Tuesday, September 18, 2007

About Mohican

Hi, mohican here.

Well I am feeling a little weary of this current real estate discussion and financial markets appear to be apathetic to the current risk climate so I thought I'd stray a little from the debate and the analysis to do a post about myself.

For starters, I'm married and I have been for a few years now. We have a young son who was born a few months ago and he has been a wonderful addition to the family with grandparents, uncles and aunts all taking time to enjoy his company. I never imagined how wonderful fatherhood could be and I am planning on cherishing every day. More children are planned.

My wife and I are very practical people who grew up in families of very modest means. My wife's father died in a tragic accident when she was young and finances and family life, although adequate, were never comfortable for her, her mother and siblings. This taught her about prudent financial management among other important lessons.

I also grew up in a family who made choices about lifestyle that meant financial and material sacrifice. I am the oldest of four children and the most meaningful sacrifice that my family made was enabling my mother to stay home for most of my and my younger siblings growing up years. This has had obvious benefits and I am appreciative of the sacrifice my parents made. This also taught me some valuable lessons about personal choice and freedom, namely that it is not necessary to conform to the typical pattern of North American life.

My wife and I are both commited Christians and have been for most of our lives, not without much distraction and wandering on my part. My beliefs play a large role in forming my views on family and finances as I believe God has a place for everything and it is our role to discover the ideal way and put what He has given us to the best possible use - this is a way of thinking called stewardship. This includes how I use my time, talents, belongings, and finances. I am not intending to be preachy here and I've never used this blog as an outlet for that but I believe this part of my life is so formative of my views that I must inform you of it.

I wandered a great deal on an interesting and challenging path of discovery as a teenager and young man. I have always been a hard worker and I was an avid saver during my teenage years. As I gained more freedom as a young man I did not control my spending and consumption habits and got myself into a great deal of debt. I realized that my pattern of consumption was going to end me up in self imposed slavery if I didn't do something drastic so I stopped spending money. I gradually, over a period of 5 years paid off all of my debts and actually started saving money and investing it into some very basic mutual funds at my bank.

Having come out of that experience I wanted to help other people realize that they do not need to be slaves to their finances and that they could take control of the situation by implementing 3 simple steps:
1) stop spending so much
2) pay off debt fast
3) start saving as much as possible

Pretty basic procedure I must admit. At this point the attraction of helping others with their finances was so great I decided to leave my very successful career in the telecommunications field and go into financial planning. This meant a meaningful pay cut and a career restart but I had to do what I felt was right. I do not regret my decision.

I have had two different positions with two different companies since making the decision to go into finance and the one I have now is immeasurably better than the first one. The first job I had was a fully commissioned role with a large insurance company. I did pretty well but I could not come to grips with the fact that I had to sell certain products to the exclusion of others in order to make a decent living.

After one year, I switched companies after a friend told me about an opportunity with one of the big five bank's brokerage division. The institution I work for now pays me a base salary and some small bonuses. The focus is on writing financial plans for my clients and ensuring they are on the right track. I enjoy this role immensely more and I appreciate not having the continual pressure to sell certain products or rely on a commission payout. After helping my clients with a financial plan I help them with their investments, which for the type of clients I have, mostly means mutual funds, bonds and GICs. I do not receive commissions based on what I sell.

I hope that wasn't terribly boring but I like knowing where people are coming from and I thought you might too. Cheers.

24 comments:

FUDGEBOYZ said...

Did you go back to school or did you have formal training in finance. I ask because I am an accounting student but I also have an interest in finance. I have read a lot about budgeting and am starting to learn how to spend and save. I used to be house poor but have sold recently and am attending University. Any advice on becoming a financial planner would be helpful.

Thanks,

mohican said...

I have a diploma in General Business Studies, an Advanced Diploma in Management Studies and a Bachelor of General Studies.

I also have taken several financial industry training courses including the Canadian Securities Course, Personal Financial Planning Course, Mutual Funds Licensing, Insurance Licensing and my Certified Financial Planner designation. Ongoing learning is important in the financial industry.

I am still considering becoming a Chartered Financial Analyst but I'm going to wait on that decision for a while.

stan said...

Mohican,

Really interesting to read about you after following your blog.

(good work on the blog by the way, v enjoyable though I rarely post, I read avidly)

Since you reveal yourself as a non commisioned financial planner, how about some impartial advice for us working stiffs on how to get some financial advice.

As one anonymous man to another, how would you recommend I go about getting some fairly impartial financial advice. I went to the TD bank today and the guy tried to sell me some pretty frightening MER funds. They have returned 89% in 10 years (very poor I felt) and all had negative returns for the last month (he has no real idea why this was when questioned).

How about a post from you detailing how to get good advice and what to whatch out for (ie when they are selling you stuff for the commission and when they are genuine (not easy to discern).

A lot of the bears reading here (and a lot of lurkers like me) have sizable chunks of cash that we have in GIC's etc and it could be better working for us.

I personally am in GIC's till the spring then I will see where to stuff it all.

Where do I get a christian with a concience as my Financial Advisor rather than the Capitalist used bond salesman I had today?

Great Post,

Stan

Aleks said...

"Having come out of that experience I wanted to help other people realize that they do not need to be slaves to their finances and that they could take control of the situation by implementing 3 simple steps:"

I'd actually simplify that to one step.

solipsist said...

Well I am feeling a little weary of this current real estate discussion and financial markets appear to be apathetic to the current risk climate so I thought I'd stray a little from the debate and the analysis to do a post about myself.

Great post mohican. I am especially in agreement with your first line regarding weariness with discussion.

Your post answered a lot of unasked questions, and stan asked some good questions that I also have had in mind. What to do beyond GIC's, etc. that doesn't involve risking the capital? If I was greedy and irrational, the answer would be day-trading gold and oil or such, but I am neither.

Right now my nut is at one of the big banks "high interest" savings acct. at a better rate (3.75%) than their one year cashable GIC. I know ING offers 4%, but I am leery, and just don't need the hassle. I don't like the idea of "bundled funds" either - for ethical reasons, as well as the more obvious ones around the whole sub-prime fiasco.

aleks - great link.

freako said...

Thanks for sharing those personal details. If everyone was like you, well we'd have no liquidity crises, and Opra's would have trouble filling her show. On that topic, has there been any major sob stories covered yet. We often mused about VHB's Oprah moment, which at one time seemed so far away. Strangely, Vancouver must have found the immunity idol. Best of luck, Mohican, for you and yours.

freako said...

I went to the TD bank today and the guy tried to sell me some pretty frightening MER funds.

Right bank, wrong fund. The TD e-funds have criminally low MER's. Last time I checked anyways. While you wait for financial guidance, I don't think that you can go wrong with low MER index for the "risky" portion of your portfolio.

FUDGEBOYZ said...

This maybe astupid question but what is MER

RentingSucks said...

Management Expense Ratio. Basically the amount a fund charges you to manage the fund and pay for trading.

This comes right out of your fund earnings and can be a big drag on your overall performance. The fund manager would have to beat the market by more than the typical 2 to 3 percent mutual funds charge to come ahead of an Index fund with a low MER.

This is typically hard to do. Some fund managers might have a lucky year and beat the street by a wide marging but eventually everybody gets hauled towards the mean stock market performance over time.

mightymouse said...

Slopist,
I locked in a lage chunk of my cash for one year yesterday @ 4.89% (GIC) with RBC Dominion securities. Just tell your banker that you want to get the same rate as GICDirect.ca is offering.

WoodenHorse said...

mohican and freako: What about some of the index based ETFs? Many of them have MERs less than .5%

mohican said...

On the topic of savings and investing conservatively, for those of you who don't know you can get a higher interest rate on GICs by opening an account with a brokerage firm - TD Waterhouse, RBC Dominion Securities, etc. The brokerage firms take a smaller spread on GICs than the banks do and you have more selection.

For example I have access to a 30 day GIC that pays 4.76% today.

On the topic of mutual funds, TD e-funds have extremely low fees and so do ETFs (ishares). All of the big banks have decent funds that are not part of their Fund fo Fund programs. These FoF programs typically have high fees and honestly don't add much to a portfolio. I would suggest when building a portfolio you discover what you risk tolerance and asset allocation should be (lets say its balanced at 40% fixed income, 60% equity) and then pick a good canadian dividend fund (25-30% of total) from your bank for your canadian content, then choose a global dividend or value fund (30-35% of total), then choose a decent bond fund, GIC or both for your fixed income portion.

Building a portfolio does not have to be complicated and you can get decent performance from the portfolio I mentioned above.

FUDGEBOYZ said...

My business professor says that I should be gatting a high rate of return on my investments. Somewhere close to 8%.
I have my money invested in term deposits at 4%. I have also found at 3.75% daily savings investment rate at vancity.
My question is where do I invest without taking a lot of risk to earn these knid of numbers?

freako said...

What about some of the index based ETFs? Many of them have MERs less than .5%

Yes, that is what I meant, the TD e-funds have MER's of 0.31% for domestic equity index funds.

freako said...

My business professor says that I should be gatting a high rate of return on my investments. Somewhere close to 8%.

It is not possible to achieve 8% without exposing yourself to risk. You would need to be 100% in equities in order to achieve that. If you are young that may not be a bad idea. But there are some caveats. Market timing is extremely tricky (and costly) business, but I don't think the situation will be rosy going forward, so you may want to claw that back.

In any case, unless there are cataclysmic events in the future, taking on the risks of equities and moderately leverage real estate would be very safe if you have a long time horizon.

FUDGEBOYZ said...

Thanks Freako

So is it better to stay the course at let's 4% and keep investing money monthly. I lost a lot of money in 2000. I was saving for a home and a friend of mine is a financial planner. He suggested I put all my money in mutual funds. He knew I was looking for short investment, less than a year. I lost around 15% of my investment. I found out later, from other friends that he makes a bigger commssion on certain funds then others. I have been gun shy ever since. I am not saying I was duped but I really don't know. My parents were in the same boat with him and invested 200,000, there are still waiting to break even and sell. How do yoy find a financial planner that is looking out for your interest an not his. this is the same scenario I have with Realtors. No offence Mohican I am not comparing you to my friend.

mohican said...

"How do yoy find a financial planner that is looking out for your interest an not his. this is the same scenario I have with Realtors. No offence Mohican I am not comparing you to my friend."

None taken. I agree that it is tremendously difficult to find someone suitable. I think this mostly has to do with how our industry is setup rather than the people involved. Bless their hearts, but most of my current and former co-workers fall into the category you are talking about.

For example, I would prefer that I be paid for writing a financial plan and a modest investment management fee that was transparent and negotiable rather than the convoluted MER / trailer fee system we currently work under. Until the industry sees a major customer backlash toward the current setup it won't change. Witness the dominance of Investors Group, largest fund company in the country, for how ignorant the large majority of clients are to the fees they pay. I constantly hear that it is all about the client relationship, this is true but does not give MF companies the right to charge criminal fees for doing some fairly simple investment management.

WoodenHorse said...

Yes, that is what I meant, the TD e-funds have MER's of 0.31% for domestic equity index funds.

Wow...that is LOWWWW.

Aleks said...

Losing money is a great motivator to get educated. As the old saying goes, nobody cares about your financial well-being as much as you.

As far as what to do with your money, right now I have less than $5000 in an ING savings account for short-term emergencies, a bunch in GICs (I made the mistake of putting $10,000 in an ING 1 year GIC at 4% back in January, before I knew about buying through a brokerage), and some longer-term money in mutual funds at Phillips Hager and North.

Until recently PHN didn't pay kickbacks to financial planners, instead choosing to keep their MER as low as possible. Consequently they were never recommended by financial planners and you pretty much had to buy them direct. They now offer a version of their funds through resellers which has a .5% higher MER, which is paid to the reseller.

freako said...

Until recently PHN didn't pay kickbacks to financial planners, instead choosing to keep their MER as low as possible. Consequently they were never recommended by financial planners and you pretty much had to buy them direct.

Unfortunately that is the way this racket works. I would think a financial planner would have an obligation to point clients in the direction that is optimal for them (the client), not the advisors wallet. I totally agree with Mohican. The convoluted way of remunerating financial planners leads to this. Of course, if people could choose between a planner who is "free" versus one who charges by the hour, he'd choose the "free" one and could end up paying triple the MER's as well as a front end fee.

When my son was born a few years ago, my wife started getting calls from a lady (who ever sold us to a mailinglis should b sued) who wanted to meet to set up an RESP. As you know maternal hormones do their thing, and my normally very financially astute wife was ready to meet this lady for lunch. I intercepted, did some research and found out that it was a pooled RESP with criminal front end commission fees. Commons sense tells me that people don't call cold an meet strangers over lunch without hefty commission fees to be gained. Junior is now hooked up with the e-funds. The funny things is that I probably know more about the nitty gritty of investments that this lady ever will, I just needed to read up on RESP's which took about an hour and change.

Clarke said...

"My parents were in the same boat with him and invested 200,000, there are still waiting to break even and sell."

I am utterly amazed at how routinely I read in the news about people signing over huge wads of cash (often life savings) to financial planners/advisor/broker or what have you, and losing it. Said planner, investor, , as their advisor is either a fraud artist, or just merely incompetent. While I might use an advisor for advice, I prefer to do my investing on my own. That way, if things blow up, I know who made the mistake.

I just cannot grasp showing up at somebody's office and writing a big cheque, saying "go on, make me money." Someone will likely make money, but it may not be who you think....

Livingsword said...

Long time lurker and very occasional commenter here, I very much appreciate your excellent blog and loved this article. It helps a lot to have a better understanding of “what makes you tick”. It matters what foundations, concepts, ideas and character are built upon.

Lenn-Louis said...

Hello! I was surfing online trying to find an affordable condo and I clicked on over here from condohype.com.

I really enjoy reading your blog knowing that I'm not the only one trying to avoid going crazy in this real estate market and feeling that the sky high prices are unsupported by any real value. I am currently in the telecommunications industry and am a new Christian and feel that I can identify with you in that strength to find the stewardship of life is from Above.

With that in mind I am currently reevaluating certain financial decisions that are causing me some sleepless nights. My current financial advisor/insurance salesperson sold me all the insurance policies under the sun, CI, DI, UL. and a leveraged investment/loan mutual fund. And they are all based on the same mutual fund. I was reluctant to do this since I thought "aren't all my eggs in one basket?"

I am thinking of going to term life policy instead of the Universal and am thinking about having a more diverse portfolio (is being invested fully one mutual fund for all these insurance products a good way to go? or is it more convenient /prosperous for my current advisor this way. (by the way I'm single and renting, do i need all that coverage?). I also use edjones to do some stuff for me, and vancity.. but anyhow, I could rant on and on... I used to be able to save 10-20% in a savings account biweekly @3.5%-4% and put 18% annually into my rrsps and now i feel like i'm living paycheck to paycheck...and i wanted to stop renting and buy a place...*yikes!

I look forward to more of your blog for financial sanity and personal planning =)

Livingsword said...

Hi M;

I have “tagged you”, I know you are not often into these kinds of things but I think you could have fun looking at it from your perspective.

Here is the link to the article with the tag:

http://lifeontheblade.blogspot.com/2007/10/art-of-blogging-lifestyle-and-god.html