Preet Banerjee is a consultant to the wealth management industry with a focus on commercial applications of behavioural finance. He is also the chair of FAIR Canada - the foundation for the advancement of investor rights in addition to being a financial content creator and commentator. Represented by Speakers' Spotlight, he is a professional public speaker and media personality.
He was a panelist on CBC's The National with Peter Mansbridge for 10 years and hosted his own television show on The Oprah Winfrey channel. He originally trained as a neuroscientist before enrolling in auto-racing school. After running out of talent and money, he landed in the world of finance.
This week we welcome back return guest Preet Banerjee, a renowned speaker, personal finance expert, consultant, and author of Stop Overthinking Your Money. Listeners may remember Preet from his previous appearance on the show back in 2019 when he was first embarking on his doctoral journey. Several years and one pandemic later, Preet has finally made it through the monumental task of completing his dissertation! We spend today’s conversation with Preet getting into the fascinating details of his research which interrogates the value of financial advice within households and explores the pressing question of whether it’s worth getting it. Preet provides a comprehensive overview of the current state of financial planning and shares his most intriguing findings before unpacking the policy and regulatory recommendations that emerge from his research. The latter part of the show includes our Mark to Market segment with Mark McGrath, where this week, he delivers key insights on retirement savings plans (RSPs) and why he believes RSPs are actually tax-free. You’ll also hear our reflection on our past conversation with Colonel Chris Hadfield, paired with a book review of Kevin Kelly’s Excellent Advice for Living: Wisdom I Wish I'd Known Earlier. Join us for an expansive episode on the value of financial advice along with timely insights on what truly matters in life!
Key Points From This Episode:
(0:03:34) Background on today’s guest, Preet Banerjee, and the focus of his research: the value of financial advice to households and whether it’s worth getting it.
(0:06:29) Key problems with past research attempting to demonstrate the value of financial advice (including the portfolio-centric advice model).
(0:10:47) A review of the existing literature on the value of financial advice; the gap in the literature that his research is addressing.
(0:16:27) How Preet measured holistic wealth scores and comprehensive financial confidence in his research and the dataset he based his research on.
(0:21:26) What Preet took into account to determine who were DIY investors within his sample and which advice channels they use.
(0:28:27) The study of financial planning, shortcomings within the field, and some of the positive developments in recent years.
(0:30:00) Informative takeaways regarding advice channels, investable assets, and having a financial plan.
(0:36:30) How Preet approached his data, the progressive regression model he developed, and what it demonstrates about key topics in his research.
(0:47:36) How wealth allows you to access better financial advice versus the options available to you if you’re in the mass market.
(0:49:48) Learn about the policy and regulatory recommendations that emerge from Preet’s research.
(0:56:04) Preet’s advice to listeners and DIY investors and what’s next for his research.
(01:05:17) Our Mark to Market segment with Mark McGrath and his insights of everything you need to know about retirement savings plans (RSPs).
(01:18:02) A recap and review of Episode 266 where we talk with Colonel Chris Hadfield and why it’s worth the listen.
(01:20:39) Hear our review of the book, Excellent Advice for Living: Wisdom I Wish I'd Known Earlier by Kevin Kelly.
(01:25:34) Our after-show section; Find out what we have coming up and how to attend our upcoming meet and greet.
Read The Transcript:
Ben Felix: This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision-making from two Canadians. We're hosted by me, Benjamin Felix and Cameron Passmore, portfolio managers at PWL Capital.
Cameron Passmore: Welcome to episode 269. This week, Ben, we have a blockbuster episode. What a great line up. We kick it off first, we welcome back a good friend of ours, Preet Banerjee, or I should say, Dr. Preet Banerjee. For those who remember, he was on a few years ago. We talked about his upcoming doctorate work, and he's actually made it through his dissertation. He'll join us to talk about a multi-dimensional analysis of the value of financial advice to households in Canada. Fabulous conversation.
Ben Felix: Oh, yeah. Nicely done research. It's his dissertation, which he just defended vigorously as he explains to us at the end of the conversation. I really do think that he's done some research that is currently and will continue to be useful for how the industry, the financial services industry thinks about advice and also, how households think about what type of advice they should be seeking. Anyway, we dig deep into those details with Preet and what I think was a fascinating discussion.
Cameron Passmore: But after that, our colleague, Mark McGrath will join us for his regular segment, which will now be called Mark to Market. We'll take a look back at one of my personal favourite episodes, when Colonel Chris Hadfield joined us last year. For the book review this week, we'll take a look at a book that I devoured while on the dock a few weeks ago on vacation. It's called Excellent Advice for Living: Wisdom I Wish I'd Known Earlier by Kevin Kelly. Of course, at the end, we've got our after show.
Ben Felix: I do want to mention quickly because talking about these webinars has proved to be a success. People listen to the podcast. Who knew? When we mention the upcoming webinars, a lot of people are going and signing up, which is pretty cool to see, honestly. The next webinar coming up is on September 27th at noon Eastern Time. The topic for this one is finding and funding a good life, which is a topic that we've, of course, talked a lot about on the podcast. I've seen a version of this webinar and it's really, really good content that I think is going to be useful to a lot of people.
For the last webinar that we mentioned on the podcast, the one on employee equity compensation, I think it was called What Are My Options With My Options? Clever title. A 110 people signed up for that one. Again, I mean, that's just cool to see. A large portion of those were people who signed up through listening to our podcast, but they were, I think, from social media posts and stuff like that, other people signed up. Great to see. I think the content of these webinars has been great. I've been checking them out myself. I also think it's a useful opportunity to meet the PWL team, beyond me and Cameron. People listen to our podcast, but there's a huge team behind us. They've got lots of things to say that we haven't said, or haven't thought about, so I think it's worth hearing from them.
It's also just neat to see that a lot of new clients that have come on board to PWL in the recent past since we've started doing these webinars are coming to the firm already being familiar with the team outside of Cameron and I, because they've been attending these webinars. I think the webinars are great. Next one, September 27th on finding and funding a good life.
Cameron Passmore: Great setup. With that, let's go to our episode.
***
Cameron Passmore: All right, welcome to episode 269.
Ben Felix: We're welcoming Dr. Preet Banerjee under our podcast in a minute. Preet was last on Rational Reminder back in 2019, in episode 53. One of our earlier guests. He's a long-time friend of ours. He's been in and around the financial services industry in Canada for a long time. He's got a background that he calls a shiny ball philosophy. He was an advisor for a while and he had a regular gig on national TV news, a reality TV show. He’s also an author. He's got a podcast or had a podcast. I don't know if he's still making new episodes. He's got a YouTube channel that's got over 100,000 subscribers. I could see his silver plaque thing behind him when he was with us a minute ago.
Cameron Passmore: Oh, yeah. That's right.
Ben Felix: Back in 2019, when he was on Rational Reminder, the first time he had talked about how he wanted to do something that would create a legacy from his career, and that led him to work on his doctorate, his DBA, his doctorate of business administration with a thesis looking at the business of financial advice, the value of financial advice. He's got an article, the Globe and Mail article from back in 2012, where he hammered this study that had purported to show how incredibly valuable financial advice was just by looking at differences in net worth between advice and non-advised households. Of course, that has major issues with endogenous effects. Financial advisors will be much more willing to work with higher net-worth households.
Anyway, so Preet wrote an article saying, this is ridiculous. Then he's gone and done his DBA and done his dissertation on a model looking at financial advice that controls for endogenous effects, but also looks at a whole bunch of other angles, including different channels of advice, just a much more comprehensive look at examining the value of financial advice. That's what we just spent about an hour talking to Preet about, and I think it's a really good conversation.
Cameron Passmore: Preet's a good guy. Known him a long time. Super proud of this work that he's done, so let's go to our conversation with Dr. Preet Banerjee.
***
Ben Felix: Dr. Preet Banerjee, welcome back to the Rational Reminder Podcast.
Preet Banerjee: Thanks so much for having me, guys.
Ben Felix: Preet, how do you describe the focus of your research?
Preet Banerjee: On the surface, it's pretty simple. I was looking at the value of financial advice to households, and is it worth it to get financial advice? That may sound like a trivial question, and I think there's a lot of people who have pretty firmly entrenched views as to where they stand on that question already. Some think financial advisors should be shot out of a cannon, and others think quite the opposite. I'm sure you are probably on the opposite end of that spectrum. You probably believe in financial advice.
I know some pretty smart people on both ends of that spectrum, in terms of their beliefs. I really wanted to explore this, because it seemed quite paradoxical. There's got to be something more than just a black-and-white way of looking at the world.
Ben Felix: Can you talk about some of the main problems with past research that's attempted to demonstrate the value of financial advice?
Preet Banerjee:There's a couple. I cover quite a few aspects in terms of the challenges of studying this problem. I'll just highlight, I think, a couple of them that come to mind right now. The first one is moving goalposts. Financial advice has evolved continuously and continues to evolve and will into the future. It's in response to competition, consumer preferences, availability of information. If you use it as an example, May 1st, 1975, pretty auspicious day in our industry. It was May Day. That's when commissions for securities trades were deregulated. Up until that point, it was a fixed commissions schedule no matter where you went on the street.
At that time, a lot of people thought, this is going to be the death of financial advice. That didn't end up happening. The industry responded. Consumers said, “Oh, great. We'll go do these discount brokerages.” The industry, in attempt to respond to changing consumer preferences, changed from just providing advice on individual stock trades to at the time, portfolio management, and trying to look more holistically at all the different parts of people's portfolios.
Now, that was a slow process. That did not happen overnight. You could argue that that's still happening in the industry. Not everyone is evidence-based like you guys. Changing goalposts is one thing. Over the time, you look at the history of research in this area, that's one part.
The second, the framing of the value of financial advice has always been made in the context of the portfolio. It's very portfolio-centric, where the measures of success, the outcome measures, the dependent variables have been, what's the size of the portfolio? Are people getting more diversification if they use a financial advisor versus doing it themselves, things of that nature, all rooted in the portfolio. Contemporary industry practices, the market for financial advice has again, shifted. It's again, a very slow gradual shift towards non-portfolio-centric advice model. Looking at being more holistic, including things like insurance coverage, estate plans, tax planning, cash flow management, debt management, and other things other than the portfolio.
The other problems that thinking about the value of advice has been a very binary thing. A lot of the research says, here's a study looking at people who use advisors and people who don't use advisors. Now, there's a couple of problems with that. One is not all financial advisors are created equal. There's a huge variation in the quality of financial advice. Some of that is even set at the firm level. It was interesting. There's early on in the days of financial planning, when it was still been delineated, there are some firms that borrowed the use of the word financial planning. Because if you said that, that might put the firm at risk of having to fulfill a fiduciary duty, and they didn't want to go down that road.
Portfolio management at the same time has become a little bit commoditized. The value propositions have changed. There's also different channels of advice. It's not just financial advisor or not. There's many different types of financial advice available. Then within those channels, there's different quality of advice as well. I would categorize a lot of the prior research as being very undifferentiated. What I set out to do was take a much more differentiated look at the market for financial advice and take into account that there are some channels that might be better than other channels. Within each of those channels, there might be better models of those channels, again, in those silos. Previously quite undifferentiated.
Then the flip side of that coin is households are also not all the same. Just as not all financial advisors, or channels are the same, not every individual is the same. You probably have great stories to tell about different types of clients. Some that are probably can't wait to have this meeting. It's going to be, I enjoy talking, they get it, we're on the same page. Other where maybe you end up firing down the road, because you know what? It's just not a good fit. We're giving you all the advice and you're just not taking it. Households are not all the same as well.
Cameron Passmore: How would you summarize your review of the existing literature on the value of financial advice?
Preet Banerjee: In one word, fascinating. In two words, fascinating and very fragmented. There's a lot of different aspects that impact household financial outcomes. It seems like a Sisyphean task to really try to incorporate all known facets of all the research that has been done heretofore into one study.
As an example, some have argued that advice exists. Financial advice exists as a means to reduce financial errors. There are all sorts of errors that investors are subject to. It could be something like information processing asymmetry. There's a really cool study. I don’t know if you guys have talked about this before. Looking at the differences between retail investors and institutional investors and information processing asymmetry. Basically, what they found was when security analysts make recommendations like strong buy, buy, hold, sell, institutional investors know to discount that because they're positively biased. They're just too optimistic about these recommendations. More so, when the firm is also underwriting the issues and there's this huge conflict of interest, whereas retail investors take that at base value.
Reducing errors of that nature and other nature has been posited as one of the reasons for needing financial advice. At the same time, there are other studies that say, “Well, but look, financial error rates follow a U-shape pattern over a lifetime. People make more mistakes when they're younger and more mistakes when they're older.” The reason that they make them more mistakes when they're younger is due to a lack of financial literacy. The reason they make more mistakes when they're older is cognitive decline.
I mean, there’s just so many moving parts to try and figure out how you get someone to realize their maximum potential. If you take a look at financial literacy, I know you guys had a great episode, I think, with Annamaria Lusardi talking about financial literacy. This is another thing that it's not a linear effect. Financial literacy can be complementary to households with high financial capability. The promise of financial advice is that it should be a substitute for financial literacy. Those people who can't do themselves, they should rely on financial advice. What we actually find is low financial capability households, people don't have a lot of income, or assets yet. They don't have access to good quality advice and their low financial literacy is actually a way for the industry to prey on them and take advantage of them.
That changes when you have someone who is highly financially capable has high financial literacy. In that case, when they work with, I'll use you guys as an example, they probably get way more out of that relationship than other people, because financial literacy is complementary to financial advice for these highly financially capable households. I mean, there's just so much to dive into in the literature. Again, as you go further and further into the literature review, it's very fragmented.
Then thinking about, how do you get one ring to rule them all? I don't think you can't. You can just chip away and move in the right direction. I think in the end, that was my goal, not trying to figure it all out, because I think that would be pretty pretentious for a thesis.
Ben Felix: Was a really good review though. It was enjoyable to read.
Preet Banerjee:Thanks.
Ben Felix: Can you talk a little bit more about the gap in that literature that your research is filling?
Preet Banerjee: Couple of main aspects to it. Again, as I alluded to, the previous research tended to consider financial advice as a binary condition. Treated all financial advice as basically the same. Of course, that's ridiculous. I considered five main categories of financial advice channels. Then within those five broad categories, 18 subcategories. I really differentiated the market for financial advice. There's a difference between a bank grants financial advisor versus a full-service advisor at a bank, versus an independent advisor, versus a money coach. There are also non-traditional sources of advice. People are more and more turning towards social media podcasts, like this one, hopefully. Then there's social media that might not quite be as good. That's one part of it, differentiating the market for financial advice.
Then the second one was to keep in line with contemporary industry practices in the market for financial advice, not just considering a portfolio-centric measure, or an outcome measure. I wanted to take a look also at non-portfolio-centric measures of value. Some of the previous research has basically said, we know that advised investors. There's a preponderance of research that say, they were soft compared to a counterfactual portfolio, which is not a perfect comparison. There's obviously more to impact than just that, but it's taken now at face value that in the aggregate, people using financial advisors tend to underperform, because of the cost of advice. It's very much tied to. That's like an anchor.
Those researchers come together to just say, well, how do you rationalize this? How does this make sense? Especially as this becomes more and more known, and there must be some intangible benefits of advice that doesn't show up in the portfolio. I wanted to try and capture that. One is a measure of the breadth of advice that more reflects financial holism, or being holistic when thinking about your financial situation and not just your portfolio. The other one was a more comprehensive measure of people's financial confidence.
Instead of just asking, “Well, how financially confident do you feel on a scale of one to 10?” Went a little bit deeper and created a scale comprised of up to 10 items, depending on the individual. Asked them, along these different measures of household financial decision-making, how do you feel? Those two non-portfolio-centric measures were two main dependent variables and then the investable assets, because so much research is that is what it's looking at, so I wanted to have a point of comparison, obviously.
Ben Felix: Can you talk more about how you measured the holistic wealth score and the comprehensive financial confidence?
Preet Banerjee: Yeah, it was pretty simple. Started with a pilot study to test some questions based on the literature review to try and capture some of these aspects of household financial decisions. We went through a couple of pilot studies to assess these measures for consistency and reliability. Pretty simple, really, just on 10 different aspects, investments, life insurance, disability insurance, emergency funds, debt management, cash flow management, retirement forecasting, tax planning, state planning and education.
Cameron Passmore: Well done.
Preet Banerjee: 10 of these aspects, just asked them, when it came to the holistic wealth score, with respect to your primary channel of advice, have they given you advice, or service on these categories and what level? It's just the Likert scale response, from one to five. Same with the comprehensive financial confidence. Well, how confident do you feel about how well these aspects of your life are managed? Those form the two non-portfolio-centric measures that I looked at.
Cameron Passmore: What data set is your research based on?
Preet Banerjee: The nerdy answer would be that it's a single-stage, non-probability convenient sample of Canadian households, head of household over age 18, minimum assets of $10,000. The short answer is trying to find a sample representative of Canadians who are making investment decisions. Of the sample collected, the final analysis was only on people with a minimum of $10,000 invested. I actually have a really good story about this, because the questionnaire, or the survey, so it was a survey that I deployed. When I looked at the mean completion time, it was 70 minutes. It was a long, pretty detailed survey. It's including the appendix, if anyone wants to take a look at it, but took the average person about 70 minutes to complete it.
I thought, okay, so after testing this out a couple of times, I'd be lucky to get 500 responses. I happened to be invited onto The Agenda, TVO’s Agenda with Steve Paikin, which would be very familiar with anyone in Ontario. Pretty popular program. I had mentioned to the producer, I was, I don't know, maybe looking pretty frazzled. I said, “Yeah, I'm just about to deploy the survey for some research.” She said, “Oh, what's it about?” “It’s about the value of financial advice.” “Oh, that's pretty cool. Do you want Steve to plug it on TV?” I'm like, “Yes.”
The ironic thing is that the program I was invited on was talking about the upside-down world of financial planning for low-income Canadians and how the standard rules about saving into an RSP don't make sense for people who have very low income. It's actually quite a drag to invest in an RSP, because it caused back your income tests and benefits, all this stuff. It's ironic that on that program, which is geared towards people who are probably not going to be investing very much, Steve Paikin made this call three times during the show. I received a thousand responses that night.
Ben Felix: Wow.
Preet Banerjee: A lot of them had a lot of money. It was great that they were interested in that issue as a social policy aspect. I think, collected about 2,100 surveys in total. Ones that were usable were about 1,500 after establishing that asset threshold.
Ben Felix: Wow. You mentioned that you looked at 18 advice channels and then grouped them into five categories. I won't make you go through all the channels, but can you talk about the five broad categories?
Preet Banerjee: The five broad categories were based on, you can go to some channels of advice and get execution with advice. A traditional financial advisor, they will talk to you, give you advice and implement the investments for you. Then you have execution with what I would call directed advice. This is where a robo advisor would fall into. Previously, if you went to maybe an online bank, they had some online investing options. These were straddling the line of advice. It's a directed turnkey, answer a questionnaire, here's your portfolio directed advice. Not as bespoke as a traditional full-service advisor or independent advisor.
Then you had execution without advice. There's really only one channel there. That's what are called OEO platforms. For the benefit of the listener, OEO stands for order execution only. You're not allowed to give advice, and you know them more as discount brokerage accounts. You just go and execute your own trades.
Then you have advice without execution. This is an emerging category. We've seen it, I think, associated mostly with money coaches. These are individuals, or firms, I guess, who are not licensed. They don't have a securities license. They're not allowed to talk to you about individual securities with respect to your personal situation, but they can give you financial planning. That's advice, but there's no investment execution. Then the last category is the reference category, which is no advice to no execution, which is basically a bank teller. That was the reference category from which I judged everyone else against.
Cameron Passmore: How do you determine who is a DIY investor in your sample?
Preet Banerjee: If they list their primary channel of advice, so they could list not only their primary channel, but also all the other channels of advice that they use on a secondary basis. If they listed their primary channel of advice as an OEO platform, again, order execution only, that put them as a DIY investor. It's a great question, because it's important to distinguish between someone who does not have an advisor versus a DIY investor. Those are actually two different things.
Someone who does not have an advisor, I say many of the studies out there that have looked at this assume, and I think colloquially, a lot of people assume if you don't have an advisor, you must be DIY. That's not true. You just might be on the side lines and not doing anything. That's important to study as well. To answer your question, DIY was specifically when they said their primary channel was a discount brokerage account.
Ben Felix: For those people who end up being DIY in your sample, what advice channels are they using?
Preet Banerjee: Some cases, it's themselves. But I did ask about secondary channels that they use. Predominantly they're using non-traditional channels of advice, such as social media, print media, podcasts, books, things of that nature, online forums to inform themselves. It speaks to the nature of advice. I didn't really get into the qualitative aspects of the advice that people were receiving, but you could probably, suppose that that advice was more geared towards investments only.
That was actually interesting. I actually found that people who turned to social media, podcasts, actually had an increase in their holistic wealth score. In terms of looking more holistically at their households, they actually looked more on a holistic basis than some of the traditional channels. My theory on that would be, when you look at the compensation mechanisms and you pay someone to sell funds, or insurance, that's what they're going to talk about. They may not necessarily say, “You really should talk to a lawyer. I'm not going to get a cut of that, but you should go talk to them and get your estate plan in order.” There's less of an incentive to do that.
It was interesting. There's so many findings, when I look at the data set, that I could spend more and more hours on just diving into these little things. At one point, my supervisor said, you have to stop at some point. You keep adding more tables and charts and graphs. At some point, you're going to have to stop. He said, “Realistically, you and I are the only people who are going to read this.”
Ben Felix: That's super interesting. People listening to this podcast may be doing themselves a favour.
Preet Banerjee: Oh, a 100%. I mean, especially this podcast. I think podcasting the aggregate, the research in this case showed that, but certainly, your podcast, it's the gold standard for people who want to learn about managing their money and investing. It's fantastic.
Ben Felix: Thanks, Preet. How did you deal with endogeneity in your research?
Preet Banerjee: There are tons of controls added into the survey. A lot of that was predicated on pulling from different studies that were out there already that said, here are the things that we wanted to take a look at. I cobbled together a pretty big list of controls, added some new ones in as well. By background, for those who may not be familiar, I was in the industry providing advice. I was a financial advisor. Geez, almost two decades ago. There's some things that I found and some of the relationships that I had with clients that I thought were worth exploring. They always stuck with me.
One of them was, people who had financial insecurity in the household that they grew up in, they tended to have more financial agency, and they tended to really know what they wanted more than people who maybe came from more privilege, never had to deal with any adverse consequences. I really wanted to take a look at that. It turns out that that is a pretty significant indicator of how well people do later on in life, is how financially insecure the household was that they grew up in. That's because they never want to replicate that feeling again. That is a core memory for them that shapes a lot of their decision-making is avoiding financial scarcity.
Then you have a standard ones, income assets, education, age. But I also wanted to look at, well, how much money did people bring into the relationship? What was your income when you started this relationship with whatever primary channel that you're working with? What is the level of investable assets that you brought into the relationship? Who solicited who? That was something that I wanted to explore more, because again, based on how the industry compensates financial practitioners, you are incentivized to go out to people with money. You're not going to go after people, necessarily, who have no assets to invest. Everyone's got their sort of, “Oh, we'll have a chat, but we're not going to take you on.”
The other thing is generally speaking, really good advisors, as they get more experience, they tend to lift their asset minimums in time and time. The access to better quality advice goes away. I wanted to see, dive into that a little bit more. Then I also wanted to ask about people's preference to delegate decisions. We know that there are some people who are just high-income, high achievers, good decision-makers in general, and they will choose a financial advisor, maybe because they just don't have time and they just want to delegate. They're happy to pay. When I say they're happy to pay, they're happy to pay for you execute, be my sounding board, or what have you. The other people is like, “I don't know what I'm doing. I'm totally financially anxious. Teach me everything. I'm putting everything in your hands.”
You would say that in that latter condition, the financial advisor has more of an impact, whereas in the previous condition, they're really just implementing. It's a qualitatively different type of relationship. I wanted to look at that as well.
Cameron Passmore: How do most people in your sample get their financial advice?
Preet Banerjee: If you look at the breakdown of how many people go in a channel, about 34% were in the DIY channel, 15% were with independent financial advisors. Social media was 12%. 12% of people in the sample identified social media as their primary channel of financial advice. Interesting. Full service, about nine branch financial advice, about nine print media, about six. That accounts for about 85%, I think, of the total sample. Pretty diversified from that sense. I was surprised at how many people picked social media as their primary channel.
I did take a look, I don't think it's in the thesis, but I do remember taking a look at the people who picked social media as their primary channel, what was the other channels that they use? It was primarily DIY, like OEO platforms.
Ben Felix: Very, very interesting. How do you determine whether a respondent has a financial plan?
Preet Banerjee: It was self-reported, so you have to take it with a grain of salt, I think, because you know that some people consider how much will I have at 65, projection as a financial plan. That's definitely something that I would do differently in a future study to drill down on.
Cameron Passmore Well, that's the next question. What constitutes a financial plan in the research? Because it is more than just that projection.
Preet Banerjee: In my research, it was a self-reported, do you have a financial plan? Was a financial plan created for you by the primary channel of advice? In terms of what it's defined as in the literature, the academic journals are maybe not as granular in their definitions, if there are many definitions. But in the practitioner journals, it's really based on the CFP board's definition. The practitioner journals, it's interesting. There's obviously a lot of work done on the value of financial planning and the Journal of Financial Planning. But one of the things that both academics and practitioners in terms of researchers have been saying for decades minimum is that there's still no real theory. There's no real academic theory of financial advice or financial planning.
What everyone goes back to is theory from 50s, 60s, Ando and Modigliani, lifecycle hypothesis of consumption smoothing over a lifetime. That's the backbone. Now a lot of people have said, well, it should include this theory of insurance and all this stuff, but no one's really come together and create. It's starting to now. I should say that there are now Ph.D. programs in financial planning and there was this movement not that long ago to say, we need to create this because in order to be taken seriously as a profession, some of the hallmarks are master's degree, doctoral degrees available, practitioner requirements and all this stuff. That's been lacking. When we hear about the profession of financial advice and financial planning, it's still in the early stages.
Ben Felix: That was incredible to read in your paper. I think you referenced another study that looked at the appearance of theory in the Journal of Financial Planning, and it was like, there was no discussion of theory, or very little, at least. Which advice channel did you find to be the strongest predictor of having a financial plan?
Preet Banerjee: Money coaches, as you would expect, and independent financial advisors. There are, I think, different types of money coaches. There are maybe people who focus on cash flow and could fall under the category of money coaches, but there are many more who are CFP professionals, but they don't have a securities license, and so, they don't do anything on implementation. But this is a fast-growing space, the money coach world.
As people become more agreeable to paying out of pocket for advice, that's a relatively new thing. Back when I was an advisor, I used to offer clients, you can pay me in, I think it was three different ways. We can do this traditional commission route. We can do fee-based, or you can pay me by the hour. I was at a big five full-service brokerage. I remember, when I said to compliance, “Hey, can I charge by the hour?” They said, “We think so. Let's see if anyone else is doing that at the firm.” There's one other team that was doing it. This was back in the early 2000s. They said, “Yeah, talk to them and we'll just do what we're doing for them.”
I would give people the choice and talk through the pros and cons. More often than not, people said, “I don't want to know. Have it embedded.” That's changed a lot in the last – because there's just more access to information. People are talking about it more. People understand the impact of fees over a lifetime a little bit more. It's not maybe fully appreciated, but a lot of things have changed.
Cameron Passmore: Which advice channel has the highest amount of investable assets?
Preet Banerjee: Technically, it was newsletter subscribers, which I think is a bit anomalous. There's only a handful of people in there. While I did clean the data set for three sigma outliers, there's still, I guess, just enough in there with outsized level of assets that they actually showed up as the highest, but there were so few of them that I think you can pretty much discount that category. In which case, it was full-service advisors. The reason for that is when you have a lot of money, a lot of people tend to have legacy family relationships with a big six institution. They tend to engage private banking and they have – we're talking 25, 50, a 100 million dollars.
You tend not to get that as much in the independent channel. It exists, but it's rare. I think that's why they came out as the top channel by assets. Followed by accountants. If you listen to your accountant as your primary channel of advice, you also had very high levels of assets compared to other channels.
Ben Felix: What was the relationship between having a financial plan and investable assets?
Preet Banerjee: Oh, yeah, this was amazing. Almost across the board with few exceptions across the 18 channels. Having a financial plan was associated with significantly more investable assets. It was double if you used an accountant.
Ben Felix: Whoa.
Preet Banerjee: If you had an accountant and you had X, but you had an accountant and you'd gotten a finished plan, it was two X. Again, almost double out of full-service bank. Again, I think there's some nuances of the full-service channel, because there's still a lot of people in full-service who are primarily portfolio-centric. But again, if you've got a big family estate, you tend to also get not only that person but a team of estate planners and trust specialists and whatnot. If you have a financial plan at a full-service institution, big difference.
It was interesting. There was a significant difference, but it wasn't as big for the independent FA channel. Again, I think because of the nature of full-service relationships, quite unique. I think that explains that.
Cameron Passmore:That's correlation, not necessarily causation, right?
Preet Banerjee: Oh, yeah. I mean, if you sell a business for a couple hundred million, was it the adviser who was responsible for that? Or do you have a couple hundred million and you're like, “You know what? I need a lot of help. I know that if something goes wrong, you're a big brand. I can sue you. I've got lots of lawyers. You've got lots of lawyers.” I don't think it was ‘You go to an advisor because you meet the threshold of a million and you've got a 100 million 10 years later’. I don't think that's how it works.
Cameron Passmore: What are the factors in your model that best explain the differences in the investable assets?
Preet Banerjee: Obviously, having a financial plan was associated with having a lot more assets, but income before you started your relationship, big factor. The level of assets you brought into the relationship when you started your relationship with that channel. Childhood communication was another aspect that I studied. I think that's because I have always been tangentially involved in financial literacy and creating content for a long, long time. I believe that there's value to that. A lot of parents lament the fact that they don't even have the financial literacy to teach their kids about financial literacy.
What was interesting is just the level of communication about finances in the household that you grew up in. Control for was good information. Not just the fact that you talked about money was associated with more investable assets later on in life. If you're interested in personal finance, which makes sense, obviously, you're going to spend more time thinking about it and your decisions and consuming information and these have positive impacts. Not having a pension. People who don't have a pension have to take it more seriously. That was something that I looked at in some of the early pilot studies as well.
One of the things that I noticed that I think it was maybe, I don't know, you deal with couples over back when I was an advisor and both of them were teachers, both had got pensions, they had no other savings. They just relied on that and they didn't take their finances. I'm speaking in a very general manner. They didn't maybe take it as seriously because they didn't feel they had to. That is great safety net. That was what I found not having a pension. Maybe people, I guess, forced to make some of these decisions.
Use of social media. Not as a primary channel, but as a secondary channel. If you're using a financial advisor and you also use social media, you tend to be better off. If you use a traditional financial advisor and use an accountant, that's associated with having more money. Makes sense, because if you have more complex tax situations, you probably have a lot of money. Being married. Your age is correlated with investable assets. Your income, current income, the length of use of a channel and then a couple of the channels, full-service FAs, independent FAs and the DIY channel was associated with statistically, more assets than other channels.
Ben Felix: Reading through that part of the paper on all the different elements, now they impact is super, super interesting.
Preet Banerjee: I had a lot of fun with the data for a very long time. Trying to tell a story out of that, it took – of all the time I was working with the data, I would say, the first 90% of that time was just trying to figure it all out. Try to figure out, what is the story that this data is telling? The last 10% of playing with that data is where everything really came together. My supervisor and I, we decided to develop a progressive regression model. For each of the dependent variables, we start with this, even on its own, a pretty big regression, a lot of variables in there, but then we added in more controls and each successive iteration of that regression. There's five models. Each model having more controls than the previous.
What was really cool is to see how robust some of these effects were, because they stayed consistent through a lot of the five models. Then as you add in some new ones, how there are new things that's emerged. I'm probably the only person who found that interesting. I'm sure no one's going to read it, but I just want you to know that that was fun for me.
Ben Felix: I read it and I also found it interesting. It's not just you.
Preet Banerjee: I appreciate you, Ben. Thank you.
Ben Felix: We talked about investable assets. Can you talk about which advice channel had the highest holistic wealth score?
Preet Banerjee: Yeah, money coaches by a pretty big margin.
Ben Felix:Wow.
Preet Banerjee:That makes sense, because they're not focusing on the investment implementation. Their focus is going to be more on holistic financial plans and being more well-rounded with the advice that they provide, which makes sense. The holistic wealth score is a measure of the breadth of advice.
Cameron Passmore: I'm assuming, having a financial plan positively affected the holistic wealth score?
Preet Banerjee:Absolutely. Super robust across pretty much every channel. There were some channels where you could not get a financial plan, like a robo advisor, etc. But for the channels where it was possible to have a financial plan, having a financial plan, there was a very robust and strong effect of an increase in the breadth of advice that people were getting, which makes sense because the financial plan is generally going to be very holistic.
Ben Felix: Can you talk again about the factors in your model that influence the holistic wealth score?
Preet Banerjee:The one, I think, that initially surprised me was the secondary channel use of social media, podcasts, and print media. If you read Rob Carrick's articles in the Globe and Mail, he'll talk about things other than just investing. That's beneficial to the readers. People who listen to your podcasts, even though you have a lot of great papers talking about portfolio management, you also talk about things that are qualitatively super important to people, like happiness and decision-making. You talk about the benefits of financial planning. People would not be attuned to the fact that financial advice is not just portfolio advice unless they were relying on other sources of media.
In the aggregate, whereas most people going to a branch financial advisor, or traditional financial advisors who have been predominantly compensated based on products, that's two, three channels maybe that they can get an income on. That means it's two, three channels that they're going to be providing advice on. If you use social media, podcasts, print media, it is complimentary to the use of those channels. Don't just rely blindly on the channel of advice that you're using. Look to other sources of information to augment your financial journey, if you will.
Ben Felix: That's super interesting. That's like, even if someone has an advisor and they've decided to delegate having other sources of information, good information improves the overall situation.
Preet Banerjee: Yeah, it's a check and balance, I think. There's a lot of financial content creators out there. When I say there's a lot, there's also a lot of variation in quality. There's some just atrocious garbage out there. Then there's some really good stuff, like Common Sense Investing, Ben Felix's channel. When you use that in tandem with a channel of advice, it's good, because it gives you things to talk about, to maybe push back on, learn about. Maybe your advisor, or a channel of advice will say, “Oh, yeah. We can talk about that. Didn't know you wanted to.”
There's only so much time you can dedicate to individual client reactions as a practitioner. It would be great if people were more informed, you can have more productive relationships. What time you have together can be much more efficient. The other thing that was in the model that explains differences in the holistic wealth score was the responsibility index, which I talked to earlier. It was, who is delegating decisions for certain things? This was an index that took a look at, with respect to your savings rate, who is more responsible for the level of contribution. You or your advisor? Did you decide, I'm going to save a $1,000 a month, I just need someone to implement it.
Or, did someone come to you and say, “You need to save a $1,000 a month if you want to hit your goals.” The more responsible the individual was, the higher their holistic wealth score, which again is interesting, because if you have more financial agency and you know more about personal finance, you're going to ask for advice on more areas of your household financial decision-making.
Ben Felix: That's interesting. I think, Cameron, that's something that we talked with, I hope I'm getting this right. I think it was Ayelet Fishbach, about the science of motivation and how for stuff like setting financial goals and savings rates and stuff like that, people will be much more engaged and motivated if they're the ones doing it, as opposed to the advisor. It's exactly what you just said. It's just a super interesting connection to make back to a past guest.
I've also seen research, and you mentioned this earlier, and you were just talking about it, but I've seen at least one paper showing that more financially literate people are more likely to seek advice and more likely to benefit from advice.
Preet Banerjee: Yeah, absolutely. There's a complementarity effect there. Again, that works really well for higher income households with higher assets, because they can get more out of those relationships. But the flip side of that coin is for the people who arguably need more advice, or need access to more advice, the mass market, if there is no financial literacy, the financial advice as a substitute for our lack of financial literacy, that relationship doesn't exist. It actually allows the industry, from what I've seen, to prey upon individuals, which is why you have financial salespeople dominate the mass market, as opposed to what I will say as professionals.
Ben Felix: Man, that happens in product innovation, too. Not just in the advice market. But I think, if you look at the thematic ETFs and even cryptocurrencies, a lot of the clientele of that type of stuff is people with low financial literacy. They're getting hammered not just in the advice channel, but even in the product manufacturing channel.
Preet Banerjee: I think that's a perfect example.
Cameron Passmore: Which advice channel has the highest comprehensive financial confidence?
Preet Banerjee: DIY had the highest level of confidence, because DIYs have the highest level of confidence generally, right? They think they can do it themselves.
Cameron Passmore: Wow.
Preet Banerjee: That would hopefully come with a good level of confidence.
Ben Felix: How does having a financial plan affect the confidence?
Preet Banerjee: Yeah. Again, robust across almost all channels of advice. If you have a financial plan, your level of comprehensive financial confidence is strong, pretty much across the board.
Ben Felix: That seems like one of the big findings from the paper is that regardless of channel and regardless of whether how valuable we think advice is, having a financial plan is huge on every metric that you looked at.
Preet Banerjee: Yeah, because portfolio management is commoditized now. The value add is in everything outside of the portfolios. Now, I know there's some people who are still stuck in the portfolio-centric view of the universe of financial advice. Not to say, it's unimportant. It's just that the relative importance of adding value on that aspect, that's a much tougher game now than it was before. Now, we have all-in-one portfolio ETFs. What are they? 20 basis points now? Man, that's tough. That's tough to beat. Wouldn't you rather focus your time and energy on areas where you can make a much more significant difference with probably a higher level of reliability as well? I mean, that seems to be the trend moving forward, but it's a slow-turning ship as you know.
Ben Felix: I don't know. We've been saying for years that investing has been solved, but I've also seen people writing articles literally refuting that exact sentence. Investing has not been solved. Look at this product.
Preet Banerjee: It's a paradox for sure.
Ben Felix: Yeah.
Cameron Passmore: What factors in your model do explain the differences in the comprehensive financial confidence, other than the incoming confidence of DIYers?
Preet Banerjee: The length of relationship. Obviously, whatever channel you’re with, the longer you’re with it, you tend to have more confidence related to income as well. Makes sense. The more income you have, the more you're going to feel financially confident. Being retired was associated with a higher level of comprehensive financial confidence. That's interesting. I think that as you approach retirement, you're probably less financially confident. You're probably more anxious. That's when people tend to get a little bit more serious about their planning as well on their own.
Then when you probably don't make that decision to retire, until they feel that they're in a position to retire. I think that probably explains why people have higher levels of financial confidence once they are retired. If there are fewer people in the household, you have more financial confidence, less mouths to feed, I suppose. If you own real estate, that was associated with more financial confidence.
Ben Felix: That's interesting.
Preet Banerjee: The sample is taken 2019, so I don't know if things have changed. Then this was interesting. If you use a robo advisor, not as your primary channel of advice, but as a secondary channel that used, there's a negative correlation with comprehensive financial confidence, which is interesting. I mean, you could probably make a meal out of just digesting that. If your primary channel of advice was a traditional financial advisor and you had a robo-advisor account on the side, you probably are not that confident in that primary channel of advice, let alone your overall financial confidence for your household. It was interesting.
Of course, there's basically zero barrier to opening up a robo-advisor account. But I could see situations where, and you guys would know, because you’re practitioners, but you have clients and they have portfolios, and it's based on evidence. Maybe it's not sexy and they've got an itch to scratch. Maybe you allow them to have a small trading account. I don't know if that ever exists with some of your clients. That's different than having a robo-advisor. What itch are you scratching by having a directed portfolio, which really could be just an all-in-one ETF portfolio? It's interesting to think about that.
Ben Felix: That is really interesting. You mentioned the effect of the duration of the relationship on confidence. How does the duration of the relationship with a channel affect other outcomes?
Preet Banerjee: I mean, it's generally all positive. The longer you're in any channel, you tend to have more assets. You've had more time to accumulate assets. Across the board, the length of your relationship with any channel is positive at the P 0.01 level.
Cameron Passmore: What are the bottom line main findings of your research on the value of financial advice?
Preet Banerjee: I would summarize it to say that traditional financial advisors are associated with higher levels of investable assets only for wealthier households, who identify full-service advisors, independent advisors, their primary channel of advice. The other part of that, though, is that traditional financial advisors dealing with mass market households, there was statistically no difference than just using a bank teller. Even most interesting part of that is that holds true, unless you get a financial plan.
If you get a financial plan and you're in the mass market, then there is a robust effect across all three outcome measures, investable assets, your holistic wealth score, the breadth of advice that you're getting, and the comprehensive level of financial confidence that you have. I think the really important thing here is when I looked at this, I thought, “Well, this isn't very earth-shattering.” This lines up with what I see. That is if someone has a lot of money and they come to me and they say, “I want to work with an advisor. Can you recommend someone? I've got 2 million, 5 million, whatever.” I say, “Yeah, that's relatively easy to do. I've got a Rolodex full of financial professionals I've worked within the past, or no. I say, yeah, you're in good hands with them.”
If someone comes up to me and says, “I've got $75,000. Can you recommend an advisor?” I cannot. Can't do it. Unless, I know that they're a financial planner and they're working with people who don't have significant levels of assets, then I know that they're probably – that's as good as they're going to get for the mass market. Initially, again, I thought, yeah, not earth-shouting, but this goes back to the beginning of our conversation, which is we have a lot of people who firmly believe that all financial advisors should be shot out of a cannon and they've got a bunch of people who know really good financial advisors exist and are out there and working with people and delivering value for the fees that they're paying.
How do you make it all square? This is it. If you have a lot of money, you've got access to better quality advice. If you don't have a lot of money, you better be looking for someone who provides financial planning. Not that you shouldn't be looking for financial planning at the high end, but you better be looking at for financial planning if you're in the mass market. Because that's the single, biggest differentiator for knowing that you're going to get better advice if you're in the mass market.
Ben Felix: Just incredible. What are the policy and regulatory recommendations that come out of your research, do you think?
Preet Banerjee: Well, I think if we take a look at what's been happening lately, we're seeing more and more people turn to social media as a substitute for traditional financial advice. This speaks to, again, the mass market. This tends to be more the case where if you're in the mass market, there's a lot of information out there that talks about the failings of financial advice if you don't have a lot of money. It's going to be mostly financial salespeople.
Now, I do want to make clear, of course, there are advisors out there working with the mass market that are doing well. It's just finding them is very difficult. There's a lot more that are quite suboptimal, and you want to steer clear from. In the aggregate, the value just isn't there in the mass market, unless you get financial plans. As more and more people on social media expose this, both non-licensed individuals and licensed individuals talking about this, this is not new stuff. As more and more people learn about this, they are turning away from the traditional models of financial advice for the mass market, because they're just not seeing the value of paying 2% and not even getting holistic, big breadth of advice. They're turning to other forms of advice, namely in the form of social media.
Again, some of that social media and other types of non-traditional advice is going to be good. No doubt about it. There's some great stuff out there. There's probably a lot more bad stuff. People being lured onto cryptocurrency platforms when they don't know what they're doing. NFTs. But that's the first time you heard that in about two years. That was a grace for a while. There's all these substitute for traditional financial advice. If from a grand regulatory perspective, we're trying to think about protecting investors, fostering efficient capital markets, then I think we have to think about whether or not regulation of financial advice, and it's really regulation of securities, has kept pace with changing consumer preferences. I'd argue that you could pretty strongly say, no.
The problem is, how are you going to change a system which is based around securities regulation, which is very much product-driven and focused? If you're going to talk about this, you need a license. If you’re going to talk a fund in ETF for an individual, you need a license. At the same time, there's this big category of people. Let's say, an ideal money coach, they're making great financial plans and sending people to, I don’t know, a robot visor to do it on their own for the implementation, whatever it is, I think that is a growing model. I think there's probably some people, financial content creators, money coaches, who I'd be much more comfortable with them saying, you could go into this ETF portfolio. Is there a different registration category that needs to recognize that there is some limited advice with some restrictions for this category that is going to deal with the mass market?
Because traditional channels, you could argue there's a failure for market advice for the mass market. Is there a different way of doing it? That's tough because now you're talking about changing from maybe potentially securities regulation to advice regulation. That's just a hornet's nest.
Ben Felix: Crazy. I think I remember seeing that Australia is now regulating financial influencers like you have to have the license to talk about products.
Preet Banerjee: Yeah, and that's interesting. I do remember seeing a headline like that. I also saw it was a lawsuit against TikTokers in Australia for millions. Oh, yeah. Here it is. TikTok GST fraud, 4.6 billion dollars in fraudulent tax activity because of bad TikTok advice.
Ben Felix: Wow.
Preet Banerjee: I'll send you the article and you can take a look at that, but –
Ben Felix: Crazy.
Preet Banerjee: - they're, I think, moving a step ahead on that. It'll be interesting if it's the right step, but it's a step.
Cameron Passmore: So, Preet, we have a lot of other financial advisors that listen to this podcast who are running firms, full-service firms like we are. On behalf of all of us, what recommendations do you have for us?
Preet Banerjee: Probably join PWL. From what I've seen from what you guys are doing and knowing you guys, I think you've got a really good template that squares all the stuff that we've been talking about. I think I heard in one of your recent podcast that you've relaxed your minimums. These point people in the right direction. It'd be great if more firms did that. In the real world, I know that's not going to happen overnight, or anytime soon. My advice is to the extent that you can, as a culture for your firm, you want to move more towards planning centricity, as opposed to portfolio centricity.
I think it'll make your lives a lot easier in the long run, because if it hasn't happened already now, the competition for making better portfolios, you're competing against, basically, the counterfactual portfolios that are used in the research is available as products to people now. As more and more people start to figure this out, they're going to see, well, I'm getting minimal value here, but certainly not as much as in the past. If the costs aren't really coming down that much, better be getting some value in other places.
The non-portfolio-centric measures of value, I think is where people need to focus on. Again, the challenge is we're still based on securities and revenues based on assets. They're linked. Whether you pay fee for service, or sorry, fee-based, or commission-based. It's tough. But to the extent that you can, I think financial planning is going to create more fans of your practice. People are going to be more likely to spread the news about financial planning strategies and confidence and how they feel as opposed to trying to explain why you have, I don't know, structured products you've put forward. I don't think people go on and talk, “Oh, you should see this product I have.”
Ben Felix: I don't know. You'd be surprised.
Preet Banerjee: Oh, I know. Just make a little dig.
Ben Felix: We did an episode on structured products a while ago, and a lot of people had lots to say about that.
Preet Banerjee: I'm sure.
Ben Felix: What do you mean? How can this not be good? Kind of funny. What about for listeners of the podcast who are maybe they are DIY investors, what do you think they should be thinking about to put themselves in the best position to maximize the metrics that you looked at in your research?
Preet Banerjee: Yeah. For the listeners who are managing their own portfolios, from the thesis, what I can say is you've probably checked off a couple of boxes already. You're interested in personal finance, so that I know is important. You've probably taken some time to research the channels that you've chosen. That was important in the amount of time you spent researching the channel, or the advisor because I'm sure some of your listeners have advisors. That's important. Financial planning still isn't super sexy.
I try to adopt a planning-first mentality. The portfolio stuff is secondary. I know, it's not sexy. It is not sexy at all, financial planning. Maybe if you save a lot in tax, they're like, “Okay, that's pretty cool.” But beyond that, financial planning is like, do you know Josh Linkner's analogy, vitamins and painkillers? What are you selling? Okay, this is brilliant analogy. Imagine you're on vacation and you've got a splitting headache. You will get up at 2 in the morning, drive 10 miles to find a convenience store. You'll pay 20 bucks for eight pills that you get at a convenience store of painkillers. People are price-insensitive. They have a sense of urgency when they want to solve a pain when they want to address pain.
When it comes to selling vitamins, it's a bad business to launch, because it's like, yeah, this would be a little bit better for you. There's no sense of urgency. People are like, “I'll get it the next time I'm at the grocery store.” They're very price-sensitive. It's a very tough thing to sell, the difference between selling vitamins versus painkillers. People think of their portfolio problems as pain, pain that needs to be solved. They think of financial planning as, “I'll get to it. I know I should. I'll get to it.” But they don't. There's no sense of urgency. They're price-sensitive. Not so much so on the portfolio side. I think that's interesting.
What I would suggest to listeners is you don't have to do it yourself planning. That's actually very difficult. Outsource it. Get a money coach. Test the waters. Try and get some kind of plan in place. You might be surprised, some of the gaps that exist in your financial situation. A lot of people focus on in 40 years, I'll have 10 million dollars if I keep on doing this. If you get hit by a bus next week, you're not going to have any of that. All those plans, those retirement projections all go out the window if you lose your ability to earn an income. That's just not something people think about.
Ben Felix: I came up with this. I don't know if it's a good question or not, but I'm interested in how you answer it. You've got this dissertation that's 320 pages long. We just spent whatever, almost an hour talking about it. If someone asked you in a noisy bar, whether financial advice is valuable, what would you tell them?
Preet Banerjee: In a noisy bar. I would say, if you have money, yes. If you don't, you probably should be looking for financial planning, not portfolio management.
Ben Felix: Great answer.
Preet Banerjee: Even then in a noisy bar, I don't know if that would come across at all.
Ben Felix: That's pretty good.
Preet Banerjee: I did my best.
Cameron Passmore: What's next for your research?
Preet Banerjee: I think there's a lot in here that could turn into some papers to submit to some journals for sure. It was such a long journey and there's so many little notes that I've seen scribbled over the years that look more into this, look more into that and they've piled up and I was like, yeah, there's some really cool stuff in here. I looked at a lot of these metrics for financial advisors, compared to households and the differences between these two groups. There's something there.
All these little nooks and crannies in the data that I want to explore, but I think the important thing is to maybe get some of the top-line findings out into some journals. In the meantime, I'll be doing some consulting work for some wealth management firms who want to continue to improve their offerings and learn from this. I've done some work already over the last couple of years based on this research, which has been great. Hopefully, doing more of that. I think if anything, what I've taken away most from all of this is that we need to do a lot better, increasing the access to quality financial advice to the mass market. That is still a nut that has not been cracked properly.
I think there's a lot of opportunity, especially with the advances in technology and the ability to scale basic financial advice to the masses. I think there's some real opportunities there. Probably going to narrow in on that segment.
Ben Felix: Looking forward to see what you do. Sounds pretty cool.
Preet Banerjee: Thanks.
Ben Felix: I got to ask, you've been working on this doctorate since you were on this podcast in 2019. We talked about this then and we were excited then to see the results. Now, we finally got to see them years later. What was is like?
Preet Banerjee: Yeah, you're very patient. You're very patient, as was my supervisor. It took a lot longer than I thought it would. In between, I guess, last time we spoke, I've recently moved to London. My wife's career is based here. I still work primarily in North America, but I just work from home for the most part, but I commute back and forth quite a bit. Maybe once a month, I think. In any case, during that time, talking to people, so I don't know if this is true across the board, but talking to people when it comes to defending a doctoral dissertation, in North America, apparently, you work with your supervisor and your thesis examining committee has all senior work over a couple of years and they're more collegial.
Apparently, they don't even let you get to the point of defending until they say, “Yeah, you're ready to defend,” and it's probably going to go through it. I wouldn't say it's a formality, but a lot of people told me, yeah, it's more formality at that point. In the UK, the university that conferred, even though my primary supervisor’s at Rotman at U of T, it was a partnership program with Rotman in the University of Reading in the UK. In the UK, it is a defence. What made it even worse was my secondary supervisor, he had just completed his thesis defence two years prior. He said it wasn't too bad. They came in and they just wanted to talk about the research and have a conversation. I guess, I lucked out, but I wouldn't worry about it too much. Everyone else is saying, “No, no, no. It can be quite adversarial.” Really depends on who your committee is.
I had Laurence Booth, who's the Chair in Structured Finance at Rotman. Another examiner, who was the chair of the International Capital Markets Association at the ICMA Centre, at the University of Reading. They read the thesis and I guess, they decided to teach me a lesson. When I went in, you have – it's three hours. You don't prepare a presentation. They just go in, guns blaze. That's another difference. There's a more of a presentation, apparently, in North America. You have a slide deck. You talk about your findings and research and all this stuff.
This was like, you log in. It wasn't in person, because of continuing pandemic restrictions. You log in and there's like, “All right, let's go. On page 34, you said this. What are you thinking?” They challenged me on everything. I felt at the end of the three hours, there are, I think, five possible outcomes. One is you pass with absolutely no corrections, which is very rare. Apparently, it doesn't happen. You can pass with minor corrections and they give you three months to make some minor changes and resubmit it. You can pass with major corrections, which could be six months to a year. It's like, you need a new chapter. You need to deploy a new survey because this is garbage. Option four is this is so bad that at best, we’ll give you a master's degree. Then option five is just go away and never speak to anyone in academia ever again.
At the end of these three hours, I went in there thinking, “All right, I'm aiming for pass with minor, pass with minor.” If I go pass with major, I'll live with it. At the end of those three hours, I was pretty sure that I was going to end up with a master's. They grilled me so hard.
Ben Felix: Wow.
Preet Banerjee: It was so adversarial, I was almost shaking at the end of it. At the end of the three hours, they say, “All right, you can log out and then you'll get a text message to log back in after we've conferred. You'll get your decision in the room.” I'm waiting there for 10 minutes and my primary is allowed to watch, but he's not allowed to participate in the three hours. But during, he was texting me, he’s like, “Hey, hey. Six months, not a big deal, make some corrections, whatever.” He said, “You know, you handed yourself well.” I get the text message to log back in. I remember this, it was ingrained in my memory. Laurence says to me, first thing he says, “Congratulations, Dr. Banerjee. You passed with no corrections.”
It took me, I'm going to say, it’s all three months before I felt elated about it. I was in this complete stupor for the next couple of days. I didn't feel happy about it. I was in the state of, I don't know what to make of all that. It was a very stressful experience.
Ben Felix: Wow.
Preet Banerjee: In retrospect, I appreciate how thoroughly they dove into it and made me defend everything that was in there. Cause it feels like, okay, it's held up to some pretty serious scrutiny, so I feel better about that. Anyways, that's how I'm rationalizing it.
Ben Felix: Unreal. What an experience.
Preet Banerjee: Yeah. I don't know if I'd recommend it.
Ben Felix: Good to know. Well, we really appreciate you coming on to talk about your dissertation. It's really fascinating stuff. I do think that you've filled an important gap in the existing research. Well done and congratulations.
Preet Banerjee: Thank you very much, guys. Appreciate you having me back for a second time.
Cameron Passmore: Yeah, congratulations, Preet. Great to have you on.
Preet Banerjee: Thank you.
***
Ben Felix: All right. we're going to kick off our segment with Mark McGrath. We did ask in our last episode for feedback from the community on what we should name this segment. We had tentatively called it Mark's Minutes, which we all acknowledge was a little bit of a terrible name. Weak, yeah. But we got a suggestion that was like, all of us when we saw the suggestion, we're like, “Wow, that is so obvious. How did we not think of it?”
Cameron Passmore: Between the three of us, you would think we would have come up with it.
Ben Felix: Right.
Mark McGrath: I was using ChatGPT to try to figure out names and every iteration of Mark and financial planning and investing and everything. I still didn't stumble upon this. It's a stroke of genius.
Ben Felix: Yeah. Humans are victorious again. We did a poll in the community and there was, let's see. Oh, wow. I hadn't checked the poll in a few days. It's up to 70 votes now in the Rational Reminder community. 70 people voted on this. By a landslide, the winning name is Mark to Market. That's going to be the name of our Mark McGrath section going forward is Mark to Market. Mark, to kick off the first Mark to Market, let's go.
Mark McGrath: Great. I just like to point out that after this, I came up with the name McGrational, which I thought was also awesome, but I can't think of a smart way to put it in there. I'll just use that from time to time, maybe.
Cameron Passmore: What did our buddy Rob suggests? McGrath's Wrath?
Mark McGrath: Yeah, the Wrath of McGrath, or something like that.
Ben Felix:There were some pretty ridiculous suggestions. Along with some really good ones, there are some pretty ridiculous ones.
Mark McGrath: Good. Okay. Today, I want to talk about RSPs, registered retirement savings plans. I think there's a lot of misconception around how these work from a tax perspective. I am constantly running into people that in my opinion, are thinking about these the wrong way. A lot of people are focused on two things. One is the tax at death on the second spouse. To put a background, an RSP can roll over on a tax deferred basis to a surviving spouse. But on the passing of the second spouse, it's taxed as income on the terminal tax return. A lot of people get hung up with this idea that your RSP is going to be taxed at the top marginal tax rate, which could be true, yeah, but there's a lot of other things to consider.
The other thing that people mention is that RSPs, the returns inside an RSP, they all get converted into regular income, basically. If you have a diverse portfolio that's spinning up Canadian eligible dividends, or capital gains, when you withdraw from the RSP, because it's all taxed as income, it's converting these more potentially tax efficient sources of income, like dividends and capital gains into regular income and help. That's detrimental.
Well, what I want to do today is reframe this. In my view, RSP returns are actually tax-free. The exact same way they are from a TFSA, but people aren't thinking about it correctly, because they're forgetting that RSPs are actually pre-tax money. I know you've talked about this before. I've talked about this online before. I've had some advisors question me on it, but I think when you think about this, the way I'm about to describe it, hopefully, becomes obvious that that's the case. I'm going to walk through a scenario.
Imagine you've got, I'm going to frame it two different ways that I think are going to be helpful for maybe tricking people's brains into thinking about this. In the first scenario, imagine you have, say, $20,000 in cash in your bank account, and you want to make a $10,000 investment. You want to invest $10,000 of that $20,000 that's in your bank account. You've got two choices. You've got the RSP, or the TFSA in this fictional scenario. Those are your only two choices. To keep the math simple, let's just assume that today and in the future, your tax rate is going to be say, 50%. That's just going to make the math easy to understand.
You've got the RSP or the TFSA. If you contribute to the TFSA, you can just contribute the $10,000 to the TFSA, to the tax-free savings account. There's no income deduction. There's no tax refund associated with that. You put the $10,000 in the TFSA and you've got $10,000 left in your bank account. Now, to make the equivalent comparison to an RSP, you would actually want to contribute $20,000 in this scenario. Because if you contribute $20,000 and you're at a 50% tax bracket, when you do your taxes, you're going to get a $10,000 refund. In that scenario, you're still left with $10,000 in cash, which was your objective. You wanted $10,000 left in your bank account. You have to gross up the RSP contribution to account for the fact that this is pre-tax money.
I don't think anybody disagrees that this is pre-tax money. That's the whole point of the RSP is we don't want to pay tax on that income. When we receive it, we want to pay tax some other time. We have to accept that this is pre-tax income. The other way to think about this is imagine you earn income and there's no tax withheld at source. For employees, we get taxes withheld on our paychecks and that goes to CRA. If you had other sources of income, like rental income, royalties, forms of investment income, dividends from a corporation, for example, there's no tax withheld at source and putting aside the potential for tax installments and that type of thing.
In that scenario, let's say, same thing, you earn $20,000 of income. There's no tax withheld at source and you have a choice, either RSP or a TFSA. Well, if you're in the 50% tax bracket and you choose to contribute to the TFSA, you're only going to be able to contribute $10,000, because your tax bill is going to be $10,000 and you have to set that money aside. Whereas, if you decide to go with the RSP, you can allocate the entire 20,000 to the RSP, because you're going to get an income deduction and therefore, there's going to be no taxes owing.
In both of those scenarios that I framed, I think it's hopefully, somewhat obvious that the RSP is pre-tax money. The TFSA is after-tax money. When you're comparing TFSAs-RSPs, you have to gross up the RSP contribution. If you do, they're virtually identical, assuming the tax rates stay the same. Let's just assume, you earn, let's say, 7.2% returns on your portfolio, and over 10 years, your investments double. With the RSP, you have $40,000 pre-tax. With the TFSA, you have $20,000 post-tax, because the TFSA is post-tax.
If you withdraw from the RSP, and again, you're still in the 50% tax bracket, you're going to have $20,000 after tax. If you withdraw from the TFSA, of course, it's tax-free, you're going to have $20,000 after tax. Now, if we agree that the returns that you earn inside a TFSA are tax-free, and we also agree that the outcome is the same in both of those scenarios, we must accept that the RSP returns are also tax-free. That's how I like to think about it.
I think it's a bit of a mental – it's not a trick in that it's not true, but sometimes when we look at the balances in our bank account, we make an RSP contribution, but we don't consider the tax refunds along the way. I think, when people are focusing on the potential for a very high tax return at death, they're ignoring all of the tax refunds that they received along the way, and they're just focusing on this one outcome.
The other thing to keep in mind, I'll say, is that because when you convert your RSP to a RRIF, a registered retirement income fund, which is the usual option, it's not the only option, but it's the most common option. After age 65, if you have a spouse or common-law partner, you can split that income for tax purposes. When you withdraw from the RSP, let's say, you withdraw $50,000 and it's now a RRIF, you can allocate up to 50% of that to a spouse. Between that and some additional tax credits, the probability that your income in retirement is going to be equal, or higher to your income when you contribute to the RSP, in my experience, is very, very low. I think that's it. There's a lot we could talk about with RSPs. You could do a 10-part episode series on it, I'm sure. But for the sake of brevity, that's all I got.
Ben Felix: I love that. I love that segment. There's two things, I think. There's the tax-free aspect. If your tax rates stays the same, the RSP equals the TFSA, other than some little nuances, like you can get lower withholding tax rates in the RSP on U.S., but whatever. That's beside the point. Assume that they're the same if tax rates stay equal, the RSP in addition to tax-free growth inside of the account has a separate, completely separate benefit of pushing the income taxes on the original income that you earned to put into the account to the future. That's going to give you either a bonus, if your tax rate’s lower, or a penalty, if your tax rate’s higher. Those are two separate attributes. One is tax-free growth inside the account. One is a bonus or a penalty based on the differences in your incomes.
I agree with you that it's unlikely barring major changes in tax rates, which if you look at historical tax rates, there actually have been some pretty significant changes over time. Usually, it's a safe bet that your tax rate is going to be the same, or a bit lower in retirement. There's splitting RRIF income. There's also spousal RSPs. Splitting pension income, like a lot of times people think like, “Well, I'm earning this high salary now. I'm going to have this big pension.” If they have a pension, “I have this big pension when I retire,” but that can be split, too. Your taxable income in retirement tends to be quite a bit lower. Great topic to bring up and super important point. I don't think it's debatable.
Mark McGrath: I agree.
Ben Felix: If anyone's disagreeing with that, I think that is objectively wrong. It's not a debate.
Mark McGrath: Yeah. Because otherwise, you're paying tax twice, which is not the case. If you don't agree with that, then you're accepting that you pay tax today and when you withdraw the RSP, which is obviously not true. I do want to bring up one good point you made, which is that potential for a bonus or penalty. What I think people don't realize is it's true of the TFSA as well, in that if you elect to pay taxes today by contributing to the TFSA, but had you waited until retirement, you're in a lower tax bracket, you have effectively paid that penalty now when you could have received a bonus by using the RSP, instead of the TFSA. That same difference between your current tax rate and your future tax rate, you need to apply that to the TFSA as well.
You made a really good point, I think, a few months back on Twitter, when I was writing about this, that the RSP provides tax uncertainty and the TFSA provides tax certainty. I think that's a very, very valid point. We don't know what future tax rates are going to be. Yes, in many provinces, they are indexed to inflation, but we don't know if there's going to be a hike in tax rates. We don't know what the optimal decision is without hindsight. If you value that certainty, then potentially, a TFSA might make more sense psychologically, let's say, even if it turns out that it's not mathematically optimal.
Ben Felix: We had our guest Scott Cederburg a while ago. He used US data for this, not Canadian. But it was still, I think, relevant. He did some simulations using historical US tax rates and found the optimal contribution to the tax-free, the TFSA equivalent and the tax-deferred, the RSP, or the pre-tax and post-tax savings accounts. Pre-tax being RSP, post-tax being TFSA. Even for people at a high tax bracket, there is an optimal amount that should be contributed to the TFSA, along with the RSP, because it provides that hedge against tax uncertainty.
I just pulled up. I have these charts that I made. I found this paper a while ago that had historical tax rates for an Ontario tax payer going back to 1920. There's this big – Up until about 1970, there was a pretty big difference between the top tax rate and the 99.99 percentile tax rate. I guess, very few people were actually paying this really high-top tax rate. Even if you take that 99.99 percentile tax rate, the marginal rate for going back to 1920 was 25% and it went up to 80% in the 1940s. Then it came back down and went up again and then it drifted down lower to where it is now at like, 54%.
That future tax rate uncertainty, even if you knew your future income, which you don't, future tax rates are still uncertain. I think that's a whole interesting. You said earlier, Mark, we could keep talking about RSPs for a long time, which is true.
Mark McGrath: Yes. We'll do another episode on because I think there's one other point. We won't get into it, but the RSP over a long enough period of time can actually outperform a non-registered account, even if you withdraw at a higher rate than when you contributed. I know, Jamie Golombek has written about this. I think one of your episodes actually covered this as well. Even when you factor in things like old age security clawback. I know we're talking about RSP versus TFSA, but the RSP can even outperform in situations where you withdraw at a higher tax rate than when you contributed, which I thought was really, really fascinating.
Ben Felix: When we did that episode, we found your tax rate could be in the example we looked at, which, I don't know if it was 20 or 30 years or something like that, but it was your tax rate withdrawal could be up to 13% higher than it was at contribution and you're still better off than had you invested in a taxable account. You're right. It's necessary to have that, because when people say, “No, I don't want to use the RSP, because my future tax rate might be higher,” you have to ask, what is the alternative.
Mark McGrath:Exactly.
Ben Felix: You have to. Otherwise, there's no point in even having the conversation.
Mark McGrath: Given that TFSA room is relatively low for most people compared to an RSP, I don't always know that. I mean, for a lot of Canadians, I'm sure they have to make that decision. But when you get into higher incomes, that decision becomes a lot easier and you can contribute to both, or you can max out both anyway, right?
Ben Felix: Cool. Well, that was a great topic. Thanks for bringing that, Mark.
Mark McGrath: Yeah, thanks.
***
Cameron Passmore: That was this week's Mark to Market. Such good content from Mark. So great to have him on. Could have watched you guys nerd out for hours, I'm guessing.
Ben Felix: Oh, it's fun. We could have nerded out for hours.
Cameron Passmore: All right, let's carry on. I want to do a quick episode review for those newer listeners who might want some guidance and which episodes to go and check out. This one I thought of because I spoke to a couple of people in the past week who did not listen to the episode with Colonel Chris Hadfield, episode 226. Then when we mentioned it afterwards, they did go back and listen to it. They were so grateful that we did. I thought that's come up twice lately. I thought, why not? It was such a great episode. If you have not listened to episode 226, please do.
I think it's one of our great conversations. It's also arguably the most shareable conversation with kids, with friends, with family members. The lessons that we learned from Chris are super valuable. They're life lessons and do apply to everyone. With that, let's kick off a quick review of that episode.
Colonel Chris Hadfield joined us on episode 226. Chris is an astronaut, author, musician, photographer, public speaker, and professor, just to name a few. Incredible career he has had. This conversation can possibly benefit more people than any other conversation that we've had. I consider this a must-listen episode and also, a must-share. We started by talking about the importance of setting goals. However, you must be ready for a change on the path towards those goals. Setting out to achieve the goals. What matters is what you do next, because a path to goals is a series of little decisions. What matters most is the deliberateness of how you make each of your small decisions every day. That will determine your path of who you are going to be tomorrow.
He says, you need lofty goals in order to have inspiration to do what is needed next. Enjoy the process and celebrate the process. He also talked about how the greatest antidote to fear is competence. We are fearful when we do not know what to do. Always improve your competence. Being an astronaut is not only about when you're in space but rather, it is all the work for years and years to be able to be considered, considered to go into space. That was Colonel Chris Hatfield, episode 226.
Ben Felix: That really was a great episode. It was the one when it came out, not a lot of people did listen to it. As we can see the stats on the episode, we saw like, okay, a lot of people didn't listen on. No comments were left on the episode. Then we followed up in our next episode and said like, “Hey, you guys didn't listen to the last episode. You should have. It was really good.”
Cameron Passmore: You might want to check it out.
Ben Felix: Then a bunch of people listened to it, they're like, “Wow. I'm glad you told us to do that, because this might have been the best episode you've ever done.”
Cameron Passmore: How about a quick book review? Very quick. I know we have a big episode this week. I thought I'd choose one that was mentioned often in my various social media feeds. The book is called Excellent Advice for Living: Wisdom I Wish I'd Known Earlier by Kevin Kelly. I follow him on Twitter. He was on Tim Ferris. He was also on with Patrick on Invest like the Best. I really enjoyed those conversations, so I grabbed the book. Excellent advice for living.
Kevin Kelly is a founding executive director of Wired Magazine and has written many other successful books and many articles and very prominent publications. This book, quite simply, I thought was fantastic. I read it while on the dock of the cottage a few weeks ago. The book was published a couple of months ago and it's basically a collection of his thoughts and insights that he has been collecting forever. He finally took the time to assemble them all in one spot. There's 450 of them in a 224-page book. Super short read. You can start it anywhere. It's one of those books you can pick up and put down and pick up again, start anywhere you like.
I think it goes really well with the Chris Hadfield episode we just highlighted. Learning and capturing knowledge from someone's career, that can really benefit a lot of people. It's also the perfect book, I think, to read on Kindle, because it becomes really easy to save his pieces of advice easily. Then I fed it automatically into my Readwise app, so it shows up in my daily feeder reminders, which is super valuable. I thought maybe Ben, you and I could share what I thought were my 12 favourites out of the list that I ended up saving from Kindle. Here's the first one. You can't reason someone out of a notion that they didn't reason themselves into. You want to take the next one?
Ben Felix: Sure. On that first one, I remember people telling me that exact, or maybe not verbatim, but similar, when I did one of my first videos on dividend investing. It caused this big uproar of people getting angry at me on the internet. Someone said to me, “Well, you can't reason people out of something they didn't reason themselves into.” Pretty good.
Cameron Passmore: It's not bad.
Ben Felix: Next one. A great way to understand yourself is to seriously reflect on everything you find irritating in others.
Cameron Passmore: Interesting, isn't it?
Ben Felix: Yeah.
Cameron Passmore: Whenever you can't decide which path to take, pick the one that produces change.
Ben Felix:I like that. You should demand extraordinary evidence in order to believe extraordinary claims. That's a good one. These are all things that I've heard before.
Cameron Passmore: Yeah. I'm not saying they're his. These are things he's collected from all over the place and assembled in this one spot.
Ben Felix: Yeah, yeah, yeah. Okay. Yeah.
Cameron Passmore: He's not claiming ownership.
Ben Felix: : I understand. Yup.
Cameron Passmore: Investing small amounts of money over a long time works miracles, but no one wants to get rich slow.
Ben Felix: When someone tells you something is wrong, they're usually right. When they tell you how to fix it, they're usually wrong.
Cameron Passmore: You learn a lot more. If you ask people, how are you sleeping, instead of how are you doing? Side note to that, I started asking people this question. I've actually modified it a bit. I said, what's keeping you from sleeping lately? Something like that. I've had a number of incredible answers lately. People talking about illnesses, family illnesses, other stresses in their lives. Really interesting, as opposed to saying, “How are you doing?” You always get back, “Ah, things are good.”
Ben Felix: That's a very interesting idea. I sleep fine. I fall asleep fine. If I wake up in the middle of the night, I just have trouble falling back asleep. Unless, I've done my heavy leg lifting. Even though I know I need to do that, I don't always do it.
Cameron Passmore: Leg lifting causes you to sleep.
Ben Felix: If I do heavy squats, I will usually sleep. Even if I wake up on it, I'll be able to fall back asleep. Even like yesterday, I went for a long bike ride and a long kayak, a lot of exercise. Drenched in sweat when I got back and woke up in the middle of the night and tossed and turned after that.
Cameron Passmore: Really?
Ben Felix: Yeah. It's like, there's some kind of hormonal release, I think when you do heavy leg stuff. Anyway, all the greatest prizes in life, wealth, relationships, or knowledge come from the magic of compounding interest by amplifying small steady gains. All you need for abundance is to keep adding 1% more than you subtract on a regular basis. I like that.
Cameron Passmore: Another one, don't ever work for someone you don't want to become.
Ben Felix: Figure out what time of day you're most productive and protect that time period. I like that.
Cameron Passmore: I remember Gene Fama talked about that.
Ben Felix: Oh, yeah.
Cameron Passmore: Protects his mornings.
Ben Felix: I think about that a lot, actually.
Cameron Passmore: After 1:00, anything goes. Next one, your enjoyment of travel is inversely proportional to the size of your luggage.
Ben Felix: Sounds about right.
Cameron Passmore: Sounds about right. Agree.
Ben Felix: Measure your wealth not by the things you can buy, but by the things that no money can buy.
Cameron Passmore: There’s a quick dozen, I say probably a 150, I would think. I love the book. Really good book. I highly recommend it. Excellent Advice for Living: Wisdom I Wish I'd Known Earlier by Kevin Kelly.
Ben Felix: Cool.
Cameron Passmore: All right, let's go to the after show. You mentioned exercise. Lisa and I are briefly living closer to town, since we're doing some renovations at home, as we're living this walking, bicycle-based lifestyle, as opposed to car-bases in suburbia. Just loving it. It's so nice. It's right near the Ottawa River, so you're able to bike along the river and over the new bike bridge they built over to the Quebec side. It's just phenomenal bikeways. Beautiful. Beaches I've never seen before. Then we get home and you park the bikes and you go for a walk to the grocery store, it's just fantastic.
I rejoined. There's a great gym right next door to where we're staying. It's a great gym that does circuit training. I'm sleeping great now. I was always, but it's really good now. A little sore, but haven't been to a circuit-type gym since the pandemic. I thought I'd be a complete mess. Quite relieved I wasn't, so I was doing okay.
Ben Felix: That's good. Feeling sore from working out is one of the best things ever.
Cameron Passmore: I love it. You and I have got lots of travel coming up. Going to Future Proof next week. Then in Toronto later this month at the big CFA event. Don't forget, if you're in Toronto and want to come to our meet and greet on the Thursday night, the 21st, email info@rationalreminder.ca. Do you want to read the recent review?
Ben Felix: That travel is just – when you said next week, that's like, “Oh, man. It is next week.”
Cameron Passmore: You're not really built for travel enjoyment.
Ben Felix: Literally though, because I don't fit in airplanes.
Cameron Passmore: I know. That's what I mean.
Ben Felix: Yeah. Okay. RockyTopMen77 on Apple Podcasts said that it's a data-driven financial podcast. The review is, “Benjamin and Cameron clearly wants to understand the topics thoroughly and get in the weeds to help listeners to understand what the data says about financial markets, filled with great information.” It's very nice.
Cameron Passmore: Keep going.
Ben Felix: On Spotify, I actually personally switched to Spotify for podcasts, because I keep having problems with Apple Podcasts, not being able to continue playing an episode if I pause it.
Cameron Passmore: Really?
Ben Felix: If I'm listening to something and then I stop listening to it and then I come back to it later, it won't reload the episode. It drives me nuts. I just said, “Okay, I'll try Spotify.”
Cameron Passmore: Never had that problem.
Ben Felix: Going to use Spotify for music. Just the free version. Anyway, I noticed that in Spotify, you can ask for the podcast that I listened to, they ask you a question as the listener. In the app, when you're on the episode, it says like, “What did you think about the episode, or did you enjoy the episode, or whatever?” You can write a comment. It turns out, we had that on for Rational Reminder, but we weren't paying super close attention to the fact that they were there. Now we're going to be more engaged with those and try and write questions relevant to the episode as we go along so that people can give their thoughts.
I was just looking through past comments that people have left. I thought I would share one. This is just in response to, what did you think about the episode? Which is the default question on Spotify. Somebody said – Peanuts was their name. Said, “Ben's analysis on HISA answers a question, I didn't even realize was currently fundamentally influencing my investment decisions. I think this is a crucial episode.” It's cool. If you're on Spotify for listening to this episode, we'll have a relevant question and hopefully, we get some interesting responses from people.
Cameron Passmore: You mentioned Spotify. We were with friends on the weekend. I went out for dinner and one of Lisa's friends, great guy, Matthew, was a listener before. I actually met him. Then through Lisa's friend, found out that I was part of this. I said, “Well, how did you find out about it?” He said, it was suggested in his Spotify feed.
Ben Felix: Wow.
Cameron Passmore: Maybe he just started listening a few years ago. It was nice to hear.
Ben Felix: Yeah, really cool.
Cameron Passmore: Also heard on LinkedIn from Anthony from Vienna reached out to thank us for helping people around the world with their financial decision-making. You'll be glad to know, Ben, that beers are on him when we go to Vienna. I also wanted to thank our friend and professional peer, Carlo, for posting pictures on LinkedIn with his laptop displaying our logo so prominently. Thanks to Carlo for that.
Any Canadian advisor who might be attending the IAFP conference next month in Edmonton, our friend, Marcus, DM’d me earlier today to say that they're hosting a hot wings competition on the Thursday night of the conference. Yes, the hot wings debate that never ends is going to be at the IAFP. Now, you won't be there until the Friday, I believe. But Mark McGrath will be there, as he's always been the butt of this hot sauce debate and takes a lot of flag for being a fan of Tabasco sauce. Any advisors that have any idea what we're talking about and are going to be there, you're more than welcome to check out. Somewhere is going to be announced where this hot wing contest will be. I don't know if you have any other insights into this event, but I was asked to pass this along.
Ben Felix: Yeah, no. I don't have any other insights. Like you said, I won't be there until Friday. I would have joined in. I was craving Szechuan last night, like really hot Szechuan, so I made some.
Cameron Passmore: Who doesn't? It's so good.
Ben Felix: Yeah, it’s so good. So good. I made some. I made it really hot, because I wanted some really hot Szechuan. I was like, I served myself and I served my wife. I gave us a bowl each and she was doing something else and I ate mine. I walked over her to tell her it was really good, but my eyes were dripping and my nose is dripping. She's like, “Are you sure I should eat this?” “You'll be okay.”
Cameron Passmore: The kids touch it?
Ben Felix: No. But oh, man. My eyes were just watering like crazy. I really went for it. Worth it though.
Cameron Passmore: It's so good. I love hearing from people on LinkedIn, so please do reach out. Both of us are on, I guess, we call it X now, instead of Twitter.
Ben Felix: Yeah.
Cameron Passmore: Rational Reminder is on Instagram. Make sure you follow on Instagram, or Rational Reminder on Twitter to see when our next live event will be. There is one every other week for the rest of the year. Anything else, Ben, to add this week?
Ben Felix: No. I think it was a good episode. I hope people enjoyed it and they can leave a review on Apple Podcasts, or they can tell us what they thought about the episode on Spotify, or in the Rational Reminder community. Lots of different places to tell us what you thought. I do want to say before we go that it is really helpful. I think that's the right word to use when we do hear from people on episodes. Because sometimes we'll do an episode and nobody says anything, which is fine. We don't need comments for the sake of getting comments, but there's a asynchronous relationship that we have with the audience where we put a bunch of time in, we create an episode, we record the episode, and then a week later or whatever it is, people listen to it.
If nobody says anything, we have no idea if was it interesting, but not interesting enough to say anything. Was it terrible? Was it, whatever? Anyway, so whatever people leave, even if it's a great episode or terrible episode, it's super useful to hear feedback.
Cameron Passmore: Feedback I've had lately is people enjoy the mix. We've been mixing up with some really good nerdy red meat and the more applicable type stuff and throwing in Mark. I think the cocktail is interesting. But we do enjoy feedback. If you have suggestions or feedback, let us know. All right, as always, thanks for listening.
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Books From Today’s Episode:
Excellent Advice for Living: Wisdom I Wish I'd Known Earlier — https://www.amazon.com/Excellent-Advice-Living-Wisdom-Earlier/dp/0593654528
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