Monthly Archives: January 2017

Financial advisers are double dipping

Hanging out with my friends.

Not too long ago, a friend of mine showed me the statement coming from her financial adviser. It was from a company called R——- Wealth Management.

Immediately I noticed several things.

  1. All the investment were in actively managed mutual funds, with management fees between 2% to 3%. The main reason for these high fees is that mutual fund companies generally give a kick back to the advisor who sells the fund, these kick back is called the Trailer Fee. The fee is generally about 1% of asset. As long as the investor keeps his money in that fund, the advisor will get his kick back every year, even if never speaks to the client ever again.
  2. In addition to the selling funds which generates the greatest kick back for the advisory service, they charge and advisor fee, every month, to the client. This reminds me of the time I got a traffic ticket in which I was charged for the violation plus a service fee for giving me the ticket.
  3. Although my friend went to the advisor with her husband, both of them were sold exactly the same portfolio. The advisor didn’t see them as a couple, but as two different individuals to whom they could sell the same cookie cutter predetermined portfolio.

The example of my friends is not unique. There is hardly any financial institution in Canada who will offer index funds or ETFs. The main reason for this is that index funds and ETFs don’t offer kickbacks to advisors, so advisors have no incentive to offer them to their clients. None of the big banks in Canada will ever offer you index funds or ETFs, they will offer you their branded actively managed funds.

Considering that most actively managed mutual funds charge 2% to 3% fees, here are some ETF that you can use as comparison.

iShares S&P/TSX 60 Index ETF. This fund is composed of the 60 biggest Canadian companies. Their expense ratio is 0.18%. Wow, that is a long way from 2-3%

If you invest in the US. How about this one: The Vanguard Total Stock Market ETF with a expense ratio of 0.05%

The alternatives are numerous, but only by being aware of this abuse you can protect yourself. Stop contributing to your advisor’s retirement and contribute a little bit more to yours.

In life, generally you get what you pay for, but that rule does not apply to investments. In investments, you get to keep what you don’t pay for.

Coaching services

I am a money coach, don’t hesitate to write me if you want to talk about money or anything else that is going on in your life.

How to avoid buying new clothes

These are my old shoes. Even after this tear, I think I can use them for a few extra weeks.

I hate buying clothes

I hate spending money on clothes. I don’t know for certain, but I think that I spend about $200 every year. I only buy new clothes when my old ones are all worn down,  tearing apart, have holes or a big stain.

Why people buy new clothes

Generally, people buy clothes because they are bored, because of social pressure, because they want to showcase their wealth, or because they want to compensate for their insecurities.

My friend Elijah, getting the most out of his t-shirt. He is a great drummer so he has no one to impress with his clothes.

Succumbing to social pressure and lack of confidence

One of my ex-girlfriends used to work for a cosmetics company. All her coworkers were always wearing the latest fashion and she felt compelled to keep up with her peers. Every month or so, she would go out and buy something new. She succumbed to social pressure.

A friend of mine, a well-established businesswoman, would never go out of her house without having her nails painted. Is this a sign of confidence?

Mix messages: Spending vs. Frugality

My friend Cheryl. Once a t-shirt is too worn out  to use it in public, she uses it to clean around the house.

At our Toastmasters club, one of our ex-members did a speech about her shopping techniques, how to be fashionable on a budget. The ironic thing is that on the same day, I did a speech on how to be frugal and among many things, how to avoid being seduced by the advertisers and their latest promotions. Our message could not have been more opposite from each other.

Advertisers tell us we are not perfect

Advertisers will make us believe that our bodies are not perfect and that we are ordinary, but if we buy their products, we will become better looking, more confident, and different from everybody else. This is the message, “The rules are not made for you, be unique, buy my product.”

My friend Natalie has been wearing this sweater for 23 years.

Consumers believe these lies and they spend millions of dollars buying new clothes, facial creams, hair products,  etc. And they pay for services such as facials, hair stylist, manicures, etc. All to be unique, we all become unique when we buy the same stuff as everyone else.

Objects will never make us confident

At the end of the day, all the new clothes in the world, all the creams, hair products, etc., will never make you more confident. Instead, you will depend more on them to feel good about yourself.

On the other hand, a person who doesn’t succumb to the social pressures and to the seduction of the advertisers is a person who is, in fact, unique and confident.

If you are reading this blog from your laptop or your smart device, you probably have enough clothes, you don’t need to buy more. Our constant consumption may be good for the economy, but most likely is harming your personal finances, in addition, it’s killing the environment.

My friend Nadal. His jacket has a tear, but he has too much self confidence to let that bother him.

Instead of buying more clothes, I propose to spend your money on experiences, or saving for retirement, or just working less because you have less stuff to buy.

Coaching services

I am a money coach, don’t hesitate to write me if you want to talk about money or anything else that is going on in your life.

My friend Katie Leen. Here is a what she has to say: We do a lot of our own work because of our frugality. I cut all the kids hair, Sam’s hair and my own. Once every 5 years I go to a professional but I can’t see much difference.
I have learned to plaster, sand, paint, sew, bake, cook, and make things I want just because I can.
My friend Catherine likes to repair her old socks.

How to save money and time by cutting your own hair


Alain cutting his own hair
I save about $150 per year, plus the trip to the barber and the waiting time.

Autotonsorialist: (Noun) One who cuts their own hair.

I have been cutting my own hair for about two years now. This is how it all got started:

I used to love my barber. His shop is located only 5 minutes away from my apartment. I used to pass right in front of his shop and if there was no waiting line, I used to get in and get a haircut in a few minutes. His price is only $13. He’s fast, friendly and he has this ability to make anyone feel at ease.

My friend Raja has it easy, he probably can cut his hair with his eyed closed

But all good things come to an end. His shop started getting busier and busier. Now there is a waiting line just to get in and if I want to see him, I have to plan for 30 minutes of waiting time.

One day, out of frustration, I went to the hairdresser across the street. He took care of me immediately, but his haircut was $35 and in no way any better. I paid three times as much for nothing extra.

I went right from the hairdresser directly to the pharmacy store and I bought a hair cutting kit ($35). How hard could it be to cut one’s hair?  With a short clip, I cut the sides and the back and with a longer clip I cut the top.

I made my money back by the second haircut. The benefits were numerous. I save about $150 per year in haircuts. I also save the time. I don’t ever have to wait for service. I unbox my clippers and start cutting away. The whole thing takes me about 5 minutes to cut and 2 more minutes to clean. In addition, my hair always looks freshly cut and I have a sense of pride after doing each haircut.

Natalia cutting her own hair.
Natalie has been cutting her hair for 15 years now. Assuming a savings of $300 per year at 6% rate of return, she has saved $7,400

The only drawback is that I am limited to only one style. I don’t know any other cuts than short on the sides and long on the top.

I noticed that my friend Raja also cuts his own hair and I fell a sense of comradely with him. But also, at my new year’s party, while talking to a girl, she told me that she too cuts her own hair. I was intrigued and I asked my Facebook community. I found out that several of my female friends also cut their own hair. Here are pictures of Natalie and Annie.

If you are a woman, the savings can be significant. One of my female friends pays $50 for a haircut, if she gets 6 haircuts during the year, she is down $300. This money could be put to better use, either saving it or going to the restaurant with friends.

Have you ever heard of the Pink Tax? Many products or services are marked up when they are targeted to women. Haircuts is one example, but also razor blades, shampoos, conditioners, shaving cream, girls bikes, etc. have a bigger markup when marketed to women.

If you have never cut your own hair, I suggest you give it a try. If you screw it up, what’s the worst that could happen? It will always grow back. It won’t be the end of the world. On the other hand, if you succeed, you will save lots of time and money.

Annie cutting her own hair.
My friend Annie. You should see her in person, her hair is gorgeous.

If you are a woman, here is a video that can show you how to cut your own hair.  https://youtu.be/kgYVImOwYiI

If you want to share your experience cutting your own hair, please send my a message or share your experience in the comments.

Coaching services

I am a money coach, don’t hesitate to write me if you want to talk about money or anything else that is going on in your life.