Tag Archives: Investing

Your Money, Your Life – A Discussion with Steadyhand’s Tom Bradley

Tom Bradley, President and co-founder of Steadyhand Investment Management Ltd.

Tom Bradley, President and co-founder of Steadyhand Investment Management Ltd.

Money Coach Noel D’Souza, P.Eng.,CFP® recently sat down with Tom Bradley, President and co-founder of Steadyhand Investment Management Ltd. to talk about what Steadyhand offers Canadian investors how it serves its clients and his perspective on personal finance in Canada.

In addition to Tom Bradley’s leadership at Steadyhand, he selects and monitors Steadyhand fund managers and manages the firm’s Founders Fund. He has over 30 years of experience in the investment industry, including senior leadership roles at other well-known investment management firms. He currently serves as the Chairperson of the Investment Committee of the Vancouver Foundation.

Noel: Tom, who would you say is Steadyhand’s typical client and what services does Steadyhand offer?

Tom: We have a wide variety of clients, but I’d have to say that the bulk of our clients are what we call midlife professionals, in their forties and fifties, busy with kids and careers and the stuff of life. Very smart people who just don’t have the time, interest, or maybe knowledge, on the investment side of their finances, and so they look to us to do that for them.

2016-05-16_1212We also have an increasing number of young clients. Our low minimums, which are ten thousand per fund, have opened that door. But of course we also have many retired clients as well.

Our average client portfolio is around $275 000, but we have many clients under $100,000. We offer them investment management and we offer investment advice, not holistic financial planning.

Noel: I think that’s one of the reasons why Steadyhand’s work resonates with what we do at Money Coaches Canada, and why we work well together; we also typically serve busy mid-to-late career professionals, but we provide that holistic financial planning element.

What would you say is the single greatest benefit that a client will experience when working with Steadyhand?

Tom: I’d say that the single greatest thing we do for our clients is right in our name; we do a very good job of providing a steady hand. Dealing with the ups and downs of the market is crucial to long term returns. We keep people on track. We’ve looked at the data and our clients are letting the power of compounding, which Einstein calls the eighth wonder of the world, work for them in growing their assets over time.

We’re all living longer. We want people to think ahead to what I call the last third of their lives, which is going to start somewhere in their sixties and could very well go into their nineties. We need to get people to think ahead to that last third. Continue reading

The Real Secret to Making Smart Investment Decisions

By Tom Feigs, CFP®, CET

As a fee-for-service financial planner it’s not unusual to be approached for a “quick” portfolio review. “Can you just look over my investments?” or “Can you tell me if I’m saving enough?” As much as it’s in my nature to want to help people, it would be unethical and unprofessional to advise someone without a comprehensive look at their finances and a clear understanding of their goals.

The idea that investments are priority one is a by-product of how traditional financial advisors are paid – commission on investment sales. In fact, where and how to allocate your funds are decisions that should only be made after reviewing your personal situation and needs.

Imagine your financial journey. The destination is your retirement. Your personal framework (income, obligations, health, family commitments, risk tolerance, age) represents your vehicle and the road map is your various goals. Your investments and savings are the fuel to get your vehicle to your destination.  You wouldn’t be looking for fuel before having a car and directions.

I work with individuals and couples that earn upwards of $150,000 a year, and because of the possibilities their income allows, they will all have their own set of priorities and cash flow needs for retirement. They also have various personal situations (for example, some people may have family in distant locations, others have no children, others have health concerns and still others have various complexities in their personal and business lives.)  All this information is vital to the financial plan we create together. Continue reading

Podcast – What do we do with our investments in this volatile Investment Market?

If you are wondering what you should be doing with your investment portfolio in these volatile times, this podcast will be a huge help.

Listen to our Let’s Talk Money Podcast to find out what you need to know.

Investing in Volatile Times Podcast

Featuring Karey Irwin, CFP, Investment Funds Advisor with Leith Wheeler Investment Funds.

For more information or questions, you can reach Karey at www.LeithWheeler.com

Should You Borrow to Invest?

With interest rates at historic lows, a rising market, and money starting to flow again, some investment advisors are encouraging investors to look at the merits of leveraged investing.

Is this a good idea? Maybe, but first look at your reasons for why you want to borrow to invest. Are you hoping to make up the money you lost in the stock market over the past year? Do you feel like you’re just not getting ahead fast enough and want to implement what can sound like a “sophisticated” investment strategy? Or perhaps you’re facing increasing pressure from your investment advisor to put more money into a hot market.

There are conscientious advisors out there who can be of great assistance in advising you about the pluses and minuses of leveraged investing, but you should also take responsibility yourself to make sure this strategy fits with your goals, your psychology and your risk tolerance. Here are a few pointers to help guide you along the way:

Pluses of Leveraged Investing:

  1. You can magnify portfolio returns;
  2. You can deduct interest rates at your marginal tax rate. (Note, however that your investment must have the capability of producing income – not just capital gains. You might need to consult a tax expert.)
  3. The cost of borrowing has never been lower. Some firms are offering an interest rate of prime + 1% on investment loans – or about 3.25%;
  4. Dividend yields on many corporate stocks and bonds are outpacing interest rates;
  5. Investors who are best suited to leveraged investing are generally those with no mortgage and low debt, a stable cash flow and a thorough understanding of the risks of leverage.

The Down Side:

  1. While leverage can magnify gains, it can also greatly magnify losses;
  2. Leverage adds a whole new level of risk to investing. You could be putting the collateral of your loan at risk, such as your house or mutual funds;
  3. Buying “on margin” through your investment dealer typically means you can borrow up to 50% of your investment on margin. The danger is that if the markets drop, you are liable for a margin call requiring you to put money into your account to cover any shortfalls;
  4. Remember, there is never a good time for a margin call. Just ask anyone who has experienced one in the last year what they now think of buying on margin.
  5. Debts of any kind can dramatically increase your stress load. Paying off debts on investments that have just tanked is no fun;

Leveraged investing can be an attractive way to accumulate dividend-paying stocks and bonds if you have a long term investment horizon of ten years or more. Unfortunately many ill-equipped, ill-advised and ill-prepared people are also lured by the prospect of borrowing easy money to speculate in the market. Not only is that just plain bad business – it is also a recipe for disaster! Be careful out there. – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-only financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

Mischievous Strangers & A Steadyhand

Economic depressions, recessions, downturns, slumps and hard times are nothing new. In his novel “Hard Times” written in 1854, Dickens comes down hard on the bankers and other financial experts of the day and rages against their dubious use of statistics to confound and befuddle the common man.

There is a rather poignant passage in Dickens’s rant against the economic power brokers of his day that bears some reflection during our own “hard times”:

“Now, you have always been a steady hand hitherto; but my opinion is, and so I tell you plainly, that you are turning into the wrong road. You have been listening to some mischievous stranger or other – they’re always about – and the best thing you can do is, to come out of that.”

Tom Bradley hardly claims to be a latter-day Charles Dickens. But as President of Steadyhand, a rather aptly named Canadian mutual fund company, he does write frequently on what he sees as the problem of relying on those “mischievous strangers” to do our financial thinking and investing for us. As Bradley puts it, “I am continually impressed by just how wrong economists and financial analysts can be.”

I personally like Bradley’s investment philosophy that relies on a straightforward lineup of no-load, low-fee mutual funds that Steadyhand offers directly to investors. He believes that most Canadians are over-diversified and overwhelmed with too many investment choices and too many flavors of the month. His firm offers 5 funds with concentrated portfolios largely unconstrained by geography and market cap size.

Steadyhand is also firmly committed to “transparency” when it comes to rates of return and fees. Their statements are simple, clear and easy to read – a rare and welcome occurrence in the industry.

Before launching Steadyhand, Bradley was President and CEO of the highly respected investment firm, Phillips, Hager & North. “I learned from the best, like Art Phillips and Bob Hager. They tried to keep it simple – and they were right!”

Despite his many years in the business, Bradley is still shocked by how few investors have an investment plan, even those with large portfolios. He insists that even a “back-of-the envelope” plan would provide a framework to help guide investors through a maze of often contradictory information, advice and, yes, statistics. “Even a simple spreadsheet can tell you a lot about a proper asset mix”, he insists. “Most people are way too diversified. Without a plan it is difficult to know what a good asset mix is.”

Bradley is committed to educating the public about the investment industry from an “insiders” perspective and isn’t afraid to express controversial views in his regular blog posts and Globe & Mail column. For an interesting read on how the company started out, check out The Steadyhand Diaries.

Steadyhand runs a series of info session across Canada where investors can “kick tires” and, as Bradley puts it, “learn how Steadyhand is changing investing in Canada.” Not sure that Canada needed yet another mutual fund company, but this one just might be on to something. – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-only financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

How Much Cash Should you Hold?

Risk averse Canadians are sitting on an “astoundingly massive” $1 trillion or more in cash, or near cash holdings, according to a recent study by Scotia Capital Inc. While we might pride ourselves on being prudent savers, some experts are warning that our rainy day funds are now so large that they could jeopardize the country’s economic recovery. They also fear that you are not getting a good return on cash holdings. So what is right for you?

It is certainly true that cash investments aren’t very exciting these days. Rates of return for so called “high” interest savings accounts run at around 1.5% or less, and 5 year GICs are only returning 3%. And of course, over the long run, cash investments haven’t done as well as bonds or stock investments. But still, I like cash – a lot.

There’s much more to investment planning than just getting the best rate of return. Sure inflation is an important consideration. So, too, is outliving our money. So is having enough money to meet future expenses and goals. BUT – if our investments are ultimately designed to help us enjoy our life, then we need to consider the emotional as well as “dollars and cents” implications of financial security. Being stressed about money doesn’t make for good investment decisions or a happy life.

As a financial educator, I know firsthand the value to clients of being more educated about how money and investments work – greater understanding of money usually leads to better financial decisions and less worry. But I also know that graphs, charts, and financial calculations can only go so far to relieve the anxiety caused by market fluctuations.

So what do these concerns mean to your portfolio?

Let’s start with a simple and obvious fact. We’re human. Sometimes we make irrational decisions based on emotions – sometimes fear, sometimes greed, sometimes wishful thinking. Even though we “know” we should keep our emotions from dictating our investment decisions, it is unlikely that our species is going to change this type of instinctual behavior anytime soon.

So you need to make investment decisions that suit all of your needs — including the very human need and desire for security. This means that cash investments should always be an integral part of your portfolio. The amount of cash you should hold is largely dependent on two factors. First is your tolerance for risk. Second are your cash needs for the near future.

So for instance, if you don’t want to take any market risk at all, then your choices are pretty much limited to a 100% cash or government bond portfolio. (If you take this strategy, you should run the precise numbers to be sure that you’ll have enough to cover your long term needs after tax and after inflation.)

And even if you can accept a high level of risk in your overall portfolio, but need to use some of your funds in the next 2-3 years, your best bet is to hold the total amount you will need in cash or near-cash investments.

How does this work?

Let’s say you want to buy a house in 2 years but first have to save for the down payment. Your existing savings and new money should be held in cash investments so you can be sure that the money is there when you need it – regardless of what happens in the markets.

Or if you’re at retirement age and you need $3,000 a month ($36,000 annually) to fund your lifestyle, then keep a reserve of about $100,000 in cash to fund the next three years. This will give you the emotional upside of knowing that you have cash in the bank and you will be financially ok for the next few years.

By holding cash for your 2-3 year short term needs, you will be more comfortable with your other higher risk investments that you need for growth. Then even when the markets fluctuate wildly, it will be easier for you to resist the temptation to react emotionally because you know that some of your portfolio is protected. Not an exciting strategy but a good night’s sleep sure make sense to me.  – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-only financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

Financial Advice – Are you Getting What you Pay For?

I was pretty surprised to read about a rather dramatic change to the financial planning profession in Australia.  Financial planners certified under the Financial Planning Association (FPA), will have to abandon the practice of receiving trailing commissions from investment products if they want to remain members. The organization has asked their members to go to a “fee-for-service” model which means that certified financial planners will only be able to receive payment directly from their clients instead of accepting commissions from product providers, such as mutual fund companies.

Will this happen in Canada? Probably not anytime soon. The Financial Planners Standards Council, the Canadian counterpart to Australia’s FPA, currently doesn’t take a position on how financial advisors are paid other than requiring that financial planners fully disclosure the way they are being compensated to their clients. Barring a major scandal such as the one that triggered these reforms in Australia, there is unlikely to be an immediate call for major changes here in Canada. But this doesn’t mean that investors shouldn’t be looking very carefully at the compensation issue here.

Under the current system in Canada, even if the compensation model is disclosed, it’s often only done so by way of a prospectus. Financial advisors selling funds are required by law to provide investors with a prospectus, but let’s be honest – they are notoriously hard to understand and seldom read. Often there is no open and meaningful discussion of fees between client and advisor and details are often glossed over.  The bottom line is that even if the industry is doing what it needs to do to fully comply with the law — most people really don’t understand what fees they are actually paying.

Having worked under the mutual fund commission model in the past, I’m not a fan of mutual fund companies paying planners to provide advice to clients.  It muddies the waters and it’s a complicated system that isn’t easy to explain to clients. Not to mention that the commission-based system can — overtly or subtly — affect a financial planner’s recommendations – even those who are scrupulously ethical and honest. I know, I was there.

So how do you know if you are getting value from your financial planner?  Start by finding out how your advisor is being paid and what fees you are actually being charged. This isn’t always as easy as it sounds, but you can either ask your planner directly or check your mutual fund prospectus.

To give you an idea of how mutual fund compensation works, here’s a typical scenario (actual fees will depend on the mix of funds you are invested in):

If you invest in mutual funds distributed through a financial advisor (usually referred to as “load” mutual funds), and you have a portfolio of $200,000 with a mix of stock and bond mutual funds, you’re probably paying an annual management fee of around 2%. This means that, every year, you are paying $4,000 to have your investments managed.  Roughly speaking, between 0.5%  and 1% of this fee (or $1,000-$2,000 per year) goes to compensate your planner for providing you with service and advice. The rest of the fee goes to the mutual fund company to pay for investment research and selection, administration, marketing, etc.

You then need to ask yourself – am I getting $1,000-$2,000 worth of financial planning and investment advice every year directly from my advisor? Using an hourly rate of $200 (a typical rate for an independent fee-only financial planner), this means you should be getting between 5 and 10 hours of your planner’s time and attention.  If you are, then you’re likely getting a good deal, if not, well, maybe it’s time for a serious heart to heart chat with your planner. – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-only financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

Welcome to our blog.

Feeling overwhelmed, confused or bored with your finances? Learn to make better financial decisions with more confidence and less stress.

Karin Mizgala and Sheila Walkington are co-founders of the Women’s Financial Learning Centre: www.womensfinanciallearning.ca

In additon we both have our own coaching practices. As fee-for-service planners we offer unbiased, customized planning and coaching to help you reach your financial goals.  We offer advice and coaching only and do not sell any investment products.

Sheila Walkington, CFP www.moneyreallymatters.ca

Karin Mizgala, MBA, CFP  www.lifedesignfinancial.ca