Build Wealth Canada Podcast Kornel Szrejber: Investor

In this episode, I interview S&P, the creator of the S&P 500, Dow Jones, and many other popular indices used around the world by millions of investors. 
On today’s interview, we’re going to be covering the SPIVA scorecards which are semiannual reports published by S&P that compare the performance of active funds (i.e. active investing) vs taking the passive index investing approach.
In other words, when you hear the debate of whether you should be a passive index investor, or an active investor, the SPIVA scorecards actually look at how well the active managers have done compared to if you just invested in the index.
Our guests today are Joe Nelesen from S&P, and Erin Allen from BMO ETFs. Joe is the Senior Director of Index Investment Strategy over at S&P, and Erin is the Vice President over at BMO ETFs, which is the largest Canadian provider of ETFs.
I thought we could have both Joe and Erin on the show, as that way we can learn more about the insights and discoveries learned from the SPIVA reports when it comes to the active vs passive debate. And, since Erin and her team actually create these ETFs for Canadians, we discuss how to actually practically apply these SPIVA findings and insights, when constructing or optimizing our own investments portfolio, here in Canada.
In other words, what to look for and things to watch out for when we are actually building, optimizing, and deciding which ETFs to use for our own portfolio. 
Questions Covered: Joe, to make this friendly to anybody new to the world of investing, can you start by telling us a bit about S&P, as well as the SPIVA reports and why they are important for us everyday investors?

The SPIVA analysis has over 20 years of data at this point. Can you speak to what these decades of analysis have taught you and individual investors about passive and active management around the world?

Erin, for those like myself who are totally on-board with what the SPIVA findings suggest and are looking to just have an easy-to-manage investment portfolio where they’re just looking to buy the total market index; what are the options available to them in Canada, and can you take us through the pros and cons of these different approaches?

Joe, one of the reports that I’ve always found fascinating is the persistence scorecard that you publish. Can you speak to what it is, where can listeners find it, and what is the role of ‘persistence’ when measuring active outperformance?

Erin, when it comes to the core ETFs and asset allocation ETFs that try to mimic the index, one of the critical metrics that individual investors need to be aware of is the tracking error, especially when trying to choose a comparable ETF from one provider to another.

Can you take us through: What ‘tracking error’ is? Why is it important? How can we check it ourselves?

Is some tracking error normal, and how do fees (MER) factor into the tracking error number that we see published?

At what point would a tracking error be considered high? And does that number vary depending on which index we’re looking at? (ex. S&P TSX vs something like an MSCI emerging markets index)

Joe, it seems like with the thousands of investment products out there, the definition of the word “passive” can really vary quite a bit, not just amongst individual investors but amongst companies offering these products as well.
I’ve even heard arguments about the S&P 500 not actually being 100% passive as there is still a committee that chooses which stocks are included in the S&P 500 index. Can you speak to that a bit and also, how do you think individual investors should define “passive” vs “active”?
Erin, when a DIY investor is purchasing total market index ETFs, do those literally include all publicly traded companies on any exchange that fit that region? (ex. S&P TSX for Canada), or is it more of a representative sample of that region?
Also, I think it would be good for invest

Today we have a great case study of somebody that I really respect, and who has been able to achieve financial independence, at a really early age.
I wanted this episode to be relevant to you no matter where you are on your financial independence journey, so I thought we could approach it from two angles:
If you are in the asset accumulation phase and working towards financial independence, we get into how you can get there quicker AND also enjoy the process and not get burned out as you're working your way towards it.

If you are already financially independent or are getting close to it, we tackle how to live a happy, fulfilling and meaningful life once you transition to the financially independent stage of your life. Questions Covered: One of my favourite things to do on the show is interview those that have achieved financial independence early, where they can retire if they choose. Then, I like to dissect and take lessons from that journey, that we can all learn from and apply to our own lives to help us get to financial independence quicker, and to actually be happy with the journey before and after achieving financial independence, where we can retire if we choose.

There are lots of different paths to get there. For anybody hearing about you for the first time, can you tell us about your journey and how you got to early financial independence?

I’ve been following your work for a long time, and it’s clear that you definitely don’t need to be working at all anymore, and definitely don’t need to be taking on any new income producing projects in your semi-retirement. Yet, it seems like you keep taking on significantly large projects, like the YouTube channel that you launched and worked a lot on to get to where it is today, and of course you have your giant book launch today that took you three years.

All this takes up a good amount of time obviously, and I imagine it’s really not about the money anymore for you. So what keeps you going? Why not just relax, or at least scale things back a bit?

How many years have you been financially independent now? What were some of the most critical lessons that you learned about financial independence? Was there anything that surprised you?

You’ve interviewed over 450 entrepreneurs on your My Wife Quit Her Job Podcast. Some were incredibly successful where they are most certainly financially independent and could just close up the business or sell it, and just live off the proceeds from their investments. Have you found commonalities in regards to what keeps them going? Why do they keep working?

What are your sources of fulfilment in semi-retirement? and what have you found to generate the most meaning in your life after hitting financial independence?

From those that you interviewed, have you noticed any patterns in terms of what tends to add the most to that feeling of fulfilment, purpose, and happiness once money is no longer the priority? Our Guest: Steve Chou Steve's New Book: The Family First Entrepreneur
Steve is a highly recognized influencer and speaker in the e-commerce space. His blog, MyWifeQuitHerJob.com has been featured in Forbes, Inc, The New York Times, Entrepreneur and MSNBC.
His podcast, My Wife Quit Her Job, is one of the top 25 marketing shows on all of Apple Podcasts, and he and his wife run a 7 figure e-commerce store called BumblebeeLinens.com
Steve also runs one of my favourite marketing podcasts here.

One critical topic that can have a substantial financial impact on both us and our loved ones, is the subject of inheritance, and how to ensure that you and your loved ones don’t end up overpaying in both taxes and fees, once the whole inheritance process starts taking place. 
To help me with this subject, I’d like to welcome back Selene Soo on the show. We learned a lot from her last time in the interview on annuities, and this time, we’re going to focus on some best practices, when it comes to inheritance.
Selene is the Director of Wealth Products at RBC Insurance. She has been in the wealth management industry for over two decades, so she definitely has a really large wealth of experience and knowledge when it comes to different retirement planning solutions, whether it’s annuities, segregated funds, and much more.
Enjoy the episode, I hope you learn a lot from the session, thanks for tuning in, and now, let’s get into the interview.
Questions: Why is it important to have an estate plan here in Canada?

Selene, I was told that you and your team did a new survey when it comes to how prepared Canadians are when it comes to inheritance. Can you take us through the insights and lessons learned from those results, that we can then apply to our own lives?

One component that I think is a bit of an unknown for those of us that haven’t gone through the process, is the subject of probate and probate fees. Can you speak to this, and what are the options available to us for minimizing probate fees?

Are there any other fees or taxes that we should be aware of when thinking of inheritance and estate planning?

I suspect that the word “will” is often used interchangeably with “estate planning”. Can you speak to what the differences are between the two, in particular, so that we can all be aware of the different components of estate planning here in Canada, and plan accordingly.

To tie everything together, can you give us a synopsis as well as anything else that you’d like to add in regard to best practices that we Canadians can do to ensure that we have this critical part of our financial planning taken care of?

When it comes to inheritance and estate planning, I suspect that I common challenge most Canadians experience, is bringing up the subject with their loved ones, and then carefully navigating some of the really sensitive and emotion triggering questions that inevitably come up. How do you think it’s best to bring this subject up? and what are some good questions to ask, and “next actions” to do, to actually get the ball rolling on this project?

Can you tell us more about what you and your team do, and direct us to any educational resources that we may find helpful when we start working on optimizing our inheritance and estate planning? Resources from the Episode: Retirement Investment Solutions - RBC Insurance
Facebook: @RBCInsurance
LinkedIn: https://www.linkedin.com/company/rbcinsurance/
Check out my previous interview with Selene on Annuities - Guaranteed Income for Life

Today’s guest is Jason Heath, one of Canada’s best known fee-only financial planners that you’ve probably seen in all sorts of media here in Canada over the years. He’s a Certified Financial Planner (CFP), has been providing financial planning for over 20 years, and is currently a personal finance columnist for the Financial Post, MoneySense, and is also a regular contributor to RetireHappy.ca.
I’ve been reading his insightful financial planning articles for years, so it’s really great to have him on again, and in this episode, we get his perspectives on:
How much do you actually need to be financially independent here in Canada and have the option of retiring? What is the process that should be undertaken to figure this out?

Next, we get his take on how to live off your investment portfolio by withdrawing a sustainable amount every year, along with some alternatives to the 4% rule (which as you likely already know, has some limitations).

We actually go through the process and calculations that he does annually with clients to ensure that they are withdrawing a sustainable amount from their portfolio every year, and we discuss how you can do it yourself in case you’re purely DIY and want to do it all yourself, and not have to meet with a financial planner every year.

Also, since Jason has been doing fee-only financial planning for over 20 years, we talk about the patterns that he’s noticed between those that are successful financially in and in life, long term, vs those that are not. From those, we hone in specifically on the things that you and I can actually control and do in our own lives, to help get us there too. Enjoy the episode, it’s great having you here, thanks for tuning in, I hope you leave the show a rating on Apple Podcasts or Spotify, and now let’s get into the interview.
Questions Asked:
When somebody is trying to determine how much they need to be financially independent and have the option of retiring, what is the process that should be undertaken to figure this out?

One strategy that has really peaked my interest and that I think can be highly relevant for those that have hit their financial independence number, is doing some sort of variable withdrawal strategy with a spending ceiling and floor.

When a client comes to you and says that they don't just want to use a fixed withdrawal strategy like the traditional 4% rule, and instead would like to be able to take out more when the markets are doing well, and are okay withdrawing less when the markets are not performing well, is there a certain variable percentage withdrawal strategy that you have found to work well, along with any particular rules for a spending ceiling and floor? or is there maybe something else entirely that you prefer recommending to clients?

What is the process and calculations that you do annually with clients to ensure that they are withdrawing a sustainable amount from their portfolio every year?

My understanding is that the ideal way to tackle this, is to work with a fee-for-service financial planner like yourself or somebody at your firm, where every year the numbers get updated in the financial planning software for that person's particular situation. Then the expertise and analysis of the Financial Planner is used to determine what the withdrawal rate should be for that year. Is that the ideal way you'd recommend that it’s done?

For those that are more on the DIY side and do not want to meet with someone annually, what approach or process do you recommend for them? For instance, maybe they just want to meet with a Financial Planner when there are significant life changes or financial events like an inheritance, the birth of a child, getting married, etc.

You have been a Financial Planner for decades at this point and I'm sure with that level of experience you've noticed certain patterns when it comes to clients that are successful financially and in life, versus those that

With the significant increase in interest rates over the past year, and with home buying and selling season right around the corner, I thought it would be great to have our resident mortgage expert on the show, to go over the implications of this higher interest rate environment that we're in. 
Whether you’re getting a new mortgage, or are considering refinancing, we tackle whether you should go with a variable rate or fixed rate mortgage in this current interest rate environment.
There could also be some new mortgage rules coming out this spring as well, so we cover what those are so that you can be better prepared. 
You might have also been experiencing quite a bit of a payment shock if you hold a variable rate mortgage, with a drastic increase in your monthly mortgage payments. And, if you’re a fixed rate mortgage holder, then you’re not out of the woods either, as when your mortgage inevitably comes up for renewal, you might very well be forced into a much higher rate on your new mortgage than what you’ve been used to over the past few years. We’re going to cover this new challenge that you may be facing, with these higher rates, along with some things you can do to lower your monthly mortgage payments, despite these increases in rates.
Our Guest: Our guest today is the show’s resident mortgage expert, Sean Cooper. He's who I go to and who I send friends and family to for any mortgage related questions.
Sean is the bestselling author of the book, "Burn Your Mortgage". He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30.
These days, Sean’s helping others burn their mortgages too, as an independent mortgage broker.
Sean has offered to answer for free, any questions that you, the Build Wealth Canada listeners have. I’ve set up a special page for him so all you have to do is go to buildwealthcanada.ca/sean, and there you can send him a message with your questions.
Or, if you prefer, you can even pick a time on his calendar for a phone or video call to get your questions answered with him live, for free.
Sean is a licensed mortgage broker too so I definitely also encourage you to reach out to him if you’re looking to get a new mortgage or if your mortgage is coming up for renewal, as at the very least he’ll be able to provide you with a short list of the best mortgages that he’s been able to find across all of Canada from the 60+ lenders that he monitors.
None of this costs you anything, and there’s no obligation to get your mortgage through him or use any of those suggested mortgages.
At the very least, you’ll get some good education and research on the top mortgages available in Canada right now, you’ll learn what to look for when choosing your next mortgage, and you can always decide later whether you’d like him to help you with the process, or if you want to do it all yourself. It doesn’t cost you anything regardless.
Questions from the Episode: In 2022, the Bank of Canada raised interest rates 8 times. The prime rate went up a whopping 4%. So far we have already seen one increase of the prime rate in 2023. As someone that’s in the industry, what are you hearing and what do you think is in store for mortgage rates in 2023, 2024 and beyond?

With all these mortgage rate changes that we’ve seen in the recent past, what are some considerations when choosing between a fixed rate and a variable rate mortgage?

What’s happening in the real estate market right now (so the first quarter of 2023 which is when we’re recording this episode)? And is now a good time to buy a home?

I heard there could be some new mortgage rules coming out in the spring. Can you tell us about those and how they may affect buyers? 

For anybody new to working with a mortgage broker, can you speak to how it works, and whether you have to pay for the services of a mortgage broker?

What are some ways to qualify for a higher home purchas

It's RRSP season here in Canada. Remember that March 1 is the deadline for contributing to an RRSP, and have it count towards your 2022 tax year. 
Also while we’re on the subject, remember that your TFSA contribution room grows every year, and for the 2023 calendar year, you now have an extra $6,500 that you and your partner can contribute each. That's $13,000 total if you both max it out.
Last year the limit was $6,000 per person so the government did increase that by $500 per person for this year. 
I find that these are things that are easy to forget as life gets buys, but I always have reminders set up for these things as, especially in the case of the TFSA, it’s always nice to put in the effort to max that out so that you can get that tax-free growth on that new money invested, all year long.
Since it’s RRSP season, and tax season is coming up, I thought it would be worthwhile to have another successful Canadian Financial Planner on the show, so that we can get a good second opinion on:
·         How much do you need to be financially independent and have the option of retiring?


·         What are some of the sustainable withdrawal strategies that you can use when you’re ready to start living off your portfolio?


·         What is the process and calculations that should be done annually to ensure that you are withdrawing a sustainable amount from your portfolio?
·         And, since our guest has been in the financial planning industry for decades at this point, I ask him if he’s noticed certain patterns when it comes to clients that are successful both financially and in life, versus those that are not. This way we can pick some lessons learned from others, apply them to our own lives, and hopefully avoid some completely avoidable mistakes that others endured before us.
Before we get into the interview, I wanted to invite you to a free webinar and Q&A that I’ll be doing with the actual co-creator of the TFSA.
He’s the former Chief of Staff for the Minister of Finance in Canada. His name is Kevin McCarthy, and if you’ve ever had TFSA or RRSP related questions, or would just like to ask the creator of the TFSA your questions, you can do so at this webinar.
I’ll be there too obviously and so after Kevin goes through his educational presentation where he goes over the RRSP and TFSA fundamentals, as well as the tax deductions and tax credits available to us as Canadians, we’ll then have a live Q&A with him and I and so you can ask him or me your questions when it comes to personal finance, investing, financial independence and retirement, living off your investments, etc.
The session is on February 23, 2023, and it will be recorded so even if you can’t make it live, you can still signup to be emailed the replay once it’s released. 
Also, Kevin has informed me that anyone attending live will receive a downloadable version of his and his team’s proprietary Income Tax and RRSP Tax Savings Calculator.
The link to sign up for free is BuildWealthCanada.ca/webinar.
I look forward to seeing and interacting with you there, and now, let’s get into the interview!