Editors note: I’ve known Kim Linekin for several years and she’s one of my favourite people because, if nothing else, she brought me a cat. She’s also a single mom, a journalist, and she was literally a rock star in the 90’s, which was arguably the coolest time to be a rock star.
She’s also been reading this site for a while, and whenever we share a smokey bourbon, which we don’t do nearly enough, she has questions about investments. Not necessarily because that’s her favourite topic, but because financial freedom is more important today than it has ever been, and when a little guy is reliant on you for everything for the next 15 years, a good parent is devoted to making the best they can with what they’ve got.
When the market looked set to crash because of COVID-19, back in February, I made it clear I was out. All cash. Sitting this one out. Too much risk of a wealth-flattening event. And as the market did in fact crash hard, that looked smart. Soon enough, however, the US Fed began pumping trillions into equities and the market roared back.
I missed the drop, but I also missed the comeback, which I’m okay with because I protected what I had. We’ll call it square. Kim did likewise.
Which leaves us in a quandary today; put that money back into an artificially inflated market that may pop at any time, or play it cool for a while longer til the dust settles (hopefully) in November?
The usual play here is to ask a financial advisor. But can we really trust an advisor who makes their money selling us into mutual funds, and not from increasing our returns, that they’ll do us right? Can we trust an industry that is increasingly being replaced with an algorithm? Is the financial advisor about helping us make money, or helping us allocate it to the places that pay them the highest commissions with the lowest possible chance we’ll blame them if things go wrong?
Increasingly, investors will be content to earn a few percentage points less if it means feeling good about what they’re invested in. Green energy. Biotech. Tech. Companies that focus on social responsibility. Companies in the developing world.
But if you could make a quick triple on a gun stock.. should you? If you can make money in oil and gas, and then use your shareholder vote to make that company more environmentally responsible, should you? Can you get those big returns while also not being the kind of jerk ‘teenage you’ would have hated?
I asked Kim to help chronicle her journey to financial freedom so that others in the same place as she could use her experience to help walk their own path.
Step one: Actually asking questions.
I should’ve known my days were numbered with my current financial advisor when I, a leftie in my private life but sheepishly content to let her pick any evil stock that would grow my RRSP, finally asked last fall if she could begin pulling me out of oil and gas stocks. My advisor responded by spouting conspiracy theories about pipeline protestors being paid by shadowy forces in the US.
I persisted, urging her to move me towards energy companies that were at least trying to get into renewable energy, but she said there weren’t any in Canada.
You might be thinking I should’ve fired her right there (or maybe you think she’s right?), but I’m a single mom with no time to finish a thought, let alone rethink my entire financial life.
Plus she’d managed to get me portfolio returns averaging 9+% per year (minus her 1.5%). So I stuck it out.
Then the pandemic hit. I work in media – I saw which way the world was turning. So when I read Chris Parry’s article in March about pulling out of the market, I decided his advice resonated more than the ridiculously optimistic newsletters my advisor’s boss was sending out (wherein he blasted the media as “fear-mongering” – thanks, buddy, I’ll take that personally).
I made the big call. My advisor balked. Of course she did. If all advisors pulled their clients out of the stock market when it started to tank, the market would most assuredly tank. I told her I wanted out anyway. She asked, “but what if everything turns around in 30 days?” I decided to keep our chat brief lest I lost all respect for her opinions on things. Instead of proposing other options, she insisted I write an email saying I’m cashing out of the market against her advice. Her instinct was to cover her ass. I wrote that email, she sold everything, my money then sat for months while her fees kept being deducted and she went radio silent on me.
A few weeks ago, I realized it was time to cut my losses and look for a new advisor.
I’d heard of one a smart friend really liked, so I reached out to this woman and had a good phone chat. She’s a leftie in her private life, like me, which seems to correlate with being less sharky at investing. My friend warned me that was her only qualm with this woman – that she advised caution instead of going for high-risk stocks.
I asked her about that, and she reassured me she takes whatever risks the client wants. But her definition of taking risks and mine aren’t the same. She believes in sticking with the stock market no matter what. She was “understanding” of my (and two of her clients’) decision to pull out of the market when the pandemic started, but her opinion is that it’s best to stay in, and getting back in now is better than waiting. I doubt I’ll ever find an advisor who’ll agree I did the right thing. I’m not sure I did the right thing anymore. I just know my current advisor didn’t do a great job at talking me off the ledge, and this one was making more sense.
Her fees are also better than my current advisor’s. Instead of taking 1.5% per annum in perpetuity, she said she wouldn’t take anything while my money was in cash and I could consider a fee-per-transaction instead of a flat rate. It seemed like a good idea to move my money into her hands for now.
First, I did my laziest due diligence and put up a Facebook post asking for more recommendations. A few friends responded gushing about their own advisor, but mostly because that person helped them with retirement planning.
It was dawning on me that I didn’t need or want an “advisor.” I’ve done my financial planning already. I have an RRSP and I’m not making any new contributions to it, beyond home buyer’s plan repayments, until my kid gets a bit older and I can work more. I’m maxing out his RESP every year. It used to be mostly in Alphabet stock, because I have a relative who works for and believes in Google, and I considered it a fun way of investing in my relative. (It paid off – that RESP grew fast.) I’m chipping away at my mortgage when I can.
So what advice do I need? I just want someone who’ll put my money in stocks, monitor them, move them around and make them grow. That was worth 1.5% per year to me when the world was spinning normally on its axis.
But just as I was almost finished signing with my friend’s advisor, I got the deflating news that she wouldn’t be able to invest my son’s RESP in stocks. Only mutual funds. That’s a deal breaker for me – mutual funds have too high MERs to be worthwhile. (See? I know some things.) My friend guessed they have this rule so yokels won’t blow their kid’s education on a dumb stock hunch.
But still: mutual funds? No, thank you.
Back to the drawing board. I called a rich relative tonight. (Why didn’t I think of calling a rich person about money sooner?) It turns out he’s a leftie in his private life and in his investments. He likes ethical fund ETFs. He gave me the spiel about self-investing in index funds and ETFs, letting the stock market work its long-term magic instead of paying someone to pick and choose and probably never beat it. I’d heard about canadiancouchpotato.com from another friend who explained he was using the same strategy. It’s sounding more tempting now.
I also found out I may have free access to a financial advisor through another relative, just for intermittent check-ins on my holdings and strategy.
So that’s where I’m at. I’m thinking I’ll move my RRSP and RESP accounts into an online brokerage; QTrade looks good. And then I’ll get help parking it somewhere safe until the next market correction. (Market timing is a bitch, but I’m already cashed out so I just think I’d be an idiot to get back in when the bubble’s this big and obvious.)
Then I’ll consider ETFs. Or something. Maybe Alphabet stock again. Maybe I’ll end up an Equity.Guru disciple. Who knows?