Build Wealth Canada Podcast

In this episode, we cover the rising interest rate environment that we're currently in here in Canada, and how it can impact you financially.

We also cover how to decide whether you should go fixed or variable on your mortgage in the current interest rate environment.

Next, we cover the subject of how you can take out some of the equity that you've built up in your home, so that you can either use it to invest, or deploy it elsewhere (without having to actually sell your home).

We also discuss the Smith Manoeuvre, which is a technique that you can use here in Canada to make your mortgage interest tax-deductible (and be able to invest a bit easier when you pay down your mortgage).

All this and more on this month's episode.

Questions Covered:

1. For the first time in over 3 years, the Bank of Canada has started raising interest rates. What should we be considering if we have a variable rate mortgage or have debt that's tied to the prime rate (like a home equity line of credit)?
2. For Canadians that have their mortgage coming up for renewal in the near future, or those looking for a new mortgage, based on the current environment, what is the mortgage rate outlook for the coming year and how can those Canadians best decide whether they should go fixed or variable?
3. From what you're seeing, what is the real estate market outlook for this coming spring and the rest of the year? Is it likely to be a buyer's market or a seller's market? What kind of buying/selling environment should people be ready for if they are thinking of moving, buying/selling a house?
4. Home prices have grown substantially over the years making many Canadians who already own a house pretty wealthy on paper, but much of that money or equity is tied up in the house, and I'm sure many of us would like to be able to use some of those gains either for investing, or other things. We've probably all heard of using a home equity line of credit (HELOC) to take some of that money out, but what are the other options available to us, and what are the pros and cons of using a HELOC vs these other options?
5. On the flip side, with the rising cost of living (we're hearing about inflation a lot), cash flow is becoming a challenge for some Canadians, making it even more difficult to find extra cash to invest for their retirement, while also paying down their mortgage and other expenses. However, there are strategies to pay down your mortgage and invest at the same time. Can you explain this strategy to listeners that are in this situation? And what are the pros and cons?

On this month's episode, we're going to discuss some of the most frequently asked investing questions that I receive.

The first of these is helping you decide if you should just pick one ETF for your entire portfolio (these are referred to as asset-allocation ETFs), or if you should pick and choose multiple ETFs for your portfolio to fine-tune tune it based on your specific preferences.

We also talk about how to determine the asset allocation for your portfolio (the stock to bond mix), as well as how to determine how risky the ETFs that you're considering actually are.

It turns out that there is an actual standardized risk rating in Canada to help you determine this which I think you'll find really helpful.

Last but definitely not least, we cover socially responsible investing (also known as ESG investing) to help you decide whether ESG ETFs could be a good fit for your investment portfolio, and some things to be careful about and consider, when partaking in socially responsible investing by buying these types of ETFs.

To help me with this, I'm thrilled to have Danielle Neziol back on the show. Danielle and her team actually create some of the most popular ETFs that Canadians invest in.

She works for BMO ETFs which is the largest Canadian ETF provider in the country, so we're literally getting this information right from the source here which I'm always a big fan of.

Danielle and her ETF research team have put together a lot of free resources for Canadian DIY investors over the years, and because there are so many of them, I created a resources page where you can see them listed and access them easily.

They're all free, they're not affiliate links or anything like that, and you can check them out and start learning over at buildwealthcanada.ca/bmo

Enjoy, a big thanks to Danielle and the team for putting these together and making them available free of charge, and now let's get into the interview.

Many listeners of the show (myself included) are total market index investors, where we just buy ETFs that are meant to represent the entire market as a whole, worldwide (as opposed to stock picking, or trying to speculate what will go up or down and investing based on that).

After you've been index investing for a while though, it's easy to begin to wonder whether you should customize your portfolio a bit further so that it's more aligned with your particular situation, or so that it holds more of the types of companies that you want in your portfolio.

When you start looking into this, you'll quickly come across what is known as factor investing, which can be used to tweak your portfolio so that it holds more companies that contain specific attributes that you like.

In this interview, we talk about the benefits of doing this so that you can better decide for yourself whether it's worth the added complexity in your portfolio.

We also discuss the risks that you need to be aware of if you partake in modifying your investment portfolio in this way, and we cover how you can analyze factor ETFs to find out which (if any) are the right fit for you.

Of course, we also cover some of the different types of factor ETFs out there and what they mean, so that you can better decide about potentially incorporating them into your portfolio.

Questions:

1. A lot of the listeners of the show are total market index investors, where we just buy the market as a whole using the same core ETFs. What is the advantage of now also adding factor ETFs into our portfolio?

2. What are the risks of incorporating factor ETFs into our portfolio vs just sticking with a total market indexing strategy?

3. There are a lot of factor ETFs out there. How do we begin to analyze them as a DIY investors to find out which (if any) are the right fit for us? Are there any educational resources you can recommend?

4. Would you consider factor investing to be "active" investing?

5. When I spoke with your team in the past, it was mentioned that BMO believes that it is most optimum to have both passive and active investments within our portfolio. Interestingly, when I interviewed Vanguard in the past, they also had the same viewpoint (I wonder if that's a common viewpoint among all the major ETF providers). Can you share why you think our investment portfolio should have an active component as opposed to just being 100% passive through total market index ETFs?

6. When factor ETFs get launched, they don't have a long history where we can, for example, stress test them by seeing how they performed during the 2008 financial crisis or the tech crash in the 2000s. If we want to see/simulate how that ETF would have performed in adverse market conditions, how would we go about doing that? I suppose we can use this approach for most new ETFs that get launched and that we want to evaluate?

7. How is using factor ETFs different from just using active ETFs or mutual funds?

8. Would it be fair to say that we can start with a broad, total market ETF approach, but then we can use factors to fine tune our portfolio for our specific needs? (i.e. To either increase potential returns at the cost of risk/volatility, or to reduce volatility/risk at the expense of lower expected returns?). Are there things that we should consider other than just looking at returns and volatility?

9. In one of the BMO white papers I read, it was mentioned how one strategy is to go into and out of factors depending on the economic climate. For example, if we're seeing slowing vs rising growth, or increasing vs decreasing inflation. However, most listeners of the show (myself included), I think prefer the set-it-and-forget-it approach where we don't have to follow the economy, the different economic markers, or the markets. Instead, we would rather just have the same ETFs to buy every month with a piece of every paycheque, and just hold those ETFs long term until retirement. For those types of investors, should they just do total market index investing or can factors still be a smart tool to use, without having to analyze what economic climate we are in?

10. Can we go through each of the different factor types and explain what they are?

11. Where can we learn more about factor investing, and where can we get some of your free tools, white papers, and other resources?

Resources:

Free ETF Tools and Resources

ETF Market Insights (Free resources, webinars, and Q&A)

Factor Based Investing ETF White Paper

BMO ETF Lookup, News and Resources: BMOetfs.com

ETF Comparison Tool (for both: Non-BMO and BMO ETFs)

Today I'm extremely excited to have Canadian best selling author, Andrew Hallam on the show. His first book, Millionaire Teacher is currently the #1 best seller in the Investment and Portfolio Management category on Amazon.

He has been investing in the stock market for 32 years, having built a million-dollar portfolio on a schoolteacher's salary when he was in his late 30s.

Over the past 16 years, he has given hundreds of talks in over 30 different countries espousing research on financial wellness, sound investing and life satisfaction.

We cover a lot of areas in this interview, but since Andrew achieved financial independence in his 30s, I especially wanted to ask him how we Canadians can live off our portfolios long term, without depleting it prematurely (while also maximizing the income that we are able to withdraw).

We discuss what to do when it comes to our withdrawal strategy in different economic environments, and we discuss how one can best use the 4% rule, and how we can modify it, depending on what happens in the markets.

We also talk about one of my favourite topics, variable withdrawal strategies which help us maximize how much income we can take out of our portfolio every year (while not running out of money).

Questions:

1. For anybody that hasn't read your books or is hearing about you for the first time, can you tell us a bit about yourself, especially when it comes to the world of investing, financial planning, and retirement?
2. You're someone that has achieved financial independence many years ago and has had to learn how to live off your portfolio indefinitely in a sustainable fashion. Just to set the groundwork and for somebody that hasn't read your books before, can you tell us what kind of investments your portfolio consists of that has allowed you to do this and retire early?
3. Do you have a system or process that you follow to determine how much money you can take out from your portfolio to live off of every year? (with the implied goal that you're trying to maximize how much you can take out annually, while still having that amount be sustainable so that you don't run out of money in the future).
4. There are many withdrawal strategies that one can use to live off their portfolio. Apart from the one that you just mentioned that you do yourself, are there any other ones that you like or have found to work well for others?
5. What are your thoughts on variable percentage withdrawal approaches? Ex. Taking out 4% of whatever the portfolio value is at the time, instead of more static approaches like the traditional "4% rule".
6. Before we get into more questions can you tell us more about your new book called Balance and where can we get it.
7. When we spoke before the interview, you mentioned that sometimes when pursuing money and financial independence, we can actually fall into a trap and miss the point of why we pursue it in the first place. And in relation to that, in your book, you talk about how we need to be careful about how we define success, and how we need to strive for the goal of life satisfaction as opposed to just a high monetary figure within our portfolio. Can you speak to that bit?

If you're working with a good certified financial planner here in Canada (a CFP), there are specific categories that they should be helping you optimize. According to FP Canada, which is the organization that issues the Certified Financial Planning designation (the CFP), there are 6 areas that should be covered, as they are critical to your financial health.

For your reference, the pillars are insurance and risk management, financial management, investment planning, tax planning, retirement planning, estate planning and legal aspects.

Today, we're going to talk about the insurance and risk management pillar to help you optimize that, and my returning guest today is insurance expert, Laura McKay.

Laura used to work as an actuary, and is now the Co-founder of PolicyMe.

One of the things that I REALLY like about PolicyMe, is that they have an incredibly useful tool on their site to help you determine how much, if any, life insurance you actually need.

What I found really sets it apart from the other online calculators that I've seen, is that it will actually honestly tell you, if you do not need life insurance.

Questions Covered:

1. As the new year kicks off and we look for ways to optimize our finances, one important area when it comes to our financial health is insurance coverage and risk management.A big piece of this has to do with life insurance. In case somebody is on the fence or not really motivated to look into life insurance, can tell us why this should be on our radar, and what are the consequences of not having this type of insurance when we need it?
2. Can you tell us more about what the role of life insurance is in financial planning?
3. I suspect that one of the reasons that looking into life insurance isn't often near the top of Canadians' to-do lists, is that it's perceived as expensive and as an additional cash flow drain month-to-month. Can you give us a ball-park range of what life insurance can typically cost us in Canada, and what things can we do (that we have control of), to get the absolutely lowest rates for the coverage that we need?
4. Is there any innovation around insurance happening in Canada that we should be aware of, especially when it comes to making insurance more affordable?
5. I've definitely heard of Canadians getting some really slick and persuasive sales pitches to use permanent life insurance as an investment vehicle, in addition to the life insurance coverage that it provides. Often large tax savings are mentioned as one of the key benefits. Can you talk about the pros and cons of using a less expensive term life insurance policy to just cover our life insurance needs, vs using permanent life insurance like whole life or universal life to receive both life insurance as well as an additional investment vehicle (please define whole life and universal life insurance for anybody not familiar too).
6. Of course now, with COVID being the big elephant in the room, I'm sure many Canadians are wondering whether COVID has impacted their life insurance in any way, and if they are in the process of getting life insurance, will they still receive the payout if the insured person in their family passes away due to COVID. How can we best ensure that we are covered if we get life insurance now, and for those that already have life insurance, what's the best way to check that we're still covered?
7. For anybody listening that does not currently have life insurance, how can we best determine if we actually need it for our particular situation?
8. Whether we're shopping around for a policy, or already have one, what kind of analysis can we do ourselves to evaluate the quality of a policy?
9. Are there certain types of Canadians for which life insurance is especially critical?
10. Personally, I've always felt a bit skeptical when asking somebody that sells insurance "How much insurance coverage I need?". I'd think of it like asking a real estate agent how big of a house I need when their commission is obviously higher the bigger the house I purchase. With insurance, I find it often a similar story where the insurance expert that you are speaking to is maybe compensated more depending on how large the policy is that I buy, so there is an incentive for them to paint a story of why you need as much insurance as possible. For people like myself that have this concern how can we best determine how much insurance we actually need without having to take advice from someone that is financially incentivized to sell us as large of a policy as possible?
11. Can you tell us where we can get more of your educational resources and what is a good next step for someone that thinks life insurance is something that should be on their radar, but either doesn't have any life insurance, or is not sure if they have enough through their employer, or other sources?

Today we're going to have a two-part episode. Part 1 will be about the lessons that I've learned after being either fully retired, or semi-retired for the past 5 years. I definitely made some mistakes both during retirement and leading up to retirement; things that I definitely would have done differently if I were to do it all over again.

I hope that by sharing these lessons, it'll help you avoid them on your financial independence and early retirement journey, as well as give you some insights on what it's been like to actually live off an investment portfolio as opposed to being reliant on a job.

Part 2 of the episode will be some useful information for all the current and future Canadian small business owners out there:

As COVID-19 restrictions loosen in many parts of the country and world, consumers are thinking differently about their needs/wants. During the pandemic, new habits and practices were formed, and altered how people do business.

For small business owners, it also meant many changes along the way. In the interview, we tackle which of these practices are here to stay because they offered a good client experience? What types of businesses and experiences will Canadians seek out in a post-COVID economy? And what about the businesses that launched during the pandemic - what's next for them?

Resources:

Join Our Free Live Retirement Planning Strategies Webinar:

The free live webinar and Q&A on Retirement Planning Strategies is on November 24th, 2021 at 1 pm EST. You can sign up for free at buildwealthcanada.ca/retirementwebinar.

If you're seeing this after the event has already taken place, you can still go to the link above to get the recorded version of the webinar.

Definitely join us live though if you can as that way you can get your questions answered, plus we'll be giving away prizes during the webinar but you have to be on the live webinar to be eligible.

Excellent Resources for Canadian Small Businesses:

As mentioned in part two, this RBC page has some really useful education and free resources for Canadian Businesses, and they've partnered up with other businesses to get you additional discounts and bonuses. You can access all the information for free here: BuildWealthCanada.ca/rbc

Free Assessment Call for Financial Coaching:

The free assessment call mentioned in the episode is available here: buildwealthcanada.ca/call. This is part of the coaching program that I am currently going through with Enriched Academy.

Our guest today is Arian Beyzaei, the Vice President of Enriched Academy, one of the most successful companies to be featured on the show Dragon's Den.

Over the past 6 years he has travelled around the country teaching students and entrepreneurs how to get smarter with their finances. He has presented to over 10,000 people and has been the keynote speaker for several corporations.

Arian has also been featured on the Financial Post, The Globe and Mail and many more providing personal finance tips and strategies.

What's really neat about Enriched Academy is that they are definitely one of, if not the largest financial literacy educators in Canada. They have over 100,000 students, so I thought it would be useful for Arian to share some of the top money saving lessons learned, after teaching that many students, here in Canada.

In other words, what can really move the needle for all of us, when it comes to making a dent in our spending?

What are the highest impact savings strategies that we should be focusing on, to really drastically increase the extra cashflow that we all receive month to month?

Questions Covered:

1. We talk a lot about increasing our wealth through investing on this show but a higher income, or return on investment, is only one component of growing our net worth. The other of course, is saving and not incurring unnecessary liabilities. To kick things off, why should finding ways to save money be on our radar? As opposed to us just focusing on maximizing our income and returns?
2. When it comes to saving money on things that really move the needle in increasing our financial wellbeing, housing and transportation come to mind as the top areas to optimize. Can you give us some insights and advice on these two areas?
3. While housing and transportation are definitely high priority areas due to their high price, another area that can have a large impact is those smaller but recurring expenses that we sign up for, which end up draining our cashflow on an ongoing basis. Can you give us your thoughts and strategies on those?
4. While mortgage rates are relatively low these days, they are nevertheless a very large monthly cashflow drain for most Canadians. Can you talk about some of your favourite mortgage tactics to help us save money?
5. If someone is looking for a little bit of extra income this year, without an enormous time commitment, do you have a favourite go-to's that you found many Canadians can benefit from?
6. When it comes to debt, how are Canadians doing vs the rest of the world, and what are your favourite strategies that we can use to lower the interest on our debt?

Resources Mentioned In the Episode:

The free tickets to this year's Online Canadian Financial Summit are here: http://buildwealthcanada.ca/summit

The free assessment call mentioned on the episode is available here: http://buildwealthcanada.ca/call

The Ultimate Phone Script PDF is available for free download here: https://buildwealthcanada.ca/script

The financial literacy for kids educational program is available here: https://buildwealthcanada.ca/kids

The Mortgage Broker mentioned on the episode (to get your mortgage questions answered for free) is available at: https://buildwealthcanada.ca/sean

Today we're going to focus on how to best track your investments, as well as your net worth.

This is of course critical, as you need this data to determine:

1. How much more do you need to be financially independent and retire?

2. Whether you are trending in the right direction(i.e. Is your net worth actually growing to get you closer to that early retirement and financial independence number?).

Tracking your net worth and investments is no longer something that you have to do manually, by tediously entering your numbers from all your different accounts into a spreadsheet. You also don't have to do that boring data entry over and over again, every time that you want an update.

So for this episode, I brought on the creators of two free tools available to Canadians. The first is a net worth tracking tool called Wealthica. While the second is an investment tracking and automation tool called Passiv (which I've already been using for years to manage, automate, and get reports on my investment portfolio).

Questions Asked:

1. We're going to be talking a fair bit about tracking our net worth in this interview, and how we can automate it. But before we get into that, how should we be defining "net worth", and how do each of us actually benefit by tracking it?
2. It used to be that in order to track your investments and net worth, you'd be stuck with whatever your banking or investment provider gave you, and oftentimes you had to use a spreadsheet to get a holistic view of all your accounts. It seems that now, we are transitioning to more open banking where that is no longer necessary. Can you speak to what's been happening in regards to this, specifically here in Canada?
3. For anybody that hasn't heard of your tools before, can you each take us through what it does, especially when it comes to saving Canadians time, and helping automate some of the more tedious parts of being a do-it-yourself investor, and net worth tracking.
4. Looking at your sites, there seems to be some overlap in terms of what you each provide. Can you take us through the differences between Passiv and Wealthica? Is there a specific type of investor that each tool is more suited for?
5. One of the big developments that many of us have noticed is that your tools are now integrated with each other. Can you take us through what that means for us the end users? And how does that helps us be more efficient and save more time with our investments and net worth tracking?
6. Brendan, when I spoke with your team offline, they mentioned that users get more functionality if they use one of Passiv's brokerage partners like Questrade. Can you speak to what users can and can't do depending on which brokerage they are currently using?
7. Some of us get nervous about using tools where we need to enter our login credentials for the different companies that we bank with or do our investments through. Can you talk about the technology that's being used here to keep everything safe? And are we potentially breaking the terms of service with some of these institutions we bank with by entering this private information?

Resources:

You can click here to open up a free Passiv account (Questrade members also get the free upgrade to the Elite Member Plan.

You can sign up to Wealthica for free here.

Free tickets to the Canadian Financial Summit: Sign up anywhere for free on buildwealthcanada.ca to get free tickets to the digital event once they are ready (the annual event is on September 22, 2021).

Your Mortgage Questions Answered: Since it's real estate season here in Canada, we also mentioned our resident mortgage expert who can answer your mortgage questions for free. You can sign up for a free call here (there is no cost and no obligation to select any of the lowest cost mortgages that he's able to find in from the 60+ lenders that he monitors.

Investing Course: The investing course was also mentioned in the intermission, which you can try risk-free for 60 days here.

If you liked the episode sign up for free to receive all new episodes as they get released, news on giveaways, and the free guide on the Top 5 Personal Finance and Productivity Tools.

Today we're going to cover the top ETFs in Canada, specifically for Canadian investors.

These findings are based on 8 experts in this field who are part of the Best ETFs in Canada Guide which is published annually on MoneySense and written by the one and only Jonathan Chevreau.

In this episode, we're going to talk about what the findings were with the creator of the guide, and one of the top Analysts from the panel. We will actually give you the ticker symbols of the top ETFs according to the panel of experts, and we will discuss why those particular ETFs were chosen, and go into detail about some of the nuances so that you can better choose which ETF is better for your situation.

Each category has several finalists so it's important to know the caveats of how they differ so that you can choose the one that's right for you.

This interview expands on what you will find in the text version of the guide, so use this interview as a supplement to the MoneySense written guide, which you can find at buildwealthcanada.ca/moneysense.

If you liked the episode sign up for free to receive all new episodes as they get released, news on giveaways, and the free guide on the Top 5 Personal Finance and Productivity Tools.

More than half of Canadian adults don't have a will which can cause additional legal costs, family conflict, and unnecessary legal battles.

Unfortunately getting a will done is very easy to procrastinate on as it can be a hassle to set up meetings with a lawyer, ask those difficult questions and be involved in all the back and forth that's required when setting up a will the traditional way by meeting with a lawyer face-to-face.

As many long time listeners of the show know, I'm a big fan of technology companies that help automate or at least make it a lot easier to do some of the more tedious but important things that we need to get done.

So in this episode, I'm excited to bring on Daniel Goldgut, a former tax and estate planning lawyer here in Canada, who together with his team over at epiloguewills.com has created a tool that you can use to get a will created in as little as 20 minutes. It's also a lot less expensive than what I paid to have our will done with a lawyer years ago before this tool existed.

We cover what the top mistakes are that Canadians do when creating a will, as well as how and when to properly update it when different events occur in your life.

We also cover designating a power of attorney and how to ensure that your will is actually legally enforceable here in Canada.

If you want to check out the tool that Daniel and his team have built you can go to epiloguewills.com, and Daniel's been kind enough to also provide Build Wealth Canada listeners with a $20 discount if you choose to use the service. To get that just use the promo code BUILDWEALTH20.

There's no affiliate or commissions for me on that, it's just a straight $20 off for all Build Wealth Canada listeners.

Questions Covered:

1. To start things off, why is having a will important, and what are the main negative consequences that we may encounter if we don't have one set up correctly?
2. What are some of the most common or most critical mistakes that Canadians make when it comes to their will? and how can we remedy them?
3. Before we go any further, for anybody that hasn't heard of you or Epilogue before, can you give us a bit of a background on what you do?
4. I saw an article on your company in the Financial Post about how Epilogue is the first online will platform to give its customers the option to include their RESPs in their wills (Registered Education Savings Plans). Can you speak to why that is important?
5. I noticed you recently launched a free tool to create a Social Media Will. Can you talk about what that is, why it's important, and where can we go to have one created for free?
6. When we hear about wills, we often hear about also designating a power of attorney. Can you explain what that is, and are there any other elements like the power of attorney that we should be aware of?
7. When we set up a will, how can we ensure that it's actually legally enforceable, in case somebody ever challenges it in court?
8. In what scenarios should we be updating our will? And what's the best way to do that?
9. Whenever we do update our will, how can we ensure that the newest version of the will is what will get enforced?
10. What are the pros and cons of using a tool like Epilogue vs hiring a lawyer directly?
11. Are there any clauses that you think are especially critical to have in a will to prevent issues and conflicts in the future?
12. How important is it to use an actual Canadian lawyer or service like yours, as opposed to using something from the US or another country, or one of those "create your own" will packages that we may see in a store or advertised on TV or online?
13. How long does it actually take to create a will using Epilogue, and for anybody that doesn't have a will or needs one updated, how can we get started?

If you liked the episode sign up for free to receive all new episodes as they get released, news on giveaways, and the free guide on the Top 5 Personal Finance and Productivity Tools.