Episode 100: The Worst Advice Ever | So Far

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The naked truth about all things finance, from a Canadian perspective. This podcast is created and delivered by Verecan Capital Management Inc.

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In this episode of the Bear Naked Money podcast, the hosts discuss the worst financial advice they have ever heard. Each member of the team shares their own personal experience with bad advice, ranging from investing in high-risk private equity investments to chasing high dividend yields without considering the overall health of the company. The hosts emphasize the importance of seeking professional advice and conducting thorough research before making financial decisions. They also highlight the dangers of following advice from friends, relatives, or unqualified individuals. Overall, the episode serves as a reminder to be cautious and critical when receiving financial advice.

Announcer (00:00):
Welcome to Bear Naked Money, the podcast where we stripped down the complex world of finance to its bare essentials. With your hosts, Josh Sheek and Colin White portfolio managers with Raan Capital Management, Inc.
Colin White (00:12):
Welcome to the next episode of Bear Naked Money, where we have had the unabashed audacity to launch a podcast named The Worst Financial Advice Ever. Now, Josh, I think we may have overstretched with the title for this one because I think that that's a pretty high bar, and I'm not convinced that I've seen the worst financial advice I'm ever going to see, so I can't wait to see what we find.
Josh Sheluk (00:37):
Well, you forgot to say, Colin, this is not just the next episode of Bare Naked Money. It's a very, very special, important episode of Bare Naked Money, a bit of a milestone. It's our hundredth episode.
Colin White (00:51):
You're right. So this is the appropriate moment to reach for the stars.
Josh Sheluk (00:54):
That's right. You
Colin White (00:55):
Reach for the stars, you may land on the moon, but we're going to reach for it.
Josh Sheluk (00:59):
And we did not think by any stretch that we've seen the worst financial advice ever, which is why we're bringing a dozen or so of the smartest people from our team into the room to talk about the worst financial advice they've ever seen. So we can try to reach for the stars. Maybe we'll land on the moon.
Colin White (01:19):
Yeah, no, and it's interesting. To my knowledge, we haven't given them a lot of guidance as to where they should go mining for their particular example, because philosophically there's different ways to judge something as being bad. Something could be just bad on its face because the math doesn't make sense or the outcome was terrible and maybe that's what made it bad. So I'm curious to see what people define as bad.
Josh Sheluk (01:42):
Yeah, I was saying to you before I kind of went two directions with this. Do I look for the thing that just makes the absolute least amount of sense possible, or do I look at the thing that's been maybe the most destructive, that's burned the most dollar bills that we can find? And I don't know. So I'm excited as well to see, because I think we are going to get a pretty good cross section of bad advice that's out there.
Colin White (02:06):
And I guess the most important part about this is we haven't had to make that decision. We have democratized the entire journey as to what is bad financial advice. So we should get answers in all the different spheres and maybe even spheres that we haven't even considered. So color me excited.
Josh Sheluk (02:24):
Great. Well, I'm excited. We're going to invite our first guest in here now.
Ainsley Mackie (02:28):
Sorry.
Josh Sheluk (02:30):
No problem. We got you
Ainsley Mackie (02:31):
Now. I had to say yes. I'm okay with it recording. Otherwise it wouldn't let me share my screen.
Josh Sheluk (02:36):
Okay. Sorry about that. No problem. Who knew we were recording a podcast? Right?
Ainsley Mackie (02:42):
Exactly. Yeah.
Josh Sheluk (02:44):
Well, Walter Ainsley, we are here. You are our first guest, so you are going to have to set the bar really, really high for the rest of the guests. And why don't you kick us off with the worst financial advice you've ever heard
Colin White (02:57):
Before. She does that. Josh, you want to give her the big introduction?
Josh Sheluk (03:02):
What's that?
Colin White (03:03):
Well, who Ainley is and what her role is and all those other, you were the one that brought that up before we started.
Josh Sheluk (03:11):
I just brought this up. I got thrown off.
Ainsley Mackie (03:15):
You're doing this to set me at ease. Here we go. Okay. Yeah.
Josh Sheluk (03:19):
So we have Ainsley Mackey here, portfolio manager on the team. Ainsley, how long have you been working in the business now?
Ainsley Mackie (03:26):
Almost 20 years. I
Josh Sheluk (03:28):
Can't that almost 20 years. Yeah. Can we round up and say 20 years? Are you starting to say that yet, or are you more so rounding down to 10 years?
Ainsley Mackie (03:35):
I am definitely rounding up. Yeah.
Josh Sheluk (03:39):
Okay, good. Well, you've no doubt seen a lot of bad financial advice in your time, and you come from a particularly special part of the world Nelson vc, which there's maybe some off the wall financial advice as well. So I'm really curious to see where you're going to take us with this one.
Ainsley Mackie (03:56):
So typically, based on where we live, I would like to take us down the anti-establishment route. However, I wanted to bring up one that has stuck particularly hard in my mind for the last decade. Essentially, we had a client who was diagnosed with a terminal illness, short life expectancy, and he wanted to protect his wife and his pension, make sure she was okay. So he opted to commute his company pension to a lift and have it privately managed, which is a great idea. But he decided he would shop around and see what other advisors had as an option outside of our office. He had an advisor that was highly recommended by a family member. So he went and interviewed them, went to Kelowna, checked it all out, came back to us and said that this advisor could offer them 12% returns every year with low risk.
(04:53):
And we said, well, there's absolutely nothing in the marketplace that could do that for you. So against our recommendations, they opted to go with this other advisor firm. And the reason why this story had stuck with me, I found out five years later that everything had, pardon me, had been put into private equity investments. Everything ended up being locked in. The portfolio value went down about 90%. So all of their intentions to protect his wife when he does pass, it was all blown out the window because sometimes when what you hear, it seems to be too good to be true. It actually is too good to be true.
Colin White (05:33):
There's a lot on that onion to unwrap because you led with commuting a value of a pension. To be self-directed is a good thing. I don't think you could call it universally a good thing specifically for this reason, with great power comes great responsibility. And unfortunately, the world is such a place that you can't underestimate the pressure that you take on to yourself when you elect to remove your money from. And again, Josh and I have done podcasts picking on pension funds and how they're not reliable in some cases and all that kind of stuff, but again, they're not likely to go down that far of a rabbit hole for sure. So that's tragic on a whole bunch of levels
Josh Sheluk (06:17):
And sad and tragically, all these things when you started with terminal, I was like, okay, great. Ainsley, thanks a lot for starting us here,
Ainsley Mackie (06:25):
Kicking it that way.
Josh Sheluk (06:26):
Yeah. Yeah. But yeah, it seems, I mean, I'm sure the unfortunate thing is with a lot of these scenarios that we're going to go through, the advisors probably going to get compensated quite well for it, whereas the client themselves are losing out and there's a real mismatch in terms of what the client is prioritizing and what the actual recommendation was in this case, which is a tragedy on itself.
Ainsley Mackie (06:51):
And the other thing that we did find out is that the advisor was only ever insurance license, so he really had no clue what he was selling.
Josh Sheluk (07:00):
Right.
Colin White (07:02):
And unfortunately, the advisors do get paid very, very well on the private equity side, and there is a huge liquidity. And because it's more opaque, it's not subject to the same disclosures as regularly market traded mutual funds or ETFs, they get away with a little bit more and they can make forward-looking statements a little bit more, which again, is tragic on its own level. I mean, this is the kind of stuff that I kind of jump up and down and say, the industry is at fault for letting these things exist in this way. But yeah, so the bad financial advice in this case, I guess we're going to have some kind of a scoring chart or graph. This is like a licensed advisor giving bad advice. I don't think we can blame the client here. I think the client actually did a reasonable job in interviewing a few advisors. Their mistake was being taken in by somebody who wasn't telling a full story or was getting away with telling alts. And that's truly what keeps a lot of Canadians from getting good financial advice is that that exists out there today.
Josh Sheluk (08:03):
Yeah. The one thing you mentioned AIDS as well is do
Ainsley Mackie (08:05):
We want to end this with a bit of a laugh?
Josh Sheluk (08:09):
Well, before you go there, the one other thing I just found interesting about what you said is when something sounds too good to be true, it may not be, but I'd say in finance when something seems too good to be true, it's almost always not true.
Colin White (08:26):
Yeah. I can't wait to see her build a bridge from terminal disease to laugh at the end. So go in.
Ainsley Mackie (08:34):
Okay, perfect. So as we mentioned, we do live in an area where it's a little bit different and pretty much every six months you get someone who comes in the front door and has the latest great thing that they want to buy, that they've got a recommendation from the internet, their best friend, whatever. About six months ago, we had a gentleman, I was having my lunch and I could hear him out in the entrance way saying that he needed to talk to an advisor immediately. He had to make a Bitcoin purchase. It had to happen today. And I laughed out loud and walked outside and I said, sorry, sir, I'm probably not something we can assist you with, but what are we looking for? And he is like, I've got this hot tip. I need to make this buy right now. I don't know how to do my own, but I need to do it. Bad song where you can't figure out how to do it on your own to start with. That's a bad investment.
Colin White (09:26):
No idea what I'm doing, but I need to do it right now. Yes. That's a bad thought to have.
Josh Sheluk (09:30):
Yeah. Thanks so much for joining us AEs. That was awesome.
Ainsley Mackie (09:34):
Thank you guys. Much appreciated.
Josh Sheluk (09:36):
Started off with a banger. Dan the man is the next up. That was a good one. That was a good one. Yeah.
Colin White (09:44):
You see Daniella bra.
Daniel LeBlanc (09:46):
Good day. Two of my favorite people in the world.
Colin White (09:49):
Aw, you sweet talker.
Josh Sheluk (09:52):
You always know how to guess to blush Dan.
Daniel LeBlanc (09:54):
There you go.
Josh Sheluk (09:55):
Yeah.
Daniel LeBlanc (09:56):
Can't wait to see the outcome of these conversations.
Josh Sheluk (10:00):
Well, why don't you do an intro.
Colin White (10:02):
Oh, you see Daniel LeBla. Dan and I have worked together since 20 0 8, 2 0 7. So Dan and I've gone back a while and I worked closely together over the years, and he's a PM with our group. He's also our chief financial officer and all around, good guy, best golfer on the team by a mile, maybe the best hockey player, not entirely sure, but Dan's got a wealth of experience and experience. Lots of different financial organizations prior to this. So I don't even know where you're going to start to pick something, Dan, as to where you're going to go with this. I'm excited.
Daniel LeBlanc (10:40):
Do the listeners know what we're talking about? Has that been already discussed? Okay.
Josh Sheluk (10:44):
You bet. We've greased the wheels. Ainsley started off with what I've called a banger of a story. So you have a high bar
Daniel LeBlanc (10:52):
East. That might be a tough one to beat. I don't know what she talked about, but it's hard to come up with one story Over the years. I've been in this business since 1995, starting with the bank and independently since 2000. So they've come across a lot of conversations over the years. But one that's always kind of stood out to me was conversation I had with an individual who came in and we're talking about their child's education and how to fund the education university cost. And they came in with a $50,000 universe or a whole life insurance policy, and that was sold to her on the basis that the insurance policy would fund her child's education. And even though whole life policies have a small cash value at this point in time, I would've paid a fraction of one year's worth of schooling. And I said, well, this is a life insurance policy and you realize that the individual needs to pass away for this to pay out at the $50,000 and it's not going to do anything for education funding. But that was her belief that this policy that was put in place when a child was young that was going to fund the education cost, which was completely off the mark. And there are many other plans and strategies to use such as our ESPs for that kind of purpose. And so that's one that's always kind of stood out to me that there's a far departure from the product that was used to accomplish what was intended.
Colin White (12:19):
Well, this is two for two, Josh and somebody getting bad financial advice from somebody who was actually a licensed advisor. I was hoping we were going to hear more bad stories about just general stupidity in the world, but we seem to be gravitating towards advisors misusing product or giving bad
Josh Sheluk (12:35):
Advice. We did call as bad financial advice or worst financial advice you've ever had. So it is going to have that slant for advice. But I think the reason we go down that path is because these are the issues that we find most egregious. If somebody makes a bad decision on their own, you can look a little bit down on them for that, not getting the proper advice or not doing the proper research. But you can forgive them a little bit. But if a professional, somebody who's licensed to provide you with the good financial advice is actually giving you terrible advice, then that's extremely problematic. And why we sometimes get sick to our stomachs here.
Colin White (13:16):
Yeah, no, that's fair. My mind went a couple of different directions, but selling life insurance to fund education or bank on yourself, see the other podcasts or any of the other insurance concept cells that are out there. So were you able to save them, dad? Did the kid actually get to go to school or,
Daniel LeBlanc (13:34):
Yeah, I think the kid up going to school, it wasn't funded by that life insurance policy. It was funded in other manners. But actually we all know on this call that the motivation behind the advice of selling a life insurance policy versus funding a monthly contribution to an RESP, for example, and where the motivation would've come from the advisor for that particular advice, which is way off the mark.
Josh Sheluk (14:02):
And where is that motivation just for the audience?
Daniel LeBlanc (14:07):
A higher commission. There's a much higher commission payout on the life insurance policy than funding a small amount on a monthly basis than an investment plan. Sure. That's just where, from that perspective, obviously that's likely where it came from. And it's interesting that you two both had a conversation recently on banking on yourself and the use of whole life policy. So maybe that's why it's so fresh in my mind right now.
Josh Sheluk (14:30):
Yeah. Well, I love the idea that somebody comes to the table looking for something to help their child with education, and somebody puts on the table how both this life insurance policy, it's like, how does that work? Well, if you die, it pays out. I'm still not seeing the connection between education and how this is going to help. But again, a lot of people, people are relying on professionals. It's hard,
Daniel LeBlanc (14:56):
Especially with our ESB programs where the government funds 20% of your contributions and that's just a no brainer for most people.
Colin White (15:03):
Yeah, yeah. No, I also think that this moment, we should mention the scholarship trust funds, which are also equally evil.
Josh Sheluk (15:09):
I feel like you're stealing the thunder of somebody that's going to come later. Colin, I know that.
Colin White (15:13):
Oh,
Josh Sheluk (15:13):
You're right, Dan talking about this. I thought he was going down the path of scholarship trusts and he didn't. So that's another one that's ripe for the picking off the tree.
Colin White (15:24):
Well, I just think in context, if everybody's going to listen to this one piece of the podcast, scholarship trust fund's bad. Now. Somebody else may tell a story, but I just want to make sure that's this part of the podcast.
Josh Sheluk (15:34):
Yeah, that was a great one. Thanks so much, Dan.
Daniel LeBlanc (15:38):
Alright, thank you.
Colin White (15:39):
Yeah, see, my mind went completely into the really, really stupid things that people say to people about money. That's where my mind in thinking about this. So it's interesting. We're two for two so far.
Josh Sheluk (15:51):
Two for two. Yeah, no doubt. Dylan. Dylan wears bow tie today. Awesome.
Colin White (15:58):
The power tie.
Josh Sheluk (15:59):
Yeah.
Dylan Wilson (16:00):
Someone's got to do it around here.
Josh Sheluk (16:02):
Yeah. Good, good. I've been thinking about wearing a tie for a while, but I get such a hard time every time I wear a tie now it's like, ah, what can I do? Yeah, what can I do?
Dylan Wilson (16:12):
I'm starting it back up. It starts with two
Josh Sheluk (16:14):
Good stuff, good stuff. Alright,
Colin White (16:16):
So Dylan, we've had two people go in the same direction, so we're kind of curious whether you're going to make it three for three, no pressure, and we're not going to tell you what that direction is, but we're plotting a graph. So see if you can stay in line with the graph or whether you're going to go in a new direction.
Dylan Wilson (16:31):
So the advice was the same, the bad advice was the same, or it was just the theme was the same
Colin White (16:38):
Similar theme, let's say
Josh Sheluk (16:39):
Thematic. Yes. Yeah. Okay. But by way of introduction, we have Dylan Wilson here, portfolio manager out of our Ontario offices. And so you're the first one from Ontario, Dylan. So we're expecting really big things. We know everything is better and bigger in Ontario here.
Dylan Wilson (16:57):
You got it.
Josh Sheluk (16:58):
Including the badness of the financial advice.
Dylan Wilson (17:01):
So the worst piece of financial advice I've ever received, and I still get it to this day, and I still hear chatter about it among social circles, is you should earn less money so that you pay less in taxes. And what I mean by that is most people don't understand In Canada we have a progressive tax system. So I've heard of people turning down bonuses, turning down raises, and more commonly not wanting to work overtime because they think by working more and earning more, they're going to pay more in tax overall and going to be worse off, which is not the case.
Colin White (17:38):
Thank you for breaking the trend. Yes, yes. And I wholeheartedly endorse this bad advice because it is pervasive and it's difficult to spot because you don't see it coming. It's like talking to somebody who's a flat earth or partway through the conversation, you're going, wait, we have two different assumptions about what we're talking about here. And then you think, oh my God, I've got to describe the shape of the planet to them. So yes, this is more nefarious because it kind of speaks up on you. You don't know why somebody is against taking a bonus and you really can't figure it out because you would never think they didn't understand taxation that badly.
Josh Sheluk (18:14):
This to me is a failure of our education system, is it not? This goes beyond the failure of a regulatory regime or licensing requirements. It's a failure of our education system to provide a basic education on personal finance at a young age.
Colin White (18:29):
I'll share one other viewpoint because this is often used by lazy people to get out of working harder. So it's not that I just don't want to work. Well, why? Because I'm going to have to pay more taxes and you go home and do your thing. So I have watched people who have a really, really complicated view of the world that involves them doing less because if they did it anymore, they weren't going to be rewarded for it. So I have witnessed that in real time as well. So sometimes it's acquired stupidity and other times it's just naturally occurring. You explain to somebody, Dylan, when you bump into this and you realize the conversation you're having,
Dylan Wilson (19:10):
Try to stop it in its tracks. It's just flat out not true. So you get taxed based on the next dollar that you make. So when you bump up into a new tax bracket, doesn't impact all the previous income that you've earned. And I think where a lot of this comes from is payroll departments don't do the best job when they do taxation on bonuses or over time. And sometimes what they'll do is they'll apply that progressive tax rate. Your new blended tax rate on that one paycheck is if you earn that on every paycheck. So sometimes the payroll department screws us a little bit there, but can usually get to the person to understand that no, you're taxed on the next dollar, not on the clean mode of total.
Colin White (19:59):
I think that I'm willing to go on record here knowing that this could get edited out if I get proven to be wrong, that there is virtually no scenario where you can earn a dollar and have to give up more than a dollar in taxation. Now I'm racking my mind, and I'm not withstanding things like not qualifying for a government program, which is not taxation, that's not qualifying for a program, but there's no situation where you earn a dollar and you have to give up more than a dollar in tax. So there's always something there for you. So for those who maybe the light goes on, oh my God, I can work harder and get paid for it, and there's a whole bunch of people and I don't believe you, and those people just didn't want to work harder.
Josh Sheluk (20:40):
So you can't be financially worse off by making more money. Can we say that conclusively? I think so.
Colin White (20:47):
I'm willing to put that out in the world and have somebody tell me I'm wrong.
Josh Sheluk (20:50):
Great. Thanks a lot, Dylan. Appreciate it. Anytime.
Colin White (20:55):
Yeah, I'm happy we went in a different direction because that is one of those ones that's just so ubiquitous. I wouldn't have thought to have brought it up. So
Josh Sheluk (21:02):
Yeah, no, it was definitely a departure, definitely departure from the trend that we've got. So that was refreshing.
Colin White (21:09):
Well see, there we go. We didn't have to define it and we're getting all kinds of different answers and Deandra of course is going to come up with something different,
Josh Sheluk (21:17):
But that one was interesting because it was destructive and a whole different way in that there's literally no downside to doing things more intelligently to this. But the bad advice is just pulling you away from that no downside scenario.
Colin White (21:35):
Hi Deandra.
Deandra Camilleri (21:36):
How are you guys
Colin White (21:38):
Getting educated? I'm spectacular. Good,
Josh Sheluk (21:42):
How are you?
Deandra Camilleri (21:43):
I'm good. I'm good.
Josh Sheluk (21:45):
Good. So by way of introduction, Deandra is one of the newer members of our team, so she's going to have lots of awesome examples of bad financial advice from before being here. I'm sure she's an associate portfolio manager with the team, again working out of our Burlington office here. So Deandra, why don't you take it away, give us the worst piece of financial advice that you've ever heard.
Deandra Camilleri (22:06):
Sure. So a few years ago when my husband and I bought the house that we live in now, the real estate agent that we were working with at the time suggested that we take on the maximum amount of mortgage that we could possibly afford to get as much house as we could. Now, my husband and I did our own financials and we thought this was a terrible idea because it would just be stretching ourselves to the max and we don't have a buffer. And so we disagreed with this advice and went about it a different way. So we took on a mortgage that was more affordable for us and just stayed within our means. And everyone on this call we'll know what happened in 2022 with interest rates. And so had we stretch ourselves to the very max, we would've been in a pretty precarious position, especially with the cost of living increase over the last couple of years. So we promptly fired that real estate agent and went with somebody that was just a little bit more aligned with what we wanted. And that's one of the problems that comes up when you get advice from somebody that's not aligned with your goals and your best interests at heart.
Colin White (23:28):
But you understand you let all of us down by doing that Deandra, if the average consumer is not overextending themselves, the economy just can't grow that
Josh Sheluk (23:40):
That can't be true.
Colin White (23:41):
We count on people getting in over their heads. That's how the GDP grows by more people doing more stuff they can't afford to do. Of course, I'm joking, but that's the advice you get out there and that's very self-serving advice for anybody in the profession. They get paid based on how much of a house you buy and then the mortgage is based on how much mortgage you borrow. And that's the conflict inherit in the system that is going to lead into what my worst financial advice I think has ever been given. But I'm not going to share that now. I'll share it later.
Josh Sheluk (24:14):
Do you think it was actually Mein intent by the real estate agent as Colin saying more house means more commission, or do you think it was more so I hear what you want to get and I think that this budget, maximum budget will help you get into that property
Deandra Camilleri (24:34):
In this particular circumstance? I actually think the issue was not being educated and sort of just extending yourself without realizing the implications of doing so. I don't think it came from a malicious point of view, but it was still bad advice. Nonetheless, the kicker here too is once we express that we're not taking on that kind of mortgage. We're talking like an eight, 900,000 mortgage. It just blew our minds. He suggested that we get a home equity line of credit and draw down on it and invest. And that was just a straw that broke the camel's back for me. And so I said, thanks very much, but we're going to part ways.
Josh Sheluk (25:19):
Yeah. Now that does seem a little bit malicious, unfortunately.
Colin White (25:23):
Well, no. I would argue again, the first victim of every great fraud is the perpetrator. So if you have a fundamental belief that real estate only ever goes up in value, is the best investment ever had, you should lever up as far as you possibly can lever up and levering is how rich people make money. Now you could have somebody fresh off a three week training program and that was what they were trained on and they ran into the world believing it, and the trainers were the malicious ones. Those are the ones saying, let's train people to do the thing that's going to make us the most money. It could be the person actually doing it is not none the wiser for what's going on, but you do hope that by somebody doing a course and spending some time being a professional, they would give us some second thought, but maybe I'm expecting too much from people.
Josh Sheluk (26:05):
Well, that leads to another good question. How old was the individual and do you know how many years they had been a real estate agent for,
Deandra Camilleri (26:14):
I don't know how long he was a real estate agent for? He was about, I want to say the late fifties.
Josh Sheluk (26:20):
So he should have seen a downturn in his life anyway, and he should have seen a period of time with higher interest rates than we have now.
Deandra Camilleri (26:27):
Yeah,
Colin White (26:28):
Yeah. Well see, the thing is, again, I made said this before, you watch people who have been in the business for 30 years, but they got six months experience because they stopped learning 29 and a half years ago, and they're just riding that pony. That's what they know. So again, I think it's bad financial advice, there's no question, but as to the intent of the person that's between them and their God as to whether or not they understand exactly how badly they're screwing people by giving that kind of advice. That does top it off though. When they tell you to actually, you don't know enough money, you should lever yourself into other investments. Now I'm out taking my money off the table. Yeah,
Josh Sheluk (27:04):
It's so bad. You're choking up over it, they call it.
Colin White (27:07):
Yeah, exactly. Bone's my coffee.
Josh Sheluk (27:09):
Yeah. Well this is a good one because the advice was maybe plus or minus you still being in your house right now, which is Yeah, that's pretty significant. That's pretty bad.
Deandra Camilleri (27:22):
Yeah, it was excessive. And I think a lot of people probably fell into that trap. I know of people that had to sell their house and downsize the last year because they overextended themselves on house purchases in 20 20, 20 21 and started 2022
Colin White (27:40):
In the accounting profession, we would call that a material difference. So it matters.
Deandra Camilleri (27:45):
It does.
Josh Sheluk (27:47):
Thanks a lot, Deandra. Really appreciate it. Thanks guys. That one was good because it was first person account, the bad financial advice. I wonder if the real estate agent thought about it and was like, I'm giving this advice to a financial professional. Does that
Colin White (28:07):
Make sense? Never crossed to mind. They never crossed mind. Never crossed to mind. They were trained, baby. They were trained.
Josh Sheluk (28:12):
Yeah. So for the first time on the podcast, we have two Collins at the same time. I don't know if I can handle that much, Colin right now.
Colin White (28:21):
Colin squared, if you'll
Josh Sheluk (28:23):
Colin ship is the man here. Colin, you've been with the team for a couple years now, is it?
Colin Shipp (28:28):
Yeah. Yeah, it's coming up on the big two year anniversary here in a month or so.
Josh Sheluk (28:33):
Alright. And associate portfolio manager with the team. And prior to being with our team here at Raan, you were with Remind me.
Colin Shipp (28:42):
So I was at CIBC as an advisor at their Imperial Service division there. Good time there and had the fortune of meeting the other call here and kind of hit it off and think we shared a lot of the same philosophies around the industry and I was lucky enough to join the team.
Josh Sheluk (29:04):
Awesome. Well, yeah, with that philosophy in mind, why don't you share a little bit about how we've seen our philosophy totally derailed by bad financial advice that's out there.
Colin Shipp (29:16):
Yeah, and I'd say Jack, in the spirit of the worst advice I've ever heard of and in this case actually received, it was bestowed upon me a number of years back, but it's always stuck with me a little bit. It was from a good friend's relative and essentially their whole philosophy and idea around personal finance and career was that you should always, they were very clear on that part. Always be spending at least as much if not more than you're currently making. So in other words, always make sure you're living beyond your means because if you do that, you'll always be forced to increase your means. So this whole idea that if you're spending more money than you're making, what are you going to have to do? Find a way to make more money, don't, obviously it is not all that well thought out, and I don't know what the end result would be, but it is kind of always stuck with me as obviously people have their beliefs and their thoughts and just how much they were bought into this.
(30:33):
And it wasn't like a tucked away secret thing. It was like, I need to share with everyone this financial life hack that I've discovered here. It's so simple. So I think that kind of takes the cake for me as the worst advice I've ever heard. And if I may, Adam, I guess a cherry on top at the time that this was explained to me, the individual in question was actually working as a mortgage officer at one of the Canadian banks. So it makes me shudder a little bit thinking about the type of advice you may have been getting if you were looking for a mortgage from someone who thinks that their one main principle is to be spending more than you can afford to spend at all times. So just
Colin White (31:28):
We do know what that results in because that was the last person that was on the podcast talking about the advice they received from a mortgage professional. I would venture to say that this individual was in somewhat of a managerial role. Would that be an accurate
Colin Shipp (31:43):
Yeah, you hit that one right on the head there. Yeah.
Colin White (31:47):
Okay. So here I knew this was a sales trainer. So a sales manager is trained to day one. You get a new recruit, you go out and you co-sign for a real expensive car that they can't afford and go buy them a real expensive suit they can't afford. Make sure they're deeply in debt before you let them start the job because there's nothing more motivated than a broke employee. That is actually part of the training for sales managers in financial institutions.
Colin Shipp (32:14):
The fact
Colin White (32:15):
He believes it took it out the world.
Colin Shipp (32:17):
I think they took that course, whatever that one is, it was, yeah, that was their favorite book was on the bedside table.
Josh Sheluk (32:25):
So curious, how is this individual doing now,
Colin Shipp (32:28):
Colin? So I was reflecting on this before I jumped on. I'm due for, I'd like to touch base with them again. The whole idea there has to be some sort of a ceiling. So where does this stop? And I don't think if you've been training yourself your entire life to always be pushing the limits of what your means can support one day you just dial it back and go against all those habits. Haven't checked in with them in a while. I hope it has worked out for the best. I don't think it's the best way to manage your finances or tell others to, but I hope it worked out.
Colin White (33:06):
I have an example of that in my life, a good personal friend who I've used many, many times as an example, that spending 5% more than what you have at any moment in time forever. Forever is not as sustainable as maybe you would hope. And it does come with level of stress that many people are not comfortable with.
Colin Shipp (33:27):
I guess it boils down to that running away from that uncomfort to try and get to, I guess a place of comfort. But it's a bit of an odd roundabout way to try and get there.
Colin White (33:37):
Well, and the people that would ascribe to this are the ones that live for today having most fun all the time, never think about tomorrow, always enjoy today. That mantra that people play for themselves to avoid delaying gratification with something that whole slowing down that's not as emotionally appealing to some people. They want to burn the whole candle right now. So yes, terrible, terrible financial advice. And for someone to take management training program and turn it into advice to the world, yeah, that's particularly bad.
Josh Sheluk (34:09):
Yeah. Before you go Colin ship, I just want to ask, have you ever challenged this individual and said, what happens when you can no longer make more or spend more than you're making? I think you mentioned what's the end game here? Because at some point your income can't go up anymore or you have to retire or you whatever. So
Colin Shipp (34:32):
What is that? Yeah, exactly. So there would obviously have to be some sort of a ceiling and you can't, so the setting it was given to me in was a family barbecue that I was a guest at. The individual was very passionate about this, as I mentioned, kind of had to read the room a little bit and decided to not push back too hard. I think it's probably something that again, you can poke some holes in. But at the time and place where I heard it, it was not, I don't think would've been, I don't, I was going to talk them down from it. Let's just say that.
Josh Sheluk (35:12):
I mean, that sounds like the perfect time to start poking holes to me, but you're a better guy than I have gone. Can we all agree that no good financial advice has started with my friend told me, or my relative told me this, my relative
Colin Shipp (35:27):
Believes this. My friend's distant relative has found this one simple life hack that financial planners hate because it just solves all problems.
Colin White (35:38):
Yeah, the problem is, good advice is so boring that people don't pass it on. It's more exciting to have something that's like, you know what, if you spend more than what you have, you're going to have more money. Well, that's way more interesting than you should spend less than what you have because
Colin Shipp (35:53):
Yeah. Yeah. I mean it's so true in the allure of the get rich quick or the one quick trick and yeah, I mean we've been looking for them. They unfortunately don't exist.
Colin White (36:05):
There you go. There you go. There's good advice.
Colin Shipp (36:08):
Yeah.
Josh Sheluk (36:09):
Well, we're expecting some invites to your next family barbecue call
Colin Shipp (36:12):
For sure. Bring you guys in tow and you can ask the top hard hitting questions.
Colin White (36:17):
We'll bring the posse, we'll straighten this fellow out.
Colin Shipp (36:20):
Right on. Look forward to it.
Josh Sheluk (36:23):
Thanks a lot.
Colin Shipp (36:24):
Thanks guys.
Colin White (36:25):
Well, it's neat to see different generations like Colin being a younger guy, more people will be walking up to him, who's the young guy in the finance field going, Hey, listen, I got the right thing for you. I mean, he probably attracts more of that kind of advice than others.
Josh Sheluk (36:38):
Yeah, well both call and him and Deandra being younger, they both had personal one-on-one first person experiences with that bad financial advice. So I don't know if that's a trend. Maybe we'll see here with Taylor. How are you doing? Good. Very good. Taylor Lance here joining us from our Powell River office portfolio manager with the team as well. And Taylor, you also are in a smaller community, MVC, and I'm sure you have some gems for us. So why don't you give us, why don't your worst piece of financial advice that you've ever heard?
Taylor Lance (37:13):
For sure. Yeah. So I was thinking about a few, but they might've been repeat. So I wrote a few down and decided to go with this one. So years ago I was on the ferry there heading to Vancouver Island as one does. And gentlemen sat down next to me and he was a bit of a talker, so struck a conversation and asked me what I was doing, was going to go see some family on the island, and he was heading to work camp over in Alberta working in the oil and gas and asked me what I did for a living. And so told him I worked in finance, and as soon as I said that, he seemed to really spark up and sound like he had something to say. So he started telling me about the best strategy that he follows and that everyone should follow.
(38:00):
And it's quite easy. All you have to do is find out a company that pays a good dividend, and as long as they pay that dividend, then you keep them in your portfolio forever. It doesn't matter what happens to the company, it doesn't matter what happens to the stock price, what's going on in the economy. He just checks his transactions. As long as they pay that dividend, they stay in his portfolio forever. And yeah, he said, I tell all my friends, I tell all my family to do this, and apparently random people on B as was his go-to that, everyone should be just chasing that dividend no matter what.
Colin White (38:41):
I think it's important to set the scene here how talkative this man must have been, because Taylor is a member of our team. You're not known as the most talkative person of the group. For someone to actually engage you in conversation, they have to be fairly determined, I would imagine, to get this story out of them. So they must've been very excited to share this story with you and probably yes, everybody around them. But Josh, I've actually been watching this because you and I have made fun of this a little bit in recent podcast, and this is a very fortuitous time for this conversation to be had because how has dividend based investing held up in Canada over the last, I don't know, five years?
Josh Sheluk (39:18):
It certainly hasn't been the best strategy, that's for sure. And I think that's the issue with some of this stuff is if it was really that simple, everybody would be rich. And it's just not that simple. You can look at a chart in 30 seconds and figure out which companies have the best dividend to buy those. It's not going to work out in a favorable way for you. In fact, some of those companies with the highest dividend yield are probably in a lot of trouble. So I don't know if that's specifically how this guy was making his decisions, but it can be problematic if you're just focusing on one thing.
Colin White (39:56):
Well, yeah, I mean, you get into situations where, what are they paying out? So the industry unfortunately has figured this out that high dividends attract people. So a lot of product, it's designed high dividend paying, and a lot of it's return to capital. It's not even earnings of the company, but anything measured in one dimension is going to get gained. And the issue with this is the price of the underlying security gets set based on a few a hundred million or billion people deciding what it's worth. So it's probably fully priced for what it is. You're not getting any kind of a deal in purchasing that security, whatever the expected rate of return is. And yes, Josh, I'm oddly arguing a little bit here for the efficient market theory, which I don't ascribe to in a big way, but to say that there's a dividend paying stock out there that's being covered by a bunch of analysts that doesn't have a share price that reflects that dividend. I don't think that's true.
Josh Sheluk (40:52):
Did this guy give you any specific stock picks? Taylor? Did you go that far with them?
Taylor Lance (40:58):
No, we didn't get into specific picks, but I did ask him, I said, what are you trying to achieve with this ultimate all in one strategy for everyone? He says, oh, growth. I'm trying to grow for the future here. And I thought, well, that was a bit strange. You're focused on gaining income, but you really want growth over time. But what I asked him after was, what happens if there's a change in management? What if there's a change in strategy services and offerings change over time? What if they're disrupted? What if their distribution changes? And he says, well, as long as they pay that dividend, then they must be doing fine.
Colin White (41:36):
Josh, we should look out when did Nortel stop paying a dividend? At what share price did Nortel's dividend get suspended?
Josh Sheluk (41:43):
That's a good question. I don't know the answer to that, but I'm sure there's a long list of companies throughout history that have paid dividends well past the time that they should have. Dividends are just a return of profits, and at some point that return of profits becomes a little bit challenging for businesses that are in decline. So
Colin White (42:04):
It certainly is bad advice, and it doesn't hold up to the promise that it holds out for sure, and it's a shortcut you don't need to take and shouldn't take. And the fact that it was delivered on a ferry ride, I mean, that's going to get bonus points for proliferation. That idea is proliferated more than the other ideas that have been brought forward because if everybody's talking about it at that level, that's a big deal.
Josh Sheluk (42:31):
I thought is this guy wasn't compensated for what he was pitching in any way, shape or form. It was just out of the goodness of his heart.
Taylor Lance (42:38):
And I did ask him, I said, how do you hold it in the negative years? What if your stock is down 10% and you collected your four, you're still down six? And he said, I'm fine with that. I know in the long run it'll do well. And then I asked him, okay, you're collecting this income. What are you doing with it? Are you rolling it back into your portfolio? He said, no, I just keep it in cash there, and then every now and then I'll find a new name. But he was really focused on just cracking the money coming into his account. He did not care, I guess, about the account balance, which was quite unique, but I didn't get too deep into it because someone had clearly sold him on this. A good salesman had sold him on this, and he had gone deep down the rabbit hole. So that was the Dane,
Josh Sheluk (43:29):
And that might be one of the most disruptive or disruptive parts for him, is just leaving that money in cash and not reinvesting it on a prompt basis. That can have a significant impact on your long-term returns alone.
Colin White (43:43):
I think in this one here, we're arguing or debating the degrees to which it underperforms. That's not an optimal strategy. It's not what it holds itself out to be. It's not an optimal strategy. It doesn't work in all weather, and it's not the best way to build wealth. So none of that is true. Having said that, concentrating on good dividend paying stocks, you're less likely to suffer the consequences of going into the private equity story that we heard earlier and things like that. So it's not that poison, it's just nothing that it holds itself out to be.
Josh Sheluk (44:13):
Yeah, that's fair. Great. Well, thank you Taylor. Really appreciate that.
Taylor Lance (44:18):
Anytime. Thanks, Vince.
Kathryn Toope (44:20):
You just listened to our 100th episode of Bare Naked Money, talking about the worst financial advice our team has heard or been given. And the sad news is we had so much
(44:31):
Of this to share that this 100th episode is broken up into three parts. So you've just finished Part One. Tune in later in the week for parts two and part three of more Crazy Advice than our team has received.
Colin White (44:45):
If you're breaking a sweat trying to figure out what your financial advisor's talking about, you're not getting the service you need. You probably hate trying to get an answer from them, but you also think moving your accounts will be a headache and it might be, but working with Don't Rock the boat. Wealth planning.com or AU isn't exactly stress free, is it? Call us. We will demystify the world for you.
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Please note the information provided in this podcast is for general information purposes only. It is not intended as financial investment, legal, tax, accounting, or other professional advice. Our discussions are not a solicitation to buy or sell any securities or to make any specific investments. Any decisions based on information contained in this podcast are the sole responsibility of the listener. We strongly advise consulting with a professional financial advisor before making any financial decisions. Listeners should be aware that investing involves risks and that past performances not indicative of future results. Barenaked Money is produced by Verecan Capital Management, Inc. A licensed portfolio management company in Canada. We operate under the regulatory framework established by the Provincial Securities Commissions in the provinces within which we operate. The views expressed in the podcast are our own and do not necessarily reflect the official policy or position of any regulatory authority. Remember, at Verecan Capital Management Inc, we focus on aligning our goals with yours, prioritizing integrity and transparency. For more information about us and our services, please visit our website. Thank you for listening and let's continue to challenge the norms of the financial services industry together.