there’s a lot that are sort of glorified product salespeople, right? They sell a product and earn an income. And although there are good advisors and bad advisors, there are good salespeople and bad salespeople. The majority of advisors derive an income by selling some form of products. Whether it’s life insurance or mutual funds or other investment products, other insurance products. I would say the overwhelming majority are those kinds of people. Some work on commissions, some work on salary. If you go to a bank sometimes you’ll get advisers who don’t earn a commission, but they get paid by the financial institution they work for and will often have some biased recommendations based on who they work for. For the longest time, that was kind of where you went. Early on, you went to an insurance agent to buy insurance and you went to a bank to buy GICs and you went to a stockbroker to get stocks. But now it’s really blended. Everyone does everything. An insurance guy will do money and stockbrokers will do insurance so that part of it has really evolved and changed over the years. And, over the years there’s been a lot of concern or negativity towards the idea of people selling products for commission and maybe charging to higher fees. So the natural evolution was something I call “fee-based” advisors, where they would often manage a portfolio, but their fee would be a percentage of the portfolio. Maybe one percent or half a percent, something like that. It became more transparent, which I think was a very good thing. People started to understand the importance of fees and how they’re charged and started asking questions. A lot of advisors were really good about making that shift to disclosure and making sure clients knew that they didn’t work for free but helped them understand how they got paid. There’s probably a growing camp now where, instead of fee-based advisors, I call them “fee-only” advisors. They basically charge an hourly rate or a flat rate for advice. They don’t generally sell products. Although there are some fee advisors who do sell product as well. They will sometimes do one or the other. There is some fee-only advisers that don’t sell any products and all they do is they charge a fee for plans or an hourly rate for information or advice. So it’s evolved quite a bit. And the good thing is there’s more choice. The bad thing is there’s more choice. It’s become somewhat confusing for people sometimes. But I think choice is a good thing. There are lots of people looking for different ways to get advice. And there’s some people that don’t want to pay a fee, they just want to an RRSP or just want to open up a TFSA and that’s okay, too. I know sometimes the media and the Internet criticizes financial institutions for charging fees. And they may be higher fees but it’s also part of business.  

 

Tom: I think one of the things just being online is there’s already this inherent bias towards do-it-yourself and save that fee. When you’re an adviser and charging a commission—maybe it’s just because of where you work, I understand that there’s a potential bias there where if one thing gives a higher commission than another thing, it gets hard not to recommend it. But I assume we don’t paint all advisers with that brush. Some of them, no matter how they get paid, may actually still have the client’s interest in mind. 

 

Jim: It’s easy to point fingers at advisors and how much they get paid but at the end of the day I do believe they deserve to get paid. We’ll always question how much and the potential conflict of interest that may exist there. Are they making valid recommendations based on the validity of the investment? Or are they biased by compensation in some way, shape or form? I think you have to hope for the good. There are always bad apples out there. There’s no question about it. But there’s bad apples in every industry. There’s bad doctors, there’s bad lawyers, there’s bad politicians. That being said, there’s a lot of good advisers out there. And there are a lot of advisers I know that are good, honest, ethical people who try to do the right thing. But you bring up a valid point. There’s always that question when you’re selling product and is there a conflict of interest? 

 

Tom: I personally think it’s good to have that concern. But to just look at everything fairly, you can say, “I’m not going to pay this person a fee. I’m going to go get my information online,” if free information still has ways to make money. There’s ads, there’s commissions and recommendations. Even if you’re saying, “I’m not going to pay this fee. I’m just going to get my information for free,” you still have to be critical about what you’re looking at. 

 

Jim: You’re absolutely right. The Internet is full of ethical, honest advice and it’s also full of shady information and people who use information to take advantage of innocent people. I couldn’t agree with you more. It’s easier now to invest yourself than ever before. When I first came into the business, I had access to more information than the average person. And now everyone’s on a level playing ground. The Internet has opened it up and we all have access to the information. The challenge is the filter. How do you filter to the right information? How do you filter out the bad information? I think about it like I was building a deck. I’m pretty handy. And anybody can build a deck themselves. You can Google building a deck, watch a YouTube video or go to Home Depot, buy a package, have it delivered and, boom, you’re ready to go. But it doesn’t mean you’re going to build a good deck. It doesn’t mean you’re not going to make mistakes. And it doesn’t mean you’re going to do better than a contractor or somebody who knows what they’re doing. Now, that said, we all know about professionals who do crappy jobs building decks, too. So no matter how you go, you always have to be careful saving money. Remember the old adage, sometimes you get what you pay for. Even when you spend money, sometimes you don’t get what you thought you were paying for. Investing is the same way. 

 

Tom: I like that analogy because, in my case, if I were to build a deck, I would pay for it. Because there’s two things I’m short on—that’s time and skill. To me the money would outweigh both of those. 

 

Jim: And that’s perfect, because that’s what I always say, can you do it yourself? Can you invest money yourself? Can you be your own financial adviser? The simple answer is yes, absolutely you can. But I challenge people to answer a few key questions like, do you have the time? The time to learn, the time to research, the time to read, and the time to engage? Do you have desire? You can have time but I know lots of people who have no desire to try and do this on their own. They would much rather pay somebody else to do it. And another question is, do you have confidence in yourself? You could have time. You could have desire, but then you lack the confidence. And essentially, I kind of think you need all three to be able to take that step to do it yourself. I always tell people it’s okay because you watch the trade advertisements or the Wealthsimple advertisements where they all preach, do it yourself, do it yourself. And you can do it yourself but do you want to? Can you? So, I think that’s really important. 

 

Tom: When I first got interested in a proper portfolio with ETFs, I had all three of those things. And nowadays I do have less time and I kind of have less desire. I don’t have the same excitement about rebalancing my portfolio that I used to have. I had the spreadsheet and it was great. I could figure out exactly which ETF I had to buy more of to rebalance. And now, I just look at it like a chore. I’m still doing it but when I look at newer options out there, there’s all-in-one ETFs or robo advisor, they’re starting to look more attractive to me because it saves me from those two issues. I don’t have enough time and I’m starting to have a waning desire to do things like rebalancing. 

 

Jim: You know what? I think there are a ton of do-it-yourselfers who are thinking exactly the way you’re thinking. Looking at the world of options that are out there today, you can still do it yourself and still save a lot of money but you don’t have to do all the work—all the heavy lifting. Truthfully, I’m not far off of that. The bulk of my portfolio are all these all-in-one ETFs. I’ve now structured my wife’s portfolios into these robo-advisor type of options where it’s super simple. We do a lot of work in the group, Retirement World and promote things like target date funds and asset allocation funds for that same reason. If you’re a hands-off investor and you would rather read a fiction book or watch a movie than read an investment site, then that’s the purpose of these types of investments. And they’re good. They’re really great options. 

 

Tom: If someone’s listening to this and they haven’t taken the DIY plunge yet, you mentioned these three core things they need. But how do they find that in themselves? When it comes to something like knowledge or confidence, people may be misjudging. They may think they’re more confident than they are. Or think they’re more knowledgeable than they are. How do they “read” that and make a real assessment? 

 

Jim: You know what I say, Tom, is to just take baby steps. If you’re the type of person that is wanting to take that plunge and do it yourself, just take a little bit of your portfolio and try it. Let’s just pretend you have (and I’m making this up) $100,000 saved up. That doesn’t mean you have to put the whole $100,000 in and manage the entire $100,000 right? You might have $20,000 in a TFSA, $70,000 in an RSP and $10,000 just sort of sitting around in non-registered. Well, you might say, “Okay, I’m going to take my TFSA (the $20,000) and open up a trading account at Questrade or one of the banks. Then take that $20,000 and say, “Okay, I’m going to buy some stocks or ETFs and then just kind of leave the rest where it is. Also, the good thing about that is it gives you some means to compare how you’re doing compared to how maybe an advisor might be doing it. So if you don’t quite have the full confidence, just the baby steps might be a natural progression to that. I’ve met lots of people who have $100,000 and they’re all-in, both feet, head first. That’s okay too. There’s nothing wrong with that. It’s their money. But if you have that hesitation, just take a baby step. It’s okay. 

 

Tom: If someone wants to make a change like this, it’s relatively easy to move to a different account, right? I believe the companies are more than happy to help you out with that. 

 

Jim: Oh, my goodness, yeah. I’ll use the example of Wealthsimple. Wealthsimple is probably the most successful robo-advisor in Canada. They’ve done an incredible job. And what they’ve really done well is made it simple. Their name is very much in-line with what they’re doing for people. They are making it so simple. If you want to start with $50 month, they can do that. If you want to start with a lump sum of $10,000 and that’s all you want to do, they can help you with that. If you have money at the bank in an RSP and a TFSA and you want to transfer over, they can help you with that too. So robo-advisors—and I’ll just use the name Wealthsimple because it’s probably the most well-known and recognizable and it’s a natural step towards moving away from that advisor-type of mentality and getting lower fees. Sometimes I call robo-advisors advice on demand, service on demand. You still have access to people. You still have access to some support. You just don’t have the same relationship with one person. And if you call Wealthsimple—it may be a 1-800 line, you still get a real person. You don’t get a robot. You still get help and support. There are still real people behind those machines. 

 

Tom: That’s something I actually forget quite often—that you can actually call someone with this so-called robo advisors. There is advice there. And I assume it’s still the same but early on they would answer basically any question. It didn’t have to be specifically about my portfolio. They answer pretty much any question you have.  

 

Jim: I mean, to me, the term robo-advisor is a financial institution that’s got a leverage on technology. But that doesn’t mean you can’t speak to real people. They’re going to use the Internet to make it easy. They’re going to use onboarding technology to help you on board. They’re going to use those chat lines or different ways to communicate, not just face-to-face or phone. You’ll have multiple ways to communicate, whether it’s email, social media or different things. It makes sense in today’s world. I think that’s why robo-advisors are gaining in popularity. 

 

Tom: If someone’s looking to make these changes, one caution I would add is, don’t pull your money out of your RSP. You do have to go through a transfer process or else you lose that contribution room. And I’ve heard with a lot of some of these group RESPs that there are a lot of nasty fees if you pull out early. Is there anything like that with a financial advisor? Are certain contracts or anything where there might be fees just to get out if you wanted to move to something else? 

 

Jim: Yeah, for sure. Anytime you’re changing institutions, it’s really important to ask the question about fees. In the mutual fund world, backend loads are horrible. The good news is, the whole mutual fund industry is moving away from it, which is a very good thing. But I still run into contracts where people are still invested in these backend loads or DFC fees and it’s just robbery. It’s not nice. So yeah, investors need to be aware of what fees and costs are if they do make these changes. And even if there are these costs, it doesn’t mean you shouldn’t make the changes. You just need to be aware. And sometimes you should get some help from somebody about doing a cost analysis and saying, “Okay, if I get charged $1,000 but I’m lowering fees by 40 percent, how long will it take to mathematically recoup some of those losses?” Your breakeven point might be a year and a half and that may be reasonable. But, if your breakeven point was eight years, you might say, “Okay, that’s not really worth it.” It would be sad if somebody got locked in for that long but it’s important to do that analysis. So, with RESPs, you have to be careful about those. They call them pooled or group are RESPs. Those are also full of fees and full of small print. And again, pretty unfortunate from my perspective. 

 

Tom: I know you dabble in different accounts for different uses. Just on a high level, can you explain how you use different options for different things? I think your own personal situation is a good example for people on how they might want to try different things. Maybe they don’t need to go all under one brand. 

 

Jim: Yeah, absolutely. I try and diversify my accounts. For example, my whole RSP account is with Questrade. I don’t want an RSP account with Questrade and then another one with the bank and another one here and there. I want all my RPSs together in one account so I use Questrade. Questrade is designed for the do-it-yourselfers primarily. I would say that 50 to 70 percent of my RSP is in these All-In-One ETFs. Without going into a lot of conversation, they’re just designed to be simple and easy. They do all the rebalancing. I don’t have to micromanage it. The other 30 percent of my RSPs… I’ll use the word babble but it’s not really dabbling. For example, I’ll invest in a little bit of small caps when I think maybe they have value. I’ve owned gold with that 30 percent. I have owned Bitcoin with some of that 30 percent and some Emerging Markets. I might dabble in a few things outside of what I’ll call those “core” holdings. My RESPs are all with, Just Wealth, which is a robo-advisor. And the reason for that is,  Just Wealth has created an investment option (kind of like target date funds) that are geared towards when the child is turning 18 and going to school. The portfolio naturally gets more conservative as they get closer to that period of withdrawal. I really like that idea. I don’t have to micromanage Just Wealth. They’ve done great in terms of returns. I’m very happy with them. Tom, you and I were just talking about my oldest son who is turning 18 and going to post-secondary school, so I’ll be doing my first withdrawal out of the RESP as opposed to just putting the money in. My wife’s accounts—she’s not investment savvy. She obviously trusts me to make some of those decisions for her. I try and keep her informed, but we have most of her stuff with Wealthsimple. And the idea there is, I could manage it in Questrade just like I do my own but I always think, what if I pass away? What if something happens to me? If I have her stuff in Wealthsimple and something happens to me, it really just continues. And it’s really better suited for somebody like my wife, who is very hands-off and not as literate in investments. I felt like Wealthsimple was a really good place for her. She and I had the discussion. I talked to her about doing a Questrade option for her versus a Wealthsimple. And in the end, I think we both agreed that Wealthsimple was a better way to go. My TFSAs are also at Questrade. Her TFSAs, taxes, RSPs, they’re primarily with Wealthsimple. She also has a group plan and we just have that in sort of a balanced, asset allocation fund. Thankfully, it’s a good plan with lower fees, but it’s essentially a mutual fund that is lower fees because it’s part of a group environment. I just keep different accounts separate. As much as I like Questrade, I think Wealthsimple makes sense for some people. There’s also a lot of alternatives. You could go to the bank and open up an RBC Direct account. You and I were talking too about Qtrade and other discount-type brokers. For a long time, my money was in mutual funds, paying two, two and a half percent MERs and as the ETF industry evolved and the robo-advisor options evolved, it made it easier to transition into some of these other things. 

 

Tom: Yeah, I think I need to at least transfer into the All-In-One ETFs so I can quit the rebalancing part. 

 

Jim: I love it. I really do. I use Xbal, which is the iShares balancer. I use VGRO, which is Vanguard growth. I have some also in the Vanguard conservative VCNS and it’s just makes life really easy. I’ve been in those for quite a while now so I’ve been able to see if a more conservative option really is more conservative. And it is. Is the equity option, the growth option more growth oriented? Does it have more ups and downs? 

the answer is, yes. They really are living up to expectation. 

 

Tom: On the Maple Money blog, we’ve covered a lot of what broker would be best for a different person, what robo-advisor would be best for a different person because they are so different. I’ll make sure we link those in the show notes because there are so many different situations, and I love how you’ve broken it down for those different situations, even in your own family. Thanks for coming on and explaining all of this. Can you let people know where they can find you online? 

 

Jim: Yeah, retirehappy.ca. You talked about our relationship being over 10 years old, Tom. I’ve been blogging before blogging was a word. There is so much information on retirehappy.ca. I’m really proud of that site and where it’s come. So, if you need information on retirement, investing, personal finance, there’s something for everyone. 

 

Tom: Great, thanks for being on the show. 

 

Jim: Thanks, Tom. Thanks for having me. 

 

Thank you, Jim, for going through the various do-it-yourself investment options while reminding us that financial advisers still offer a lot of value. You can find the show notes for this episode at maplemoney.com/158. I want to take a moment to let you know about all the materials over on Jim’s site. He has a manual financial checkup, model portfolios, retirement income charts as well as check-lists to review your portfolio, retirement, and what you need to know an executor. Head over to retirehappy.ca/subscribe and join for free. Thanks, as always, for listening. I really appreciate the community we’re building both on the Facebook group and the personal messages and reviews I’ve received. I look forward to seeing you back here next week.