If there’s anyone who knows how to beat the bank at its own game, it’s 35-year banking industry veteran turned investor advocate Larry Bates. His new book, Beat the Bank: The Canadian Guide to Simply Successful Investing, just hit the shelves and in it he reveals the winning formula to turn the tables on Bay Street and double your investment returns.

How? By learning investment basics, thinking long-term, and minimizing costs.

Larry first came to my attention when he introduced the T-REX Score, a calculator that tells you how much of your investment return you actually get to keep versus what gets lost to fees. It’s a shocking illustration of the damage fees can do to your long-term investment returns. Using his T-REX Score as the catalyst, Larry continued to sound the alarm over high mutual fund fees and conflicted investment advice. I liked him immediately.

Beat The Bank

I got early access to read Beat the Bank this summer and I was thrilled to provide an endorsement for this simple, practical guide to successful investing:

Beat the Bank: Larry Bates

Beat the Bank: Book Review

Larry’s extensive experience in investment banking, primarily with RBC Capital Markets, gives him keen insight into the Canadian financial system. He says that very few Canadians understand how much they are paying for investment products and services, or how much value they’re getting in return. That lack of knowledge serves Bay Street well and allows banks, brokers, insurers, and financial advisors to collect fat fees from your investments – fees that have barely budged over the years.

Why don’t Canadians take the time to find out what’s going on behind the scenes? Several reasons:

  • Unconditional trust in the advisor or institution (Bank loyalty)
  • Erroneously assuming there are no fees (“Our financial advisor is such a nice man. Every year he takes us out for a wonderful dinner. I wish we could pay him in some way.”)
  • Not knowing the right questions to ask
  • Fear of asking a ‘dumb’ question (Information asymmetry)
  • Not wanting to seem impolite (We’re Canadian, eh?)
  • Mistaken belief that the advisor or institution must act in the customer’s best interest (Instead we have the inferior ‘suitability’ standard)
  • Disinterest
  • “I just don’t have time”

What this ultimately means is that hard-working Canadians are losing up to half their wealth over time as fees quietly strip away their lifetime investment gains.

The Enlightened Banker

From his ivory tower on Bay Street, shielded from the plight of ordinary investors, Larry got a wake-up call from his sister who was nearing retirement and wondering why her mutual funds had gained so little over the last 20 years. Fees of 2.3 percent over two decades had eaten up 30-40 percent of his sister’s retirement nest egg.

Embarrassed and ashamed of his employer and the investment industry, Larry has become the ‘enlightened banker’ and staunch advocate for Canadian investors.

He wants investors to beat the bank – make Bay Street work for you rather than against you – by taking advantage of one of three methods of Simply Successful Investing:

  1. Do-it-yourself investing (blue chip stocks and high quality bonds)
  2. Assemble-it-yourself investing (Index mutual funds and ETFs)
  3. Robo-investing

Old Bay Street Tricks

One of the tips you’ll read in Beat the Bank is to avoid high-fee balanced mutual funds sold by the big banks – what Larry calls Old Bay Street packaging.

“Be aware of the powerful grip Old Bay Street has on you. Realize that Old Bay Street’s Pitch, Plan, Product, Prize strategy is a sales pitch, not objective advice.”

He also has a list of “No Thanks! Investments You Can Ignore”, including corporate bonds, preferred shares, mortgage investments, gold, and Bitcoin and other cryptocurrencies.

Wealth Builders and Wealth Killers

Larry writes about reducing the impact of ‘wealth killers’, or eliminating them altogether where possible. The number one wealth killer is fees, and you’ll want to identify and reduce them.

The number two wealth killer is tax, and so a savvy investor will need to understand how best to use their RRSP, TFSA, and non-registered accounts, as well as the ins-and-outs of capital gains tax, the dividend tax credit, and how interest is taxed.

Wealth killer number three is inflation. It diminishes your purchasing power over time. That’s why saving is not enough – you must invest your savings to beat inflation and protect your purchasing power.

Combat wealth killers with wealth builders: the amount you save and invest, the length of time your investments have to grow, and the rate of return at which your investments grow.

He ends with 10 rules or commandments to beat the bank and double your investment returns through simply successful investing:

  1. Learn investment basics
  2. Understand The Wealth Formula
  3. Know your T-REX Score
  4. Recognize how Bay Street operates
  5. Be a long-term business owner
  6. Know your risk tolerance
  7. Make a simple plan
  8. Invest like clockwork
  9. Ignore the market
  10. Enjoy life!

Final thoughts

Beat the Bank is an insightful look into fee machine known as the Canadian investment industry. It offers more than just platitudes against the industry, though, as author Larry Bates provides the playbook for investors to build and grow their wealth at any age and stage of their lives.

Read the book. Then start investing (or investing smarter). Your future self will thank you in retirement.

Time for a Giveaway!

Larry was kind enough to send me an extra copy of Beat the Bank to give away to one lucky Boomer & Echo reader. To enter, just leave a comment below and share your own experience with beating the bank, or when you became an ‘enlightened investor’.

The contest will be open until 5:00 p.m. EST on Friday September 14. I’ll announce the winner in the next edition of Weekend Reading. Good luck!

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