Money all over the place. What to do, what to do? | General financial discussion | Discussion forum

I have no experience with either of these institutions. WealthSimple has a pretty good reputation, as I understand it.

You two need a complete financial plan makeover. Ask around your neighbourhood for a reliable financial planner who will charge on a fee-for-service basis just to develop the plan. Both of you need to be on board with the plan. You may find it painful to come to an agreement, but better to do this now than divorce later. Money issues have a way of wrecking marriages.

Good luck!

I agree with you, financial planners (note the word, "planners") are of limited or no use for people who "have know (sic) idea what our life plan is", are "fly by the seat of our pants" people, have not "any intention of making" a plan. Probably save your and others' time by just sitting down with a piece of paper and summarizing all your pots of money so at least you've got it all documented in one place. As you want "flexibility" I guess high interest bank accounts and short-tern GICs give you the option to get at the money whenever the urge hits. Key thing: If you're not a planner, well, then don't make plans.

Schrodinger's Ape said

As an aside, and knowing how much work this would be to setup, it'd be great if this info was available in a graph.

In case you haven't discovered this, you can go to the rate comparison chart and click on the current financial institutions' rate. This will bring up a list of historical rates since the institution was listed on this site. That might make it easier to create your own graph for comparison purposes.

Pretty much all "financial planners" are really just mutual funds salespeople, so when they tell you you're good to go, you don't need them, then I'd thank them profusely for their candour and take their advice. Given what you said, that you like to do research and think no-one knows your evolving plan better than you (I agree), you might want to consider opening an online account at a discount broker and then investing based on your ongoing research and growing knowledge over time. Sounds like on the investment side you're not sure about passive vs active investments, so you could use both methods (discount broker where you control choices and Wealthsimple where a lot of stuff gets done "automatically"), no rule against that. Hard to say whether a particular institution, like CDF for savings and Wealthsimple for investments, is the "the best" - if there was a clear best I guess everyone would be there. It really depends on factors such as convenience, cost, investments selection, personal service, importance of "advice", etc that are important to you.

Schrodinger's Ape said

I'm having trouble telling the difference between what Wealthsimple does and something like indexed e-series funds. The e-series seem to have a lower MER, and if I'm reading it right, it also looks like Wealthsimple does some portfolio manipulation to improve performance, which I don't like. I've got an appointment next week to open a mutual fund account with TD and then I'll convert it to e-series. We bank with TD so it should be a bit simpler.

I don't think WealthSimple is as inexpensive as their site suggests. It's clear what one pays them directly: $19/month = $228/year for $50,000 portfolio = 0.456% per year. It is not clear whether or not that is all one pays, including the MER of the ETF's one would be invested in.

I suspect not. One of the funds on their menu is the Vident International Equity Fund. That fund has a MER of 0.68%.

According to An Interview With Wealthsimple: Part 1, there doesn't seem to be any financial planning. They ascertain the investor's risk profile and calculate an appropriate asset mix. Money is invested in ETF's to match the asset mix and rebalanced to that asset mix.

As for rebalancing, one does not need to spend the trading commissions to keep the asset mix within 0.1% of target. The results won't be materially different there is some drift. Just direct new money into investments that become underweighted.

I agree with all the criticisms regarding financial planners etc. The one we visited was useless and told us we were going to face disaster upon retirement, which has not been the case at all and is exremely unlikely to happen now that all the stats are in. He just didn't agree with our way of doing things and didn't understand our assumptions and our lifestyle.

However, in my house, the two of us don't disagree on how we should deal with money issues, and nobody is going to spend more just because it's there. This is your red flag, from what I hear you saying. And that is the reason I suggest you need an outside voice. I was reluctant to suggest it earlier, but there are also people who are professional counsellors (more on the psych/socialwork side) who specialize in helping couples reconcile their attitudes towards money. I don't know any of them, and they may be even harder to find than an unbiased advisor, but I know they exist, and you are a good researcher.

If you really want to DIY, I can guarantee that you will end up with a ton of reading ahead of you, and you will never get it done if you want to keep up with physics too. It's obvious that you are bright, have done minimal reading so far, and enjoy the challenge. But, while learning can be fun, failed experiments with one's own money are much worse than scientific experiments that go wrong. +5% overnight is fun, but -20% is not, as you have found out.

I have been trying to educate myself for a while now. And I have the credentials to prove I'm not stupid. But I have to say that it's really much more difficult than one might imagine. This is not to say that most financial planners are any wiser. They're not. Just read the curriculum they follow at any number of community colleges to get their certification, and you will see why not - note that all of them, as far as I have seen, and I have researched it, include a mandatory course or two in "Sales". An awful lot of them seem lazy and commission-driven. I personally think that IG is one of the worst. I know it can be difficult when you're the smartest person in the room, but I still think you need someone to help you.

I read something recently - can't remember where any more - which was an interview with one of those rich entrepreneurs from Dragon's Den TV show, which you may not have had time to watch in recent years. He was asked basically for generic investing advice. His answer was that the markets were far too scary for anyone who is not a real pro, and that the best thing was to invest in a broad index fund and leave it there. He did say which market(s) it should follow, but I can't remember. It was one of the major ones. He refused to be drawn into the discussion any further. I found that interesting and it's not unlike what people like Buffett have said is best for us little guys.

I think this woman looks promising http://www.eurekainvestorguidance.ca/bio It sounds like she shares your independent spirit. She is the only fee-based independent planner in SK who is on the Moneysense list. I have never met her and know nothing about her other than what I have said, but she sounds right for you from what I can make out. She may not be convenient, but I'm sure you have wheels. You'd go to Saskatoon or Regina if you needed specialized medical care. This is not so different, and takes fewer visits.

Bill is probably right that you are going to be poor candidates for planning, and that you should just go your own way because that's all you're willing to do. But I think it will come back to bite you later precisely because the two of you don't have the same attitude to savings. Right now, based on what you have said, you don't seem to have a huge amount of liquid assets, but, over time, with your savings attitude and restrictions on what he can do, there will likely be significantly more money- especially if you land a good job. The more there is, the more it will be burning a hole in his pocket, and he will want to get his hands on it, and the more you will get into conflict.
Another eventuality which has explosive potential is if your plan loses money. If you invest in the stock market, be it ETFs or mutual funds or individual stocks, you will have some bad years. Your husband may look at those and start talking about the things he could have bought with the money you lost. Ouch!
These are the kinds of reasons you need to agree on what is to be done, and you are so far apart now that I think you need someone to help bring you together.
I hope he gets some sort of "allowance" - money he can spend as he wishes without having to answer to you. It's important that he have some independence and build up his financial muscles by making his own decisions.

We too told the financial planner that we didn't really have a plan or a goal other than to be OK financially. I find it fruitless to pick a number out of the air and say "this is how much I want to have in X years" because I think it's a trap. What we all really want is to have as much as we can without taking risk and without getting dinged for a lot of taxes, right? If your answer is on the low side, showing that you can get there without their advice, they often will still direct you into investments with risks you don't need to take, suggesting you can and should get better returns, and scoffing at your conservatism. These are the same people who can't find you a savings account that pays more than 1%.
And if your answer is on the high side, meaning that you want more than you are projected to have, then they jump in with all cylinders firing, telling you that in order to meet this goal you MUST take more risk, and then they go on to recommend things that are too risky. Pretty soon the "in order to meet your goals" part gets dropped, and they're off to the races with your money. They seem to enjoy instilling panic, making you feel weak, and then presenting the "solution"- which is always pretty much the same, no matter who you are. I can't recall when I've seen a financial makeover plan which did not recommend either 60:40 or 50:50 mix of equities and cash. Even the theory that the percentage in equities should match your age, which did put on some restraints, is little heard from these days. Even people in their 90s are expected to have money in equities according to these people, which contradicts what they said an hour ago about market horizons.

And if the solution doesn't work out so well for you, they have a variety of ready-made answers: "the markets will come back; they always do" (if you can wait that long, and not ALL markets have come back); "I only sell advice and can't guarantee the results" (but I take my commissions regardless); and "this is a great buying opportunity" (more commissions, rain or shine; not for the faint of heart). The answer is never, "I recommended investments that really weren't suitable for you."

The attitude of my spouse and myself was quite contrary. It was "this is what we have. We intend to continue to be very conservative with preserving, growing, and spending it. AND we intend to live on whatever it gives us." He didn't like this answer because it doesn't allow for what I call the "panic paradigm". See above. We expect to live within our means, not live on our dreams!

I have spent much of the last several years wrestling with this question of goals. I think the question does matter (but not in the way that a lot of the people in the industry think it does), and it's worth the effort to work it out. That's the hardest part in a way. Once you have that clear, the rest is more obvious.

In the meanwhile, you'll be entering the regular job market soon, I imagine. Try to get yourself a job with a good defined benefit pension plan with inflation protection at or close to 100% if you can. NOT a defined contribution plan, although that would be second best if you can't get the former. These still exist in some government jobs and maybe others. A good pension plan is your best hope if you don't want to plan. I believe CN also has good pension plans, or used to. I know someone who started very young there, retired in his 40s, is happy with his pension and is now in his late 60s, going strong. If you have good jobs and good pension plans, you don't have to do all this financial planning except for things like insurance and estate planning. If you are inclined to jump around from one job to another, DON'T take out your pension contributions when you leave (if this is an option for you). You'll thank me for this advice in about 25 or 30 years, at which point I'll be long gone! If you do this, you can probably depend on this income stream for your basic needs in retirement, along with CPP and whatever provincial plan may be in place where you live.

You're quite right that, with relatively small amounts in each pocket, it doesn't make sense to incur the big fees for setting up more sophisticated accounts. A selection of ETFs like those that TD offers will likely be the most economical route until you have at least over 100,000. I think, but am not sure, they won't charge you for rebalancing as long as you stay within the family. Make sure you don't buy funds that overlap, funds that are just amalgams of other funds, money market funds and unhedged foreign equity funds, for now at least. Personally, I would also avoid domestic or US bond funds right now; I would get GICs instead. Some GICs allow early redemption (with penalty), if that makes you or husband feel better.

You MUST do some planning to decide which kinds of investments are going to go into which pockets of your assets. There are various theories about which things are best to put where, and it mostly relates to tax consequences The amounts you appear to have are too small to reasonably put more than one type of investment in each pocket, IMO.. Wait til you have more money to do that.

Well, I have said more than you wanted to know. And Bill will probably tell me that I should have saved my breath - and he might be right. Perhaps someone else reading this will find it helpful.

regarding 1. Emergency funds, my preferred alternative is a line of credit, so you are not tying up money for an emergency that may never occur. But if you want a GIC for this purpose, Oaken has cashable GICs (two types - 1.75% and cashable will full daily interest after 30 days, or 1.85% after 90 days). Oaken is CDIC insured.

Or, in addition to either of these alternatives, build a ladder of GICs in a self directed RRSP. Make sure something matures every 2 or 3 months. That way, in a real pinch, you can withdraw what you need on maturity or reinvest in another 5 year GIC with whoever is offering the best rate. In my opinion, if you are going to hold GICs, your RRSP is the best place.