The Wealthy Barber Podcast - #50 — Ben Felix (Returns): Investing Insights and Rapid-Fire Q&A

Episode Date: March 31, 2026

Our guest this episode is Ben Felix — Chief Investment Officer at PWL Capital, co-host of the Rational Reminder podcast and creator of one of the most respected investing YouTube channels, @BenFelixCSI. Ben is a returning guest from Episode #5, one of our most popular episodes to date. In this episode, Dave and Ben go through a rapid-fire Q&A on some of the most important (and misunderstood) topics in investing. They cover everything from the biggest mistakes investors make to the difference between investing and gambling to why professional investors struggle to beat the market and common misconceptions about dividends. Ben and Dave also break down the flaws with covered call funds, market timing, and touch on other topics like annuities, crypto, homeownership, life insurance and all-in-one ETFs. If you want clear, evidence-based answers to your biggest investing questions this is an episode you won’t want to miss. Tune in now on our website, YouTube, Apple Podcasts, Spotify and all other podcasting platforms!   Show Notes (00:00) Intro & Disclaimer (00:55) Intro to Ben Felix (04:22) A Huge Investor Mistake: Not Owning Enough Equities  (06:04) The Difference Between Investing and Gambling (07:33) Increasing Your Income is One of the Best Things You Can Do for Your Personal Finances (08:55) Dave and Ben’s Advice: Don’t Trade Options (09:40) Why Professional Investors Struggle to Beat the Market (13:40) Misunderstandings About Dividends (16:11) Why Covered Call Funds Underperform Over the Long Run (20:17) Even Experts Can’t Effectively Time the Market (23:18) High Valuations and Expected Returns (25:12) Behavioural Traps: Overconfidence and Pessimism (27:31) The Role of Annuities in Retirement Planning (32:03) Crypto and Prediction Markets (35:21) Renting vs. Owning a Home (38:56) The True Maintenance Costs of Home Ownership and “While We’re At It” (40:46) Is Life Insurance a Good Investment Product? (45:03) How Often Should You Check Your Portfolio? (46:30) The Benefits of All-in-One Asset Allocation ETFs (48:12) The Behaviour Gap in Investing (48:53) The Positive Evolution of the Financial Advice Industry (54:15) Conclusion

Hey, it's Dave Chilton, the wealthy barber and former Dragon on Dragon's Dent. Welcome to the Wealthy Barber podcast. Well, we'll be hosting some of the top minds in the world of personal finance. Yes, that's to balance me out. The podcast is about making this subject not just easy to understand, but dare I say, even fun, honest. Whether you're trying to fund your retirement, figure out how to build a down payment, save for your kids' education, manage debts, whatever, will be here to help you.

You do it. Before we jump in, a quick but important note, nothing we discuss here should be taken as investment advice. We don't know you and your personal financial situation. So we're not here to tell you we're specifically to put your investment dollars. We're here to educate, get you thinking, and we hope entertain. But please do your own research and or consult with your financial advisor before taking any action. Hey, it's Dave Chilton, the wealthy barber with the wealthy barber podcast. And wow, what an episode we have. It's our 15. episode and we brought back one of our most popular guests, Ben Felix, the CIO at PWL Capital. I'm going to give Ben quite the introduction. He is one of my heroes in this industry. He's a person I look

up to literally and figuratively. He is 6-11 or something crazy like that. But he is a giant in our industry, financial education. He commands respect on both sides of the borders. I watch everything he puts out. He's extremely, extremely smart. He's a great communicator, takes the research end of things more seriously than anybody I know. I think one of the skills he has, many skills, is he covers off the nuances of things. So when he's teaching something, he's very good at, yes, but, or here's an exception, that type of thing. And that's not easy to do, by the way. You have to really understand the material to do that effectively. He has helped so, many people out there. A lot of you have watched the Rational Reminder podcast. I would argue the best investment

podcast on either side of the border. It's that good. They get top guests on. Again, Ben's knowledge shines through. Go check him out on YouTube. You will benefit so much from watching his videos. He's also an extremely nice guy. So there's a lot of positives, immense pressure on you after that intro. I wouldn't even want an intro that big. Can you imagine if you suck on this show? Like, it's going to kill at people. Yeah, that was quite the introduction. Thank you very much, Dave.

But I meant every word. I mean, you are a person I just have incredible respect for. I love watching your material. You and I are aligned on literally everything. You never say anything that I disagree with, ever. Like, you really don't. I mean, I think you're just so good at all of this. Your memory for the material you cite is crazy.

Like, often we're. talking and you'll say there's a study and you'll quote it off the top of your head. Like, do you have it in your photographic memory? I don't think so. I'm okay at remembering stuff. Yeah, I don't know. I think once you've read a paper in some amount of detail, it does kind of stick with you. So there's an amount of recall there just from spending a lot of time with stuff. But no, I don't have a, photographic memory or near one. My father had a photographic memory. And what was really interesting was when he was in his 50s, he could talk to you about books that he had studied in university and where on the page certain things he had read were.

Now, how I can verify it, no, but he was just incredibly adept to doing that and a very sharp guy knew nothing about money, but was very good at languages, geography. He's still alive, by the way. I'm not sure why I'm using past tense. I'm writing this guy off. He's still actually fairly sharp. Now, today we're going to do something we haven't done in our podcast before. Our podcast is always free flowing.

I just, you know, throw out some questions and chat back and forth with the guest. But today, being able to access your expertise, I wanted to put together questions ahead of time and run through them kind of almost in a rapid fire way. You'll have three, four minutes. Sometimes you'll take a little less, sometimes a little bit more. Things that I knew our audience would benefit from you taking a look at. So the pressure's on. Are you ready? I'm ready.

And just so the audience knows, I typically prepare a lot in advance for my podcast. So doing this kind of off the cuff, not knowing the questions you're going to ask is unique for me too. Okay, well, here's one to start. You produced a video a while ago, 10 mistakes that investors off to make. Can you give us a look at two that jump out of you? Not taking enough risk. I think that's something that really affects a lot of people. And there's lots of evidence that people don't invest enough in stocks, which have high expected returns. They either don't invest at all, or they hold too much cash. They hold too much in bonds. And the long term cost of not taking enough of the right kinds of risk is substantial. And you see that just by looking at the difference in

historical and expected future returns between stocks and bonds or stocks and cash. And you compound that over somebody's lifetime, assuming that they're investing some portion of their income over time, not taking the risk of owning equities implies just a massive cost in the amount of wealth that you can expect to accumulate. So I think that's a big one. And it's one that's really easy not to frame as a mistake or see as a mistake and definitely to feel as a mistake because you don't even realize that you're doing it. And in many cases, people believe that taking the risk of investing in stocks is the wrong kind of risk. But yeah, that's one of my favorites from that from that video is I see that a lot in TFSAs. I see a lot of people get the money into the TFSA and then not invest

a period, just essentially leave it in the savings account. I think sometimes because they know they can access the money as an emergency money or trip money or whatever. they tend to leave it there. And again, the foregone returns are huge. Yeah, there's probably something to do with the account, too, or because it's called a savings account. It should be called the tax-free investment account or something like that. The research used to say that's one of the problems in finance that females are more guilty of than males, that males in many cases, young males take almost too much risk on, as we see with the meme stocks and crypto, et cetera, but a lot of females tend to be more risk-versed and tend to not embrace stocks when they're relatively young. Does the research still

say that? I'm not familiar with super up-to-date research on that, but I'm definitely familiar with the research that you were talking about. But I think this also touches on one of the other mistakes that I had listed in that video, which was taking the wrong kinds of risk. So we agreed taking risk in equities is a good thing. But that implies taking risk in a diversified portfolio of stocks. But people will often take the risk of betting on an individual stock or the risk of trading options to try and generate high returns or investing in a specific sector that they think is going to do well. And those are all risks that are a lot more like gambling than like investing. Investing has a long-term expected return. You expect a positive outcome for owning whatever

diversified investment over a long period of time. Gambling is kind of the opposite where you can get lucky in the short term, but the longer that you gamble, the more likely that you are to lose, which is the opposite investing where the longer you invest, the more likely you are to come out ahead. So I think that, and there is definitely evidence supporting this as well, that young men, young single men are much more likely to engage in that type of gambling, where they're much more likely to make themselves worse off rather than better, especially in the long run. So that that's another big mistake. And I'd be interested in your thoughts on this one. The first mistake I talked about in that video, which got some pushback online and I knew it would. I said it would be controversial when I set it up. It is not earning enough money. I think that's something that really gets underappreciated. where if you really lean into your education, your skills, starting a business, all that kind of stuff, increasing your income is one of the best things that you can do for your personal finances. Anyway, so I said that in the video, but I did get quite a bit of pushback online. So I'd be curious in your thoughts on that topic.

No, I'm with you. In fact, you know, you read the updated version of the wealthy barber and Roy Miller hit that twice in the book and said that's something that in the world of personal finance does not get enough attention, the top line. It's all about how do you save from what you make, but what about making more. I am seeing a fair number of young people, by the way, start to take on side hustles that are truly making a difference. I'm not talking about starting a new business that's making 5 and 10 and 15,000 a month. I'm talking about doing something here and there that's adding

500 to 1,500 a month. I'm seeing more of that. And I love that stuff. And I said in the book, a lot of them end up really enjoying it. It becomes almost a profitable hobby. But I'm surprised you took pushback. I'm sure some people said, hey, it's tough enough to make what I'm making. I've got young kids at home, I don't have the time to take on extra employment, all justified arguments. But your basic thought's pretty hard to argue with. I think so. I think so. Yeah, no, I think that's a good. Now, going back to trading options before we move on to question number two, my summary of trading options is trading options is really stupid. Do you have anything you want to add to that? No, I completely agree with that. And there's a ton of evidence that retail investors who engage in

option trading are much more likely to really hurt themselves financially than come out ahead. It's one of the worst things that you can do as an investor, which I think is really problematic because a lot of the DIY investing platforms, they facilitate this type of trading, but they don't just facilitate it. They promote it as a sensible thing to do. And that really, that really bugs me. No, I mean, they're making good money from it, obviously, but it's horrible for the consumer. And they're blowing out a lot of their consumers, by the way. They're going to have to find fresh money all the time because so many people are losing. Okay, we talk a lot about index fund investing, versus active management, why is it so hard for a very smart, well-trained, professional

experienced people to outperform the stock market? So there's a couple of things. A big one is what's known in finance as the paradox of skill, where I agree with what you said. The people managing actively managed portfolios are some of the smartest people on the planet. I mean, sometimes you hear about the brain drain into finance where finance gets all the smartest people while adding questionable value to society, which is a whole, that's a whole other interesting topic. But you do have these absolutely brilliant people who are doing their best, their absolute best with teams of smart people and with AI and whatever tools they can buy with all the money

they have from their relatively high fees. They're all competing to generate outperformance, but they're all competing with each other. And the more you have really smart people competing for an edge, the more the outcome of their competition is going to be determined by luck rather than skill. I agree. If you had one really skilled manager and everyone else was stupid, that one manager would make a killing. But the reality is there are tons of very, very smart, very competent people all

trying to do the same thing. And that's why we see the randomness that we see in actively managed fund performance and the lack of persistence. The best managers can do well for a period of time, but they don't tend to continue outperforming after that initial period. And again, that just comes back to randomness. The other issues that there's a ton of skewery. in stock returns, which just means that a huge portion of the market's overall return comes

from a relatively small subset of stocks. So if you're an actively manager trying to pick a subset of stocks that you think is going to outperform the market, so say there are whatever, say there are 10,000 stocks that exist in the world and you're an active manager, so you're going to pick the 50 or 100 that you think are going to outperform, your chances of missing the big winners that drive most of the market's return are quite large. And so this shows up as skewness in actively managed fund performance where there are a relatively small number of funds that do perform exceptionally well over a period of time. Now, persistence is the next issue. So though that small subset that does outperform, they don't tend to go on to continue outperforming,

but most actively managed funds underperform because they miss those big winners, or at least in part because they miss those big winners. So there's other, I mean, fees is another reason too. So actively managed funds charge higher fees, which shifts the whole distribution of outcomes to be a little bit less favorable. But I would say that why does smart managers underperform is really those two, those two things. Paradox of skill, skewness and returns, and they're handicapped by fees. You and I are two of the only people who really talk about the skewness issue. Like when you listen to other people interview, people much smarter than I am, they don't tend to bring that up, but I actually think it's a huge factor in all of this. And then the research says that even among

the group who happens to be in those stocks that intend to influence the market, they don't stick with them long enough and take the full ride in many cases. So they get out of them at some point, understandably. They put up big numbers. Have you seen some of that research? And do you think that also plays a role? Oh, for sure. That's part of it. That's part of it without question. And the fees, of course, you and I talk the first time you're on about 2% may not sound like much to most people. We still think of percent back to our high school grades. But when you think of 2% of a potential return of 8 to 10, and then suddenly it's 25, 20% of the projected return overcoming that up against all the other things you just described,

boy, is it ever difficult to do? So for our audience, what percentage of actively managed funds over, let's say, a 10 to 15 year period tend to be able to overcome all of that and outperform the broad market averages? It depends on the data that you're looking at. In Canada, the best source we have is the SPIVA data, which there can be some issues with it, but you're looking at it's 5 to 10% in a good, in a good period. It's a very small proportion of funds that are going to outperform. And to your point, it's not the same 5 to 10% necessarily over the next 10 years, which makes it trickier still.

All right. Question number three, a lot of DIY investors in Canada love dividend paying stocks. In fact, they've made that the backbone of their portfolios. Now, for a number of years, that really paid off because you had a declining interest rate environment and many of those types of companies outperformed. What is the basic misunderstanding that you see when you speak to? a lot of these investors about what dividends represent? There are a ton of biases at play for why investors really like dividends. I think if I were to say the biggest problem in conceptualizing what dividends are

and what they mean to investment returns is that dividends are themselves investment returns. If you receive a 5% dividend from a stock, that 5% dividend is not an investment return. The reason is very simple. It is because the capital of the stock that you own has decreased by 5%. So you received a 5% cash payment. The value of your stock has decreased by 5%. Now, this is where it gets really tricky because I just said the value of your stock has decreased by 5%. The price on the day that you receive the dividend might not actually drop by 5%.

Because there's a whole bunch of other stuff happening that's going to affect the price of the stock. But that idea of dividends being free money and being an investment return, I think is one of the biggest sort of cognitive shortcomings that leads people to believe that dividend investing is good. I think we see something very similar with covered calls where it's perceived that those income distributions are free money or safe investment returns, which is just not the case at all. So that's one piece of it. And then the other thing that gets really confusing is that dividend paying stocks do often load on characteristics that may over some periods of time lead to outperformance.

So if you take a portfolio of dividend paying stocks, it's probably going to be a value portfolio. So stocks with low relative prices, there's a good chance it's going to load on profit. just meaning that the underlying companies are profitable, which is why they're paying consistent dividends. And so factors like that, they can lead to outperformance and there's evidence supporting that. So if you take a dividend portfolio, it might load on actual evidence-based factors that can describe outperformance. There would be better ways other than focusing on dividends to build that factor tilted portfolio. But the reality is a dividend-focused portfolio that loads on value and profitability and maybe some other academically supported factors, it's not the worst portfolio. I agree. I agree totally. In fact, I'll go a step further. I find a lot of the people who go that route, because they are getting the income, they're less inclined to panic during a market downturn. And that has to be factored into the equation as well. So, no, I think that answer was really good. You know, covered call funds, I have said for 20 years are stupid. Like, I'm always surprised that so many pretty smart people get sucked into covered call funds. It's a little past most of our audience members, but can you just give me a quick description of what they are?

why you share my opinion? Yeah, so basically it's a fund that owns stocks and then sells call options on the underlying stocks that it owns. Selling those call options generates income, which is then distributed to shareholders or to unit holders of the fund. And those income distributions,

because of the options selling, tend to be very high. You can see some funds distributing 10% of the asset value as distributions, which feels really good if you're an investor, but the problem is that selling the call option caps the upside performance of the stock. And because stock returns tend to be positive and stocks often have big opt days that explain a huge portion of their overall returns, by capping that, by missing out on that upside, particularly after periods of market volatility, you really, you really take a big chunk out of your expected return from owning that stock.

What frustrates me about this is that you take some pushback when you make that point. Like when you've done videos about it, you always get hit a little bit. But what bothers me is this can be proven. But you can actually go back and look at if you just own the underlying securities versus if you were writing the calls against them in a fun format, which is outperformed over rolling five and 10 and 15 year periods. And the data totally supports your argument. So I did this multiple ways. I did three videos on this last year. It was a topic that people kept asking me to cover.

And I never thought it was that sort of interesting. But I decided to dig into it and write a video. And when I did that video, the pushback that I got made me realize, okay, this topic actually is way more interesting. than I thought it was. I didn't realize covered calls have, I would say a stronger called following than dividend paying stocks. Anyway, so I did three videos. And in all of them, I looked at past performance, like you said, compared the underlying to the covered call fund. And the covered call fund underperforms almost in every single case that I look at, which, as you noted, should not surprise anyone. It gets really tricky because in many cases, I had to build my own custom benchmark

to properly compare at the underlying, which most investors just don't have the tools or maybe knowledge to do. But when you do that, when you properly benchmark them, they underperform. The other thing that was really interesting is that a big pushback that I got is that I'm only looking at accumulation. And if I look at the need for income, then I'm going to find that covered calls are better. So I said, okay, so I did, I built simulations where I said, okay, you're going to live on the covered call income from this fund or sell. Yeah. Right.

Or you're going to live on the, the underlying equities, including the dividends that you're paying, but then making up the difference between the covered calls income and your income with the underlying by selling some shares. Yeah. So I held income constant and I looked over a long period of time. And again, the underlying outperforms by a wide margin while supporting the exact same level of income. Now, we're getting deep in the woods.

So we're going to move off this. I will say one last comment into this is that if you step back and you have a good understanding of markets and of course, you are a. genius on the front. It really can't work. Like, if it worked most of the time, that doesn't make any sense. And that's when I'm a little surprised that a lot of sharp people can't grasp, because to me, that's kind of common sense. The simplest way to think about it is that you are reducing your exposure to the stock. Yeah. And that's it. And most of that reduction is coming on the upside of the return, not on the downsides. You end up with lots of downside exposure, but a capped upside. And it's just

not a, it's not a good mix for most investors, I don't think. No, over the long term. Now, you could have a period where you had very flat markets. And again, it does indeed add value, but over extended time frames, I don't think so. And even in the flat market, it's tough because it would have to be literally quite flat as opposed to volatile flat, if you know what I mean. Yeah, and I think the option premiums would go down in a literally flat market too. Absolutely. Yeah, no, absolutely. Especially an extended one. Yeah. But to your point, flat markets are never flat. They're volatile in the interim. You can look at over five years and say, wow, that was a flat market. But I can guarantee to you, it wasn't flat day to day.

No, for sure. Okay, you are this super smart guy. As you say, you have access to tools. Nobody reads more than you. Let's be honest, you're a great athlete, but you're a geeky guy. You're both. You're a great athlete and a geeky guy. Why can't even the Ben Felixus of the world market time?

Why can't you be able to figure out valuation approaches that let you get out of the market when it's high and back in when it's relatively low? I'm not talking about perfectly nail it. but why can't you add value through market timing with all of your skills? I mean, it's similar to what we talked about with the paradox of skill. So I, even if we assume I'm smart, let's take that as a starting assumption. Okay, there's a smart guy, whether it's me or some other person or manager, my knowledge is competing against the aggregate knowledge of all other investors.

And so the idea that I can know more than everybody combined is just preposterous. It just can't be, it just can't be the case, no matter how smart, one individual is. I mean, there's a couple stories in financial market history of investors who have consistently beaten the market over long periods of time. Jim Simons of Renaissance Technologies is a big one. He's since passed away. But because there are these limited examples and Renaissance technologies had to cap the value of their fund and distribute all profits every year because there was not enough capacity for them to continue doing whatever it is that they were doing at a larger scale. So there may be some people who can figure this out, literally. Jim Simon's was literally

one of the smartest people that has ever lived. No question. And he was able to do it for a long time. But the fact that we talk about him, I think it supports the case that most people cannot do that successfully. So the big thing is, no matter how smart you are, you yourself are competing against the aggregate knowledge and intelligence of everybody else who wants to try and outperform. And that makes it really hard.

Now, all that said, do you ever try to time the market? Despite your answer, do you sometimes get so tempted or think the market's so expensive of you're going to lighten up a little bit. I personally don't. I think about expected returns. If stock valuations are really high, I might expect lower returns in the future, but we could have been having the same conversation five years ago with the U.S. market, for example, valuations have been consistently high and returns have been

higher than any model of expected returns would predict. So I think it's really hard. We had a Yale professor on our podcast recently, and he talked about not just got feel market timing, but there is, there are some academic models that would support varying your exposure to stocks just based on the level of risk and expected return in the stock market. And he talked about how he had tried to follow that model for a period of time. And it worked out well a couple times. And he got completely smoked one time. And so now he's, he's given up on his model based market timing. Well, you have to have two good decisions because if you're

lighten up, you also have to get back in at some point. And that's difficult to time as well. Yeah. So I don't, I don't think about. about it, I don't try to do it. When I have money that I know is going to be invested for the long term, I just slam it into the market no matter what's happening in the world. Yeah, same with me. Okay, now speaking of which, there are a lot of very sharp people who think we are probably looking at a prolonged period of substandard returns, that you've got valuations using almost whatever approach you want to that are quite high. Let's focus on the U.S. market right now. And therefore, they're saying when they typically have been this high using, let's say, Cape, then the next 10 years

of provided returns on average of minus two to plus three. I'm making up the numbers, but that general, do you think there's a chance that we do look at lower returns? Are you factoring that into your expected returns for your clients, for example? Yeah, so we do use CAPE. That's the cyclically adjusted price earnings ratio. It's just a measure of how expensive the market is relative to the fundamentals of the underlying companies. There is some evidence that CAPE can be predictive of future returns. So we do use it as one input to our expected returns model. So basically when valuation are really high, we slightly reduce our expected returns for stocks. So it does get factored in that way. I did a study a couple of years ago where I took, I think it was, I think it was 10

different countries. And I looked, I charted their starting Cape ratio and their future 10 year returns. Just to get an idea of how predictive Cape is outside of the U.S. In the U.S., there's some evidence that it has been predictive. But when you go outside the U.S., it's a little bit different, there's a lot noisier. There is definitely still a trend. The chart's really interesting. It does show that there is some kind of relationship. But what jumps out is that there are, other than the extremes, like Japan had cape ratios of just twice as high as any other countries ever seen. And in those periods, returns tend to be pretty low going forward. But other than that, there's so much noise where you can have a really high starting cape ratio. There are a couple of examples in

Canada, actually, leading up to the tech crash where the starting cape ratio was super high and the 10-year return was still super high. So there's so much noise, even in that estimate, which is one of the best ones that we have. I really don't think it can be used for market timing, even if it does contain some information about expected returns. Okay. Next question. You and I love the math of all of this, but behavior plays a huge role as well. Walk our audience through two behavioral traps that tend to draw people in. Oh, man. Overconfidence is a huge one where people, for whatever reason, whether it's their own past experience or something that one of their friends or coworkers was able to do with financial markets, leading people to believe that they can outsmart the market or they can

outperform. I think something similar happens with people working in a certain industry where tech has been a really interesting example recently because tech stocks have done so well relative to the market. I think there are a lot of people working in tech who may have taken some speculative bets on either individual technology stocks or a technology index and had that work out for them. They now believe that they're the next Warren Buffett. So I think there's a lot of risk, a lot of risk there. So that's overconfidence. Another behavioral trap. It might be, so overconfidence is one. Pessimism might be the other one that I think is really problematic where kind of like we were just talking about. The U.S. market looks really expensive right now. There's all this crazy stuff

happening in the world. I think a lot of people will get into their mind that this is the riskiest time ever to invest and therefore they should either invest less in stocks or hold off investing whatever money they have in the stock market because they're waiting for some big, bad thing to happen. But I think that's pessimism. As much as overconfidence is an issue, pessimism is probably one of the most expensive behavioral biases that exists in investing. Well, and it ties back to your very first answer of the day in terms of a lot of people not taking on enough risk because there's already, always, so many things you can convince yourself can go wrong. It's easy to stay out. And I think that particular problem is getting worse now because of social media and because of all the news we're bombarded with,

the algorithms, of course, feeding us over and over again. It's tough not to be negative right now, tough not to be pessimistic about the future, even though the long-term trends always tend to be positive. Yeah. The news has a negative bias. And that's something that has been studied and that negative bias has actually gotten stronger over time. So if you read the media, it's usually maybe by design, if we want to be cynical about

it, it's doom and gloom. That's what gets people interested and keeps their attention. So, yeah, I think that pessimism is definitely one of the big. behavioral issues that I think cost investors a lot in the long run. Couldn't agree more. Okay, can annuities play a role in people's late life finances and why do we see them use so remarkably infrequently in Canada? They theoretically they should play a meaningful role. I think right. Now that's like going and purchasing an annuity is one form of annuity. I think delaying CPP or delaying OAS is another form of purchasing more annuity. If you take CPP early, you're foregoing a lot of future

inflation index annuity benefit. If you delay CPP as long as possible, by funding your consumption yourself in the interim, that's kind of like buying more CPP. So I think that's probably an underutilized annuity. The nice thing about CPP is that it is indexed to inflation. Regular annuities, nominal annuities that you can go and buy from an insurance company, they're not indexed to inflation. The closest thing we have in Canada is you can buy a fixed indexation, so you can buy like an annuity that increases by 2% a year. Right. But it's not indexed to inflation.

So it's not, I don't think those are usually worthwhile. But so in theory, it makes a ton of sense to buy an annuity. It hedges against longevity risk. It gives you access to something called mortality credits, which basically means if you live long, you benefit from people who die early, dark to think about, but it's a real economic benefit of annuities. Why don't people use them? You know what?

We did a big push. This is years ago now. Maybe we should try it again. But we had had a couple of guests on our podcast who made, just such compelling cases for annuities in retirement planning. And so we were like, geez, we're probably underutilizing annuities for our clients. We need to really bring this to light and make sure that our clients are aware. And so we got access to a tool that helped you, helped us optimize the allocation to annuities in retirement portfolios. And it adjusted the overall

asset allocation between stocks and bonds in the non-annuity portion of the portfolio to sort of optimize everything. We could show people like, hey, if you buy this annuity, you're going to have more expected wealth at your eventual death, and you're going to have a lower probability of running out of money while you're alive. Nice combination. It's right. It really is. Not a single person was interested. They looked at us like they were crazy. Like we were crazy. Why are you trying to sell us this insurance product? This isn't what we deal with you for. And we were like, okay, I don't know, really know what to do here. No, it's amazing. Canadians hate annuities. And it's funny because a lot that people blame the industry. They say that the commissions are lower, that if you left the money in a

managed account, and that's true, but I have found that even the people out there, as you just said, who said, I think it might play a role, not the dominant role, but a role in your retirement income planning, the consumer goes, no, there's this feeling I'm going to buy it, even with the guarantee, I'm going to walk out and get hit by a bus. They don't like the fact that it doesn't adjust for inflation. A lot of people in the back of their might want to leave money to their kids. All of these factors come into play. And I don't think people should be embracing them, but there's many instances where they could add a lot of value. And psychologically, for the people who have used them, they're a big positive. If you don't have a defyed benefit pension plan, often having that extra guaranteed income for sure coming through beyond CPP and OAS is very soothing to people.

All the research says that. We still can't get people to be open-minded to them. Yeah. Yeah. So we'll bring it up when it makes sense for a client, but the uptake for us has been very low, even if we can show it makes like objective sense. Like, this will make you better off. It's really tough to get people to actually make the commitment and write the check to purchase the annuity. Do you know that years and years and years ago, one of the insurance companies did come out with a fully indexed to CPI annuity. And I ended up

goofing around, looking at it very carefully, a little bit, something that you would do. And it was not a good product because they had to be so conservative. Well, they estimated inflation to be so high, of course, to de-risk it from their perspective, that using probabilistic thinking and the odds of inflation, it was just not a good product for the consumer. And so it never got traction. Of course, it ended up fading away. And you're right, you can only get the two percenters now. But I think annuities are underutilized and more people should take a look at them. But I think we're beating our heads against the wall a little bit. I think the bigger victory is realistically is getting people to delay their CPP and in some cases their OAS as part of their retirement portfolio. I think

that's an easier sell than getting someone to buy an annuity. And it's probably a higher quality annuity product, if we can call it a product, a higher quality income stream because it is indexed to CPI. Now, does it make more sense for a female to delay the CPP OAS than a male because of life expectancy? It likely would. Yeah. Yeah, that makes sense. You don't hear that a lot, but that makes a lot of sense. Okay, next question. We see so much now about crypto and meme stocks. What does the research actually say about this stuff? Like, you love to read about all of this. Is there any merit in these types of things? The research in this space is, it's tricky, okay?

And it's tricky because Bitcoin has a relatively short history. Since it's been established, it's been quite volatile. Phenomenally, yeah. It hasn't gone anywhere in quite a while now at this point in time, at this moment in time, that could change tomorrow. But because its early returns were so high, any back testing based research will make it look good in portfolios. But I think that's a really tricky. relatively short data set of just phenomenal returns, it's really tricky to include that in a back test and say, yes, you should own some of this. So I'm hesitant to use any of that type of

research. I think the more fundamental questions of like, are these things of value to society or to anyone? There's been a lot more interesting research on that that gets more into away from economics a little bit. We almost start to get into philosophy. I love reading about that stuff, but it doesn't tell you much about the value of these things as an investment. I think at this point, Most crypto are just tools for speculation. I think there's a big ideological value to something like Bitcoin, where a lot of the proponents and people who hold it and say that they'll always hold it, they're really motivated by ideals about how money should work, what government's role should be in society

and those kinds of motivations. Then there are a lot of people who are motivated to hold it because I think the price is going to go up because it has over some periods of time historically. But those are really the people who are holding the price. up. I think the reason we see it being as volatile as it is is that it shares the same fundamentals as other risky assets. When people need liquidity, some of them will sell their crypto tokens and that will drive the price down. And those dynamics aren't going to go away just because people have certain ideological beliefs about what the underlying technology means.

I think that's right of quantum computing has definitely impacted Bitcoin over the last X number of months too. There's a fear that it could come into our lives the next five to 10 years. may be able to break the codes on a lot of the types of things and then render them almost valueless at that point. It'll be interesting to watch how it all plays out. And I look at a lot of the meme coins and I just shake my head. And you look at the total market value of some of these. And you're going, can that be right? Am I reading that figure accurately? And you are. And it's just amazing how much money has been pulled into coins that add no value whatsoever, have no fundamental underpinnings. But to your point, they're just another form of gambling. And we're seeing the investment

landscape gamble-fied, for lack of a better word. It's frustrating for people like you and me who don't love that type of thing at all. I think we're seeing it more explicitly now with prediction markets and sports betting becoming increasingly prevalent, where it's pretty obvious now that people just have a propensity to gamble and make really bad financial decisions. And whether they do that in crypto or prediction markets or wherever sports betting, they're going to do it. They're going to find ways to do it. I laughed the other day. Somebody said, what is a prediction market? And I said it's where someone with inside information goes to become very wealthy because more and more we're seeing that a lot of the people betting there, they already know what's going to happen, whether it's an earnings

release or whatever else. I mean, this kind of stuff is crazy. Okay, a subject near and dear to my heart, you and I've discussed before, is rent throwing your money away? It's not. It's exchanging your money for a place to live, which is very similar to what someone who owns a home does. I think the big thing that gets missed here is that both renters and homeowners, owners have unrecoverable costs. They have costs that they pay with no residual value. So you pay rent, you get a place to live, you have nothing left over. And so people feel like that's throwing money away. You buy a house, you pay property taxes, you pay maintenance costs, and you have to pay implicitly the cost of capital, the cost of having your money, your equity in a home rather than

invested somewhere else, like in the stock market. Those are all unrecoverable costs. Those are costs you pay with no residual value. In the case of a home, you do have this big illiquid asset. And so people look at that and say, no, I have the house as an asset, which is true, but I think the big missing piece is that if you're going to make a side by side comparison of the renter and an owner to say, no, look, the owner has a residual asset, the renter is typically going to have lower cash flow costs than an owner, all else equal. They will not have had to make a big down payment to purchase the home or maybe they purchased the home in cash. But in either case, the renter has taken that money for making an apples to apples comparison.

the renter has taken that money and invested it in something like the stock market. When you set up that comparison and it's truly apples to apples, renters can build just as much wealth as homeowners. Now, I used to show that in models. And I would just say based on these expected returns, I think that this makes sense. What I did more recently is set it up with actual historical data. And that was really interesting. But I showed the same thing. In Canada across 12 cities, my most recent data shows that on average, renters would have come out a little bit

the head of honors, starting in 2005, going right through the end of 2025. I know, and I love that you do that because now I can send people to your stuff and they get mad at you instead of getting mad at me because don't you find that people get really annoyed when you make any kind of case that homeownership may not have been their best move? And by the way, I'm pro homeownership. Like I own my own home. My daughter does. My son will.

I'm not against homeownership at all. I just find a lot of people have blinders on when it comes to do the proper analysis. So I'm glad you're taking the heat off me. keep going. I own my home too. And I think there are a lot of good reasons to own a home. That's a video that I have not done yet, but Will, is the case for owning a home because I think there is a case for owning a home. I also think there's a case for renting a home. I think to your point, renting just doesn't get enough credit. It's shunned. And I think there's a lot of taboo around that as well. But it's a perfectly reasonable option for a lot of people. Owning makes a lot of sense if you

have maxed out all of your registered accounts because the primary residence in Canada, as of right now, is not taxable on its appreciation, whereas investments in a taxable investment account, you're going to pay tax on interest, dividends, and future capital gains when you eventually sell. So that's valuable. I mentioned the opportunity cost. The opportunity cost if you're a taxable investor, particularly with a high tax rate, the opportunity cost of having equity in your home as opposed to invest in the stock market is a lot lower. Because you're expected after tax return as a taxable investor is a lot lower. So that's a big one. I think if you want to stay in one place for a very long time and you're really sure you're not going to move. Owning is the best way to lock that in

because if you rent and you want to stay in one place, it's possible that rents will go up by a lot and you'll have to move and that would sell. And it's also possible you get booted out for other reasons, not because of the costs and then your kids may have to move, et cetera. So these will all go in your future video about the merits of owning a home. So all of your points I agree with, but when you and I first became friends, I talked to you about some of the research I had done over the years from getting people spending summaries and how people constantly underestimate the true cost of homeownership. Forget the mortgage. You talk about property taxes, the home insurance, the upkeep, the rentals they do, etc. When you factor all that into play, holy smokes, Rob Carrick had a great line once. He said,

people talk to me about owning a home because it's good for saving. He said it's good for spending. Because I said, I never stopped writing checks here. And I think people do really lose track of that. And again, I'm not saying don't do it. But people are out of touch with how much they've put into their homes over the years. Yeah. I would say as a homeowner, so I have at this point, I think I said this in my most recent video on this topic, at this point of my life, I have with a wife and kids, rented and owned for the same number of years. So I rented as we had kids, we have four kids. And so as we were having kids, we were renting and moving to different rentals as we needed more space, which was awesome, that flexibility. We did that for six years. Now we've owned a home, the same

home for six years. And I can tell you as a homeowner, it is, addictive, just perfecting everything and wanting to change stuff. And, oh, yeah, we got to fix that. We should make this better. I'll be so nice to do this. And it's 10 grand, 10 grand, or the roof leaks, whatever. This tree is about to fall in the house. We need an arborist to come out. It's like, man, it just, it never stops. It never stops. And you're right about addictive. I said the foremost expensive words in the English language are well, we're at it. And that's the problem is because you do one room and then the rest of the room's pale by comparison. So you keep rotating through those. And you mentioned trees. I've had trees fall. And the cost now of getting the things out of

there is absolutely crazy. Now, again, anybody listening who's upset with anything we've just said, contact Ben. Okay, do not reach out to be contact Ben. All right. Next one. Life insurance as an investment. And so where does it play a role in Canadians' lives? So as an investment specifically means we're talking about permanent cash value life insurance typically, which is life insurance where you're paying premiums that give you coverage now, but also for the rest of your, for the rest of your life and contribute to a cash value inside of the policy, which can be structured a whole bunch of different ways. I think that the main points here are that if we're looking at a typical what's called participating whole life insurance policy, one of the big

risks in the way that they tend to be presented is that they'll often be presented based on what's called the current dividend scale. That's right. And current. And current. dividend scale is like the current, so participating whole life insurance policies pay these things called policy dividends, which can contribute to future paid up permanent insurance or they can be used for a couple of other different things. But the main point I want to make here is that the current dividend scale is not necessarily the dividend scale that will be in place for the life of the policy. And so if you see an illustration, which is like a projection that an insurance agent would prepare for a participating whole life policy at current dividend scale, it'll often look very good. It can

look comparable even to investing in stocks, for example. It's always sensible, in my opinion, to illustrate with current dividends scale minus 1 and even minus 2%, because in reality, the dividend scale is not guaranteed. And if we go back over the last 20 or 30 years, dividend scales have come down pretty consistently. I don't know what they'll do in the future, but I think you have to consider the fact that the risk that dividend scale for the life of the policy, which you're presumably going to hold for many years, will not necessarily be the current dividend scale. That's one major issue. I think if you account for that risk and make reasonable assumptions about future policy values, permanent insurance can look comparable to fixed income for a taxable

investor. If you have room in your tax preferred accounts, your RSP, TFSA, FHSA, it's very hard to make an argument for permanent insurance as an asset class. If you've maxed all of those out and you're investing in fixed income in your taxable account or your corporation, it can start to look a little bit better in a projection. Yeah, I agree with all that. So let's just repeat that. If you have room in your FHSA, your RSP or TFSA, it's, it's, we're using the word almost to be diplomatic. But when I look at the math carefully, I would, I would say, like 99% of the time it's better to go that route. And then you can look at the permanent insurance as an investment. But interestingly, when you think long term and to your point, you go minus one, whatever, it is comparable to

fixed income investing. But if you're looking a long term and you've already maxed out on those, what percentage of people would actually be thinking fixed income as opposed to taking a more aggressive stance with the portfolio? Oh, I agree completely. I think there are a lot of issues with the way this stuff is presented, that being one of them. The alternative investment is another issue with the with the illustrations. They'll often be shown. So the dividend scale, I think that I mentioned, they'll often be shown in comparison to investing in an interest paying investment. So you might see an illustration that says, well, if you earn 5% interest and your tax at the highest marginal tax rate and your. province, look how much better permanent insurance looks in the long run. But that's not the right comparison. I think for most young people, to your point, they should be investing at least a

portion of their assets in stocks, which are going to be more tax efficient because a big portion of the return is going to be unrealized capital gains. And they've got higher expected returns. When you make that comparison, it's much harder to make the case for permanent insurance, both before and after tax. I agree. Now, inside a corporation, somebody's got ample retained earnings. they're later in life, they're doing it for a state planning raising, and they're getting good counsel from someone who's a true expert and knows the right type of policy and watches the fees. I think it can add value. I think in that particular case, the math can be fairly compelling. Yeah, the right type of policy, the right structure with the corporation, because it can cause other issues if it's not set up properly.

Yeah, you have to have an expert advising you, no question. Yeah. You can make a case for it in very niche cases. I think that's true. It definitely requires expert tax and insurance policy structure advice. But yeah, you can make a case for it. I think that the case is much less common than how frequently these policies are promoted and sold.

Agreed. You and I agree in all of that. How much attention should people pay to their investment portfolios? There is evidence that paying more attention to your portfolio leads to reduced risk-taking and therefore lower expected returns. So you shouldn't be checking it every day. I would, if there's a reason from a maintenance perspective to check into your portfolio, So maybe you're receiving dividends quarterly.

Maybe you're rebalancing your portfolio if you're not using an asset allocation ETF. In those cases, you should check at whatever frequency is required to maintain the portfolio. So that could be quarterly. It could be twice a year. But if you're automating things, if you're either working with a financial advisor who's doing the portfolio implementation for you, or if you're using an asset allocation ETF, maybe even with a dividend reinvestment plan set up, I'll tell you what I do.

I check my portfolio maybe once a year. And it's usually by accident. It's usually when I'm getting my tax slips and I'll look at, oh, that's how things have done. That's nice. But I do not pay attention to it. Now, my head is in financial markets all day, every day. So I kind of have a sense of how things are doing. But I do not check my portfolio.

Yeah. My father doesn't once every 23 years. That's good. That's kind of randomly pick that number. Once every 23. I think he rebalances what he does. And you know, you were talking about the formal research, but anecdotally, I've seen, even among my friends group, the ones who monitor it most closely tend to underperform by a wider

margin than almost anybody else. because they get emotionally involved. And when emotions get involved, you tend to make bad decisions. It's true of any aspect of our lives. So, no, I really like that answer. What do you think of the all in one ETS that have become so popular over the last five to 10 years? Yeah. So I alluded to them when we were talking about how often you should check your portfolio.

The fact that they automate rebalancing, which used to be one of the sort of arduous tasks related to DIY investing, is absolutely incredible. I am a huge proponent of these products. The asset allocation ETFs, just for listeners, are single ETFs that give you exposure to a globally diversified portfolio with allocations that have been determined by the experts at Vanguard or BlackRock or wherever that is rebalanced by the fund company at the ETF level. So you buy this one ETF, this one security, and it gives you everything that you need to be a very well diversified, sensible long-term investor. And you can choose your asset allocation. So you can choose a 100% equity asset

allocation ETF, but you can go right down to, I think, some of them are down to 40% equity. There may be even one more conservative than that. But you choose an asset allocation that makes sense for your individual ability and willingness to take risk. And you set it and forget it. And to me, that's incredible because as we just talked about, checking your portfolio more frequently or having to check your portfolio to maintain it more frequently are detrimental to long-term outcomes because they get you more emotionally involved.

There is evidence as well that the business concept in investing called the behavior gap, it's how much less return do you as an individual earn than the fund that you invest in? And that usually happens because people get into and out of the fund at the wrong time rather than just buying it and holding it. That behavior gap, and this is from research that Morningstar does every year, that behavior gap tends to be smallest for asset allocation funds, which is just they're self-maintained. You don't have to touch them. But going to the behavior gap, just before we wrap up here, it's remarkable how big it is for a lot of the state. Funds. Like when I first saw the research was a Dellbar maybe that initially produced the reason, I thought, is that right? And then I was telling you, I more or less duplicated it off all the

portfolio stuff. People were sending me back in 2008, 9, 10, et cetera. In 300 basis points a year in many instances, it's crazy. Delbar has been criticized a little bit, but I mean, Morningstar has done this for years now. Morningstar has been criticized a bit for it too in some recent academic work. But just the concept of, you know, people do tend to underperform because they do tend to get in and out of the wrong times. That's been pretty persistent in lots of different studies over time. And yeah, it can be a very, very big number. Okay, we're going to wrap up with one more question. But before we get to it, I want to say something very sincere to you. You should be very proud of yourself. You have really helped a lot of people directly because they listen to the rational reminder, they watch your

videos. But where I think you've been much more impactful than I think many realize is the indirect impact you've had on industry participants. A lot of people in the industry are watching you and they're saying, holy smokes, this guy is on top of it. He's got great points. It's very difficult to argue with him. I think you're upping the game of a lot of the other financial advisors out there. In fact, I'll go a step further. When you look at a lot of your colleagues at the top of the Canadian financial advice business now, holy smokes, they're good. Like it is crazy how much the top end has improved over the last 10 and 20 years. Like, I'm almost stunned by the expertise of some of the people we have on this show.

And together, you're all getting out there on your platforms, at all the symposiums, at the association meetings, and everybody's seeing what's possible. And you're raising the bar and dragging people up. So again, I think you should be very proud of what you've achieved. I appreciate that, Dave. I'm pretty good friends with a lot of the guys and women that you've had on the podcast who I would consider to be kind of at that level at the top of their games.

And I can tell you being friends with them and bouncing ideas off of each other and trying to move the industry and the right. direction. It's a, it's a ton of fun. It is, it's very rewarding. And we, that, that sort of of tightened it group of folks that I'm close with, we do hear from younger folks in the industry every single day about how we've changed their career trajectory, asking us for advice about how they can move in more in the direction that we've gone in as opposed to where the rest of the industry is. So I do enjoy that thoroughly. It's a really enjoyable part of my career. I'm hearing it all the time. And again, the nice thing is a lot of you are still fairly young.

Like, you've got years to set this example and keep pulling people. in it. And, you know, this sounds dramatic and almost corny, but I think Canadians are benefiting from this. Like, everybody who's dealing with an advisor as this gets upped and people get more into it and more passionate, I mean, they see the passion of the Jason prayers of you, et cetera. It's hard not to get excited and buy into that. So, yeah, job well done. I mean, you know, I'm your biggest fan, as you know, I'm always saying that people should be listening to you. You've just done a wonderful job across the board. Now, that being said, we have two more, two more questions. Be careful with these answers. Who has better hair? You or me? Oh, man. You know, okay, are we adjusting for age?

Adjusting for age. We have to adjust for age. Absolutely. Man, age adjusted, it's you for sure. I think that's the right answer. Straight up, it's you. Age adjusted, it's me. We both win there. And then Mo wanted me to ask, who's smarter? You or me? Oh, you're smarter. I've learned a ton from you. I still do. Even reading your updated wealthy barber book, I learned a ton reading it. So I, you know, you've also got, again, I'll play the age card here. You've got years of wisdom on me that I'm still working on building. You know, it's buddy. As a lot of the stuff that I put in the book, I learned from you.

And I rotated the book and now you're saying you learn from me. So this is all good. It really is. You know, you bring up a point about reading the wealthy barber update. I think another thing I'm seeing in your industry is that you're all watching each other's videos and speeches and everything. And even though you know the material, what you're learning from each other, communication techniques. how did that person communicate it effectively? What example did they use, et cetera?

And that helps so much in relating back to the client. Oh, yeah. Well, I said that in the video that I did about your book, that even if none of the material, like I didn't learn a ton of new technical knowledge or anything like that. Maybe none even. And like you said, a lot of it maybe came from me in the first place.

But the way that you communicated it and the way that you set it up with the storytelling in the book definitely gave me new ways to think about communicating the same type of information. So I agree with you. I think it's the same with the other professionals that I talk to in the industry where somebody will write a blog post about something that we all know. But they'll write it in a way that's, oh, I've never really framed it that way for a client. I've never really thought about it that can be really powerful. The other thing that's interesting that I think about from where I said as the CIO of PWL is that all of the people creating content, including me, give those same tools to all of the advisors within PWL. So we attract, just talk about the benefits of creating content and stuff. like that for the industry as a whole, we've been able to attract largely through that content, some of the best financial planners and portfolio managers in Canada. They come to PWL because they listen to our podcast. I know that for a fact. Like they definitely have. They've heard they like

the style. They like the fact you're actually trying to help people, et cetera. Do you listen to the plain bagels stuff at all? He's got some great stuff too. Oh yeah. Richard and I were pretty good buddies. I accidentally signed off my last video saying stay safe out there. And people in the comments, I guess I'd never watch one of his videos to the end or never paid attention, he signs off every video with Be Safe out there. And so a bunch of people in the comments called me out. And so I texted Richard and I told him I was going to pin a comment. So I said that something along the lines of, I've been made aware that I stole Richard's sign off, but we've been in touch and he's decided not to sue. We're going to settle our differences over a glass of maple syrup. He's great, isn't he? And he's got such a wonderful sense of humor. And he leaves his humor into the material extremely well. He's a smart guy. You can see it from the way he delivers. He's a very intelligent man. Anyway, I've enjoyed having you on, as always. You're a great guy and a big industry influence.

And again, I'm your probably biggest fan. So it's a real honor to have you on again. Thank you for the time. Appreciate it, Dave. Thanks so much. It was a great conversation.