Weekend Reading: Grouse Grind Edition

My wife and I hiked up Grouse Mountain yesterday. It’s a gruelling three kilometre, 2,830 step, near vertical climb known as the Grouse Grind. At the quarter mark there’s a sign warning hikers that the trail gets even more narrow and steep from here, and if you can’t go on, this is the only point you can turn around and climb back down.

We reached the summit in just over an hour. Since hikers cannot climb back down Grouse Mountain, they must take the gondola to the bottom at a cost of $15 per person. That’s right, what many think is a free hike turns into a $15 money-grab where hikers literally have no choice but to pay their way back down the mountain.

This got me thinking about the current deferred sales charge debate. Certain members of the investment industry argue that deferred sales charges are necessary for advisors to service small or first-time investors. The advisor gets a large upfront commission that the investor does not have to pay out of pocket, however if the investor transfers or sells the fund within a certain time period (usually seven years), he or she pays a deferred sales charge upon redemption.

Through this model, companies such as Investors Group and Primerica can pay an army of sales people to recruit new clients to start investing with them. Investors, usually unbeknownst to them, get trapped into a deferred sales charge arrangement that is a bit like the Hotel California: They can check out anytime they like but they pay a tremendous price (up to 5.5 percent of their investment) to leave.

Deferred sales charges hurt investors. Period. And when investment fees are already sky high in Canada there should be no reason to add to the pain by imposing another punitive fee for investors to sell their funds.

That’s why I was sickened to see this tweet from Ontario finance minister Victor Fedeli cozying up to Advocis, a key lobbyist for the investment industry that is clinging their compensation model at the expense of Canadian investors.

Deferred sales charges hurt investors, plain and simple. A blog reader shared his statement: $240,000 invested in IG mutual funds. Hardly a small investor. Funds purchased between 4-5 years ago. DSC upon sale is $10,000! #hostage #shackles #predatory #loweringthebar #bantheDSC https://t.co/gKisFXqaDE

— Boomer and Echo (@BoomerandEcho) October 18, 2018

Furthermore, shame on the Financial Post for giving print space to the CEO of Primerica to praise the Ontario government’s overturning the ban on deferred sales charges (the tool Primerica uses to pay its army of salespeople). Pathetic. It’s time to end deferred sales charges and lower fees for all Canadian investors.

This Week’s Recap:

On Monday I wrote an investing guide for beginners who want to get serious about saving for retirement.

Over at the Toronto Star I wrote about the age-old financial dilemma: Save for retirement, or pay down the mortgage?

Many thanks to Rob Carrick for linking to this important post on being an executor in his latest Carrick on Money newsletter.

Weekend Reading:

Probably the best explanation of the Financial Independence Retire Early (FIRE) sub-culture you’ll ever read, by Vicki Robin, author of Your Money or Your Life.

On the flip side, here’s how to make the best of a bad job you can’t leave.

And John from ESI Money explains what FIRE people do when the market’s on fire.

Earlier this month 200 ‘Bogleheads’ came together in Pennsylvania to pay homage to their hero (Vanguard founder Jack Bogle) and share their advice about keeping investments simple and fees low.

Here’s Jack Bogle on what he thinks expected returns will be from stocks and bonds over the next decade:

One of the best ways to teach anyone about money is to tell stories. Here Jason Zweig shares a good one from the Great Depression about eating an apple down to the core.

Should you put all of your retirement savings into one low-fee balanced ETF? Dan Bortolotti has the answer.

This common retirement savings advice is sneakily wrecking people’s finances.

Ethical questions surround the investment portfolio of the Canadian Pension Plan Investment Board (CPPIB), which was found to hold investment stakes in guns, cigarettes, and prisons. I’ll have a post or two on ethical investing in the coming weeks.

A Wealth if Common Sense blogger Ben Carlson uses a basketball analogy to make a point about consistency and staying in the game (financially speaking):

“[Kobe] Bryant avoided taking charges to prolong his career to avoid wear and tear on his body. And it worked until injuries finally caught up with him at the tail end of his career. Bryant played for 20 years, finishing in the top 15 for most games played of any player in NBA history.”

Even the folks running pension plans think you’re not saving enough for your retirement.

Excellent research by Michael Kitces on how birth year shapes a generational experience in stock market investing.

If you bought a home two decades ago or longer you’ve likely seen a large run-up in prices…enough to believe you’ve earned a massive annual rate of return on that investment. Michael James compares his house purchase in 1993 with that of his stock portfolio and finds that stocks outperformed by a wide margin.

Dale Roberts explains how Canadian markets have fared this year and how to make that lack of growth seem insignificant in the long run.

What are normal stock market returns? Ben Felix explains in his latest episode of Common Sense Investing:

I’m fascinated by the Sears meltdown and here’s a good look into how one of America’s oldest retailers unraveled.

Finally, Paul Allen, the billionaire co-founder of Microsoft, passed away suddenly last week. With no spouse or children, his $26 billion estate may take years to unravel.

Have a great weekend, everyone!