In this special year-end AMA, the full PWL crew — Ben Felix, Cameron Passmore, Ben Wilson, and Dan Bortolotti — sit down together for the first time on the podcast to reflect on the roller-coaster that was 2025 and to tackle a wide range of thoughtful listener questions. The episode begins with reflections on a year that included wild market swings, an extraordinary rally few predicted, major changes within PWL, and personal milestones. From there, the team dives deep into the psychology of staying invested, the real risks of inexperienced investors going 100% equities, the complexity of asset location and pre-tax vs. after-tax allocation, and how to talk to family members who are paying too much in investment fees.
Key Points From This Episode:
(0:04) Introduction — first-ever full-team recording and setup for the year-end AMA.
(1:12) Why not all AMA questions could be answered — over 400 submissions and many not suited to the format.
(1:48) 2024 market recap — from early-year panic to strong double-digit global equity returns.
(3:59) The speed of recoveries — why missing a quick rebound can permanently derail returns.
(5:34) Cameron’s lessons from 2024 — unpredictability, growing adoption of evidence-based investing, joining a bigger organization, and driverless-car optimism.
(7:41) Ben Wilson becomes a co-host — an unplanned evolution shaped by listener feedback.
(9:51) Dan on humility in forecasting and reconnecting with theoretical research.
(11:18) Ben’s personal year — firm acquisition, equity value jump, and navigating his cancer diagnosis.
(12:32) Talking to parents about high fees — emotional dynamics, non-confrontational questions, and the danger of implied judgment.
(23:01) Should beginners hold 100% equities? Behavioral risk, volatility blindness, and why it shouldn’t be the default allocation.
(30:35) Pre-tax vs. after-tax asset allocation — why RRSP dollars aren’t equal to TFSA dollars and how that changes true risk exposure.
(36:09) Why PWL rarely optimizes asset location — complexity, low payoff, and behavioral clarity.
(44:42) What PWL does (and doesn’t) offer — discretionary management, integrated planning, outside specialists, and tax deductibility rules.
(49:04) “I know I need index funds — but how do I actually buy them?” Robo-advisors vs. one-ticket ETFs and why placing a trade is the real barrier.
(57:47) Ben’s lessons as a new homeowner — maintenance costs far above expectations and the hidden burden of being your own contractor.
(1:01:54) The strangest portfolios — single-stock windfalls, leverage without client awareness, bullion-only strategies, and the infamous “meatloaf portfolio.”
Read The Transcript:
Benjamin Felix: This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision-making from four Canadians. We're hosted by me, Benjamin Felix, Chief Investment Officer, Ben Wilson, Head of M&A, Cameron Passmore, Chief Executive Officer and Dan Bortolotti, Portfolio Manager at PWL Capital.
Cameron Passmore: Well done, Ben and welcome everybody to episode 388. It was very well done. This is AMA number 11 and our special year-end AMA.
And I think it's the first time the four of us have done a recording together, if I'm not mistaken.
Benjamin Felix: I think that's right.
Cameron Passmore: The gang is all here, full house today.
Benjamin Felix: Full crew. Yeah, so next week is our last episode of the year. In that episode, we will be doing a bit of a different flavor where we're going to have some short interviews where Cameron and I are speaking with a bunch of the folks who make the show happen behind the scenes.
So that should be fun. I'm looking forward to that. We're asking them some questions too about how the show has impacted their own views on investing in money, which I think would be interesting.
And we'll ask them about success as we ask all of our guests, but then also just stuff about what they actually do to make the podcast run. So I think that'll hopefully be interesting for listeners, even though it's not specifically about sensible investing and financial decision making. I think it'd be neat.
Cameron Passmore: Kind of fun.
Benjamin Felix: Neat to hear from people. This week, we do have just regular AMA questions.
There's nothing super special about this being a year-end AMA episode. It's just the last AMA episode that we'll do in this calendar year. I did kind of figure that before we jump into that, we could reflect a little bit on the year so far, at least.
We're recording this on November 24th. So the year's not quite over yet. I did want to also mention that on the AMA questions, we've received in total over 400 questions.
So we had to make the decision to not answer every single one, which was kind of the original intention that we'd go through them one by one, but some of them just aren't. I mean, some of them are comments, so we're obviously not going to answer those and I don't feel the need to reply to them. And some of them just aren't well-suited for an AMA type discussion.
If your AMA question does not get answered, we're sorry, we did read it. It became unrealistic to get through all of them. So thoughts on 2025.
One thing that I think is pretty crazy to look back on is that earlier this year, so in April, May, really April, I guess, we were making content about market crashes and about why you should stay invested and why discipline is important and all that stuff.
Cameron Passmore: Liberation Day.
Benjamin Felix: Exactly, yeah. The tariffs and all that crazy stuff that was happening earlier in the year. As of November 21st, which is the last market close as of the date that we're recording, international stocks, and these are all ETF returns, so they include the low fees of the ETFs, international developed market stocks were up 22% year to date as of November 21st.
Canadian stocks up just under 25%. Emerging markets almost 24% and US stocks up 10% all in Canadian dollars. Pretty crazy.
Now, we did our market crash, stay disciplined content earlier in the year. We did talk about the data point that there are many years that are negative at some point in the year, but then finish positive and unless things change over the next month and a bit, it appears this will be one of those years, which is just crazy to think about. In early April, when everyone was worried about this stuff, US stocks were down at the lowest point, 16% in Canadian dollars for the year.
You think about being there to then where we are now, it's like, yeah, it was a good thing in hindsight to have just stayed invested. We often talk about not focusing on short term returns and I know I'm doing that now by talking about year to date returns, but I do think that it's a powerful lesson about the importance of staying invested. Things were pretty crazy when markets were down, when the US market was down 16% back in April.
Lots of crazy stuff was happening, lots of uncertainty, but as is usually the case, staying invested.
Cameron Passmore: When it changes, it changes so fast. To be out of your seat when those changes happen can be a very expensive decision. Because as we've said so many times, yeah, you can choose to get out, but when do you get back in?
You have to do both sides of that trade, right?
Dan Bortolotti: When things settle down. I remember working on those client communications with you at the time and we were discussing kind of how do we phrase this. You know, it turns out, it ended up being relatively similar to what happened in 2020 when we also got together, albeit under quite more alarming circumstances.
Market was down, what was it? 30 plus percent in about, I don't know, eight or nine weeks, something like that, a very short period of time. We got together and said, we have to try to convince clients that, yeah, this is really difficult.
We're not pretending it's not a problem. We're not saying don't worry, right? I always say that.
It's like, you can worry, just don't abandon your long-term plan. The same thing happened in 2020. The year finished very soundly positive, even after a really, really sharp decline.
So, it is a good lesson to learn. Now, recoveries are not always going to be that quick. I think we have to acknowledge that.
To try to get out, to your point, Cameron, yeah, you probably would have saved yourself some money in the short term had you got out when everything really happened in the first week or so. You'd probably still be sitting in cash saying, I'm going to wait for things to settle down.
Benjamin Felix: I'll be curious, Cameron, obviously, this has been a crazy year for PWL. Do you have any reflections or big learnings from this year?
Cameron Passmore: Well, number one was you just can't predict the future. That's one that I had written down. The other one is that people are discovering that markets work.
So many people are discovering this on their own and kind of coming to us directly. We're just one example in the industry, but I think a lot of people are starting to do their own homework, finding their own research, be it here or on Reddit or wherever, and coming to the conclusion that this sort of philosophy makes a lot of sense. Other learning this year is there are some amazing advisors out there and we've had them on the podcast that have joined us.
To have great advisors join our team and make us all better has been an incredible experience. The thing I would add to, I'd like to hear your guys' feedback on this, but being part of a larger organization, it turns out to be a lot more fun than I was expecting. Joining One Digital, even before the closing date, everything looked great.
We assumed it was going to be great, but it actually turned out, from my standpoint, working closely with so many people there, it turned out to be greater than I expected. My last point is, and this goes to what we were talking about before we started recording, the future for driverless cars is incredible, having taken a Waymo. I know I've talked about it here before, but it is unbelievable technology, where this world is going.
Those are four things top of mind for what they're worth.
Benjamin Felix: I agree on joining a larger organization. There's been no sort of stifling of creativity or any limitations or anything like that. Having people who have experience in areas that we don't, running a much larger business, but doing parallel stuff has been incredible.
To be able to call them up and be like, hey, I'm dealing with this thing. How did you guys deal with that? They have so far been super, super helpful and insightful.
Cameron Passmore: Things are making us better, too.
Benjamin Felix: Yeah, no, I agree.
Ben Wilson: I agree. It's also mutual. They're not just making us better.
We can see that they're regularly leaning on us and our expertise in the Canadian wealth management space to help make them better. We're learning from them, learning from mistakes that they've made in the past, so we don't make the same ones. It's very cool how the interaction has been going so far.
Benjamin Felix: I wanted to ask you, too, Ben. You've been newly co-hosting the podcast, which was not really planned. You came on.
You were going to do a segment. You came on, did your segment. Listeners were like, hey, we like this Ben Wilson guy.
We just decided that you keep coming on. And I think it's been great. What are your thoughts after co-hosting however many episodes it's been?
Ben Wilson: I thought that through. The original plan, as you said, was to talk a bit about M&A and how that intersects with wealth management. It's cool to see how interconnected they really are.
By accident, I ended up becoming a co-host, so here I am.
Benjamin Felix: Well, you had not much else going on, so you had lots of free time, so that helps, too.
Ben Wilson: Yeah, exactly.
Benjamin Felix: We had planned on just the M&A stuff, but I guess we forgot that you have however many years of experience you have as a client-facing advisor, and you actually have interesting, useful stuff to say. We were like, oh, maybe you stick around, Ben.
Ben Wilson: Yeah, my role has evolved quite a bit since being at PWL. I started in a job where everybody said, great guy, but what's he actually going to do when he gets here because there's not enough work to working very closely with Ben and Cameron and all their clients to eventually carving my own path and becoming the lead of what we call the advice team internally, leading a whole team of advisors and associates, and now this new world where there's another big change this year, getting involved in the M&A side of things, which has been a very cool learning experience, both for my own learning and the opportunities that are out there in M&A and inorganic growth, but also just kind of reflecting on how that intersects.
I've been trying to post more on LinkedIn, which has also been a cool learning experience of how people engage with content, how that content comes back to things like the podcast and how our listeners really actually shape what we're putting out there. It makes us better. It makes people listening better.
It just creates kind of this flywheel of cool opportunities that we get to be part of.
Benjamin Felix: You make fun of me, which people thoroughly enjoy apparently.
Ben Wilson: Yeah, that's one of the biggest reasons I'm here because they like the jokes I made about your diet and other comments.
Benjamin Felix: What about you, Dan? Do you have thoughts on the year and on joining the podcast?
Dan Bortolotti: Yeah, the year, I mean, again, I would just echo what you guys had said earlier. It's just another year where if ever you feel confident about where you think markets are headed, please stop because confidence is not founded, right? It's just something that we have to treat with humility.
Just in terms of the pod, I guess it's been now a year and a half since I came on board. I'd say, it's really been a really refreshing experience for me to not only to talk to you guys and get all of your different perspectives, but also to hear so much feedback from the community. I'm not active on the online community as people know, but that doesn't mean I don't read it.
It's just very different for me. I'm really deeply immersed up to my neck in client-facing work for 99% of what I do. A lot of the challenges that we deal with with clients on a day-to-day basis are a little more grounded and gritty than they are theoretical.
It's been really helpful for me to return to this a little bit. I was much more active in reading the academic studies and getting involved in the theoretical stuff back when I was actively doing my own blog and podcast years ago. I really set that aside.
It's nice to be able to be exposed to it a little bit more now and just get a better understanding of what investors out there are thinking about because it's not always the same things as I'm dealing with day-to-day.
Benjamin Felix: Any other thoughts on the year before we jump into these AMA questions?
Cameron Passmore: Did you have any more to add yourself, Ben?
Benjamin Felix: No. I mean, maybe I should. I had a pretty crazy year. I've covered that in past episodes, I guess.
I don't know how much more reflecting I have on that. Yeah. Crazy year for me personally, between one digital stuff being acquired, PWL equity becoming much more valuable than it was previously, and then getting the cancer diagnosis. Yeah.
Dan Bortolotti: Talk about putting things in perspective. I think a lot of – so much of the community that rallied behind you, I think was really gratifying for all of us to see.
Benjamin Felix: That was cool, but you know. Feel pretty normal now. Feels like it's been a normal year unless I sit back and think about how not normal it was.
Dan Bortolotti: I don't think you missed a podcast, did you? Maybe one.
Benjamin Felix: Missed one podcast with Michael Mobison that Cameron had to take because – Incredible. I was one day out of surgery and I thought right after surgery, I was like, I feel like I could probably do the podcast, but then sitting down was just no good. I was like, okay, I'm not going to do a podcast lying down. That would be awkward.
Cameron Passmore: That was my solo debut.
Benjamin Felix: Yeah. I could have put more thought into my reflections on the year, I guess, but it's all right. Jump into these AMA questions.
Cameron Passmore: Fire away.
Ben Wilson: Yeah, let's do it.
Dan Bortolotti: Okay.
Benjamin Felix: Someone want to read the first one?
Ben Wilson: First question is from Jah, J-A-H. My parents have been using an AUMB based financial advisor for a long time and really like them. It's a smaller private firm.
Their allocation is reasonable. However, it's in a host of actively managed mutual funds with a weighted average MER of 0.98% on top of the AUM fee of 0.9%. While overall they're in rather good financial shape, the ongoing fees, especially the underlying fund fees are a concern. I understand the advisory fees and don't want to adjudicate that here, especially compared to my own DIY portfolio.
Market cap weighted based heavily factor tilted and essentially the same stock bond ratio as theirs, his parents, but 85 basis points, lower fund fees. On top of that, their portfolio has unsurprisingly underperformed an equivalent market cap weighted based allocation fund over recent time periods, at least one, three, and five years. I will attend the next annual meeting with their advisor.
What questions should I ask during this meeting to address the fee concerns?
Cameron Passmore: There's another good example back to my takeaways from this year. People are also learning from their family. As more and more family members get this message and a lot of people are very passionate about sharing this framework.
Benjamin Felix: I think John is in a difficult position here. I did have some notes that I copied and pasted from episode 162. These are questions more about choosing a financial advisor, so they're not directly applicable here, but I will mention them anyway.
We had, what services do you provide? How are you compensated? How do you manage conflicts of interest?
Are you a fiduciary? What are your qualifications and experience? Do you work alone or with a team?
How do you describe your ideal client? What is your investment philosophy and how do you justify it? What is your firm's investment philosophy?
That's an interesting one because if someone has their own investment philosophy that's materially different from the firm that they're at, that can be problematic and it's actually quite a common situation for financial advisors to be in. What tools do you use to assess my financial situation and will you push back on my decisions if you think they're contrary to my best interests? That was a list of questions for choosing an advisor.
I think this case is different because John already knows the advisor and they can probably answer most of those questions based on the existing relationship that his parents have. I think it's, and this is what I was alluding to a minute ago, I think it's worth mentioning that it's a really difficult situation to navigate because John's parents like and they probably trust their advisor. If John were to push them too hard to make a change, it could be uncomfortable for his parents and for him.
I'm assuming John is a male. The other big issue here is that because stock returns are uncertain, like we were just talking about this for this calendar year returns, if the parents end up underperforming after making this change based on John's guidance, that starts to get really, really stressful for everyone involved. Or if John's like, listen, this way of investing is better, it's going to give you better long-term returns and then they make the change and it happens that over that, whatever it is, six month period, year period that actively managed funds with their previous.
You know what? It may not even matter the relative performance because they're not paying attention to that anymore. If index funds, if the market does poorly after they make the change, it doesn't even have to be relative to what they were previously doing, that can put a lot of strain on relationships.
We realized this Cameron and Dan, you probably did too a long time ago. It's one of the reasons we started doing this podcast. If people arrive at our investment philosophy on their own and find us after the fact, after they have come to those conclusions by themselves, they're going to be a lot more comfortable investing that way than if we convince them that this is the best way to invest when their preconception was something different.
We used to have people come to us and be in disbelief that weren't picking actively managed funds or picking stocks. If we try to convince those people that the way that we invest makes sense, I think that becomes a really, really difficult relationship to manage. I think JAWS is in a similar position.
I think it's a situation that has to be navigated really, really carefully. I also think that a small firm with presumably its own investment philosophy is probably not going to change what they're doing based on Jah's questioning. Even if they do, it could come back to being perceived as if the advisor makes a change based on the client's son saying, you should do this or I want my parents to do this and then it doesn't work out.
It's still Jah's fault in that case.
Cameron Passmore: I bet a lot of places would do it though. Anything to make the sale is quite often the case, right?
Benjamin Felix: Maybe that's true.
Cameron Passmore: So we talked to enough advisors and they say, yeah, someone wants indexing, we do it. They want active, we do it. What do you believe in?
Benjamin Felix: That may be true.
Cameron Passmore: Dan, you're laughing.
Dan Bortolotti: Well, what do you believe in? I guess in that case, they believe in making the sale, like you said, right?
Cameron Passmore: No, they call it meet the clients where they are, Dan. It's not making a sale, meet them where they are.
Dan Bortolotti: Yeah, I mean, you can put a positive spin on that and say, we're not ideological. We just try to find an investment philosophy that the client will embrace and just some truth to that at least. But I think there's a couple of things going on here.
I don't know that it's only the investment philosophy. In other words, it's not so much that Jah thinks that his parents might have the wrong philosophy. He's more concerned about fees, right?
In other words, I don't know, they could be using index funds that charge 0.98% and it would still be the issue. And this is where, and I have seen this many, many times and early in my career, I handled it poorly and had to learn. And that was in his case, and he probably realizes this, but if he was to go to his parents and say, you know, you're paying way too much, it's almost 2%.
If you were able to reduce your fund fees, even if you're paying your advisor 0.9, you know, you should probably be able to get your all-in costs, not much more than 1%. What you're saying is your fees are too high, but what the person on the other end is hearing is only an idiot would pay that much. And you didn't mean it to come across like that, but people will get their back up because it feels like you're telling them that they were too foolish to realize how much they're paying.
I made this mistake myself early on, and I don't do it anymore. And you just have to sort of say like, you know, I appreciate you're giving good service from this person. However, you know, these fees are on the high end of fees, and there are other alternatives that are significantly lower.
Maybe we can talk to the advisor about changing some of these funds out. It doesn't change the way he's compensated, but it does lower your overall costs, but just tread carefully. So you don't sound like you're being judgmental about the investor.
If you're being judgmental, it's about the advisor.
Ben Wilson: I think that's a good point. And I think one thing that we haven't talked about yet is it might be worthwhile for Jah to reflect and have conversation with his parents to ask them some questions. Like, what is it that they had value from this experience?
Like, are they worried about fees? Are they worried about investment performance? Like, some of these questions to actually identify the problem.
We talked about this a lot internally for figuring out issues for strategic planning. Like, identify the problem first. Jah has identified a problem that he perceives, but the parents may not see that same problem.
If they have got high trust value this relationship, that might supersede their concern about fees. So if it's a very good diversified portfolio, that's okay, may not the most optimal solution. Maybe it's not a big deal.
But if it is something that is putting your parents at risk, then maybe it's something to push back a bit harder on. But asking questions on both sides is probably important here.
Benjamin Felix: There's risk. Like, are they going to run out of money? If so, obviously that has to be addressed.
I also think most people don't, and it comes back to just the issues of understanding compounding without writing it down and doing the calculations. The parents probably don't realize how much that additional, call it 1% fee, is going to cost them and implicitly Jah over their lifetimes. So it could be a matter of explaining to them, listen, this is why fees matter.
This is your expected difference in wealth over the next whatever it is, 20 or 30 years with and without that higher fee. That might change. Because they might say, no, I really value the relationship.
Then it's like, no, it's going to be a third of your wealth or 50% of your wealth or whatever it is. They're like, oh, okay. I don't value it that much.
Cameron Passmore: I would love to ask the advisor, what is your investment philosophy and what do you think of an index strategy?
Benjamin Felix: Yeah. I did write down some questions that I think Jah could ask that I tried to think of questions that are like non-confrontational. I was imagining Jah sitting in the meeting with their parents and the advisor.
So you could ask, how are these funds selected? I would love to know the answer to that question. How often do you review your fund selections?
Because presumably they were selected based on some criteria. It sounds like they've been underperforming. Does that get updated?
What's your ongoing manager due diligence process? Even at PWL, we're not picking actively managed funds, but we do pretty significant due diligence on all of our major holdings every year, including our dimensional funds and our market cap weighted index funds to make sure they're doing what they said they would do. That's something we do every single year.
Cameron Passmore: The other one I would add is member Larry Swider had the question, can you show me your fund list from three years ago and five years ago?
Benjamin Felix: Yeah, that's good. I like that. How do you think about the impact of fees on your client's long-term investment outcomes?
Ben Wilson: One may not get a very productive answer.
Benjamin Felix: Non-confrontational.
Dan Bortolotti: I don't think about the impact of fees.
Benjamin Felix: I don't think about them at all. Then the last one I had is what's your view on the recent underperformance relative to an investable market cap weighted index fund of your recommended funds?
Cameron Passmore: I'm glad you're non-confrontational.
Benjamin Felix: I mean, it's factual. Listen, this is what's happened. What do you think?
You know what, in my experience, they will have a very smart sounding answer. Smart sounding.
Ben Wilson: And not smart.
Benjamin Felix: It'll probably refer to concentration in the S&P 500 and the Mag Seven. That's been the active manager underperformance narrative in recent history. Yeah, we didn't hold the Mag Seven.
There's just too much risk there. The index is too concentrated, so we're more diversified and that's why we underperformed. When those things come down, we're going to look really good.
We'll see. Anyway, that's all we have for Jah's question.
Cameron Passmore: This one is from William. Investing in 100% equities is popular these days, such as on Reddit, where people tell others to just buy XEQT. What are your opinions about it being common for likely inexperienced and low knowledge investors being in this allocation? Should we be trying to temper that?
Benjamin Felix: I'm looking forward to your thoughts on this one too, Dan. I think the big concern with inexperienced investors having 100% stock portfolios is that they may not truly understand their own risk tolerance. It's hard to know that and understand it if you have not been through major drawdowns or long-term downturns.
We've seen a few quick ones like this year, but as you mentioned earlier, Dan, recoveries are not always as quick as they have been in the last few years. To the extent that someone's misunderstanding of their own risk tolerance leads them to sell their portfolio, their equity portfolio at the wrong time, whether that's due to an unforeseen liquidity need or a behavioral panic sale, it would be much better to have just had them in a more risk appropriate portfolio from the outset. There are a couple of really interesting papers on when people tend to freak out to panic sell and also on the risks of 100% stock portfolios for people with labor income that's sensitive to the same factors that affect the stock market and have large fixed expenses.
That's a real economic risk to 100% equity portfolios. Even if we agree though that, let's just say 100% equity portfolios are good for long-term investors. That's of course itself a controversial take, but even if we said that, they're not great if it leads to fire sales in a panic.
Now, does that mean that no inexperienced investors should own XEQT or should own a 100% equity portfolio? I don't think that's the case either. I've definitely seen clients who became wealthy when they were relatively inexperienced investors and relatively young, chose 100% equity portfolios, have lived through ups and downs and have been perfectly fine.
Now, that sample is people who have an advisor obviously, so that's some serious selection bias going on there, but I still don't think we can make the blanket statement that no inexperienced investor ever should have a 100% equity portfolio. It's definitely worth explaining the risks both behavioral and economic to being in an aggressive portfolio, a volatile portfolio like that to help people make better decisions. I'm not comfortable with a blanket statement that no inexperienced investor can be 100% in equities.
Now, Dan, I know you've got thoughts on this, so I'd love to hear them.
Dan Bortolotti: I would never say no inexperienced investor should be 100% equities for sure. I think you're right. There's always exceptions.
I would say it should definitely not be the default. If you're advising somebody who has no experience with investing, wants to be a DIY investor with ETFs, my advice to them is not XEQT or one of the other 100% equities because I just have talked to enough people over the years that I know most people, even people with some experience still do not appreciate how volatile stocks are. We see this all the time.
People, you ask them what's a worst case outcome for stocks and they say 20% decline. We used to do this with our risk tolerance questionnaire with new clients. What is your target rate of return and what kind of decline would you be comfortable with?
You would be amazed at how many times people said, I want 8% a year and I will tolerate a 5% to 10% decline in the stock market. These are so incompatible with reality that I just feel like most people are not set up to do it. It doesn't mean everybody, but it means it's not the default position.
What I always say with people, again, remember if you're starting out, you're just a new investor, chances are you don't have all that much money to invest, which is why you're a new investor. The magnitude or the effect of a 5% return versus a 10% return when you only have a few thousand dollars to invest is not going to be that much over the long-term. It will be enormous over the long-term if your portfolio continues to grow.
What I say to people is start with something conservative. When I say conservative, I mean balanced, 60%, maybe 80% if you really feel that you're capable of that level of risk and then make the decision to go to 100% equities when we are in the middle of a brutal market downturn. If you can tell me after the markets have fallen 20%, 25%, 30% that you're comfortable going 100% stocks, then you probably are.
My guess is most people will not do that. They'll do what everybody else does. We're going to sit on the sidelines, wait for things to calm down, etc., etc., wait for the market to recover and buy back in high. I don't want to paint everybody with the same brush because everybody's different, but I will say to me that is more the median case than it is the XEQT or 100% equities is appropriate.
Benjamin Felix: Yeah, you know what? That's probably true. I don't remember which question is for, but I have notes somewhere in here about how the typical rational reminder listener that likes to listen to Mamdouh Medhat talk about the best way to measure profitability is not the median investor.
Dan Bortolotti: Not even close.
Ben Wilson: That would also apply to the Reddit page that William was reading. Anybody that's on Reddit reading about personal finance is probably more prone to take on higher volatility in their portfolio.
Benjamin Felix: Yeah. I mentioned there are a couple of papers on just when people sell. One of them looks at self-declared investing experience and knowledge just in terms of how they relate to the likelihood of a panic sale.
This paper finds that the likelihood of panic sales and freakouts is most pronounced when the investor has self-declared good or excellent investing experience and knowledge is similar. Similar to investing experience, we find that investors who describe their investment knowledge as good or excellent panic sell or freak out in higher proportions compared to their baseline.
Ben Wilson: Overconfidence.
Benjamin Felix: Yeah, exactly. It probably just comes back to someone who's a relatively casual investor, which is most people reading on our XEQT or whatever it's called, Just Buy XEQT subreddit that you should buy XEQT. They're like, oh, cool.
That's what I'm going to buy. Sounds good. Then they feel like they have some knowledge or experience.
Then they get punched in the face by a 30% drawdown.
Dan Bortolotti: Maybe the message here is just buy an asset allocation ETF, which I think is really what that advice is. I mean, to me, I read that more as just don't obsess over individual security selection. Just buy an asset allocation ETF and keep it simple as opposed to buy 100% stocks.
Because I've seen there's similar subreddits in that just buy VGRO, just buy whatever. It doesn't always have to be focused on the asset allocation. But the idea, I think, is pick one of these super simple ETFs and just put it on autopilot and get on with your life.
Ben Wilson: And if you are an inexperienced investor, the risk and asset allocation is one important consideration. But other factors are worth considering. If you have a long time horizon and you appropriately invest money for the long term, if you're planning to buy a house and invest all of it and the mark goes down by 30%, probably not a good decision.
But if it's truly long term money and you're comfortable with that, time horizon is important. Your income and the value of your human capital is also important. If you have a steady flow of income and you're comfortable covering your cash flow needs from your income, that gives you more capacity, which is two things at play here, your risk tolerance, your risk capacity.
If you have the capacity, then you might be more willing or more apt to invest in an XEQT or VEQT type fund.
Benjamin Felix: Interesting one to think about, especially with the backdrop of the Scott Sederberg paper that we've talked about a few times. But there are real behavioral and economic constraints that would preclude many people from investing in 100% stock portfolio. I think you're right, Dan.
The main idea of those subreddits and that concept more generally is just buy something. Something diversified and low cost.
Ben Wilson: One stop shopping.
Benjamin Felix: All right. Next one from Mike. Mike had asked a question a while back and then he resubmitted this question.
He says, hello, I asked a question a while back. If my asset allocation should consider the type of account, and that's like a tax free account, tax deferred account, all that kind of stuff. He had found a paper, so he follows up with this question.
I just found a paper that does highlight you should base your asset allocation on after tax values. I do not think many people follow this and I plan to implement this for my asset allocation. Your comments would be appreciated.
Do you adjust the allocation of assets for your clients based on account type? This is a really interesting question and Dan, I know you've got thoughts on this one too. It's about the difference between pre-tax and after tax asset allocation.
Well, I'll try and explain the issue quickly. Say just for ease of explanation that we have two account types. We've got a pre-tax account and a post-tax account.
The pre-tax account is like an RRSP in Canada or a traditional IRA in the US. These are accounts that hold pre-tax dollars. Contributions to them reduce your taxable income, which makes the values inside the account pre-tax.
Then when you withdraw the money, the withdrawals are taxable. A post-tax account, a post-tax tax free account is like a TFSA in Canada or a Roth IRA in the US. These are accounts that hold after tax dollars.
You've already paid your income tax and they are not taxable when you make withdrawals. Now a taxable account would also be post-tax savings, but a taxable account unlike a TFSA or a Roth IRA would incur future tax liabilities as it generates investment income and grows and earns capital gains. The main issue for this discussion, for answering this question, is whether the account type in question has a tax liability associated with it.
Just assume for easy numbers, a 50% tax rate. If I have $100,000 in my RRSP in my pre-tax savings account and $100,000 in my TFSA, in my post-tax savings account, I don't really have $200,000. I really have $150,000 because half of my RRSP is just taxes that I will need to pay in the future.
I'll need to pay if I take the money out of the account. Now that, the fact, so we've only really got half of what we see in the account, that applies to asset allocation. If we think about having the RRSP invested in bonds and the TFSA invested in stocks, the pre-tax asset allocation, like what you see in those two accounts, is 50% stocks and 50% bonds.
The post-tax allocation, when you take into account the future taxes owing on the RRSP, and it's still assuming that 50% tax rate is closer to 70% stock and 30% bond. It's two-thirds stock and a third bond. This comes up particularly when people want to do asset location, which is holding certain asset classes in certain account types.
There are two different ways to think about this, and this is where it gets interesting. One is that putting all of your bonds in your RRSP and your pre-tax savings account results in taking way more risk than you probably intended, than you probably realized that you were taking. The other way to think about it is that since we see our pre-tax account values and we check our accounts, maybe there's a behavioral arbitrage going on here.
That's going to depend on how you view the difference in riskiness between the two portfolios. You can be a 70-30 investor, roughly, while seeing a 50-50 portfolio in your accounts. That's why I'm calling it a behavioral arbitrage, because you're taking a lot more risk than it looks like when you look at your accounts.
Then it comes back to this fundamental question, is a 70-30 portfolio, 70% stocks and 30% bonds riskier than a 50-50 portfolio, 50% stocks and 50% bonds? That's again, back to that Scott Sederberg research of 100% equities being safer than some mix of stocks and bonds in that research specifically. Now, if you believe that to be true, if we believe, let's just say, okay, we believe that a higher stock allocation is safer for a long-term investor than being 70-30 instead of 50-50 is good.
If the difference between pre and after-tax allocation is what allows you to be in that more aggressive portfolio because of the behavioral arbitrage, we could argue that that's a really good thing. Now, to Mike, the person who asked the questions point, I think people definitely need to be aware of these issues before they can think critically about how to deal with them. You can't understand all of those trade-offs that I just explained if you don't understand that there is a difference between pre and after-tax asset allocation.
For most of our clients, most of the time, based on the research that we've done on asset location, we just hold the same mix of assets in all account types and that sidesteps the issue completely. Because in that case, the pre-tax account is reducing the stock and bond allocations pro-rata and the overall allocation stays the same. You don't end up with differences between your pre and after-tax asset allocations.
We have started looking at this for incorporated clients and our research there is actually pretty promising in favor of asset location. We'll probably do a MoneyScope episode on that when that research is ready to publish. One of the things we've done in that paper is taken the behavioral arbitrage position.
Rather than controlling for after-tax asset allocation, we are taking the position that the slight increase in exposure to stocks is actually a benefit of the strategy. Of course, that would be explained to the client. That's all I got.
Ben Wilson: I think that's a good summary. I've got a good client example where we have typically, as you said Ben, on our team, we have taken a consistent asset allocation approach across most client accounts. We did have one client that I can think of in particular.
This individual came to us after following the Canadian couch potato and had a strong bias towards taking that approach and doing an asset location implementation in their portfolio. We did that at first. Over time, the more and more we talked about it, they understood the after-tax asset allocation was actually making them more risky than they intended to be.
That caused unnecessary stress in this case. It was a relatively conservative investor that wanted to say be a 50-50. I don't remember the exact balance, but say their target mix was 50-50 and this was putting them closer to 60-40 or 70-30.
We explained that to them like, oh no, we don't want that. We want to stay conservative. Let's just do the same asset mix across all accounts.
The behavioral argument is a good one if clients are comfortable with it, but it could cause more stress the other way. It really depends on the profile of the client or the investor.
Dan Bortolotti: As you know Ben, we've talked about this before. The approach that I take with my clients is somewhere in the middle. It is not just same asset allocation in every account, but neither is it an attempt in any way to optimize because what I have found, and this is just based on 10 years of managing a few hundred portfolios, it's almost impossible to stick to that kind of strategy as a portfolio evolves over time.
I'll give you a really basic example. I typically, for my clients, hold 100% stocks in their TFSAs because my feeling is it's an incredibly valuable tax-free account. It makes sense to put the asset class with the highest growth potential in the TFSA.
Then the RSPs, typically not 100% fixed income, but more heavily weighted to fixed income with a smaller allocation equities. Then the non-registered accounts, you favor equities where you can, but I think you need to keep some fixed income in there for liquidity because this is the other thing that people don't talk about when they talk about asset location, I think, is a lot of our clients, because they've maxed their registered accounts, have large taxable accounts, most of them will say this is there for the long-term and some meaningful percentage of them will decide to make an enormous withdrawal at some point to make a major purchase. Things change. If you really heavily weight equities in the non-registered account, you have the liquidity but you also have a potential for huge capital gains when you want to sell to make withdrawals.
You want to keep a little bit nimble and hold a little bit of fixed income and equities in both the RSPs and the non-registered accounts, in my opinion. Let's say, for example, you'll go back to that first thing, you have 100% equities in the TFSA and the client makes their annual TFSA contribution. Well, you have to buy equities, but what if you're already overweighted equities in the portfolio overall?
Well, now you have two choices. You can buy fixed income in the TFSA, which you already said you didn't want to do, or you buy equities in the TFSA, go even more overweight and then you have to sell some equities somewhere else in order to rebalance. Now, that's not a terribly complicated problem, but magnify that over hundreds and hundreds of transactions.
Now, you are often in a position where you're making multiple trades for small contributions. You are starting off with a rule that makes sense in theory but is impossible to keep in place in practice. Once you have taxable accounts in the mix, once you set up a bunch of positions, it is very expensive to unwind them.
A lot of this ends up working in theory and then when you try to implement it, it's really, really challenging to do so. I would just say as a rule of thumb, I try to mirror the client's overall target asset mix. Let's say it's 60-40, that if you take all of their registered accounts combined, RSPs and TFSAs, that it's roughly 60-40 if you can, but that's going to be almost all equities in the TFSA and more fixed income in the RSP and then a mix of both in their taxable account.
But even that's challenging to do sometimes. The relative size of each account matters a lot. TFSAs are not all that big compared to clients' much larger RSPs and in some cases, much, much larger non-registered accounts.
Then you throw a corporation in there, it all becomes pretty much impossible to optimize. I think you do the best you can with some big picture rules, but let go of the idea that there's some sort of optimal and enduring solution that you can carry out for the client's full investment horizon.
Benjamin Felix: We looked at those practical realities and then we mapped out what is the expected benefit of doing this. Then we looked at the level of certainty around that expected benefit and we just said, this doesn't make sense for us to try and optimize. I completely agree with you, Dan.
It becomes this operational nightmare. People we've talked to, to the point we made earlier about being able to lean on one digital, speaking to some of those folks who, and it's a little different in the US, some of those folks who had previously implemented asset location, I mentioned that we were looking at doing it in certain cases and they gave me this big warning of like, listen, we don't do that anymore. We used to do it and we are still unwinding the cases where we used to do it because it becomes this just monster to manage and then a monster to unwind if you decide you don't want to do it anymore.
Dan Bortolotti: It's definitely a challenge. The problems are real and the risks are real and the potential benefits can be real as well. I think it makes sense to pay attention to these questions and in some cases try to implement some things on the margins.
I think it's a mistake to think that it's going to make an enormous difference over time because if it were, you would have to be perfectly implemented and it's almost impossible to perfectly implement.
Benjamin Felix: To bring it back to the listener's question, when you have fixed income in the RRSP, do you look at the pre and after tax asset allocation and talk to clients about that?
Dan Bortolotti: It's not a discussion that we have with the clients. I would tend to agree with you more on it. It's almost a behavioral cheat in the sense that it does encourage the client to take a little more equity risk because let's remember too that the whole reason fixed income is in the portfolio is to control behavior, not to optimize any portfolio returns.
If the fixed income is regulating the investor's behavior and it is encouraging them to stick to the plan and not panic sell, then it's doing its job. I've never in all of the time I've worked had a client say to me, well, the equity holdings in my RRSP fell 20%, but half of that belongs to the government. I actually feel just fine about it.
Literally zero people have, and even if you explain that to most clients, I'm not sure all of them, it would register with them. They look at top line numbers and they react to top line numbers. I think on that part, it's okay to try to get that little behavioral cheat in there.
Benjamin Felix: Braden convinced me that I'd previously looked at the numbers and been like, well, we have to control for this. Braden was like, why do we have to control for it? It's a very strong point, Braden. Do you have any thoughts on asset location, Cameron?
Cameron Passmore: I have nothing to add to you. I thought those great points. I agree. All right, next up.
Benjamin Felix: Who wants to read it?
Ben Wilson: It looks like subreddit page, r/justbuyvgro.
Benjamin Felix: I think that's their – the name they've given us is r/justbuyvgro.
Ben Wilson: Does PWL Capital provide a whole team solution for wealth? I'm talking investment management, filing taxes, maybe even the legal side as well, including estate planning such as wills, trusts, tax lawyer. Also, are the fees reimbursable to the client in any way, via tax refund, for example, across all funds?
Do you have a say, RRSP, FHSA, love the content?
Benjamin Felix: PWL does discretionary portfolio management as a core offering, which means that we're taking our client's money and we're investing it without their intervention. We create an investment policy statement and we are then managing the portfolio to that investment policy statement, but unlike a non-discretionary investment advisor, we are able to do trades without contacting the client first in order to keep their portfolio in line with their investment policy statement. Now, to do that well, to do discretionary portfolio management well, we believe that we need to be engaged in the financial planning process.
That includes retirement planning, that includes the consideration of taxes and legal obligations of the client. It includes insurance, it includes estate planning and probably other things that I'm not thinking of. We don't do everything in-house.
We are able to advise on all of those things up to a point. We don't have in-house legal counsel. If we say to a client, it probably makes sense for you to have a family trust for this specific planning purpose, we would then be engaging with external counsel to get advice on that and then draft a trust agreement and all that stuff.
We do have very good relationships with lawyers, notaries, accountants to fill all those types of needs. We don't file tax returns is another one that the listener asked about, but we are really, really tightly integrated with a very, very good CPA firm that has a ton of common clients with us. We often refer clients to them.
That works really, really well. That's how we've been doing it for years. On the fee question, reimbursement of fees in Canada, fees paid respect of a taxable investment account result in a tax deduction for the client.
You get a fee receipt, which can be used to offset regular income. Then it's not a deduction, but fees paid from the RRSP account are paid with pre-tax dollars. It's kind of a hard one to think about, but if you wanted to take $5,000 out of your RRSP to pay for a fee-only financial plan, you would have to withdraw the money, pay tax on it, say it's 50% tax rate again, so you've got $2,500 now.
If you've got a $5,000 bill, you've got to take $10,000 out. Whereas with discretionary portfolio management investment advice, those fees are paid directly from the RRSP account. It's not a deduction, but functionally kind of similar.
Ben Wilson: Yeah, I would just add to that. The fees in the taxable account are only deductible if it's an investment management fee paid directly to an advisor. If it's built into an MER, it does not qualify for a deduction in the same way.
Benjamin Felix: Not a direct deduction, it's deductible inside the fund, so it's a little different, but can have a similar result depending on the situation.
Dan Bortolotti: It reduces the amount of taxable income you get from the fund, so it's worked the same way.
Ben Wilson: Yeah, just perceptually it feels different as an investor paying or filing their own tax returns.
Benjamin Felix: I guess the only time it wouldn't be the same is if a fund doesn't have enough income to mop up the fee. Otherwise, it would be identical, I believe.
Ben Wilson: I guess also the distinction I was making is investment management versus financial planning and other fees. If it's paid from the taxable account as an investment management fee, then it is deductible. You work with a fee-only planner and there's some arrangement with your taxable account, that fee is not deductible for planning purposes.
Benjamin Felix: Which is a very contentious point in the financial planning community because it's a fair question if why should investment advice result in a tax deduction when a fee-only financial plan that does not involve investment advice is not deductible? It's a fair question. I know some folks have been working on a financial planning tax credit, which would maybe help to bridge that gap, but as of now, that does not exist.
All right. From Anonymous, Ben Felix said, the investing side is solved. Presumably, this means an index fund, not a managed mutual fund with 2% to 2.5% fees and not a specialty index fund. How do I find these funds? This is intimidating. How do I find a global asset index fund?
That's good. There are so many index funds. How do I choose?
How do I buy it? I have a Canadian bank account and a bank advisor selling 2% mutual funds. Alternatively, there is RBC Invest Ease, a robo-advisor with index funds, which might be less scary for me or the terrifying direct investing option.
I don't know this stuff. I don't understand this stuff. I have some money to invest and I'm afraid I'll mess it up. Advice.
Cameron Passmore: This makes me think of the comment you gave to me a few weeks ago talking about in preparation for an interview you were doing about what – I think you said the mass that the ETF industry is launching all these products, which only accelerates Anonymous' confusion.
Benjamin Felix: I've called that ETF slop. I think we're in the age of ETF slop. I need to do a video on it.
It's crazy the amount of just crap that is getting launched. It's obscene. Reading questions like this, and we did that investing one-on-one episode recently for the same reason because I'd had a conversation with someone who said some version of this to me, although they were a little bit further along.
It makes me feel bad that we don't spend more time on these questions because I think people can listen to 100 episodes of the podcast and still have these questions. This person has clearly heard us say index funds are good. They've clearly heard us say that thematic funds and sector funds are not good.
They still have this question like, okay, what do I actually buy and how do I actually do it? That's like 95% of the way there is just what are the right index funds and how do you buy it? We spend a lot more time on the 5% that might add marginal value to someone who has already figured out the 95%.
Part of the reason there is that there's only so much to say about the 95%, about the foundational stuff. We did that investing one-on-one episode to cover that because I think we don't give it enough time. You mentioned it, Cameron, that the amount of ETFs, the number of ETFs is pretty crazy.
I looked for Canada. The Canadian ETF Association reports that as of October 2025, there were 1,443 ETFs in Canada from 46 fund sponsors. That's a lot of ETFs.
Dan Bortolotti: How many stocks are traded on the TSX?
Benjamin Felix: TSX is around 1,800 stocks. TSXV, maybe around the same-ish, a little bit fewer maybe.
Dan Bortolotti: For a while, they were saying that there were more ETFs than stocks listed on the TSX. Maybe that's not true, but it's not far off. It's close, which is still crazy.
Benjamin Felix: Yeah. Yeah, that's as of October. I would not be surprised if that keeps on ticking up at a pretty good clip just because there are so many ETF issues are coming out with just like individual stock covered call leveraged ETFs.
Then there's like 15 of them because they've gotten 15 different stocks. They're issuing these things at a rapid pace. Anyway, that's not even to mention mutual funds, which are also available to DIY investors.
If you're sitting down at your brokerage account, trying to pick which ticker to buy, mutual funds are part of that set too. There are I think around 3,000 mutual funds in Canada. You add them together and there are more funds than individual stocks.
For this listener, a robo-advisor like RBC InvestEase is a perfectly reasonable option. You're paying a fee for ease of access and implementation. You don't have to place a trade.
You don't have to think about a bid ask spread and how many securities you need to put into your order to make sure that you have enough cash, all that kind of stuff. Robo-advisor is good. The other simple option that we've talked about is asset allocation ETFs.
Those are the single ETFs that give you exposure to a globally diversified and automatically rebalanced portfolio. They're beautiful, very, very cool tools. You do still need to learn how to place a trade in that case, which that's like it's not a terribly difficult thing to do, but it is a thing that you need to be able to do in order to be a DIY investor.
What do the listeners say? The terrifying direct investing option. You do need to learn how to place a trade.
Cameron Passmore: Well, it's terrifying if you have to build a portfolio. I get that, but it's worth it to learn how to place a trade to buy a one decision ETF.
Benjamin Felix: I'm not arguing it's worth it to learn, but it is a thing that has to be learned, as opposed to just clicking through and opening an account. If you do go down that DIY and asset allocation ETF path, I don't have a strong opinion on which one to choose, which suite of asset allocation ETFs to use. Vanguard has a suite of them.
iShares has them. McKenzie has them. TD has them.
Those are all low cost index fund asset allocation ETFs. It's honestly tough to go wrong with those. Now, we talked about this in different forms earlier.
Even within those suites of products, you do still need to choose your mix between stocks and bonds. That's another decision that has to be made that can also be intimidating. RoboAdvisors helps you do that with a basic questionnaire.
Vanguard does have an online questionnaire that you can use for free to try and help figure out what your asset allocation should be. You start thinking through it. For someone who has no knowledge, I think that there really are a lot of decisions that have to be made to invest, even once you agree that index funds are good, which is really the gist of this listener's question.
They're like, okay, I get it. Index funds are good, but that doesn't actually tell me what to do. There are a thousand index funds.
What do I do here? I mentioned this earlier. I think it's easier for rational reminder podcast listeners who love to nerd out on things like the best way to define profitability and designing a factor tilted portfolio to forget that for most people, the basics can seem out of reach.
It's funny to reflect on. I tried to do my investing 101 video and our podcast discussion. I tried to do that in a way that was really accessible and basic.
I had so many YouTube comments from people saying like, this was awesome, but can you do it in a way that I can actually understand? I'm like, damn it. I really tried.
Maybe need to try and do a prerequisite to investing 101 that is even more simple. Dan, I know I've said this, I think probably for every question at this point, but I'd be very curious to hear your thoughts on this one because you've spent pre being an advisor. I'm sure after becoming an advisor, you spent so many years talking to DIY investors as this like you were the guy that DIY investors read before they would try doing their DIY investing.
Dan Bortolotti: I would say readers like this as well as my bread and butter. These were the people that I'd spent the most time trying to help because there's a greater number of people in this situation than there are people who are nerding out on the best ways to define profitability. And those are the ones that I always felt that I could reach at the risk of plugging my own book.
My book, "Reboot Your Portfolio" is exactly about this. It starts off with just the basics about helping people understand why indexing is the right way to go. But then it literally walks you through all the nitty gritty, how to open an account, how to choose an ETF, how to place a trade, like five pages on how to enter a limit order, right?
Like it's very much practical. And it also looks at the other options such as robo advisors, which in this case, when a reader uses a phrase like terrified, I'm thinking start off with a robo advisor. You're going to pay a very small fee, but you're going to get the hang of it and you're going to get familiar with it.
And in a couple of years, if you want to make the move to a direct investing model where you're buying an ETF, great, but get started now and get familiar with it. So after a year or two, it's not as intimidating as it was before. So start with robo advisor and then move to one of the asset allocation ETS from one of those big providers that you mentioned, and try not to get any more into the weeds than that until you're very comfortable.
I never be shy to plug your book, Dan. It's a great book. Well, it just seems like an obvious one, because this is exactly the type of reader that I wrote it for.
Benjamin Felix: Good plug. Welcome plug. We talked about this when you were a guest on Rush Reminder, Dan, about how your nerdiness on your blog went from, you had the UberTuber, which was like a back to tilted index portfolio, and then you slowly migrated away from any complexity.
And now the model portfolios in your site are just asset allocation funds. That evolution based on your experience talking to people was super interesting to watch.
Dan Bortolotti: It was just this idea that, I think it was Prep Energy that used the term, like I want to help people get the easy A, not the A plus. And I love that idea. It was like, yeah, there's a lot of people out there who just don't know where to start or are doing things that are just so deeply suboptimal that we don't need to make their portfolios perfect.
What we need is to get them to be excellent. And then maybe they take it the next step, but maybe they don't. Because if you go from sitting on the sidelines, intimidated about investing or paying 3% in mutual fund fees, those are pretty terrible places to be.
We need to get you into a good investment strategy at low cost, well diversified with discipline, period. Everything else after that is details. Let's get you up to that easy A and then we can worry about the rest later or not.
Benjamin Felix: All right. I'll read the next one here real quick. Or do you want to read it, Cameron?
Cameron Passmore: Ben, some years ago, I think you became a homeowner. Could you share some things that you learned about being a homeowner and maybe you were overlooking before? Also, is a new episode on the topic of buy versus rent being considered?
I think it would be interesting for many people.
Benjamin Felix: I believe that question was submitted before the episodes that you and I did, Dan, on renting versus owning that people really enjoyed earlier this year. That has been completed. I didn't overlook them in principle.
I was aware that they would be a thing, but I think I overlooked the magnitude of maintenance and renovation costs. It has been a constant flow of significant costs for us since we bought our house. My house was built in 2003.
It's not like a super old house. It was fine. It's not like it's falling apart completely.
It's not falling down. Little things that just break and add up. We knew when we moved in that there were things we had to deal with.
We knew there was siding that had to be redone. That was the big thing. The deck didn't have a railing, so we had to put a railing on.
It was like, okay, we budgeted for that. We planned for that. Not a big deal.
Yeah, the railing for the deck, that was necessary. We knew those were coming. We ended up spending way more than we expected to.
First moved in, the roof leaked. I don't know. Other stuff happened.
I can't even remember anymore, but we spent, on average per year, it has been way more than the 1% per year of the home value that people often quote as a maintenance expense. Whenever I'm doing analysis on this, I used to feel like people would tell me 1% is way too high. I'd be like, well, maybe it is too high.
I would try and do research. I arrived at, based on what's out there from statistical agencies and academic research and stuff, 1% or even a little bit higher is kind of where I landed. Then my lived experience as a homeowner, I'm like, yeah, people who say that 1% is too much are completely delusional or they're renters.
I don't know what else it could be. Or they are themselves a property manager and are doing all of the work, but not accounting for the cost of their time in doing it. That was the biggest thing I overlooked.
Maintenance stuff, there's also discretionary renovations. There's maintenance that's like you have to do that to keep the house habitable, like fixing a leaking roof. Discretionary renovations, like making the house a little bit nicer to live in, that's another one that's like, I say discretionary because it's not technically required to make the house habitable, but when we bought the house, it had a 20-year-old bathroom that was very run down and not very well taken care of and probably not very well done in the first place that we're currently renovating.
Is that discretionary? Yeah. I mean, we don't need that, but man, it was pretty rough.
The other thing, I mentioned this with my property manager example. I don't know if people think about it and I don't think I thought about the cost of being the general contractor. When you own the home, you're the one that has to find, manage and pay the people that fix it and renovate it.
It's like a whole extra job. Basically, maintenance costs. I knew they were there.
I don't think I appreciated how significant they could be.
Dan Bortolotti: Can definitely be a lot. 1%, like you said, maybe to make the house habitable, but over the long-term, it's probably going to be significantly more than that most years, let alone if you're doing anything close to a discretionary renovation. Orders of magnitude higher than that.
Do you miss your house, Dan? Sometimes I do. I can see sometimes it would be nice to have a bit of a bigger space, but I also love living downtown and I love being nimble and not having to shovel snow and cut grass and worry about a leaky root.
Benjamin Felix: What do you think, Cameron?
Cameron Passmore: You did a renovation? Yeah, the renovation was awesome. Loved the place and I love having a house in the space.
I don't mind the tinkering and puttering on the house. In that way, you and I are a bit different.
Ben Wilson: I don't mind. I like the idea. A house to me, there's definitely financial aspects to the decision, but it was more of a lifestyle decision for me.
I couldn't imagine being a renter. I just like the idea of having a home where I can raise my kids and customize it the way we want over time. I also enjoy things like cutting the grass and snowballing the driveway and tinkering around a little bit, but I view it more as a lifestyle decision that has financial implications.
Benjamin Felix: Listen, don't get me wrong. I own a house too. I also like owning a house for various reasons. Otherwise, I would have sold it, I guess. I was fine renting too, but owning a house is nice.
Dan Bortolotti: I'll take this one because this is a fun question. This is from Gerpo, G-E-R-P-O. What are some of the weirdest portfolios some of your clients had when they came to you for the first time? Who wants to take that one first?
Benjamin Felix: I don't want to speak about specific client situations, but the ones that I can think about that have been the most interesting have been the ones where someone got extremely wealthy holding a single stock or a single crypto token. They realize at some point, they're like, oh geez, this has become tens of millions of dollars or millions of dollars or whatever the case may be. At that point, they're like, I don't know what the trigger is, but at some point they decide, okay, I need help to diversify this, to turn this luck.
The people that come to us realize that it was luck. They don't think that it was their own skill and they can keep doing the same thing again and again. There's some selection bias there, but they've come to us and basically said, listen, I did this thing, I got really lucky and now I need to make it so that it doesn't go away.
Ben Wilson: I don't know if weird is the right descriptor, but in my career prior to PWL, I worked as a compliance officer. I saw all kinds of different strategies that advisors were implementing. Some of the craziest approaches came through audits and some of the roles I was doing there.
I've seen books that advisors were investing 95% of their AUM in bullion products. I've seen over 90% where people are using leveraged money with their clients, using like a three-for-one loan, where often the one that's collateral was a line of credit. In many cases, the clients didn't even realize they were in leverage.
It's kind of wild. These are some relatively basic strategies that are way above the heads of the clients and puts both the clients and advisors at serious risk by implementing these approaches across a broad range of clients. It's not just clients here and there.
It's like, this is the strategy that we're implementing across everybody I work with.
Benjamin Felix: Man, so pre my time at PWL and once at PWL, I believe, if I remember correctly, I've seen cases where leverage was used to invest in stuff that was speculative on its own without leverage. You end up with this underwater position and a big loan. It's like, oof, I don't know if that's weird. Those are ugly ones.
Ben Wilson: Yeah, or to take it further, leverage into DSC back-end loaded mutual funds, where they're using board money to get extra revenue from the client and putting in DSC to make that a nice big juicy upfront check for the advisor.
Benjamin Felix: And advisors get points on those loans, like revenue from those loans, the investment loans that they'll take. Yeah, I've seen some crazy stuff out there.
Cameron Passmore: Then you go put a life insurance policy to cover off the loan, should something happen to you, you make the insurance policy commission. Those are the good old days. How is that not illegal?
Never did it. I never did it. You would see it happen.
Benjamin Felix: I don't know how that is legal, Dan.
Dan Bortolotti: We once thought somebody put triple leverage NASDAQ ETF in his kid's RESP. Oh, wait a second. That was Mark McGrath. If Mark is listening, I think he was joking.
Benjamin Felix: I don't think he was joking, Dan.
Dan Bortolotti: Maybe he wasn't.
Benjamin Felix: I don't think he was.
Dan Bortolotti: So we can read that disclaimer at the end. I will say what I used to see all the time.
I'm not bringing on as many new clients. I don't see it as often anymore, but I used to call it the meatloaf portfolio, which was, you'd get somebody would come in and it would be a big portfolio, like $2 million. And there was 47 mutual funds and absolutely zero thought put into any of them.
There would be like in a large account, 5% of it in a balanced fund. It's like, well, why putting a balanced fund as one small holding of a huge account? I mean, if it was the whole account, now you're talking, maybe that makes sense.
But it seemed to me like the advisor had lunch with a fund wholesaler and said, well, I guess I feel obligated now to buy some of this company's funds. And then the next month they'd have a lunch with somebody else and they would go out and buy a bunch of other random funds. And you just wonder what kind of thought process is going into any of this portfolio construction.
And I think the answer is zero. It's just complete randomness. Sometimes we would then give the portfolio proposal to the new client.
That's like, yeah, we're taking you from 47 funds down to like four or five. And they're like, well, what am I missing? It's not as well diversified.
Trust me, it's more diversified and a hell of a lot more efficient than what you had before. And also one third the cost. That was the playbook, I think, for a lot of people, maybe still is, but it's just clearly no actual thought process at all. Just randomness.
Benjamin Felix: Didn't you have a post down about the advisor six pack portfolio?
Dan Bortolotti: I would pick, oh, you have to have the Canadian dividend fund and then you have to have whatever was the top performer last year. Plus the income fund again, like even in a fund where you didn't need or an account where you didn't need income. Why is it there?
I don't know. It has the word income in it. That has some intuitive appeal.
You'd see the same really popular funds showing up over and over in client accounts, probably because they had a couple of good years, but always after all the funds roll into these funds when they're hot, then the underperformance comes after that and it's too late. I wish I could say it's getting better, but I really don't think it is.
Benjamin Felix: No, I don't think so. This next one is a quick one. Why does Dimensional offer ETFs only through advisors?
That's not quite true. Their mutual funds are restricted, but their ETFs, which they launched in the US market a while ago now are available to anyone. You can't restrict the purchase of an ETF the way you can with a mutual fund.
For their mutual funds, which they still only have in Canada, their reasoning for restricting trades to advisors who have been approved by Dimensional is really to reduce hot money, to reduce quick in and out flows based on performance chasing and stuff like that, which increase costs and decrease tax efficiency for the long-term investors that remain in the funds. They've just stuck to that since they implemented. I don't imagine that they're going to change it, but their ETFs are available to anybody.
Cameron Passmore: I'm sure that the majority of the ETFs in the US are held by advisory firms that work with them on the mutual funds before.
Benjamin Felix: Probably true. Yeah. If you had $10 billion at your disposal to test some market slash portfolio slash asset pricing related theory, what would you test?
Cameron Passmore: We'll let you take this one, Ben.
Benjamin Felix: My answer is super boring. I would test market efficiency by investing it in Dimensional Global Equity Fund or Global Equity Index Fund. I would then compare it to actively managed funds over the next 30 years. The end.
Dan Bortolotti: Oh, Warren Buffett has a lot more than that. And he said that he wants his executors to do that. So maybe it's not such a crazy idea.
Benjamin Felix: I don't think so. What do you guys think?
Cameron Passmore: All day long, you can't unhear the message.
Benjamin Felix: Yeah.
Ben Wilson: Nothing else that makes sense to me.
Dan Bortolotti: If it works at 10 million, 1 million should probably work at 10 billion as well. In fact, maybe there's even a more compelling argument because all of your great ideas aren't scalable to 10 billion.
Ben Wilson: Yeah. We often talk about this internally, how fascinating it is when people experience ultra high net worth, when they could keep their finances as simplistic as possible, that there's this pull to drag them into more complex, more speculative strategies because I guess they feel like they can lose more money without worrying about it with the potential to earn a lot more. Just this interesting psychology that comes with people that have more money.
So easy to say, if you had $10 billion, this is what you do. I think any of us would probably actually do that, but will you do that in theory if you actually had $10 billion to invest is another question.
Dan Bortolotti: Fortunately, a problem that none of us are likely to experience in the near future.
Ben Wilson: Yeah, we're okay. We're safe.
Benjamin Felix: Thank goodness. All right, last one. I'll read it again.
Hi Ben, I'm a BCom finance student and big fan of your work. It shaped how I think about investing and financial decision making. I'm in my final year trying to figure out a career path that's both financially rewarding and personally fulfilling.
You've often said that investing is a solved game and I agree. It's a great time to be an investor, but that clarity makes it harder to see where a young professional can truly add value. Roles like portfolio management or equity research seem prestigious and lucrative, but if alpha is largely illusory, how do I reconcile doing work that might not really help clients?
At the same time, financial planning seems more meaningful but often less lucrative. Not 100% sure about this. I'd love to hear your thoughts.
Where do you see the most impactful finance careers going forward, especially ones where both purpose and compensation can coexist? First, I would say the financial planners can make very good incomes. Client facing senior roles at PWL are typically staffed by people who are both portfolio managers and financial planners and they're paid well.
Then more generally, not specific to PWL, I would say there's a lot of skewness in wealth management, in financial planning. People who can build a book of business over time can make ridiculously good incomes without working investment banking hours, but that can take a long time to get there and a lot of people fail out. A lot of people can't build a business.
At PWL, it's different. PWL's employees are salaried, but if you go out on your own to start your own financial planning practice, some people will build large businesses and have very high incomes. Many people will not be able to pull that off because it's hard to do, but it's possible to make a very high income.
If you have the right personality, a little bit of luck, the right connections, and the right mentality, hustle, all that kind of stuff. I would also say though that portfolio management does not mean trying to beat the market necessarily or managing an active fund. Again, PWL employs people who are portfolio managers in wealth management roles.
They're a portfolio manager, but they're not managing a fund trying to beat the market. They're a portfolio manager focused on the things that they can control like costs, taxes, and making good long-term decisions. Again, you can be a portfolio manager, make a pretty good income, and be doing stuff that we would all agree is good and is adding value reliably.
The other thought I have on this is maybe a little bit more philosophical, but even if an equity analyst is working for a fund that maybe won't beat the market, maybe it's not going to generate positive alpha, they're contributing to market efficiency. Is that a waste? Is that not a good thing?
I don't know. It's kind of interesting to think about. The clients in the fund, they should know what they were getting into.
They're paying higher fees for trying to beat the market, but they're taking the risk that they won't outperform. Hopefully, they're aware of the data. Probably not though if they're investing in the fund, but hopefully, they should know what they're getting into.
You as the analyst, I don't know if you're doing anything wrong and you're still contributing to market efficiency, like I said. What do you guys think?
Dan Bortolotti: Passive investing is God's work. You're bringing great benefits to all of society by keeping markets efficient.
Benjamin Felix: What do you think, Dan? You started to practice 10 or so years ago.
Dan Bortolotti: It's interesting, eh? Because I think that there is still a persistent belief that investment management, the role of the portfolio manager or the investment advisor is to beat the market. If you're not going in with a goal to beat the market, what possible value could you add?
I understand it because that's been the environment and that's been the playbook of advisors for decades. I hope we brought a lot of value to our clients without ever beating the market. Yes, it's financial planning, but it's also investment management.
That can mean portfolio construction, ongoing portfolio management for things like tax efficiency, just encouraging clients to save and contribute on a regular basis and the behavioral coaching when markets go down. All of that stuff adds value. I don't know that I would call it financial planning.
I think that's portfolio management. You can do a lot of things on the margins that add value compared to what somebody would be able to do on their own. That's the way I always look at it is like, what value can I add for you compared to DIY?
Because those are the only alternative or another advisor. If I can add value equal to your fees just by doing all those things on the margins and helping control your behavior, and what's the value of the peace of mind, right? Of just being able to delegate it to someone that you trust will do a competent job of it.
You can add a lot of value there. All of that is done within the AUM model, which I think we can agree is potentially more lucrative than a fee only financial planning model. Yeah, I think you can do both, but you need to be at a firm that does comprehensive wealth management, which includes financial planning, but is not confined to it.
Benjamin Felix: I would say to the point of the listener's question, a financial planner, if you're working at a bank or even at a wealth management firm and your only role is financial planning, you're probably not going to make a super high income. Again, PWL, the way that we set it up is we don't have people who are just doing financial planning on a financial planner salary. We have people who are managing assets as well as doing financial planning and that role tends to be, I guess you would call that a wealth manager.
What's our title, Ben, that we call that role? Senior wealth advisor. Those are people who are financial planners and portfolio managers.
They're doing a combination of both those types of work as you described, Dan. That's probably for someone who wants to earn a high income and have high income earning potential. That's probably the role you're looking at.
If you go into a salaried position as a financial planner, you're not going to earn as much income. Even in strictly financial planning, a really good fee only financial planner who's really efficient with their time, they can also make a very good income.
Ben Wilson: I want to add some thoughts just like thinking about the M&A conversations I've been having. When we have conversations and look at firms to the question, whoever asked the question, their point, some of these roles that involve analysis and the CFA type prestige seem kind of exciting. That's also in a world that is dominated by active investing and the big banks in Canada.
That seems to be the highest priority. The real value where a firm like us is trying to grow is by finding people that help clients make good decisions through planning, communication, behavioral coaching, offering value over and above what you can provide through alpha if you're able to do that, which we don't believe it's achievable consistently and accurately over longer periods. The other thing I would add is as the industry evolves more towards value-added services, firms that grow quickly, there's a lot of roles that may not even exist that could become pretty well-compensated paths.
As firms grow, new positions are created, specialty roles, leadership roles, possibly even centralized teams like a dedicated planning team where you're offering high-value advice to a lot of different clients in the firm and carve your own path that could become a pretty lucrative role over time. I think there's a lot of different directions, especially with big firms out there where you could find a meaningful but also well-compensated path over time.
Benjamin Felix: You can find a good professional career. Most of the guys that I know, they happen to be guys, I don't know many women in our field, personally at least. Most of the guys that I know who are doing what we do have their own practices and they've been successful at gathering assets and growing their client base and they're doing very, very well for themselves.
Better than they would be doing if they were an equity research analyst. I think wealth management is an overlooked career path by a lot of people who come out of finance programs in university who want to go and be a fund manager or an equity analyst or go into investment banking. I don't know, man.
I think wealth management has great career prospects. You can have very, very good incomes if you know what you're doing and if you have the right work ethic and you don't have to work investment banking hours. Although, I shouldn't say that, Ben.
I think a lot of people at PWL work quite a bit.
Ben Wilson: Misleading statement.
Benjamin Felix: We're working on it though.
Ben Wilson: Also, you can make real impact on clients' lives. Are you making impact as an investment banker, analyst? Maybe, but as a wealth manager, you actually see the impact that you're making, which is a cool part of the career.
Benjamin Felix: It doesn't have a sexy reputation, I think, when people think about financial careers, but maybe we're a biased sample because we all work at a firm that we like, that's aligned with our values and we've all been pretty successful. Big fan. I think it's an often overlooked career path.
That is the last question.
Cameron Passmore: And hundreds to go.
Benjamin Felix: Concluding thoughts, guys?
Dan Bortolotti: That was a good list. A lot of variety in that list of questions. We covered a lot of ground. AMA 75 coming up. Stay tuned.
Benjamin Felix: I opened up the new AMA list because we had mostly gone through the old list, at least after going to removing some of the ones that I didn't think that we wanted to answer. I finally, for the first time, opened up the new list because we did our first AMA request, got 161 questions. Then the new one has 291 additional questions.
That's like an untapped bank of AMA questions. We're going to be okay for a while.
Dan Bortolotti: Might need to edit a little bit.
Benjamin Felix: Might probably edit some of those down. Some of the more comments, I think I read through a lot of them earlier today. It's interesting.
I don't know where it's posted or where people are finding it, but we are still getting, even within days, within the last few days, we're still getting new AMA questions added to that database. We'll probably post the form in this episode, show notes, so that people can find it. Yeah, keep sending the questions in. We'll get to them one day.
Dan Bortolotti: Good stuff.
Benjamin Felix: All right, guys. Well- That's a wrap. Last episode with all of us, at least, for the year. Enjoy the holidays.
We'll see you. In the new year.
Cameron Passmore: Likewise.
Benjamin Felix: See you soon.
Disclosure:
Portfolio management and brokerage services in Canada are offered exclusively by PWL Capital, Inc. (“PWL Capital”) which is regulated by the Canadian Investment Regulatory Organization (CIRO) and is a member of the Canadian Investor Protection Fund (CIPF). Investment advisory services in the United States of America are offered exclusively by OneDigital Investment Advisors LLC (“OneDigital”). OneDigital and PWL Capital are affiliated entities, however, each company has financial responsibility for only its own products and services.
Nothing herein constitutes an offer or solicitation to buy or sell any security. This communication is distributed for informational purposes only; the information contained herein has been derived from sources believed to be accurate, but no guarantee as to its accuracy or completeness can be made. Furthermore, nothing herein should be construed as investment, tax or legal advice and/or used to make any investment decisions. Different types of investments and investment strategies have varying degrees of risk and are not suitable for all investors. You should consult with a professional adviser to see how the information contained herein may apply to your individual circumstances. All market indices discussed are unmanaged, do not incur management fees, and cannot be invested in directly. All investing involves risk of loss and nothing herein should be construed as a guarantee of any specific outcome or profit. Past performance is not indicative of or a guarantee of future results. All statements and opinions presented herein are those of the individual hosts and/or guests, are current only as of this communication’s original publication date and are subject to change without notice. Neither OneDigital nor PWL Capital has any obligation to provide revised statements and/or opinions in the event of changed circumstances.
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