It’s graduation season here in Canada, so we thought it would be good to focus this episode on parents with kids, those with nieces and nephews, as well as those that are students or fresh out of school. This week, we cover the topic of how to best set up young Canadians and young adults for success, when it comes to money. 

Sadly, if you’re my generation or older then you probably got zero education about money when you were in school or fresh out of school. Yet, those are the crucial years where you either establish good or bad money habits, and there are so many things that can lead a young person astray. 

Heck, knowing how to keep your investment fees low can literally save you hundreds of thousands of dollars over your investment lifetime, so why wouldn’t you want to know about these things as a student or upon graduation so that you can set yourself up for financial success?

To help me with this topic, I have Canadian author, Douglas Price on the show. Douglas has written the book “Seventeen to Millionaire” a personal finance book for teens and young adults, specifically here in Canada, aimed to help them become financially literate and establish that strong financial foundation to set them up for success.

Enjoy the interview. :)

Questions

1. To kick things off, can you tell us about your book and why you decided to write it?
   
   
2. Whether we’re a child, teenager or adult, learning to manage our cashflows is a critical skill that we have to employ our entire lives. What process do you recommend to ensure that we are managing our income and expenses appropriately and not overspending?
   
   
3. When someone is entering the world of investing in the markets for the first time (whether it’s someone that just turned 18, or an established adult that is now learning how to navigate the world of investing), where do you stand on using something like a robo advisor vs a single asset allocation ETF vs buying multiple individual ETFs vs other options (ex. mutual funds, using an advisor at a bank, etc.).
   
   • Follow up question: Do you have any advice on how to prevent overwhelm when teaching someone this for the first time?

4. Your book focuses on helping teenagers learn about money and how it works so that they can have that strong foundation for the rest of their lives, but what are your thoughts about how parents of younger children can best educate them and set them up for success when they are still in elementary school, or early high school?
   
   
5. When it comes to kids or teenagers learning about money, what have you found that they struggle with the most, where us parents or educators need to spend some extra time on?
   
   
6. What would you say are your top ‘best practices’ that us parents can do to ensure that our kids are set up for success when it comes to their financial lives?
   
   
7. The world is obviously a lot different now than it was when you and I were kids. Are there any areas that have changed a lot when it comes to money that us parents need to be cognizant of when trying to set our kids up with that strong foundation when it comes to financial literacy?
   
   
8. One of the things that I found impressive in your book, is that you hired high school students to test out your book to ensure that the lessons were communicated in a way that is engaging and digestible for them. Did you learn anything from those feedback sessions when it comes to how to best teach your kids or teenagers about anything, as a parent or educator?
   
   
9. I’d really like to thank you for clearly putting in a significant effort to help educate young Canadians when it comes to financial literacy. Can you tell us again where we can get your book and where we should go to learn more?

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:

1. 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?
   
   
2. 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?
   
   
3. 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?
   
   
4. 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?
   
   
5. 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:
   1. What ‘tracking error’ is?
   2. Why is it important?
   3. How can we check it ourselves?
      
      
6. Is some tracking error normal, and how do fees (MER) factor into the tracking error number that we see published?
   
   
7. 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)
   
   

8. 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”?

9. 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?

10. Also, I think it would be good for investors to know about what the difference and implications are of a capped index, vs an uncapped index. Can you explain these?

11. Usually, we see the Canadian index (S&P/TSX) being capped when it comes to ETFs like with your ETF, ZCN. What about core index ETFs for other countries like the US, and beyond. Are those typically capped as well?

12. Joe, in the past, you mentioned how indexes help us manage our own human behavioral biases and overcome market hurdles that can otherwise derail our investing success. Can you elaborate on this?

13. Thank you to both of you for coming on. Erin, can you tell us where we can learn more on your end, and perhaps let everyone know about the ETF Market Insights sessions that you run every week where listeners of the show can submit their questions and have them answered live.
    
    Joe, thank you very much for coming on as well. Can you tell us more about where we can learn more from you and your team, and where we can find the SPIVA reports and any other resources that Canadian investors may find helpful.

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:

1. 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.
   
   
2. 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:

1. 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?
   
   
2. 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?
   
   
3. 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?
   
   
4. 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?
   
   
5. 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?
   
   
6. 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:

1. Why is it important to have an estate plan here in Canada?
   
   
2. 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?
   
   
3. 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?
   
   
4. Are there any other fees or taxes that we should be aware of when thinking of inheritance and estate planning?
   
   
5. 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.
   
   
6. 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?
   
   
7. 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?
   
   
8. 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