Weekend Reading: Value Of Financial Advice Edition

Weekend Reading: Value Of Financial Advice Edition

In 2012, personal finance commenter Preet Banerjee wrote a piece for the Globe & Mail debunking a widely quoted research paper on the value of financial advice.

The study, published by the CIRANO group, reported that “on average, participants retaining the service of a financial advisor for more than 15 years have about 173 percent more financial assets than non-advised respondents…”

Investment industry groups jumped all over this, proclaiming irrefutable scientific evidence that people are better off with a financial advisor.

But that causal link between having an advisor and having more assets is tenuous at best. Financial advisors target those who already have substantial assets and earning power.

Even the president of CIRANO, Professor Claude Montmarquette, who was one of the authors of the study, told Mr. Banerjee:

“We need a better study and a better paper before I would be comfortable with the way they are saying what they are saying.”

Years later, Mr. Banerjee appears to be doing precisely that. He’s gone back to school and is preparing to defend his thesis – a study on the value of financial advice. He’s in the final data collection phase and could use our help to complete a short survey (10-15 minutes). Respondents must be 18+ and reside in Canada.

Please take a moment and complete the survey here.

I applaud what Preet is doing here and look forward to the launch of his new financial advice platform called Money Gaps – a tool for advisors who believe real financial advice is about planning and not products.

Finally, here’s Preet in action on The Agenda with Steve Paikin discussing the reality of retiring on low income:

This Week’s Recap:

Just one post from me this week but it was a popular one that looked at three easy ways to build an investment portfolio on the cheap.

Weekend Reading:

One of the best writers in the business, Millionaire Teacher Andrew Hallam entertainingly explains why a sliding stock market is like a winnable baseball game.

Mr. Hallam then goes on to examine how Bitcoin fell further than the Dotcom crash.

Vanguard added two new asset allocation ETFs including VEQT – an all-equities version that might have me reconsidering my two-ETF solution.

Frugal Trader at Million Dollar Journey looks at how to modify your asset allocation as you age with all-in-one ETFs.

Continuing on the ETF theme, Canadian Couch Potato blogger Dan Bortolotti shares a great resource – a new rebalancing spreadsheet for ETFs.

Another terrific writer, Morgan Housel at Collaborative Fund explains why time horizon works:

“In the short run the market is a voting machine but in the long run it’s a weighing machine.”

Jonathan Chevreau gives three reasons why RRSPs still matter — and one of them you probably didn’t know.

Here’s Nick Magguilli on why even God couldn’t beat dollar cost averaging.

The Star Business Journal shared a piece on preparing your portfolio for a changing climate as risks and opportunities grow.

Michael James explains the right way to think about a CPP or OAS breakeven age. It’s unconventional to consider spending your own assets first while delaying government benefits until age 70, but that approach often gives retiree higher spending rates in retirement while also protecting against longevity risk.

Dan Bortolotti explains why GICs deserve a place in any fixed income portfolio.

The Globe & Mail published eight insights for investors and their financial advisors.

Finally, Rob Carrick says Millennials want help affording houses and proposes a solution for the federal government to consider.

Have a great weekend everyone!

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  1. Eva on February 9, 2019 at 12:17 pm

    Clicking on the take the survey here link only goes to Preet’s article, not the survey, unless I’m doing something wrong.

  2. Robb Engen on February 9, 2019 at 12:51 pm

    Sorry, I posted the incorrect link for the survey. It’s updated now and can be found here: http://advicesurvey.ca/

  3. Gert on February 9, 2019 at 12:52 pm

    I see the same, you’re doing nothing wrong. Likely a link is missing.

    • Gert on February 9, 2019 at 2:02 pm

      As I suspected, thanks Robb!
      It will be interesting to read the results if this survey when completed.

  4. dave on February 10, 2019 at 7:52 am

    The CIRANO study had a follow up study that specifically addressed the issue of how relationships were initiated. I suggest the writer have a look at it and include it’s findings in a more thorough article.

  5. DJ on February 10, 2019 at 12:12 pm

    More info please!

    What factors would you consider in deciding to move to the 1-ETF VEQT solution versus your current 2-ETF portfolio?

    • Robb Engen on February 10, 2019 at 8:44 pm

      Hi DJ, I need to do more research on VEQT. I’m not crazy about the 30% weighting to Canadian equities. What I might do is keep my RRSP in VXC and change my TFSA to VEQT, which will lower my overall weighting to Canada. I’m sure I’ll write about this soon!

  6. Dave on February 10, 2019 at 6:26 pm

    I think Rob Carricks idea is awful and he even explains why.

    He said for a 500k home with 100k down on a 25 vs 30 year amortization period – the 30 year pays 22% more total interest, but has a 10% lower monthly cost

    Not only that but there is a good chance that change would cause prices to go up

    So how is that good for millennials? It just lets you pay a little bit less now to pay way more in total

    The government needs to let prices actually fall, then millennials can buy homes they can actually afford

    • Robb Engen on February 10, 2019 at 8:46 pm

      Hi Dave, I agree with your last point but unfortunately this is election season and housing will be one of the hot button issues.

      • Robert on February 12, 2019 at 12:52 pm

        The problem with the government letting house prices fall is the fairly large segment of soon-to-retire Canadians whose house “is” their retirement plan – so what happens to them when they take a 10-15-20% drop? Like many things – it’s more complicated than it appears – and the answers aren’t as easy as we might think.

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