Debt can play an essential role in financial planning in several ways, such as financing large purchases, building credit, managing cash flow, and leveraging investments. However, it's important to remember that taking on too much debt can also have negative consequences that could impact your financial future. Therefore, it's vital to carefully consider your options and ensure that any debt you take on is manageable and aligns with your overall financial goals. In this episode, we talk about the essential aspects of debt and the role of debt in financial planning, and we unpack the two major forms of debt. Learn about debt in financial planning, consumption smoothing, the mindset and psychology behind debt, the risk that comes with debt, how credit cards impact how people interact with their money, integrated financial planning, and important aspects of mortgages. We also review a past episode with guest Dan Solin and the book, The Five Most Important Questions, which provides readers with a tool for self-assessment and transformation concerning productivity in the workplace.

 

Key Points From This Episode:

 

•   The role of debt in financial planning and the distinction between good and bad debt. (0:08:16)

•   A brief overview of mortgages, credit cards, and their associated risks. (0:11:31)

•   Consequences of borrowing money at a high-interest rate, and how financial literacy impacts effective debt management. (0:13:20)

•   The psychological aspects related to debt and consumer spending. (0:16:10)

•   Outlining the psychological interactions of established debt on mental well-being. (0:18:15)

•   Credit cards, what they offer, and their psychological effect on paying. (0:22:10)

•   Costs associated with not using a credit card. (0:28:45)

•   Why mortgage debt is considered good debt for the borrower and the different facets of mortgages to consider. (0:32:48)

•   The difference between fixed and adjustable mortgage rates and which is better. (0:37:25)

•   Highlights and key takeaways from a past episode with Dan Solin. (0:46:06)

•   A review of the book, The Five Most Important Questions and why we recommend it. (0:47:47)

•   How the questions from the book relate to household decision-making. (0:51:18)

•   A testament to Dan Wheeler and his contribution to the field of finance. (0:52:55)

•   Recent interviews with Ben, upcoming guests, other interesting financial content, and our book recommendations. (0:56:33)

•   A 23 in 23 book challenge update, feedback on the show, and upcoming meetups. (01:01:35)

 

 

 

Participate in our 23 in 23 Reading Challenge:

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Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-243-the-role-of-debt-in-financial-planning-discussion-thread/22433

 

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

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Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

 

Extra References:

The role of debt

'Life Cycle, Individual Thrift, and the Wealth of Nations' — https://www.jstor.org/stable/1813352

'Diversification Across Time' — https://jpm.pm-research.com/content/39/2/73

'Debt literacy, financial experiences, and over indebtedness' — https://www.researchgate.net/publication/282436829_Debt_Literacy_Financial_Experiences_and_Over_Indebtedness

'Restoring Rational Choice: The Challenge of Consumer Financial Regulation' — https://scholar.harvard.edu/files/campbell/files/elylecturejan182016.pdf

'Attitudes towards Debt and Debt Behavior' — https://onlinelibrary.wiley.com/doi/abs/10.1111/sjoe.12419

'Expenditure Cascades' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1690612

'Consumer debt and satisfaction in life' — https://www.researchgate.net/publication/341564180_Consumer_debt_and_satisfaction_in_life

'Good credit, bad credit: The differential role of the sources of debt in life satisfaction' — https://onlinelibrary.wiley.com/doi/full/10.1111/joca.12388

'Debt and Overindebtedness: Psychological Evidence and its Policy Implications' — https://spssi.onlinelibrary.wiley.com/doi/full/10.1111/sipr.12074

'Winning the Battle but Losing the War: The Psychology of Debt Management' — https://www.researchgate.net/publication/249644425_Winning_the_Battle_But_Losing_the_War_The_Psychology_of_Debt_Management

'Reducing debt improves psychological functioning and changes decision-making in the poor' —https://www.researchgate.net/publication/332472709_Reducing_debt_improves_psychological_functioning_and_changes_decision-making_in_the_poor

 

Credit cards

'The Effect of Payment Transparency on Consumption: Quasi-Experiments from the Field' — https://www.jstor.org/stable/40216497

'Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay' — https://www.researchgate.net/publication/233496571_Always_Leave_Home_Without_It_A_Further_Investigation_of_the_Credit-Card_Effect_on_Willingness_to_Pay

'Present-Biased Preferences and Credit Card Borrowing' — https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfiles/3531/AEJ_Meier_Sprenger.pdf

'How Credit Card Payments Increase Unhealthy Food Purchases: Visceral Regulation of Vices' — https://www.jstor.org/stable/10.1086/657331

'Distributional Effects of Payment Card Pricing and Merchant Cost Pass-through in the United States and Canada' — https://www.bankofcanada.ca/2021/02/staff-working-paper-2021-8/

'Popular Personal Financial Advice versus the Professors' — https://www.nber.org/papers/w30395

'Buy Now, Pay Later Credit: User Characteristics and Effects on Spending Patterns' — https://www.nber.org/papers/w30508

 

Mortgages

'Report of the Household Finance Committee' — https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/HFCRA28D0415E2144A009112DD314ECF5C07.PDF

'Household Risk Management and Optimal Mortgage Choice' —https://www.jstor.org/stable/25053944

'Failure to refinance' — https://www.nber.org/papers/w20401

'A Model of Mortgage Default' — https://scholar.harvard.edu/files/campbell/files/mortdefault13022014.pdf

 

The intersection between economics and psychology makes the subject of personal finance complex. To help us elucidate this topic is personal finance reporter at the Globe and Mail and the author of the bestselling book "Money Like You Mean It, Personal Finance Tactics for the Real World.", Erica Alini. Her journey into finance journalism began when she started working for the Wall Street Journal immediately after the financial crisis of 2007/08. Since then, Erica has become an accomplished writer and journalist, having worked for many respected organizations. She is also the author of a best-selling book, Money Like You Mean It, which provides readers with a nuanced understanding of the economic forces that shape financial struggles and how to overcome them. In this conversation, we talk to Erica about the importance of knowing yourself and your debt, the money bucket system, and the definition of financial abuse. We also discuss the various types of debt traps people should avoid, the dangers of micropayments, and what to be aware of when looking for a mortgage, as well as advice for finding a reliable mortgage broker, the avalanche versus the snowball model, and much more. Tune in to discover how to take back control of your finances and avoid the burden of debt with personal finance expert, Erica Alini.

 

Key Points From This Episode:

 

•    Why Erica thinks Canadians have so much household debt. (0:02:24)

•    Strategies that people can implement to avoid the debt trap. (0:04:58)

•    Erica’s opinion on budgeting as a tool to manage spending. (0:08:34)

•    How the ‘bucketing model’ changes for a couple as opposed to an individual. (0:12:10)

•    How couples with different incomes should share expenses. (0:14:17)

•    Signs of an unhealthy financial relationship between partners. (0:17:06)

•    The amount of money an emergency fund should have. (0:21:17)

•    What consumers should know about the different debt products available. (0:24:08)

•    Discover the downside of taking a mortgage with the lowest interest rate. (0:33:55)

•    Whether or not an independent mortgage broker is better than a bank. (0:38:05)

•    Important insights about credit scores. (0:39:51)

•    Whether people should rent or buy property. (0:45:13)

•    How the traditional sense of a good job with sufficient income has changed. (0:50:34)

•    Erica’s approach to explaining the risk of investing in stocks. (0:56:46)

•    Insights about the math of a financial decision versus the psychology. (0:58:25)

•    How Erica defines success in her life. (1:00:29)

 

 

Extra: Questions to ask a mortgage broker:

1.     What kind of penalty will you have to pay for breaking your contract?

2.     Is the cap on your lump-sum payments 10 percent or 20 percent of your mortgage balance?

3.     Will you be able to make lump-sum payments any time or just once a year?

4.     Can you double your payments?

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-242-erica-alini-personal-finance-tactics-for-the-real-world-discussion-thread/22326

Book From Today’s Episode:

Money Like You Mean It — https://www.dundurn.com/books_/t22117/a9781459748675-money-like-you-mean-it

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Erica Alini on Twitter — https://twitter.com/ealini

Today we are spending most of the episode going further into the basic concepts that ground good financial practices and the personal finance topics that are often taken for granted. The three main areas we unpack in this episode are the cost of living, savings capacity, and emergency funds, and though these can be viewed as basic ideas, there are always areas of the simplest variety that deserve more attention. Listeners can also expect to hear a little more about what our role as financial advisors constitutes on a daily basis, as we respond to an audience member's question about how to conceptualize the profession. We welcome Dr. Wendall Mascarenhas back to the show for a brief cameo in which he shares his reading habits and approach with us, which contrasts with some of the opinions often expressed by other guests, so make sure to stay tuned in for that. We also find time for a quick recap of an old episode we had with Rick Ferri and a book review of Rethink Lead Generation by Tom Shapiro.

 

Key Points From This Episode:

 

•    Discussing the cost of living and why an accurate picture of your expenses is so important. (0:04:08)

•    Working out your saving capacity and when and how to save. (0:21:32)

•    General advice for emergency funds and further considerations for households. (0:32:51)

•    Recapping our episode with Rick Ferri on his index investing philosophy and the lasting impact of John Bogle. (0:40:21)

•    This week's book review of Rethink Lead Generation by Tom Shapiro. (0:42:26)

•    Dr. Wendall Mascarenhas talks about his reading habits and his prioritization of reading for pleasure. (0:49:23)

•    A few favourite book recommendations from Dr. Wendall Mascarenhas. (0:58:12)

•    Current debates around ChatGPT and the sources of its information. (1:06:18)

•    Information about upcoming meetups for the Rational Reminder community. (1:09:38)

•    Further explorations on our recent goals survey and the input we received from Morningstar. (1:11:00)

 

 

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

 

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Dr. Wendall Mascarenhas — https://www.fcos.ca/meet-dr-mascarenhas/

Teeth & Titanium Podcast — https://podcasts.apple.com/us/podcast/teeth-titanium/id1514989809

Extra References:

 

Savings capacity

'Popular Personal Financial Advice versus the Professors' — https://www.nber.org/papers/w30395

'The Life-Cycle Model Implies That Most Young People Should Not Save for Retirement' — https://www.aei.org/research-products/journal-publication/the-life-cycle-model-implies-that-most-young-people-should-not-save-for-retirement/

'Exponential-Growth Bias and Lifecycle Consumption' — https://www.jstor.org/stable/43965317

'Save More Tomorrow™: Using Behavioral Economics to Increase Employee Saving' — https://www.jstor.org/stable/10.1086/380085

Emergency fund

'What Matters to Individual Investors? Evidence from the Horse's Mouth' — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12895

'Millionaires Speak: What Drives Their Personal Investment Decisions?' — https://www.nber.org/papers/w27969

'Emergency savings for low-income consumers' — https://www.irp.wisc.edu/publications/focus/pdfs/foc301c.pdf

'Emergency Saving and Household Hardship' — https://www.researchgate.net/publication/269468202_Emergency_Saving_and_Household_Hardship

'Savings Policy and Decisionmaking in Low-Income Households' — https://www.researchgate.net/publication/289069441_Savings_Policy_and_Decisionmaking_in_Low-Income_Households

'Insufficient Funds: Savings, Assets, Credit, and Banking Among Low-Income Households' — https://www.jstor.org/stable/10.7758/9781610445887

'Financially Fragile Households: Evidence and Implications' — https://www.nber.org/papers/w17072

'One in four Canadians are unable to cover an unexpected expense of $500' —https://www150.statcan.gc.ca/n1/daily-quotidien/230213/dq230213b-eng.htm

'Who Should Buy Long-Term Bonds?' — https://www.jstor.org/stable/2677900

‘Mental accounting matters' — https://people.bath.ac.uk/mnsrf/Teaching%202011/Thaler-99.pdf

'The Bucket Approach for Retirement: A Suboptimal Behavioral Trick?' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3274499

'Should Households Establish Emergency Funds' —https://www.proquest.com/openview/042e8ea8f8e3986ec6c93e5cfca265c0/1?pq-origsite=gscholar&cbl=38873

'Is an All Cash Emergency Fund Strategy Appropriate for All Investors?' — https://www.financialplanningassociation.org/article/all-cash-emergency-fund-strategy-appropriate-all-investors

'Building emergency savings through employer-sponsored rainy-day savings accounts' — https://www.journals.uchicago.edu/doi/full/10.1086/708170

'Double Mental Discounting: When a Single Price Promotion Feels Twice as Nice' — https://journals.sagepub.com/doi/10.1509/jmr.15.0559

'The Role of Mental Accounting in Household Spending and Investing Decisions'  — https://onlinelibrary.wiley.com/doi/10.1002/9781119440895.ch6

'Emergency Savings and Financial Security: Insights from the Making Ends Meet Survey and Consumer Credit Panel' — https://www.consumerfinance.gov/data-research/research-reports/emergency-savings-financial-security-insights-from-making-ends-meet-survey-and-consumer-credit-panel/

 

The decisions we make may be further out of our control than we’d like to imagine. Today we are joined by Professor Eric J. Johnson to discuss choice architecture and its role in financial decision-making. Eric is a decision science expert and the author of the book, The Elements of Choice: Why the Way We Decide Matters. In this episode, we learn about the various factors that impact not only decision-making but the effort required to make a decision. Eric shares his philosophy on free will and shares advice for making important decisions and guiding clients to find the right choice as a financial advisor. Tune in to discover how to minimize the influence of the choice architect and take charge of your decisions!

 

Key Points From This Episode:

 

•    Introducing Professor Eric J. Johnson and this week’s topic: financial decision-making. (0:00:26)

•    The hidden partner that accompanies us when we make decisions. (0:03:42)

•    How design choices impact our decisions. (0:04:54)

•    The plausible path: what it is and how we choose it. (0:06:00)

•    Advice for making important decisions. (0:08:21)

•    The impact of recent events on decision-making. (0:10:33)

•    How to be your own choice architect. (0:12:15)

•    Factors impacting the effort required to make a decision. (0:13:22)

•    The impact of default choices and what influences them. (0:16:09)

•    How choice architecture can help people find the right choice. (0:20:17)

•    The influence of sorting on what people choose. (0:25:18)

•    How the order of options being presented and the way they’re described impact decisions. (0:26:54)

•    How exponential growth bias influences long-term decisions and how financial advisors can help clients understand the impact. (0:31:45)

•    The effectiveness of Netflix as a choice engine, the role choice engines play in educating users, and the value of just-in-time education. (0:35:04)

•    The impact of social media on people’s attention and intentions. (0:40:08)

•    Eric shares his philosophy on free will and the factors impacting our choices. (0:42:55)

•    How to minimize the influence of the choice architect. (0:44:16)

•     What financial advisors can do to be most useful to their clients. (0:46:00)

•    How Eric defines success in his life. (0:50:12)

 

 

Participate in our 23 in 23 Reading Challenge:

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Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-240-prof-eric-j-johnson-choice-architecture-and-financial-decisions-discussion-thread/22037

 

Book From Today’s Episode:

The Elements of Choice — https://theelementsofchoice.com/

 

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Prof. Eric J. Johnson on Twitter — https://twitter.com/profericjohnson

 

The concept of financial math is another foundational element of investing and good economic decision-making, and today we are carrying on the recent string of shows dealing with these kinds of fundamental aspects. First, we have a look at the central idea of the time value of money, and how this plays into many areas of our finances, such as retirement planning, spending, investing, and so on. From there, the conversation goes on to cover exponential functions, the tradeoffs between saving and spending, and regrets. Today's 60-second episode recap is of the great conversation we had with David Blitzer back on Episode 54, and we also do a quick book review of the potentially life-changing How to Live on 24 Hours a Day. We finish off this punchy episode with some news from the community and some thoughts on the ways in which competition and repetition can improve a skill.

 

Key Points From This Episode:

 

•    Introducing the time value of money, as well as the concepts of compounding and discounting. (0:03:07)

•    Applying financial math in different ways to varied questions. (0:11:34)

•    Lessons from Cameron's first business selling worms. (0:18:15)

•    The challenges and biases associated with exponential functions. (0:20:27)

•    Spending and saving; illuminating the reality of the tradeoffs. (0:27:26)

•    The biggest problems of foundational regrets. (0:35:40)

•    Looking back on the episode with David Blitzer on indexing. (0:42:33)

•    Reviewing the 1908 book, How to Live on 24 Hours a Day. (0:44:25)

•    TV shows, podcast reviews, updates from the community and more. (0:49:05)

•    Incentives and leaderboards; unpacking the impacts of practice and competition. (0:56:43)

 

 

 

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

 

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-239-the-math-of-financial-planning-discussion-thread/21899

 

Book From Today’s Episode:

How to Live on Twenty-Four Hours a Day — https://amzn.to/3JLyDaz

 

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

 

A large portion of what we talk about on this show boils down to decision-making, and today we have our focus squarely on the fundamentals of this process. Professor Ralph Keeney joins us to discuss some of the simplest and most profound elements of decisions, and why we so often miss these aspects. Ralph is a true expert on decision analysis, and his systematic process for decision-making, as laid out in his new book, Give Yourself a Nudge, has truly life-altering potential for anyone looking to improve their future. The book and this conversation are jam-packed with insightful and understandable ideas and examples, including clarifying objectives, the vital role of our values, generating alternatives, and a comparison between decision problems and decision opportunities. Ralph lays out a great way to get started on the path to better decisions, so make sure to join us to hear it all.  

 

Key Points From This Episode:

 

• The focus of Ralph's research and how he articulates the importance of our conscious decisions. (0:03:48)
• The shortcomings of the trial and error approach that many of us naturally employ. (0:10:46)
• First steps towards being a better decision-maker; using personal decisions for practice. (0:13:08)
• Ralph explains his conception and use of the idea of 'nudges'. (0:14:30)
• A better awareness of the often-neglected front end of decision-making. (0:17:38)
• An explanation of Ralph's value-focused decision-making process. (0:22:25)
• Mistakes made around retirement decisions. (0:30:30)
• Why clarifying your personal decision values can be so difficult. (0:32:15)
• The process of translating values into objectives. (0:36:11)
• Ralph's important question around the different possible situations in the future. (0:41:49)
• Simple processes and common pitfalls for generating alternatives. (0:43:19)
• Exploring decisions that require third-party permission or commitment. (0:47:59)
• Differentiating between decision problems and decision opportunities. (0:52:27)
• The most important concepts for embodying value-focussed decision-making. (0:57:44)
• The role of financial advisors in aiding their clients to make good decisions. (1:03:28)
• Application of these ideas toward living a good life. (1:07:46)
• Ralph's simple definition of success in his own life. (1:10:53)

 

 

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

  Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-238-prof-ralph-keeney-decision-analysis-and-value-focused-thinking-discussion-thread/21795

  Books From Today’s Episode:

Give Yourself a Nudge — https://amzn.to/3WKMwZx

Smart Choices — https://amzn.to/3Ho0vP6

Value-Focused Thinking — https://amzn.to/3HgC7yH

Decisions with Multiple Objectives — https://amzn.to/3DywYRH

  Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Prof. Ralph Keeney — https://ralphkeeney.com/

 

Identifying your personal values is the foundation for making future decisions. In this episode, we discuss the profound ways in which personal values impact financial decision-making and share concrete steps to identify both your strategic and means objectives. Ben candidly shares his own objectives and expands on the other considerations involved in making major decisions. We then jump to the less abstract topic of 2022 returns, providing a thorough overview of the tilts and their consequences, followed by a brief summary of an early episode with Shane Parrish. In the latter half of this episode, we are joined by Zoobean co-founder and CEO Felix Lloyd to talk about Beanstack, the tech platform for reading, and Readwise co-founder Daniel Doyon. We also tackle the slightly left-field topic of marketing from a behavioural science standpoint through the lens of Nancy Harhut’s tellingly-titled book, Using Behavioral Science in Marketing. Tune in for upcoming developments in the Rational Reminder community, and to discover how to make financial decisions that align with who you are and who you want to become!

 

Key Points From This Episode:

 

• How personal values impact financial decision-making. (0:00:25)
• How to identify your life’s values and objectives. (0:07:21)
• The significance of means objectives and strategic objectives, and how to identify them. (0:16:25)
• Ben’s strategic life objectives and means objectives. (0:18:27)
• Other considerations when making major decisions. (0:19:14)
• An overview of 2022 returns. (0:22:43)
• A summary of episode 19 with Shane Parrish. (0:28:59)
• A brief interview with Zoobean co-founder and CEO Felix Lloyd to talk about Beanstack, the tech platform for reading. (0:31:15)
• Cameron’s review of Using Behavioral Science in Marketing by Nancy Harhut. (0:43:09)
• What sells (from a behavioural science standpoint). (0:47:15)
• A brief interview with Readwise co-founder Daniel Doyon. (0:52:52)
• Summaries of recent Freakonomics, 10% Happier, and Capital Allocators (1:04:05)
• Developments in the Rational Reminder community. (1:05:30)
• Upcoming podcast guests and recent podcast reviews. (1:10:25)

  

  Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

  Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-237-who-are-you-and-who-do-you-want-to-be-discussion-thread/21665

  Book From Today’s Episode:

Using Behavioral Science in Marketing — https://amzn.to/3wuDnJO

  Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

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Zoobean on Instagram — https://www.instagram.com/zoobean

Readwise — https://readwise.io/

 

 

 

Our guest today, Harold Gellar, is a lawyer who helps clients dealing with fraud and negligence perpetrated by financial advisors, and is a passionate advocate for investors and their rights. Tuning in you’ll hear details of some of the most common issues Harold has come across in his work, along with his practical advice for financial advisors and investors. We discuss the importance of clear communication between advisors and their clients, the concept of KYC (Know Your Client), and simple steps investors can take to ensure that their advice is properly understood by their clients. Harold goes on to provide an outline of factors that could make individuals vulnerable to negligent financial advice (such as marital problems or a sudden health crisis) and how to gain perspective in extreme situations. We also discuss the key differences between salespeople and financial advisors, the type of credentials investors should be looking for, and how regulation needs to be modernized in Canada for investors to be properly protected. Harold has been in this industry for a long time and is immensely knowledgeable on the subject of fraud and negligent investment advice.

 

Key Points From This Episode:

 

• An overview of Harold’s practice and how he helps clients get their money back. (0:03:22)
• The difference between salespeople and financial advisors and the vulnerability of investors. (0:05:40)
• Practical advice for investors to ensure their financial advisor is doing due diligence and the concept of KYP (Know Your Product). (0:10:46)
• The concept of KYC (Know Your Client) and how to be sure your financial advisor understands you as a client. (0:15:32)
• The type of individuals who are particularly vulnerable to negligent financial advice, and why we can all be vulnerable in certain situations. (0:18:33)
• The role of the trusted contact person in Canada specifically, and how to know when to take the advice of your financial advisor. (0:25:13)
• Harold’s thoughts on what is causing Canada’s slow adoption of low-cost index funds. (0:32:27)
• How financial advisors earn money and why we need an updated regulatory system. (0:34:21)
• Harold’s approach to crypto and why he classifies it as a speculative asset. (0:41:50)
• Examples of negligence when the investment made was too conservative and why clear communication between client and advisor is crucial. (0:44:20)
• The worst insurance products that Harold has come across. (0:46:10)
• What financial advisors should be doing to make sure that their advice is properly understood by their clients. (0:49:23)
• What investors can do to make sure that they understand what the advisor is saying to them. (0:51:16)
• Ontario’s recent implementation of title regulation for financial planners and advisors and some of its key flaws. (0:52:16)
• The credentials that investors should expect from their financial advisors. (0:55:34)
• The value of good advice when it comes to financial planning and investment, and what motivates Harold to be such a strong investor advocate. (0:56:56)

    Participate in our 23 in 23 Reading Challenge:

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  Participate in our Community Discussion about this Episode: https://community.rationalreminder.ca/t/episode-236-harold-geller-i-sue-financial-advisors-discussion-thread/21500

 

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Harold on Linkedin — https://www.linkedin.com/in/harold-geller-25094033/

Geller Law — http://gellerlaw.ca

'The Misguided Beliefs of Financial Advisors' — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12995

'Retail Financial Advice: Does One Size Fit All?' — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12514

As we kick off the new year, we wanted to look back at our biggest areas of learning from last year. So this episode serves as a great companion piece to our year-end recap from a couple of weeks ago, but the focus here is on the personal impact that specific guests, ideas, and topics had on each of our lives. We cover ICAPM thinking, the nature of money, financial literacy, setting financial goals, the history of index funds, and more. For the second half of the show, we are joined by the amazing Shaun Tomson, former world surfing champion, author, and renowned speaker. Shaun is here to talk a bit about his latest book, co-authored with Noah benShea, entitled The Surfer and the Sage. We get to hear about Shaun's belief in the power of words, the specific conditions that can enforce this power, the lessons he has taken from a life in the ocean, and how the tragedy of losing his son influenced his life's trajectory. Join us to catch it all.

 

Key Points From This Episode:

 

• Differentiating between the CAPM and ICAPM theories. (0:08:02)
• Long-run risks in stocks and bonds; demystifying safety claims.  (0:14:46)
• Further illumination on the concept of money and how to think about it. (0:24:27)
• Learnings around the empirical side of financial literacy. (0:31:00)
• Improved setting of financial goals and common mistakes that many of us make. (0:32:24)
• Filling in the gaps in an understanding of the history of index funds. (0:35:57)
• A one-minute recap of our episode with Allison Schrager from last year. (0:37:47)
• A quick review of Shaun Tomson's book, The Surfer and the Sage. (0:39:38)
• Shaun explains the significance of the wave as a metaphor. (0:43:28)
• The tragic passing of Shaun's son in 2006 and how this redirected his life's purpose. (0:45:10)
• Shaun explains his CODE method for transformation. (0:49:35)
• The significance of the structure of the book and the motivation behind it. (0:56:38)
• Unpacking the importance of purpose when making financial decisions. (0:59:40)
• Shaun's tactical recommendations; resilience, hope, optimism, and discipline. (1:05:44)
• Upcoming book recommendations for our 23 in 23 Reading Challenge. (1:19:22)

  Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

  Participate in our Community Discussion about this Episode: https://community.rationalreminder.ca/t/episode-235-top-learnings-from-2022-plus-23-in-23-special-guest-shaun-tomson-discussion-thread/21332 

 

Books From Today’s Episode:

The Surfer and the Sage: A Guide to Survive and Ride Life's Waves — https://amzn.to/3GytVJV

The Code: The of Power of "I Will" — https://amzn.to/3ZEMUvg

Surfer's Code: 12 Simple Lessons for Riding Through Life — https://amzn.to/3VZIcFb

  Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Shaun Tomson on Twitter — https://twitter.com/shauntomson

Shaun Tomson on Instagram — https://www.instagram.com/shauntomson/

Shaun Tomson on Linkedin — https://www.linkedin.com/in/shaun-tomson-42a57213/

Shaun Tomson — https://shauntomson.com/

Shaun Tomson's I Will Form — https://buzzy.buzz/kiosk/3676e3c13ae389a80dd5774d

'The Code Method for Families' — https://shauntomson.com/wp-content/uploads/2020/04/CODE-METHOD-FOR-FAMILIES.pdf

‘The Surfer and the Sage: Trailer' — https://www.dropbox.com/s/wn0q3r0gf006tl6/TrailerUSETHISONE.mp4?dl=0

'Generating Objectives: Can Decision Makers Articulate What They Want?' — https://pubsonline.informs.org/doi/abs/10.1287/mnsc.1070.0754?journalCode=mnsc

'Eyes on the Prize: The Preference to Invest Resources in Goals Over Means' — https://www.anderson.ucla.edu/documents/areas/fac/marketing/Shaddy/investing_goals.pdf

'Counteracting obstacles with optimistic predictions' — https://pubmed.ncbi.nlm.nih.gov/20121310/

'Immediate Rewards Predict Adherence to Long-Term Goals' — https://journals.sagepub.com/doi/full/10.1177/0146167216676480

'Stocks for the Long Run? Sometimes Yes. Sometimes No.' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3805927

 

Few people have impacted the way the world works, and today, we have the privilege of speaking to one of them. Professor Robert C. Merton is the Distinguished Professor of Finance at The Massachusetts Institute of Technology (MIT) Sloan School of Management and Professor Emeritus at Harvard University. He has a Ph.D. in Economics from MIT and is currently the Resident Scientist at Dimensional Fund Advisors. Professor Merton was awarded the Alfred Nobel Memorial Prize in Economic Sciences in 1997 for his work establishing a new method to determine the value of derivatives. He also created the Intertemporal Capital Asset Pricing Model (ICAPM), a popular tool to help advisors make informed financial decisions and understand market trends. In our incredible conversation, we cover portfolio theory, moving from Capital Asset Pricing Model (CAPM) to the Intertemporal Capital Asset Pricing Model (ICAPM), and how financial models work. We also discuss the difference between the value of your capital and the value of the cash flow that can come from that capital, why size can't be a factor, what aspects to consider when calculating the worth of an account, and the definition of market efficiency. We also delve into retirement, how to safely invest for it, what pitfalls to avoid, and how retirement funds may change over time. He also shares his opinion about some popular financial advise and what the roles of financial advisors should be. For all this and more, tune in to hear from the man behind the model and Nobel laureate, Professor Robert C. Merton!

 

Key Points From This Episode:

 

• We start with Professor Merton describing the concept of market efficiency. (0:04:28)
• He explains the basics of his ICAPM asset pricing model. (0:09:10)
• How portfolio theory changes when moving from single-period to multi-period. (0:10:46)
• Hear a practical example of expected returns changing over time. (0:14:15)
• Why ICAPM is dependent on the sensitivities to risk of an individual investor. (0:22:52)
• Find out how to determine if the correct proxy has been identified for a risk. (0:25:34)
• Learn how home country bias fits into portfolio choice from an ICAPM hedging perspective. (0:31:54)
• The definition of a risk-free asset and how it changes with time. (0:33:24)
• What influence the time horizon should have on the mix between stocks and bonds in an investor’s portfolio. (0:35:33)
• His opinion about young investors using leverage to make investments. (0:41:50)
• What people should be doing to get more accessibility to leverage. (0:47:39)
• Professor Merton tells us who should focus on value stocks and growth stocks. (0:51:34)
• Discover what makes retirement income a difficult problem to solve and tips to ensure your retirement. (0:56:47)
• We discuss using Monte Carlo simulations to estimate how much people can spend in retirement. (1:09:04)
• He provides insight into how to get more from your retirement investment. (1:13:04)
• Whether nominal annuities are considered low-risk assets for retirees. (1:16:48)
• An overview of the impact mathematical models have had on the finance sector. (1:20:12)
• Areas of finance practice that are lagging behind the financial models. (1:27:35)
• Hear what popular financial advice Professor Merton thinks is misguided. (1:33:22)
• Ways his work on option pricing has impacted society. (1:41:26)
• The role he sees for financial advisors. (1:45:42)
• Why he decided to join Dimensional Fund Advisors. (1:48:54)
• Professor Merton unpacks the definition of product design. (1:52:14)
• Stay listening for the extended discussion. (1:57:24)

 

Participate in our Community Discussion about this Episode: https://community.rationalreminder.ca/t/episode-234-prof-robert-c-merton-icapm-retirement-and-models-in-finance-discussion-thread/20748  

 

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Prof. Robert C. Merton — https://robertcmerton.com/