The Wealthy Barber Podcast - #9 — Dan Bortolotti: Index Investing, ETFs and Financial Planning

Episode Date: February 11, 2025

We’re joined this episode by Dan Bortolotti—Portfolio Manager at PWL Capital, creator of the hugely popular “Canadian Couch Potato” blog, author of “Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs” and co-host of the “Rational Reminder” podcast. In this episode, Dan and Dave dive deep into index investing, covering everything from active vs. passive investing styles to tips for DIY investors, asset allocation strategies, the pros and cons of all-in-one ETFs in Canada and much more. There’s a lot to unpack, but Dan and Dave make it all easy to understand. This episode is a must-listen for anyone serious about DIY investing—tune in now!   Show Notes 00:00:00 – Intro & Disclaimer 00:00:55 – Intro to Dan Bortolotti 00:02:04 – The Origins of the “Canadian Couch Potato” 00:06:56 – What is an Index Fund 00:08:52 – Why Don't Most Active Managers Outperform the Market? 00:15:12 –  How Dave's Dad Can Beat Professional Money Managers 00:16:57 –  Group Retirement Plans 00:19:25 –  Mutual Fund Underperformance 00:22:42 – Should People Speculate with 5-10% of Their Portfolio? 00:26:31 – The Financial-Planning-First Model 00:35:52 –  How to Construct An Index-Fund Portfolio 00:34:57 – Risk Tolerance and Asset Allocation 00:42:50 –  When Stocks & Bonds Both Went Down 00:44:56 –  What Goes Into a Financial Plan? 00:46:34 – Get Life Insurance! 00:47:59 –  There is No "Optimal" Financial Plan 00:49:52 – When to Take CPP 00:51:21 –  The Risks of Helping Kids/Grandkids with Down Payments 00:53:52 – All-in-One ETFs 00:58:16 – Withholding Taxes on US Stocks 01:02:27 –  Online Investment Platform Recommendations 01:04:26 – Conclusion

Hey, it's Dave Chilton, the wealthy barber and former dragon on Dragon's Den. Welcome to the Wealthy Barber Podcast, where 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 the 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, we'll be here to help 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 where specifically to put your investment dollars. We're here not here to tell you where 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. We're on episode number. I have no idea. Okay. I have no idea what episode, but I know it's going to be good because I'm here with Dan Bordelotti. A lot of you know him as the Canadian Couch Potato.

When I first heard that brand, I thought the guy was lazy and basically just describing how he sat around and did nothing and added no value to society. Turns out I was wrong. It was something you were absolutely correct. I was absolutely correct there too. He was describing his approach to investing and we'll get to that in a few minutes. Dan's an interesting guy. He graduated from University of Waterloo in Arts and English.

A lot of people, by the way, who've gone on to be very impactful in finance have an arts background. That is a very common theme you see in finance. A lot of times, by the way, it leads to strong communication skills, and that's such a big part of what we do. So we'll talk a little bit about that. He wrote two nonfiction books back in the day. What were the titles of the books, Dan? So the first one was called Hope in Hell, which was basically a biography of Doctors Without Borders, the humanitarian aid group. And the second one was called Wild Blue and it was a

natural history of the blue whale. Very interesting. So your background's a little science-oriented, obviously. My interests are, yeah, I don't have any educational background in science, but it's something that I read a lot about and enjoy learning about. Okay, well, how did you go from that to being an investment expert? Let's start there. Yeah, so it was a bit of an unusual path, I think, but when I came out of school, I started my career as a journalist. But I was a generalist, right?

I wrote about a lot of different topics. I worked for several different magazines. And as you can tell from the books, I didn't really have a specialty in any specific subject matter. But towards the end of my journalism career, I did start to write more and more about personal finance, specifically for Money Sense magazine, which is where I really got my start writing about. Again, it was mostly sort of generic personal finance. It wasn't about investing specifically, but it was

around 2008 I started to get interested in the idea of what MoneySense called the couch potato strategy. I didn't invent the term. And it was this idea of low cost investing with index funds. And I think for a lot of people, it seemed kind of counterintuitive. I didn't really understand what do you mean by not picking stocks or timing the market you're likely to do better than most of professional money managers.

So I got interested in the idea. I started reading more and more about it. And as you know, the best way to learn about something is to write about it, because it forces you to crystallize your thoughts and articulate yourself and forces you to really clarify ideas that you don't necessarily understand. And so I really enjoyed that.

I started writing about it for Money Sense. I created the blog just during the Christmas holidays in 2009 just for fun. Had no idea where it would go. And within a couple of years, I had built a bit of a following for people who, you know, that idea resonated. And long story short, within a few years, I just decided to make the leap from writing about investing to actually working directly with clients. And that's when I joined PWL in 2013.

You know, you have a great skill. I started reading your material in 2010, and you actually know that because I reached out and chatted with you. I was going to mention you favorably in the wealthy barber returns. And I loved how you were able to make things understandable. You didn't use stories really, despite your background in writing. You didn't use a ton of humor. You just had a great ability to make things understandable.

And one of the things I think you did extremely effectively was you would take questions from your blog audience. think you did extremely effectively was you would take questions from your blog audience that were set you up for responses that could educate the masses, not just the person answering the question. In fact, I think that was your greatest skill. The way you responded to questions, pulled people in, I learned from reading them and I'm in the field. So that was a place you focused and I think blog writers in general tend to do that quite well. Yeah, I think it's true. I mean, I'm not really kind of a storyteller.

I feel like my skill, if I have one, is to take a relatively complex topic and explain it in plain English in a way that people will understand and be able to integrate it into their lives. And I think that's what I try to do every day as an advisor now, right? Is, you know, personal finance and investing is complicated and it's confusing for a lot of clients. And many clients find the whole discussion alienating. So, you know, my goal is to try to

distill the most important things, get a sense of what's important to the client, and explain just enough to them that they feel confident in the strategy and what we're doing together. And it's not about dumbing it down and it's not about talking down to people. It's about talking to them just in plain English about something that if every client we have has some expertise in something else that I know nothing about and I'm sure that If they were in the in the different position that they were trying to explain to me That's how they would do it. And so it's worked very well

I think people find it comforting and when you're comfortable with your investment strategy You're much more likely to stick with it over the long term Dan do not be afraid to talk down to me at any time. Okay. People do it all the time. I'm used to it. I enjoy it. So yeah, speak down to me for sure.

Now, is it true that Bordelotti is Italian for passive? That it means passive in, in Italy. Is that true? It is not true. Alas. I wish it was though. I think by the way, looking at you, you look like a guy who would be an expert in index funds. You are central casting.

You just have, yeah, that guy knows what he's talking about. I'm not going to ask you to elaborate on that. Okay. No, it's positive. It's positive. Okay. So let's go back. First off, tell the audience what is an index fund?

So we're taking the, what's known as a passive approach. We're buying index funds. What is an index fund? Yeah. So an index fund, I mean, it's just any kind of either mutual fund or exchange traded fund that holds a portfolio of securities, right? Typically stocks, also bonds though, however. But the key idea is that most investment funds traditionally are made up of stocks that are chosen by a manager and usually chosen because that manager believes that they will outperform the market in general.

So it's essentially a basket of stock picks, hand-picked companies. An index fund by contrast is the idea is to purchase virtually all of the companies in a given market. So if we use a simple example like in the Canadian market, the traditional index is the S&P TSX composite index, which holds several hundred stocks, all weighted by the size of the company. So the biggest companies get the biggest weight in the index. Now a traditional fund might pick 20 or 30 stocks from that selection, because the manager believes that those are going to be the best performers. An index fund, however, would just buy all

of them and buy all of them in the same proportion that they exist in the index. And what that does is it allows the investor in the index fund to essentially achieve the return of the overall market. No more, no less, right? A little bit less after fees. But this is the other part is because you're not paying a high price manager to pick individual stocks, the index fund typically has very low fees, certainly the lowest in the industry compared with other investment types, and therefore you're going to get almost everything that the market has to offer minus only the smallest fee. So when you look at index funds, and let's go back over the last five years, ten years, twenty years, you

can use rolling periods, whatever, what percentage of actively managed funds, two years, year, or words, funds that are trying to outperform, they're trying to pick the best 20, the best 30, what percentage of actively managed funds two years you were words funds that are trying to outperform They're trying to pick the best 20 the best 30 what percentage of those funds have outperformed the broad market averages approximately Yeah, I mean if once you go out to about 10 years or so I mean it's rare for that number to be higher than about 5% Exactly in some cases. It's even lower than that. Yeah, I mean there's some 20 year periods where it's close to 0% Yeah, if you go out to 20 or 30 years, it's even lower than that. Um, yeah, I mean, there's some 20 year periods where it's close to 0%. Yeah. Oh, if you go out to 20 or 30 years, it's, it's. You know, statistically indistinguishable from zero, as they say,

perhaps not actually zero. I will ask you the same question. I asked your colleague, Ben Felix, one of my favorites. We had been on the show as well. And brilliant guy. I was joking with you before we went on that. I think a lot of the papers Ben cites, he's making them up.

Like he'll say, yes, well, in the Harvard paper of 1978 by Wilson, Johnson, and Kenny, uh, you'll find that they support my argument very well. He knows we won't check. Like I, I'm going to get on that one day when I'm not busy, although I'm not busy most days, so maybe I'll get on that tomorrow, but I asked him this question I'm about to ask you. I'm not busy most days, so maybe I'll get on that tomorrow. But I asked him this question I'm about to ask you, why can't these very smart, very, very well-educated managers with tremendous access to resources and talent, why can't

they outperform? Why can't they find the 20 or 30 stocks that are likely to outperform the broad market averages? Well, that's the great intuitive question, right? And that's the resistance, I think, that most investors have. It's like, what are you telling me that this great manager can't outperform a simple index fund? How can that be possible?

But when you think about it, it's actually the logical consequence of what happens when the market is full of very smart people like that. That's right. So it's called the paradox of skill. So I mean, if you look at somebody like Warren Buffett, I mean, people talk about what a great manager he is, and he is, he's a genius. But even he would admit that most of the outperformance that he was able to achieve in his investing career came decades ago when he was by far the best person out there

at that skill. Today we have so many people who have high-speed computers and algorithms and all of the resources you could possibly muster to try to get an edge. And when thousands of people have that and are competing against each other, the chances of any one individual outperforming become remote. So it's not that those managers are not smart or not capable, it's the opposite. It's that there's so many of them who are smart and capable that they can't all outsmart each other. I couldn't agree more. You said that very well. But beyond that, of course, they've also got to outperform the fee differential, and it's significant.

So in Canada, we often have mutual funds charging 2%. You don't see that elsewhere in the world too often. They're closer to one, one and a quarter on average. But let's go with Canada, 2%. As Ben and I discussed, if you're looking at markets that you hope to average 8% going forward, 2% of 8% is 25%. They actually have to be incredibly clever to overcome the drag on that fee. Is that a big part of the problem as well?

Yeah, it's a huge part. And I think that if you look at a lot of well-run active funds, you will see that if the fees were zero, there might actually be some outperformance. Agree. I mean, skill exists. I mean, I appreciate that. And there may be ways on the margins that you can very slightly outperform the market

before fees. But if you have an edge that allows you to beat the market by 1%, then you would be a genius. But if you charge 2%, then all of a sudden, you've lagged the market by 1% then you would be a genius. But if you charge 2% then all of a sudden you've lagged the market by 1% after fees and you really haven't added any value because an index fund that you can buy for 5 to 10 basis points will trail the market only by that much and will therefore outperform your active fund after fees. So fees are a huge part of it. And this is why I think a lot of people,

when we look at ETFs, for example, as an investment vehicle that is right for so many people, a lot of them assume that ETFs just in general are excellent products. And they can be, but an ETF that charges 1.5% is not superior to a mutual fund that charges one and a half percent. So, No, we'll dive deeper into ETFs in a second, but going, going back to why it's

so difficult to outperform, I would argue there's another reason. Returns are so skewed in the stock market by those few winning stocks. And you know, we've talked about finding the needle in the haystack. I think the, I was one of the first people on stage to talk about that analogy and just buy the haystack because it's so hard to find the needles. But you know what's also as difficult, also as difficult is holding the needle the entire time through these incredibly prolonged runs of dramatic out performance that carry the markets.

And even the managers who spotted them and had them in their portfolio have often gotten out too early. Understandably so taking some profits, being cautious. They're now more highly valued, etc It's just so difficult again to keep up to the index because of that type of math Yeah, it's for sure and that's one of the great advantages of a total market index or an index fund that holds virtually every publicly available company is that you will always hold the next Google, the next Facebook, whatever it is, the next Nvidia, right? And you will also continue to hold them rather than selling them too soon.

Now of course, the other side of that is you will also continue to hold them even if they tank, right? That's right. And so I think people who invest in index funds have to appreciate it doesn't protect you on the downside. Right? If the market falls 20%, your index fund is going to fall 20%. And so that is, again, a resistance

that a lot of people have. They want to enjoy all of the upside, but less downside. That's what I want. Can you help me with that? I can help you with that. Yeah, I wish I could. Right? So again, it's what I want. Can you help me with that? I can help you with that. Yeah, I wish I could, right? So again, it's just really about expectations. But you do make a good point in the sense

that when you hold an index fund and once you embrace the strategy, you just get out of this mindset that my goal as an investor is to get in at the right time and get out at the right time and to find the right company on its way up and then to get out of it on the way down. So once you get those behavioral problems aside and you focus just on the long term, that has a lot of advantages as well. It's the benefit of inaction. I've mentioned many times, my father is great at that.

Part of his portfolio is these index funds. He never looked at them. So he never gets emotionally engaged and gets panicked at the wrong time. He's outperformed all the professional money managers over extended streaks. And he knows nothing. The guy knows nothing about investing, pays zero attention, and he puts up the best performance numbers of anybody I see. And I've often said to people, if you and I take on Michael Jordan in basketball and one-on-one, we're not beating them, but my dad is truly beating the professional money managers

It's just absolutely astounding and trying to drive that home to people that that's possible is difficult But more and more people are clicking to it. And as you mentioned index funds aren't perfect They don't protect you on the downside etc. Markets are very expensive right now. For example We could have pullbacks in the next little while. But in the long term, the odds favor that they're going to give you a better performance number than a professionally managed fund.

It's that simple. We all know that over the long term, markets work. And the reason that they don't often work, well, it's not that the markets don't work, but investors fail over the short term, is because they have that short term focus. And for people who have personalities like your dad, that's a blessing, right? It is.

Because they're just not distracted by all of the things that sink so many investors. I see it in people's group retirement plans, for example, that they start their group RSP and some of them are very good. They have actually low cost index funds in there. They put money in every paycheck. They never look at it. It rebalances itself. And then like 15 years later, they look at this group RSP and it's hundreds of thousands

of dollars and they did nothing except save regularly and stay the course. That's not nothing, but it is often perceived as nothing. But that is a great insight because I have said for years that you see the proper behavior much more inside group RRSPs and 401ks. They're for whatever reason, because people know they're retirement oriented. They tend to stay away from them. They're thought of as being, you know, the company partner, et cetera. And they just don't go after them the way to self-directed or other projects.

And they just leave them alone. And the numbers are astonishing. I have a lot of friends who have multi-million dollar 401ks in the States from starting in their twenties and thirties, just leaving them alone and investing for growth. So I couldn't agree with you more. Now you brought up an interesting point. We're getting a little off topic, but in the group RSP business, a lot of funds in Canada, a lot of programs don't have the low cost index funds available.

Is that changing? Are we seeing more brought on board? I think we're starting to see more. You're right. I mean, years ago, it used to be if you had a group RSP, you had a choice between four or five overpriced mutual funds from gigantic mutual fund companies, right? And you got the mediocre performance you would expect from that.

It's pretty common now to see not only a menu of index funds, which is great if you know how to build a portfolio from scratch, but also these target date index funds, which allow people to just say, okay, I'm planning to retire in 20 years. This is the portfolio that's suggested to me for someone with that time horizon, and it's just a portfolio of index funds. And the idea is that it gets gradually more conservative as you get closer to retirement, but you don't have to take any action. The fund does that itself and I think the more you can encourage people to save automatically and keep their hands off their portfolio, the

better off they're going to be and I think a group RSP with a target date low-cost index fund like that is one of the best ways to do that. Completely agree. Okay I want to go back to something we were talking about people buying the high-cost funds etc. What's most remarkable to me whether it's the Delbar research, Morningstar, or my own research is that people not only underperform the market when they do that they underperform it by a lot more than the fee. In fact in often cases you're talking 400 to 500 basis points under performance annually

over extended timeframes. I think obviously it's because people are picking the exact wrong fund. We tend to get excited about a fund that's posted good recent performance and that often is setting us up for failure. Regression of the mean sets in, they were in the hot area at the right time, they stick with it and of course it takes a major downturn. Do you see that a lot in the research that you come across or in the clients you deal with etc. and does it not kind of stun you how bad the underperformance often is? Yeah I mean it

doesn't surprise me anymore because I've been seeing it for so long but I mean it's it's just a natural you know reaction that most of us have when we see outsized returns somewhere else. So we see it with mutual funds. We see it with stocks. If you had bought and hold a high-performing stock for 30 years, it's likely to do incredibly well. But people don't do that.

They wait for it to go up. They wait for their brother-in-law to tell them a story about how much money they made. Then they buy it. And by that time, it's on its way down and then they bail. So it's the same with funds. There are always superstar fund managers who have periods of three, four, five years

of great performance. Usually, as you suggested, because they happen to be in the right sector at the right time, if you bought large US technology companies over the last five years, you didn't have to be a genius to make a lot of money. And people will pile into those funds. And I'm not predicting any kind of downturn, but it seems likely that when you buy those funds after a long period of outperformance, you're probably going to end up disappointed.

Yeah, no, it's amazing how often I've seen that. You know where I think I had some success in arguing with people who pushed mutual funds was I would say to them, are you recommending the same funds now you were three, five, seven years ago? And to the people's credit, they almost always went, no, I'm not, and that's a good point. They got excited about one at the time,

but then that one regressed to the mean, posted under performance numbers, and now they're into the next hot thing. But it never stays that same fun. It's never because you've got a manager who truly is so wise he or she can outperform the market over an extended time frame. Yeah, and you know, to be fair to those advisors too, I mean, we all get pressure from clients to, you know, why are you recommending the same fun that you did five years ago?

And you could say, because it's a good fund. But even we get it with a passive investing strategy. Sometimes clients will just say, we've been doing the same thing for however long. The world is different now. Should we be changing our approach? We listen to them and we try to address their concerns. But at the end of the day, the answer is usually no. I mean, it depends what you mean by doing the same thing.

If you mean sticking to a disciplined plan, then yeah, we're doing the same thing. But that's not something to be ashamed of. That's what we're here for. Do you have some clients who say, I bind everything you're saying, Dan, I'm going to go index fund with the vast majority of my money, but I want a little excitement.

Okay. I want to have some speculative stocks. I want to do a little something that keeps me paying attention, gives me some jazz. Do you have clients say that kind of thing? And if so, do you kind of go with five to 10% into that type of thing? Yeah.

So I definitely have a few clients who do that. And I respect that, right? I mean, it's their money. And what we do is not very exciting. And if you want a little bit of excitement in your life, there's probably a way to do it with a different little sort of explore part of your core portfolio. Right.

I would say you're right, though. I would keep it less than 10%. I mean, 5% might be more appropriate. I would say you're right though. I want to keep it, I would keep it less than 10%. I mean, 5% might be more appropriate. I agree. And you know what? I used to be a little bit more tolerant of it. Like I used to say, hey, if you need to scratch the itch, you might as well do it with 5% of your portfolio instead of your whole life savings.

I have though over the years come down a little bit harder on it and the reason is that I find it's a huge distraction. So, you know, I will sometimes have conversations with investors who only have 5% or so of their portfolio in, you know, crypto or individual stocks, but that's all they want to talk about. Right? And I'm like, can we stay focused kind of on your financial plan, something that's actually important? And your speculative investments on the side are fine, but they're just an amusement. They're really not important to your long-term plan. And so if you can do it and have it not distract you from the main game, it's fine.

But there is always a danger that it will preoccupy and distract. Trey Lockerbie You know, I think that's true, but I think that could be a positive in a way too, that it does distract them, makes them less likely to try to time the market or do something silly with 90 to 95%. It's invested in the long-term index funds invested properly, to use that expression. So you know why I've come off it? It's not so much for the same reason as you, is that I've watched so many of my friends do it with the five, 10, 20%, they've all done poorly. And so after 10, 20, 30 years of watching them do very poorly with the five to 20%,

I say, no, stop it. You're basically just throwing money away. Now, if you get enough excitement and enough fun from losing that money, that you're actually trading it for entertainment more than investing in poorly then that's fine but in most cases that's not the situation and so I'm very hesitant to let people do that I do find a lot of younger people though feel almost a need to do it so they're doing relatively well in their 20s and 30s they have some investment capital they want a little crypto they want a little excitement and that's fine but again it's how much and

how far do you go and of course when you do that at that age if you do happen to lose it and so many do the opportunity cost is so much bigger because you've given up all those years of compounding that money. It could have made a huge difference so you and I are like-minded on all of this but we don't seem like fun people. Neither one of us. And so maybe we're coming at this from our own dull old perspective. Yeah yeah it is funny and I joked about it you know in the book that you know I've had you know met people let's say and on vacation or something and you have the usual small talk what do you do for a living and I say I'm an

investment advisor and they're like oh what are you buying these days right and I just bought this and I know I'm like, yeah, we just buy ETFs and sometimes we buy GICs if we want to really get exciting. And they look at me and it's like, all right, change the subject. Right. Like I have no stories, right. I have no exciting tales to tell you. But what I do have is a lot of clients who are going to retire comfortably and

who clients who are already retired comfortably and very happy, you know, in that situation. So, you know, you get your rewards in different ways. Well, you know, let's take that a step further. Let's look at your business a little bit. So it was PWL Capital. You just recently announced a sale to an American firm, One Digital. You'll be One Digital Canada up here. And it's more of the American model that I see. It's not surprising to me you were picked up by an American firm. So I'm going to give it my best summer and you tell me where I'm wrong. But basically you're dealing with high net worth individuals.

They're coming to you. They're paying you 80 to a hundred basis points a year type thing. And you help them to build a portfolio, but much more importantly, you help them with their overall financial plan, tax planning, estate planning, are you properly insured? Are you setting aside the desired amounts for your kids' education? It all is taken care of within that 100 basis point, 80 basis point charge. That's the true value add. They may be able to go out and create the portfolio on their own if they're willing to read your book and do a lot of podcasts, listening, et cetera.

But what they probably can't do is the estate planning, the financial planning, et cetera. Do I have that right? Yeah, I think you're bang on. And it's interesting because a lot of clients that we've talked to after we made the announcement about the acquisition, people say, well, that's interesting that a US firm picked you up. And I said, yeah, it's interesting, but maybe not for the reasons that you think, because I actually would agree that our model, which we're big believers in this idea that financial planning comes

first and investing is a tool that you use in order to accomplish the plan. So well said. Couldn't agree with that more. But that is not really the dominant model in Canada. It's not. It's much more common in the US. And for all of the issues that we model in Canada. It's not. It's much more common in the US.

And for all of the issues that we may have with the US financial system, in terms of the advice model that they have created, they're a decade ahead of Canada, right? And have been for a long time. Yeah, and they had the fiduciary responsibility. But again, you're so right about the US. So if I look at my American friends who are well-heeled, I have a lot of normal income American friends too, but let's look at the wealth heal group. They all use the model that you're talking about. Literally every one of them.

They're paying somebody anywhere between again, 60 and a hundred basis points to manage their money, give them a holistic financial plan, the insurance needs analysis, the whole shebang. That's how they do it. Any other way would seem odd to them. Like that just, and by the way, the whole shebang, that's how they do it. Any other way would seem odd to them. Like that just, and by the way, a lot of them feel it's quite a good deal.

So they look at it and they go, you know what, we think that that basis point charge for what we're getting back, more tax efficiency, because we're not missing things that we would if we were doing it on our own, we're not getting biased advice. They quite like the structure. I don't hear complaining about it.

Yeah, no, I think you're right right and I think it's very easy for An advisor who does both investment management and financial planning to add value at that fee level and You know our average fee is well below 80 basis points for the record And it's you know, it's quite easy for us to add value at that level The Canadian model is much more likely to be go to the bank, talk to someone who maybe passed the Canadian securities course and not much else, buy an expensive mutual fund, talk to them once a year during RSP season, is that still a thing? And get no planning, right?

And then- I agree, although I would argue a little bit, and I would say that that's also the American model for the non-high net worth group. Okay. Okay, so the high net worth group in the States has shifted over to the model you're using, only partially so in Canada. But it's very difficult to really nail a good business model to help people of modest income and modest wealth because there's a lot of time involvement in developing these financial plans.

I think technology is really going to help. Some of the things we're seeing in the AI space, for example, three to five years from now, everybody may have access to very strong financial planning, including people with less money. So I think that problem goes across the borders. But for well-to-do people, the model you're offering, I think, makes perfect sense. Yeah. And you've hit on a really important point. And it's something that has always,

I think, been troubling for me, which is that I'm a big believer in what we do. And I know that we're helping our clients. But I also know that we have a minimum portfolio size that is much higher than the average Canadian can afford. We are not able to work with everyone. I would love to be able to help an investor who came to us with $100,000, but there's just no model where we can make that work. The fee that we would have to charge you to keep the lights on would not be a good deal

for you. But I think that the encouraging thing is, as you said, the technology is improving. The products are better. I mean, you can now buy these very low cost balanced ETFs that are really all anybody needs. And this is a mixed blessing. There's lots of information available for free on how to invest and how to put together

a basic financial plan. It is a varying quality. I'm sure you will agree. But the point is there is excellent information out there if you know where to look. And anybody who is willing to kind of put in a bit of effort into learning it and to doing a little bit of the legwork themselves can build a portfolio and put together a basic financial plan on their own until they've built up enough wealth that it makes sense for them to work with an advisor where they can pay a modest fee and get good value from them.

Now, I agree with all of that. That makes perfect sense to me. What do you read for your investment area? You don't read a lot of the how to pick stock books because you don't believe in that. What are you reading? Are you reading books on economics, for example? The honest answer is I read a lot and I almost never read investing books anymore. I feel like I did that for a few years of my life. It was almost the only thing

that I read. Um, and I've just gotten to the point. It's not that I think I know everything by the opposite. I realized that, one is ever going to know anything and that the best service that I can provide to clients is not getting smarter about academic studies or economics or things like that. It's learning to listen to people better, learning to understand what they need. And then relying on the fact that I have the basic skills to implement an investment plan and a financial plan without having to read every new book that comes out. So, you know, I try to read a nice mix of fiction and nonfiction, but mostly it isn't investing.

But you still read The Wealthy Barber once a year, just to keep it top of mind. I still have my old dog year copy that my dad got in 1989. What year did it come out? 1941. Yeah. 1941. Now, the other thing is you really don't have to read because you work with Ben Felix. That's right.

I let him read. He's essentially a human library and you can just say to him, Ben, can you give me an answer on this question? He'll spit it out with 48 supporting documents. That's right. I just get the AI summary of whatever Ben reads. Ben, he is AI. He's artificial intelligence.

That's what applies to economics, business, and investing. He's a very, very sharp guy. And is he the tallest person you've ever worked with, by the way? He's the tallest person I know, for sure. Yeah, I would hope so. I would hope so. All right, now let's get more to the crux

of the matter of the index funds. Okay, you've sold me. I would hope so. All right, now let's get more to the crux of the matter of the index funds. Okay, you've sold me. I want to keep my costs down. I don't think I can outperform the market. I want to just take market returns, less a small fee. How do I choose the index fund? How do I choose the asset allocation aspect of it? Do I go all US? Do I go US and Canada? How much bonds? How much thoughts? All of this. How do I think through these different things? Yeah, that's a lot to cover. And I would say that let's start at the top level, like basic portfolio construction. If I'm starting from scratch and I want to build a diversified portfolio, what building

blocks do I need? And I would say the easy answer to that is some amount of fixed income, so that's bonds and or GICs, and the rest of the portfolio in stocks with a mix of Canadian, US, and international stocks. Now, the exact proportions of those doesn't really matter, but as a rough rule, one third Canada, one third US, one third international is not a bad starting place. You can certainly tweak that. I'm not going to die on that hill about what's the optimal.

But something like that. All US large cap tech stocks not diversifies. A mix of Canada, US, and international, that's a diversified equity portfolio. And then on that fixed income, that bond GIC side, the size of that part of the portfolio really depends on your risk tolerance and your ability to deal with volatility. So if you're the type of person that can weather a 30 or 40% decline in your portfolio in six months, which should be expected if you're 100% stocks, then great, go 100% stocks.

Most people cannot stomach that and so should dilute that a little bit by adding some more stable fixed income, which just makes the portfolio less volatile. But if you've got those basic ingredients in there in whatever proportion is suited to you, that's the right starting point. And there are index funds available in all of those asset classes. Yeah, we'll get to the asset allocation funds in a second. When you look at the group I write for with the wealthy barber, I'm rewriting it right now for people in their 20s, 30s, maybe kind of 22 up to 38, just to throw out the numbers.

I often push that group to be quite aggressive. They don't have a huge lump sum. Instead, they're saving monthly in their RSP, their TFSA. They can take advantage of dollar cost averaging. I push them to go almost exclusively into stocks, but with all the warnings about the volatility, but reminding them that the volatility can be their friend. At the time, it's gut wrenching as they see the market fall 30 and 40 percent, but they're still in their buying on a monthly basis, and hopefully over the very long term it'll play to their advantage. For that

particular group, more or less just starting out, not a big lump sum, do you think being more aggressive like that makes sense? For sure, it definitely makes more sense, and certainly if you look to the long term, you know, anyone who is, you know, more aggressive and is able to withstand those ups and downs with discipline will get rewarded in the vast majority of cases. And I totally agree in theory that if you're under 30 and you've got a very long time horizon, a 100% equity portfolio is perfectly reasonable. But I would give the caveat that most people overestimate

their risk tolerance. So you can ask them, how would it feel if your portfolio declined 30% or 40%? And they would say, well, I wouldn't really be happy about it, but I think I would be OK. And then their portfolio falls 10%, and they lose their minds, right? That is quite common, right?

The other thing is a lot of times when people will get started in investing, let's say if you were to do it now, well, we've just come off two outstanding years in equities. And you look back at those double digit returns, and you say, well, of course I want to go 100% equities. But think about the people who made that decision in 2007 or, you know, in 2019 and had to go through the COVID crash as short-lived as that was, or even 2022. It's all very well to

talk about your risk tolerance. It's the analogy I always use. It's like saying that you've flown in a flight simulator, so therefore you know what it's like to crash a plane, right? It's it's you don't until, so I would say my usual advice there is start out reasonable, like you can go 80% 70% stocks and wait for your first bear market. And once you've lived through your first bear market, and if you were able to do it without, you know, getting off track, then I think you've proven yourself that you can probably go more aggressive.

Well, two things on that. One is this goes back to my father. He is so good at this because when the markets go down 10 and 20 and 30%, he doesn't know the markets went down 10 and 20 and 30%. He knows the Tigers lost four, three in extra innings and that upsets him greatly. That puts his panic a level high, but he doesn't know the market's down. So of course he doesn't panic. But what about the people out there who do your point that, oh my gosh, I

can't believe it's down 30%. They are very upset. They are much more emotionally damaged than they thought they would be, but they don't get out. So they stay the course and I'm finding a lot of younger people are getting better at this. They're thinking, okay, I've got to stay in. And so when you had the gut wrenching downturn where March 2020, for example, a lot of the younger people I knew didn't get out, they were frustrated.

They were a little panic, they were down, but they didn't get out. So is that okay? If you think you have that kind of mentality where, yeah, this is going to bug me, but the risk tolerance level is still okay because I'm not going to panic and get out. Yeah, that's going to bug me, but the risk tolerance level is still okay because I'm not going to panic and get out. Yeah, that's exactly what I mean. Like, I don't mean to suggest that you shouldn't have any emotion. I mean, I can tell you March 2020 was one of the longest months of my life because,

and I mean that quite seriously. Like, I mean, I was physically sick for some of those days when I'm looking at the markets going down. There was one day I think it was down about 12 percent. I thought I remember it well. Right. And here I am responsible for the life savings of a hundred households. I mean I take that responsibility very seriously and I was quite upset about it. But we didn't panic. We did the opposite. I mean we rebalanced during those couple of months.

We were selling bonds and buying stocks, which our clients were rewarded for that over the long term. But I don't mean to suggest that there's no emotion, because absolutely there is. But the emotion has to be checked. And the way you do it is you have a process in place. And so when we were rebalancing portfolios in the middle of that, do you think my rational brain

or my emotional brain was thinking, this sounds like the right thing to do, right? It absolutely wasn't. It was screaming at me not to do this. But I knew that it was the right thing because we had this well-developed process. So if you're a young investor and you went through that, and it drove, like you were upset about it,

you were emotional about it, but you didn't do anything, then to me you've proven that you can withstand that kind of volatility. And yeah, you can probably go more aggressive in the future. You know, a friend of mine, Pete Black, I'll give him a shout out, called me the day you're talking about where the markets were down 12%. I was discerning him, and we're all locked in our houses at that time.

And he called me and said, I've got to sell. Like I'm a little older. I've got to sell. Are you selling? And I said, honestly, I'm buying a lot of different things that I'm stepping in and buying a lot, and it really tended to soothe him. He didn't panic and get out. He's never even bought me a lunch by the way for, for helping them.

And I mean, I've been a big difference in the guy's life. And then he came to see me last year and I paid for the golf. This tells you about a lot of the friends I have. They're very, very cheap people. But yeah, anyway, he didn't panic at that time, but it is tough. You're right. It's gut wrenching. I think it's worse for you, by the way, even when you're handling other people's money, the guilt and the down feelings are even more dramatic because you're a nice guy and you want to do well by them and you're a little

worried about it but thank heavens you stayed the course, did the rebalancing because of course since then markets have been outstanding. Yeah it was it was interesting because and I don't want to smugly say that you know we knew it would recover as fast as it did because of course nobody did. Nobody knew. But but we you know when we were doing rebalancing in the spring of 2020, we ended up having to rebalance the other direction before the end of the year because equities recovered so quickly. Now everybody was overweighted equities and we were selling what we had just bought to get us back.

So I mean, think long term. If you're able to capitalize on those downturns by rebalancing in a systematic way and then trimming your holdings when they go way over weight, that's a pretty powerful strategy. And it does sort of push back against this idea that index investors or buy and hold investors do nothing because we do more than nothing. That rebalancing, it's just that it's systematic.

It's not based on our sentiment, right? How did your clients handle when both bonds and stocks went down simultaneously? That must have been an interesting experience watching the reaction. Yeah, I take it back when I said 20, March 2020 was the longest month in my life. All of the months in 2022 were actually just as bad, maybe

worse. Yeah, that was a very, very difficult time as well, because we had spent so much time telling people the reason why bonds are in the portfolio is to protect you when stocks go down. And here we were in a period where everything went down. And in some cases, I mean, bonds had periods where it was almost double digit losses, it was just phenomenal.

And. You know, I don't know what we like, that was definitely a time where we had to say to people, look what we had in place, you know, definitely appears not to be working. But we also had to say, well, what would have worked and what realistically could we have done? People will say things like, well, we all knew interest rates were going to go up and bonds were going to suffer. I said, really?

We knew bonds or interest rates were going to go up 400 basis points in 18 months? That had never happened before. Never. So you can't protect against everything, but I will say, and I've been having, you know, review meetings with clients just in the last couple of months, and now we're looking back at three-year returns, which started with that brutal 2022, but then we're followed by two really good years. And I said to them, like, look, you know, you look back at your three-year return now,

and it's pretty much what we had projected for your long-term expected return. And it's just a reminder that if you hang in there during those bad years, they are pretty frequently followed by good years. And if you'd bailed out there and not gone back, think of all of the returns that you would have missed in 2023 and 2024. Well, and of course, when people do that, they Dave Chilton it, they end up going backing in when the markets are high again, because they're so upset at the returns they've missed and they set themselves up for a downturn.

So I agree with everything you're saying. When you are doing a financial plan for people, what things are you looking at? You're doing estate planning, insurance needs analysis, savings, the whole thing. Yep. Now, I mean, I don't want to oversell what we do in the sense that, you know, we're not accountants, we're not, you know, professional estate planners. Um, but yes, we look at all of those pillars. So, you know, the first sort of thing is what's your cashflow like today?

Are you able to meet all of your expenses comfortably? And if not, we need to look at the different levers that we can push and pull there. Um, and then there's the investing side as well, making sure the clients are saving in their registered accounts every year if they can, and that we project that, you know, by retirement age they will have enough that their portfolio will be able to sustain them. But that's right. And then we look at their different life stage for insurance, you know, if they're young parents, they've got young kids, they need to have a lot of life insurance. If they're young parents, they've got young kids, they need to have a lot of life insurance.

If they're older, maybe their kids are no longer dependents, but they have big tax liabilities when they pass. There's other insurance products that we can do that. And on the estate planning front, yeah, we just make sure that they have wills in place, powers of attorney. It's pretty surprising how many people don't have those things.

It's shocking. Yeah, or if they do the wills 20 years old and you know, the person they've named is their executor has passed away before them. And it's like, you know, we really got to get this updated. So my father had two executors, joint executors, and they were both dead. Yeah. So both gone. And I said to him, dad, they're both dead. And he goes, yeah, that's not ideal. That was his expression. It's not ideal. It's suboptimal.

Yeah. It's suboptimal for sure. Two dead executors. So no, you're right. I see it all the time. In fact, I see all kinds of people who don't have powers of attorney. Going back to your insurance comment, I just put a video out a couple weeks ago. I've been helping a lot of younger people with their financial plans.

Ladies, I rewrite the book just to stay in touch with what's happening out there. I'm amazed how many younger people are not properly insured and not even close. To enough insurance. If they were to die and they left a spouse and two young children with all the debts they have, oh my gosh, they'd be in big trouble. And the funny thing is the insurance, not very expensive. That's I set them up to get the proper amount of term. They're healthy.

They're non-smokers. They go, that's all it costs. And they're not doing it crazy. I think, I think you're right. I think young people might not realize how affordable term life insurance is. I mean, if you're young and healthy, it's, it's an easy decision.

Um, it is. And you know, I have a few clients, you know, unfortunately I've had like a spouse pass away, uh, relatively young and there was insurance there. And I know like these clients say to me, if you ever need to make the argument to other clients, tell them about my situation. It's life changing.

Right. It is. And look at the cancer incidence rates among 20 to 40 year olds, but especially female. They're rising significantly. I mean, you have to be properly insured against those risks. And yeah, I was quite disappointed at how often I'm seeing this now. insurance coverage in a couple instances a specific example

I'm seeing a lot an area that it's really problematic is successful entrepreneurs I think successful entrepreneurs are busy and oftentimes don't think all of this through but they're putting themselves in a very very tough spot you know one of the challenges I'm switching the topics here as you deal with your client base whether it's ultra high net worth or I'm dealing with normal income people but they're a little bit older. Wouldn't it be nice if we knew how long people are going to live? It would make this whole planning process so much easier if I could say to people, I need you to die at 84 or 92 or whatever, then I could lay it out just perfectly.

Yep. People say like, when should I start Canada Pension Plan? I say, well, when are you planning to die? Right? Exactly. Because that's the only way you know the op. I'm being facetious, but the idea is- No, that's, you're not being facetious, you're right. That's the only way you really know the optimal decision. Yes. So, so that's the, and I always try to kind of resist the idea that a financial plan can be optimal.

I mean, a financial plan can be excellent or it can be poor. Um, but it's very hard to say with confidence that your plan is optimal because you need to know the future. Not only do you need to know when you're going to pass away, which nobody knows, but also just what might happen to you in the future, just with your health. You don't have to pass away, but what if you need to sell your home? What if you're, I mean, for a younger person, I mean, something could happen in your career that could fundamentally change your situation. So, you know, you try to get away from this idea that there's a set and

forget optimal plan, because there isn't. The idea is to actively plan every year and just keep revising it. You know, it's that old cliche that the plan is worthless, but the process of planning is invaluable. And it's true. No, it's not, it's not a, it's not something that you do once and then move on. You got to revisit it constantly. It's one of the reasons I really push people to spend so much less than they make. It's not just to have the savings, but there's a buffer.

There's a safety there. If things go wrong, and they so often do go wrong now, and with AI coming, let's be honest, we can't even guess the impact it's going to have on the job market in certain sectors. And I think people have to be aware of those risks over the next three to five to 10 years and plan accordingly going forward. Going back to CPP, Ben and I talked about that. In fact, we're going to do a podcast on it at some point soon. I'm of the mind after looking at it extremely carefully that the vast majority of people

should take it later and not everybody, but most people should take it later. And not everybody, but most people should take it later. Are your clients thinking that way or are they taking it as early as possible, like so many Canadians? Definitely not as early as possible. So I do think though that that's a decision that is very individual. I mean, just briefly, I would say my starting point in most cases is 65, right? I know that there is a lot of value to deferring to age 70, but I would argue that that is much more likely to be the case for people of moderate income. Maybe this is a group that you're working with more and more.

A lot of our clients have some significant wealth and their portfolio will be sustainable for their whole lives. And so there's not really that much longevity risk. If they live to be 98, they're still going to be fine. Their wealth covers them off. Yeah. The higher CIPP benefit will help, but it's not going to be the difference between them meeting or not meeting their goals. Um, but you do pay a pretty high price to take it before 65.

And, uh, but I do have clients, you know, again, who've, if they've retired early and they need the cashflow, um, and we, you know, then, then it can make sense. Right. Um, totally. Yeah. Are you seeing a lot of your clients giving kids and grandkids money to help them with down payments, et cetera? I'm seeing that over and over again now. Yeah. Are you seeing a lot of your clients giving kids and grandkids money to help them with down payments, et cetera?

I'm seeing that over and over again now. Yeah, very common. And sometimes they can afford it. And other times, honestly, it's almost to their detriment that, you know, we have to have a talk and say, look, I understand your desire to be generous here, but you're putting potentially your own retirement in jeopardy. Just went through it. Just looked at the math with a colleague of mine. He wanted to give 250,000 to each of his two kids to help them with the down payment. I looked at all his math and I

said, I think you can do it, but I need you to die at 72 because otherwise I think this could end up being a big problem. And remember, you're not getting the money back. Yeah. And so it's gone. And I think that some people are going a little bit too far right now. I think it's great to help out your kids and grandkids. But you do have to strike a balance with your own needs as you go forward. And of course, retirement, late life retirement

is ending up being more expensive for a lot of people than they anticipated because of assisted living and everything else. I think, and this is where a financial plan is super helpful. I was working with a client in his 80s who had the same sort of thing. He's like, if I give each of my kids a gift,

and it was in that ballpark to 250,000 each, can I still have enough for myself? Well, it's pretty easy to do that with a financial plan. You just remove that amount from their accounts and then run the projections again. And if you're still coming up with a 98% success rate, then yeah, you're, you can do it, but it is pretty common. Like if you're going to do it younger, like he was in his eighties, if you're

going to do it in your sixties, well, there's too much uncertainty after that. And if you have the means that you can give your kids an early inheritance, sometimes people will say that, but if you're going to call it an early inheritance, you need to be very confident that when you pass away, your estate's going to be at least that big. Right? No, I completely agree in your point about the 60s versus the 80s is the pivotal part. Yeah. So I've seen some grandparents do it because they're so old, it's de-risked.

But when somebody does it at age 62, like my colleague, that's why I said to him, you have to die at 72 because otherwise your math isn't going to work out. My father, by the way, is always trying to get money from us. Yeah. He's always reaching out to the grandkids.

Ask me if you have 250,000. Can you pick me some lunch up? Can you get me this? Can you take me to Florida? This guy's got it figured out. Okay. He is, he's the opposite of everybody else out there. I mean, it's really yeah He's quite the good good person when it comes to financial planning. Okay, we'll wrap up It's been long and very helpful, but I want to go back to your area specialty ETFs

The all-in-one ETFs I get asked about them all the time when you look at the comment section on our videos One of the most common things that comes up people want to know about them. the time. When you look at the comments section on our videos, one of the most common things that comes up, people want to know about them. What's your thought? Well, I'm a huge fan of them. And I think for do it yourself investors, it's pretty difficult to beat. And one of the things that I've noticed, like, remember I've, you know, spent my whole kind of career as a financial journalist talking about the importance of fees.

And when I started, no one was listening. And now everybody is so obsessed with fees that I almost feel the pendulum has swung the wrong way. And what I used to get all the time when those all-in-one ETFs came out was, but I can just buy the individual components and it's like nine basis points cheaper. Right. Well, okay.

I mean, so a couple of things do the math on what difference nine basis points makes over the course of your investing career. It's not nothing. Um, but it's probably not going to move the needle very much. Right. When we were talking about low fees, I was encouraging people to go from 2.5%

to 25 basis points, right? Like 10 times as much. Now we're talking about going from 20 basis points to 12. Yeah. Yeah, exactly. Or 9. So I guess what I'm getting at is don't just look at what is the absolute cheapest. Look at what is the best way to manage a portfolio over the long term.

And I can assure you if you buy those individual component ETFs instead of the all-in-one, your portfolio is going to be out of balance very quickly and you're going to resist rebalancing it because the last thing anybody wants to do is sell what's done well recently and buy what's done poorly. So don't underestimate the value of the rebalancing mechanism inside those ETFs because it's hugely valuable from a behavioral perspective and probably worth more than nine basis points over your investment career. career. That answer is exactly what I say on stage. Exactly. Is that the nine basis points are easily covered by the fact that balancing is

automated, done for you. And the key thing is then it takes out your behavioral challenge. Cause you're right. None of us wants to rebalance when something's ripping. It's just human nature. So I agree. How often do these rebalance annually? I believe it's quarterly that they do. But the other thing is that because these funds are so popular, they have inflows all

the time, like new investors are adding new money. So every time new money comes into the ETF, they rebalance on the fly. So they will only actually need to sell anything and buy if the market moves very dramatically. Right? So over the course of a normal year, they're probably just rebalancing with those cash inflows and you're always on target. You don't have any major rebalancing trades. And when I buy the all-in-one, I can buy as I'm trying to get 80% stocks, 20% bonds, but also the asset allocation throughout the world.

I can set it up that way. I can cover almost everything off that I would want. Yeah, well, we were talking earlier about the building blocks of a balanced portfolio, and it was like a globally diversified portfolio of stocks plus bonds. That's what's in there. I forget the number, but it's somewhere in the neighborhood of 20,000 stocks that are

in some of these all-in-one ETFs. I mean, try to imagine building a portfolio like that, not even with individual stocks, which is impossible, but even with sort of sector ETFs or these other building blocks. I mean, you get everything. Vanguard estimated, I think, at one point that one of those ETFs represented something like 95% of the investable market in the world. I thought, that's a pretty nice slice of the global economy that you can buy for 25 basis points or whatever the fees are now. I hate sector ETFs, by the way, and I hate them for a very, very straightforward reason. Everybody I know who uses them underperforms.

It's that simple. So I don't have any, like it's just everybody I watch tends to go into the wrong sector at the wrong time. And you just see repeatedly, all right, last question. This is the biggest challenge of your entire career. Uh-oh. I want you to explain to our listening audience without boring them, I want you to explain to our listening audience without boring them,

US withholding taxes on US index funds, how it affects them, what the proper approach is to minimize the damage. And again, if you bore people, we will slam you. Go. All right. Well, that's quite a challenge. All right. So the basic idea here is that if you're a Canadian investor and you hold US stocks and

those US stocks pay dividends, the US government withholds a portion of those dividends as withholding tax. It's typically 15%. Right. 15%. That's right. So if, for example, you hold US stocks directly in a taxable account, and let's say they withhold $1,000 in withholding tax, that comes right off the dividend

before it's paid to you. Now, if you file your taxes correctly, you can typically claim a foreign tax credit and get it back. So that's the good news. If you hold that US stock in an RRSP, it's exempt from the withholding tax. We have a tax treaty with the US that says

any withholding taxes do not apply in retirement accounts. So if you're gonna hold US stocks- That's RIFS too. Yes, RSPs, RIFS, Liras, all of those associated accounts. If you were to hold those US stocks in a TFSA, that exemption does not apply. That is not considered a retirement account according to the US government. So you pay the withholding tax in the TFSA. And you remember

I said if you hold it in a taxable account, you can get the tax credit and recover it. Not the case in the TFSA. You lose it, you never get it back. So that's the basic. It gets a little more complicated when you're buying Canadian ETFs. Because if I buy a Canadian ETF from Vanguard Canada, iShares Canada, and it holds US stocks, that withholding tax is taken off at the fund level, not at you or at your personal level. And so if you hold that ETF in an RRSP, remember we said the withholding tax is exempt in the RRSP? It's not exempt now because it's withhold at the fund level, and the fund doesn't know that you hold it in an RRSP. So you lose the withholding tax there.

So there's an argument for if your goal is true tax efficiency to use US listed ETFs in an RRSP, but to use Canadian listed ETFs in a non-registered account and even in TFSA because it doesn't matter either way, right? You're going to lose the withholding tax in the TFSA either way. So it makes sense. It's interesting. So what's the dividend rate right now in the standard and poor is 1.8, 2% type thing?

That's what I was going to say. It would be one thing if the stocks were paying 4% or 5% dividend. That 15% is a lot. But yeah, it's less than 2%. Now, in fact, it's closer to 1% than it is 2%. Right, so even if it's 1.5% and you lose 15%, so you lose 0.225, 22 basis points, what it really is

is a slightly higher expense ratio to gain access to the US market. That being said, I still think people should do what you said and manage it in a way that they get rid of it. Yeah. And that makes a lot of sense. You just have to remember that there are some other costs associated with holding US listed ETFs in your RSP. You typically have to convert your currency from Canadian dollars to US dollars, there's usually a cost involved in that.

It's a little more complex. It makes rebalancing more challenging. So it's definitely the most tax-efficient strategy if you can pull it off. But if you are layering on a bunch of additional costs in order to do it, you might have outweighed the benefit. I completely agree. In fact, the darn currency, it kills you when you're moving back and forth the currency. Some of these companies charge a percent to a percent and a half every time you do it.

Yeah, or more. And that negates all of the things we just spoke about. Yeah. So couldn't agree more. As mutual funds have come down in price, but I think currency conversion fees is the last bastion of unfair fees in the financial industry. Absolutely agree. No, no doubt about it.

If you were going to talk to the masses and you're saying, okay, what platform should they be looking at to do some of these things? Is it the wealth simple, the quest trades, the ones you hear the most about? Yeah, I don't like to endorse kind of any specific one. Um, I, usually the advice that I give to people, especially if they're not very comfortable in online investing, like they had never done it before, right. Like one, usually the advice that I give to people, especially if they're not very comfortable in online investing like they had never done it before. Start with the brokerage that's associated with your bank, not because I love big bank

brokerages, but just because they're mostly decent and there is something to be said about having your bank account and your investment account in the same place, on the same screen. You can make real-time contributions to your RRSP and TFSA. It just simplifies things a little bit. All the big bank brokerages now are pretty much the same in terms of their pricing. There's no individual one that's dramatically better or worse

than the others. There's some differences. But then if you're comfortable with online investing and you want lower costs and you want especially, for example, zero fee ETF commissions, then you can start to look at some of the other ones, the Quest trades, the Wealthsimples. The one fear that I have sometimes with online investing platforms is they like to lure you in with zero fee ETFs. And then you have to ask yourself, why is this brokerage offering me a chance to invest

my money with zero fees? And their answer is because they were hoping that you will be enticed to make other types of trades where they do earn a lot of money. Absolutely. So they want to start options and all of these other things that they want to lead you into. So if you are very disciplined and you can stick to this idea that I'm going

to invest in this low fee brokerage and I'm only going to buy ETFs with no commissions, do it. But just be aware you're probably going to get emails tempting you to do other things. Couldn't agree more. Dan, you and I didn't disagree on a single thing. That should scare you. Like I'd probably retire if I were you.

I'd say something is off, like I'm not doing what I should be doing. We're both in an echo chamber here. I'm going to, by the way, freeze frame this when I watch it back and I'm gonna check out every single book on that bookshelf behind you. I'll learn a lot about you. What are you reading? What have you read? Or what do you want us to think you're reading? That's right. You probably haven't read those books.

You just put those out there that look very sharp. Anyway, it's so nice of you to find the time. We're gonna get Mark on the show at some point as well. I told him we were gonna have him on, but I haven't phoned him back. I'm just trying to, you know, make him simmer. Wonder if something's gone wrong. Maybe I don't think highly of him. That kind of thing. But, no, you're a great guest, you know, make them simmer. Wonder if something's gone wrong. You bet don't think highly of them, that kind of thing. But no, you're a great guest. And you know, one of the things that you should be very proud of is everybody who's ever dealt with you says you're a very nice guy.

Oh, thank you. That's come up over and over again, over the years when your name has jumped into conversation. And at the end of the day, that's one of the most important things in life that you're treating people well. And I, even when I called you, you're very generous with your time. When I first reached out in 2010 and I appreciated it so thank you so much for coming on and nothing but the best in the future. Thank you so much I

appreciate it.