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Josh Sheluk: Alright. So thanks everyone for joining us today. My name is Josh, and I have the very onerous responsibility of introducing everybody from our team that’s here. And I actually I almost never bring notes up to the front anymore when I present,

Josh Sheluk: but today I brought notes because

Josh Sheluk: otherwise I’ll forget people from our team. So I’m gonna do my best to, introduce everyone from, our team around the room here. And I’ll just start at our front, front table here. We got Dan. And I thought rather than tell you where this person operates out of or what they do for our team, I’m gonna give you a little bit of interesting tidbits of information.

Josh Sheluk: Post. I know. Of course.

Josh Sheluk: So Dan Dan with his family jarred 1100 jars of tomato sauce, pasta sauce, pizza sauce. I don’t know what kind of tomato sauce that’s in. This guy’s a master of the sauce. Any sauce questions? The answer guy.

Colin White: Master’s master saucer.

Josh Sheluk: At the table just behind there, we have Catherine. Catherine is the brains behind this entire event today, our our lovely marketing person, and she likes to read in a closet.

Kathryn Toope: I regret telling you that story!

Josh Sheluk: Amanda is right next to Catherine there. And Amanda got back from Newfoundland about a week ago. So if she seems a little foggy, that’s why. They go pretty hard out there. Katrina is standing there.

Katrina is the lovely interior designer for our Aurora office amongst other things. So if you need any interior design tips, Katrina is your girl. Well done. Jack is at the, the table there. And, Jack has a party at his house every weekend, and his mother-in-law does all the cooking.

So if you’re looking for a party this weekend, make sure you get friends with Jack. What’s

Josh Sheluk: your address? We

Josh Sheluk: have, Steve at the table at the back there. Steve is the barbecue master. If you need any tips on what the right rub is for steak or how to cook it to the perfect temperature, I can say first hand that Steve is your guy.

Josh Sheluk: This is a cooking show.

Josh Sheluk: We just like food here, I guess. Klaudio is next to Steve there. He’s working on opening Verecan’s first Albanian office. I say that a bit tongue and cheek. Klaudio did spend 2 months in Albania this summer, but it was with family not necessarily to open the Verecan office.

We have Sonia at the back there. Sonia’s son is gonna be Spider Man for Halloween this year for the 2nd year in a row. So I’m sure she’s got some wonderfully cute pictures of, of him there as well. Corbin Corbin actually recently moved to my hometown. So I don’t live there anymore, but if you wanna know where Sharon is, because most people don’t know, Corbin will let you know.

Let me tell you. He he actually lives on what used to be a farm field later. And I think I hit everybody except for the the lovely folks at the front. Dylan, was the the guy, at the the front door letting everybody in. And Dylan is a die hard Blue Jays fan and proof that there are still die hard baseball fans

Josh Sheluk: under the age of 50.

Josh Sheluk: Devin here has a baby who’s actually younger than mine. So if you’re looking for cute baby pictures, just add Devin. And last but not least, Colin here, this that looks like Santa Claus, really leaning into it with the the red beard next to me. He actually is Santa Claus. And we will tell tell you more about that in a few minutes.

So that’s it for me. I’ll pass it off to these guys.

Josh Sheluk: Sure. Alright.

Devin Cattelan: Thanks, Josh. So, yeah, as Josh mentioned, I’m Devin Cattelan. I’m a portfolio manager here at Verecan Capital Management, and I’m really happy to be here today presenting in front of you on conflicts of interest. And we have a special guest coming in all the way from the province of Nova Scotia, Colin White. He’s our CEO and portfolio manager.

So we’re gonna be presenting here today together.

Colin White: That’s your next one.

Josh Sheluk: Yep. I clicked the first one here.

Devin Cattelan: Perfect. Okay. So we’re gonna go over we’re gonna start today by going over some good news. There’s a lot of negative news around all the time in the media, and we always like to start our presentations talking about some of the good things. So we’ll start there and dive into a market update shortly after before moving on to the reason why we’re all here today, which is conflicts of interest, and we’ll talk a lot about that.

And then we’re gonna save some time at the end for questions. So please save your questions until the end. We’re gonna get around to answering all of them. So I’m gonna start by addressing the elephant in the room, and I’m gonna apologize for Colin’s appearance here today. He’s been growing a beard over the past number of months for his role as Santa Claus in an animal toy drive that we do out west in BC.

If you see him I was gonna I if you see him walking around in a red outfit or in a red jumpsuit, it’s not because he’s lost his marbles. It’s because he’s gonna be playing Santa in a few months.

Colin White: Alright. Thanks, Devin. And, yeah, That slide was put in there because of questions like I had as soon as somebody walked into the room today going, what’s with the beard? Because my beard is not always this length, so I felt it important to put it in context for everybody. So thank you for letting me know the slide needed to be there.

Whenever we do these events, we always start off with a couple pieces of good news because nobody gets enough good news. So Catherine combs the Internet to find the best of the bestest news, and we share them at the start of every presentation to try to remind people there’s good things in the world. So we’re gonna start with dogs. Dogs are good things. This is a story of an 84 year old man who fell and was unable to get up or move.

His dog ran down to the nearest highway and stood in the middle of the road and just stood there and waited for traffic to stop. Police officer came along, stopped, went door to door in the immediate vicinity to find out whose dog it was. Couldn’t find the dog’s owner. Dog laid down in the middle of the road. The dog was really committed to this.

So finally went over to the dog who led the police officer to his fallen master, and the day was saved. In honor of this story, Vericam will be making a donation to the local SPCA in the local community, whatever the closest SPCA is, and we’re doing that all across Canada to celebrate the good kind acts of nice dogs by the name of Gitta. I’ve never heard that as a dog name before, but I’m sure it’s a good dog. The other one, we’re standing up for high school kids because high school kids get picked on a lot. So this is good news about high school kids.

There are good high school kids. This is a story about a small community in Virginia where a couple of seniors decided that the custodian deserved a new vehicle, and they began on their own trying to fundraise for it. It turned into a community event. And by the end of the year, they actually presented the custodian of school with his first automobile. And it was a big community effort that was headed by high school kids.

They’re not all evil. We’re standing up for them right here, right now. There’s good in the world. We’re all okay. So we’re gonna go a quick overview of the markets, and the smarter guy is gonna take over and talk about the current overview of the markets.

Devin Cattelan: K. Now on to the fun stuff, or at least the stuff that me and Josh think are fun and nobody else does. So who here likes to talk politics? K. I’m sorry because, you probably came here today thinking that we’re gonna dive down into an analysis of, you know, which president’s gonna win and what effect that’ll have on the stock market.

I’m gonna apologize because that’s not the conversation we’re gonna be having. It’s, it’s our view that politics really don’t matter when it comes to investing funds, within within the portfolio, at least in the medium to long term. It could be some short term volatility, but in the long term, it doesn’t matter. Who remembers what happened in 2016 at the stock market prior to when Trump got elected? I’ll give you a quick Josh does, of course.

Yeah. So I’m gonna direct all my questions to Josh from now on. So, prior to Trump coming into office, markets sold off. And what was the reason for that, at least what the media stated was the reason for that, was that there was, you know, potentially the fear of him getting elected and what that would have on the global economy and on the stock market. And what we saw is that he got elected, and the stock at mark went on to rally, went on to do very quite well.

Over his term, the stock market was up 70%, and over Biden’s term, the stock market was up 85%. So and if you look back to the early 19 100 and you look back at history in terms of how a Republican candidate did or president did versus a Democratic president or candidate, there’s not a lot of difference between whether one party gets into office for or the other. And, in fact, the stock market has done very well on average, whether it’s a Democratic candidate or a Republican candidate. So I’m gonna be the bare bad news. Politics doesn’t matter.

We’re not gonna have that debate discussion. Discussion. Across the pond, we saw, Brexit happen in in 2016 as well. And prior to Brexit, what happened? Markets sold off with the fear that Brexit would occur and what what the effect would be the cascading effects would be on the European the eurozone and, in the global economy.

And the Brexit vote passed. UK left the European Union, and we went on to see a pretty significant rally in the stock market since then. We’ve seen 80% increase in the UK market and over a 100% increase in the European markets. I think it’s good evidence that politics don’t really have a lasting effect on the markets. Another big buzzword we’ve been hearing over the past number of years is inflation.

There’s been a lot of talk about higher prices and, following COVID, but the trend has been trending downwards. We’ve been seeing prices coming down over the past couple years, especially in Canada. Coming down over the past couple years, especially in Canada. We’re now seeing headline inflation below 2% and core inflation over 2%. And actually we attended a, economist, lecture by an economist recently.

And in Canada, mortgage interest payments are included in the CPI number. And so mortgage interest payments are actually higher when interest payments are. And if you take that figure out, inflation core inflation is actually below 2%, below the Bank of Canada’s target. And so what the central banks have been doing is they’ve been cutting rates. They’ve been trying to be move from a less restrictive policy to a more accommodative policy to avoid the economy from slowing down too much.

So that’s a trend that we’ve been seeing. Inflation continues to trend downwards and central banks continue to cut rates to, to ease the economy a little bit. So what does this mean? Is it a good time to buy GICs? That’s a question that we’ve been getting over the last year or so because interest rates are higher and a lot more attractive than they have been the past number of years.

And what we’ve actually found is that if you look over the past number of decades, interest rates flow flows into interest, into GICs tend to peak when interest rates peak. So which makes sense. Interest rates go up. It makes GIC rates go up. It makes GICs a lot more attractive.

People tend to move their monies into GICs. And it tends to actually be a very poor time to invest in GICs. If you think about it, what happens when interest rates peak? They eventually start to come down. What happens when interest rates come down?

Well, it’s good for bonds. Bond prices go up. Equities tend to do fairly well because interest rates come down. Companies can borrow. They can reinvest in the in the business.

They their profits increase. So it tends to be fairly good for for equities as well. So what if you look over the past few decades, what you find is investing in a balanced portfolio when interest rates increase is actually does a lot better than investing in GICs when interest rate increase. So it goes to show that, GICs really are good for safety and stability, but not great for wealth accumulation. And and definitely, you don’t wanna get in the habit of trying to time between moving to GICs or a balanced portfolio because that’s very difficult to do.

Colin White: Thanks, Devin. Before we move on, does anybody wanna discuss the economy or the election? I sat between 2 old older than me people at Thanksgiving, and they desperately wanted to argue with me over politics. And I really disappointed them by telling them it didn’t matter and I showed them numbers and we sat quietly for an hour. They were very disappointed.

The alright. So we’re here to talk about conflicts of interest. So conflict of interest, when you look it up, can mean many things to different people in different circumstances. Parable to describe what we’re discussing here. If you are standing outside of a store

Josh Sheluk: and that store has a bunch of money in it

Colin White: and your situation will be made better by having that money, you have a conflict of interest. The storekeeper would like to keep their money and you would like to have their money. The first layer of protection is I’m a good person. I’m not gonna go in there and take somebody else’s money. That’s all I need.

I’m not going to do that. Beyond that, there are rules. There are laws. There are police officers. There are consequences.

So there are rules in place to keep me from doing that. Okay. Between those two things, our civilization can function. Most people are held back by the fact that they’re either good people or there’s enough of enough of a rule in place to keep them from doing it. So that is a basic conflict of interest.

What changes the equation is when you put a gun in my hand and I’ve got a sick kid at home. Now I’m willing to overcome the fact I’m normally a good person and I’m willing to overcome the fact that there’s rules in place to prevent me from doing something, so I’ll be more likely to do it. So that’s what we’re gonna discuss today. Who’s handing out the guns and who is threatening people’s families that are putting people in a bad situation? The financial service industry has rules.

Now the problem with Confederation in Canada is that it’s provincial. Each province has a set of securities rules that are largely the same, but there are some differences. In addition, you have the insurance industry, which is kind of regulators. So it’s a bit of a hodgepodge. You add to that that they’re they also have a responsibility to maintain capital markets.

It is important for civilization. It’s important for everybody that things function well. So they have to be beholden a little bit to industry to allow things to occur in an efficient manner. So they are kind of trying to do 2 things at the same time. Look after investors, but also have a system that’s efficient and effective, which contributes to everybody’s standard of living.

It’s a very difficult thing to get right, and it moves very quickly. Technology has changed everything. Companies have gotten smarter. So they have a tough job. It’s not a simple thing.

There are no simple answers to anything that we’re gonna discuss today. The motivation remains, and this is where I start telling stories from my past and being in different rooms. Greed is a thing. There was a very dark point in my life, and some of my friends here shared that time with me, where the Bank of Nova Scotia bought my ass. So I was a I was the property of the Bank of Nova Scotia.

And working with the overlords and the people that were in control of our channel, we would have conversations about, hey. Listen. We need to do this for the business or this is wrong. We can improve this. Every conversation went back to what’s in it for the shareholder.

That was the only question that mattered. The only time we could get any traction with them to do any change was if it improved the shareholder immediately because that’s where their compensation lied. That’s what was important to them. Right? So greed is a thing.

It exists in the industry, and it manifests itself in different ways. So the view from a 1000 feet. So if you take a look at the financial industry in Canada, one thing that I was a little surprised when I pointed out to people that caused the little light bulb to go on, you have manufacturers of product and you have distributors of product. Those are 2 different arms of the financial world. So you have companies that manufacture things, whether they’re investment products, insurance products, different kinds of products, then you have distribution.

Some companies do both. They manufacture and they distribute. Many companies are set up like that. The banks are set up like that. So there’s an inherent conflict in there because as a manufacturer and it you have a distribution arm, is that a salesperson or is that an adviser?

There’s kind of an inherent fight that goes on internally there. The other thing that you have in Canada is you have companies that are building themselves to sell. Their primary purpose is we wanna grow our assets under management, our business model is, and our pitch to advisors. We’re building this firm. We wanna get to a certain level, and then we’re gonna sell all of these assets off to somebody else, and we’re all gonna get paid.

Those two business models, those two ways of running things probably encompass well over 90% of the assets in Canada. 1 of those two things. And some of it’s not obvious because the the the companies that manufacture own distribution, most, if not all of the MGAs, all of the major MGAs, managing general agents, selling life insurance in Canada, are owned by an insurance company. Now that insurance company still maintains a shelf of all of the other insurance companies to make it look like it’s independent, but they are owned by one of the major insurance companies. You also have different companies beginning to launch their own manufacturing because there’s a lot of margin in there.

So the lines get fuzzy pretty quickly. But if you if you think about it, who’s manufacturing this product and who’s distributing it, you begin to understand some of that dynamic. The purchase of IA Private Wealth, when they purchased Hollis Wealth from Scotiabank, was specifically to get that distribution. They liked the idea of the distribution, and internally, they were saying how much of our product can be distributed through that channel. Now, again, I’ll say this a few times during the presentation.

There are great people doing great work everywhere. Many cases are doing it in spite of their environment, not because of it. The focus on the firm level is how do we get our product into this channel? It’s not necessarily how do we improve the channel because that’s not the goal that they’re striving for. So compensation models.

In the financial services industry, you have a combination of compensation models. You have people get paid a straight salary, salary postponus, a commission, a percentage of grid. There’s all kinds of different ways, and then there’s incentives on top of that. Most cases, the most people you talk to has something over and above their base salary that they’re being paid. They’re getting a commission on the product that they’re recommending.

So the conflict there comes. So my father-in-law was a bank manager for TD Bank. This is an example of where the conflict comes in. And he passed away last year. So my wife, who was named as one of his executors and power of attorney over her mom, came to me and said, what should we do?

Now this is an 85 year old woman who just lost her husband of 40 years and has no idea what comes next. She’s got a modest sum of money. And I told my wife, just take it all and put it in a daily interest account, and let’s let this sort out for a couple of weeks. She went into the bank branch. The manager came out who had worked with her father and said, you’re gonna go talk to Margaret.

She’s the best. Your dad was great. Margaret will help you do whatever Margaret tells you to do. They went in and sat down in front of Margaret and they said, my brother-in-law, my wife, said we just wanna put this in a daily interest account. The response was, no.

Mutual funds are on sale right now. Your interest rate on the TFSA is gonna be too low and I’m gonna have to charge you a fee, but I can get you a really good deal on a mutual fund right now. An hour and a half later, they gave up and went out because they couldn’t get her to do what they were asking her to do. So her compensation paid her if she placed a mutual fund. It did not pay her if she placed it in a high interest savings account.

That’s how it manifests itself. That’s the net effect that you see, and I can give you 500 examples. Is this one of your examples?

Josh Sheluk: Sure. I yeah. I can give an example.

Devin Cattelan: Oh, oh, yeah. Thank you.

Colin White: No. You don’t you don’t get the cleaner.

Devin Cattelan: It’s all yours.

Colin White: Sit down.

Devin Cattelan: Yeah. No. Just, on on that thought, got a so my wife and I have recently we purchased a place, and we’ve been doing some renovations on our house. And we have a baby as well, a couple months old. And so we’ve been sitting on a little bit of cash and anticipated for a lot of expenses that have come up over the past number of months.

And so I get a call one day from, Scotiabank advisor. And so I I take the call. And he introduces himself. I’m so and so from Scotiabank. And before even taking the time to get to know me, he jumped right into well, I noticed that you’re sitting on some cash in your account.

Do you have you thought about moving it into a GIC? Here are the rates. And so it was for me, being in the industry, we, noticed that it was a lot more of a sales approach. It was some it was didn’t take the time to get to know me. If he just took 3 minutes of his time to get to know my circumstance, get to know what the save what the savings were at or the cash was actually for, he would know that

Josh Sheluk: the GIC wasn’t a good investment at all. It was it would have locked in the

Devin Cattelan: funds, and I wouldn’t have the accessibility there. Of the other things is that you deal with job security. So they’ll they’ll say, they’ll they’ll say, they’ll they’ll

Colin White: One of the other things is that you deal with job security. So they’ll set a target for an employee, and if you don’t do a certain thing, you’re gonna lose your job. You have a single mother with 2 kids at home and tell her to sell 20 credit cards by Friday or she’s gonna lose her job, and then you’re surprised at what she does to sell those 20 credit cards, that’s on us, not on her. That’s giving somebody a gun and threatening her family. So a little bit of a deeper dive into some of the providers just to point out maybe where some of the invisible conflicts can can exist.

The banks are pretty straightforward. Now they do have a couple of names that they operate under. They are associated businesses, but, you know, you can largely tell. And again, they’re in the they’re in the business of both manufacturing and distributing product. But again, you have an Assante out there that’s owned by CI Financial.

So if you’re on the Assante channel, then you are going to be predisposed to putting things out there that are CI based, and CI really feeds into that. And behind the scenes, there are incentives that are put in place. Because again, we have lived that in our past with IA Private Wealth where there’s an inducement to do things internally. So again, different companies have different combinations. To run through a couple other examples for you, like an Edward Jones.

Edward Jones is a very well run sales organization, and this is where it goes into the weeds a little bit because in conversation, we were talking with an advisor there. Some people in this room would know what a trusted contact person is. Right? This is an important part of your account opening that we ask you for a name, for someone to talk to if we can’t get a hold of you or we’re we’re worried for your health. A trusted contact person is somebody we can talk to.

So we pick up the phone and we can call and say, how is so how is Susan doing? Alright. It’s something that’s very important to your account opening. Edward Jones approach was, hey. Let’s have a sales contest.

So they ran a contest 1 month to see who could get the most trusted contact people signed up, and set their Salesforce loose to go out and try to get as many of these put on as many accounts as they could. Now that doesn’t lead to having it done in the most fulsome way with a fulsome conversation, but, you know, that’s how they manage those kinds of issues. So it really the understanding how different companies function and what their purposes are and where the conflicts can be. There was another conflict that was in the paper, and I’m only reading what was in the Globe and Mail. There was a conflict with the Wellington Altus Group where Charlie Spiering, one of the major shareholders and CEO of the Wellington Altus Group, actually owned about 30% of an exchange traded fund or an ETF provider that had been shut down for some issues.

Came to light after the fact that Wellington Altus was the largest single company holder of that exchange traded fund because it had been promoted to the Wellington Altus Advisors through the Wellington Altus Channels, and Charlie had been up there promoting it. But it was not clear to anybody that he had this conflict. This is something that was written about in the Globe and Mail very recently. So you have a conflict when somebody is involved in both manufacturing and distribution and it’s not always visible, but that’s where some of the problems can occur. Incentives comprehending.

So we did a pod so for those who don’t know, we have a podcast called Barenaked Money, and we did a 2 parter on the worst financial advice we’d ever heard. Some stuff didn’t make it into the podcast. There was some stuff that was on the cutting room floor. One of them was a story from somebody on our team who joined us from another institution. And during COVID, they had a very, very important bank outreach.

They wanted to take banking back out to the people because people were afraid to come out to the bank, so they were trying to provide a service. So this junior who now works with us went with a senior person from the bank, and they went out to a company, did an on-site visit, and they were gonna sit down with every employee and ask every employee how they could help. Well, the solution was a tax free savings account. The senior person decided everybody here is getting a tax free savings account. Now listen, tax free savings accounts are great.

It’s one of the best types of accounts you can possibly open. And they successfully opened 18 or 20 tax free savings accounts in this setting. And they get back to the branch, all the numbers go up on the board, and he’s at top of the TFSA board, which is where he wanted to put himself. This was a company that was involved in digital artwork for video games, and 100% of the employees were US citizens who were in Canada on work visas, ineligible for TFSAs. Points out the senior guy and says, hey.

We gotta let them know we need to shut these down. He goes, nope. My name’s at the top of the board. Those accounts stay. Right?

So because the conflict was he had to hit a target. It wasn’t a monetary target. It was a target for product that drove the advice that was being given. So that’s how it can manifest itself. Do you have a question at all?

Hello? Yes? Oh, sorry. I apologize.

Kathryn Toope: That be illegal?

Josh Sheluk: No. It’s not illegal?

Colin White: Not even close to illegal. Because but again, opening an account in somebody’s name, like, that can’t be that that’s not a criminal offense.

Josh Sheluk: No. But

Colin White: It’s just bad advice. You know what? I’m with you. I could see a route where it probably should, but there’s a lot when you start digging that deep and start calling us things because then it’s what did the client say or not say? Was the client truthful to the adviser?

I mean, it it can get hairy in a little bit, but people should rely on their advice. They should rely on their advice. In that situation, it was misplaced. Listen. I won’t lie.

I screwed up and opened up a TFSA for somebody and forgot that for a minute. We fixed it. Like, oh, shit. My bad. We can’t have that.

Mistakes happen. Right?

Devin Cattelan: Yeah. So just an example of where maybe incentives don’t align or definitely don’t align. So, Dylan was actually speaking with an adviser earlier this week who told him that he keeps all of or he recommends one fund company to all of his clients so that the assets with that fund company are higher so that he can he can benefit from some of the perks. So, you know, because the the fund companies will sometimes give their top producers things like trips or or gifts. And, and so there’s an example of, of an advisor who wasn’t doing what is in his client’s best interests in terms of selecting the investments that were most suitable to to the clients.

Instead, he was using one fund company so that he could generate he could benefit from the perks.

Colin White: It’s something that and here’s actually a really great example because we talk about making things illegal. That sounds really bad. Right? But there was a movement a number of years ago where there was a problem, and the problem was that advisers were selling product they didn’t seem to understand. The regulators took notice.

They said this is a problem. If an advisor’s gonna place a product, they should be held to a standard, understand what they are selling to somebody. That’s a wonderful idea. We should get right on that. So they came up with a know your product rule.

This was a rule that was gonna make it so that if I put a product in your account, they could come in behind and say, prove to me you understand that product, and I’d have to demonstrate that I did. That’s a wonderful thing. Right? That’s an excuse for me to use 1 mutual fund company because I don’t know all the other ones. I know this product.

That’s how it got used. The banks were able to eliminate a lot of third party investments as options now because we have to know our product and we can’t possibly know all this product. So there’s a rule that was put in place to solve a really good problem, and it was aiming at the right thing. But the unintended consequence was it reduced choice, which has now become the problem in the industry. The other example I wanted to bring up here because it’s less obvious and and it’s harder to see, we had a prospect back in Halifax.

They sold their business for 2 and a half $1,000,000, very successful businessman. And he received a presentation to take 100% of the proceeds and buy an insurance policy with it. He wasn’t too convinced, so he went to another adviser to get a second opinion. Other adviser looked at it and said, that doesn’t seem to match your goals. I tell you what, I’ll put together something that’s a bit different.

A little bit of insurance, a bit of investments that I think lines up with your goals better. He said, that’s great. Show it to my accountant. The other advisor went to meet with the accountant. The accountant looked at it and said, yep.

I see what you’re doing there, but I don’t get paid if he does this. I get paid if he buys the insurance, so I’m gonna recommend that. That was his accountant. If an accountant is not involved in audit work or assurance work, they have much more latitude in what they are allowed to do when it comes to recommending things. They can even be licensed to sell product.

And that’s not always apparent. I know this sounds, and at this point, I’m getting depressed talking about it. So you’re probably getting depressed with me. This is designed to be educational and maybe have

Josh Sheluk: you look under the hood of

Colin White: a few things and trust a few less things in the world. This is just education trying to point out these are the things that are out there. These are real examples, real world things that are going on right now. I needed to make this happier, and I didn’t know how. I’m sorry.

It’s it’s gonna get worse. Alright. So products are designed to sell, not perform. If somebody says a product is successful, that means they gathered a lot of assets. And, you know, they’re constantly coming to market with new things.

When marijuana was big, there was a bunch of marijuana product that got launched. Bitcoin is really popular right now, so there’s Bitcoin product being launched. Those products are being launched because they can sell. The manufacturer can make money selling them. Advisors who walk into somebody’s house and go, how can I help?

I’d like to buy some Bitcoin. Here I have Bitcoin for you. Like, that that’s a pretty easy loop to close. I was quoted in a Yahoo Finance ad recently where they called me up and asked about the role of Bitcoin for millennial investors. How they should be using Bitcoin?

And I said, well, if you want someone to say no, yes, you can interview me. So they interviewed me and I said, no. It’s a stupid idea. Bitcoin is the largest Ponzi scheme ever run-in the history of the planet. And, you know, it’s it’s a Ponzi scheme that has legs and could keep going for a while, but it is a Ponzi scheme, and now it’s not an investment.

The advisor that came on after me because they asked for another opinion for somebody who was maybe a little less me, and the advisor said, well, you know, we we expect all of our clients to take 10% of their portfolio and explore. And if a client wanted to do Bitcoin, we would put that into their portfolio in a measure. Oh, interesting. You mean you close the sale. It’s easier to take advantage of somebody’s weakness than it is to fix it.

I have lost clients over saying no. I lost a few clients over saying no to marijuana. Right? People came to me when marijuana was big. They wanted to buy it, and I said, nope.

Not in your best interest. We’re not doing it. I lose clients. I’m not gonna have my sales target. I’m gonna lose my job.

Right? That’s that’s kind of the trade off. In the insurance world, when the insurance policies are put together, there’s something called a lapse assumption. The insurance companies, when they launch a product, assume right out of the gate what percentage of these policies are gonna lapse. And it influences their it influences how they price it, influence the profitability, influence how they design the product.

Because they like it if you pay premiums for a long period of time and then never collect the insurance. They like that. So the products are actually designed in that way in some respects. I’m more talking about the more complicated types of insurance. Now we’ve had cases where we’ve had clients come to us with old policies and we’re trying to help them, and we reach out to the insurance company and say, hey.

Listen. We need information on this policy and are are informed. You can’t talk to anybody. Here’s an email address, and we’ll respond in 6 to 8 weeks. We send an email asking a question, we get a non answer back in 6 to 8 weeks, and we’re no further ahead.

Because there’s no way to get it serviced. And this more affects the more complicated stuff. Been licensed in insurance since since 1992. Love insurance. It has a role in many people’s lives.

The more complicated stuff is not to be relied upon. It is too fragile for a whole bunch of reasons. And we’ve got Claudio, one of our tax people in the back of the room. And when you do really aggressive tax planning, the government changes tax rules, you gotta be able to move your strategy. And when you put an insurance in place, it’s very difficult to move that.

Those strategies are very, very fragile. Get in the way. Sales culture. Oh. So here here’s some real numbers for you, because we’ve hired these people.

We’ve talked to these people. We’re hiring more of these people. You sit down at the bank branch. You’re given 600 in couple of cases, these are the actual numbers, 600 clients to service, you have to run 20 meetings a week, you have to make 20 phone calls a week, you have to do all your own administration work, and your compensation is based on new assets you bring in. That’s your day.

And on Monday morning, if you had 19 meetings, you your manager is gonna call you on Monday morning and say, why did you have 19 meetings last week? What are you gonna do about it this week? Normally, it’s 5 more phone calls. Every meeting you’re you’re sure you have to come up with 5 more phone calls. So to say somebody in that situation has any opportunity to do planning work is is a little bit optimistic.

Now we’ve taken some people out of that role who are very, very good, and we’ve we’ve put them in a spot where they can take the time to do a few more things with a client. It’s dramatically different. But if your workday involves 20 meetings a week, all of your admin work, and you’re supposed to stay up to date on the latest product and the latest type of accounts, latest tax planning. Again, that’s just undoable. So you’re standing aside of that store, you have a gun, and your kids are in trouble.

That’s the situation you’re in. Oh, we got a question.

Kathryn Toope: Can we ask a question

Colin White: now? Oh, absolutely.

Kathryn Toope: I’m curious to know, why you’re

Colin White: so averse to marijuana and 50%. Those are terrible investments.

Josh Sheluk: I get it,

Kathryn Toope: but, like, you’re keeping more

Colin White: Okay. So when I did the roadshow across Canada when marijuana was becoming a thing, I took a look at every provider in Canada. And Alfreo was the number one provider at the time. On their investor relations page, they were boasting, we are the 1st company to have back to back quarters with positive cash

Josh Sheluk: flow.

Colin White: Mhmm. Hadn’t made a nickel. Nobody had made a nickel. An investment is something that makes money. If it’s not making money, it’s speculation.

Kathryn Toope: Do you think a lot of that will have to do with regulations? And if

Josh Sheluk: it does, the politics are available?

Colin White: I don’t care.

Josh Sheluk: If I

Colin White: if I’m investing money, it has to be making money. I don’t know why it’s not making money. If they can solve why it’s not making money on

Kathryn Toope: a different you’re just looking at it from a different angle then.

Josh Sheluk: Oh, I’m

Colin White: not anti marijuana. I’m anti investing in marijuana. Because as a portfolio manager with a fiduciary responsibility to make you money, it’s terrible. I invest in things. I recommend we invest in things that make money, not the promise of making money.

Right? And marijuana never became mature. It never got to the point where it was actually a profitable business. In order to be a good investment, I need 2 things. I need a profitable business and I need a good entry point.

If everybody’s talking about it, it’s gonna be overpriced as a rule. And if the underlying business isn’t making any money, that’s a terrible investment. And you’ve picked one I was so god awful right on. You can watch how much money has disappeared in that space. And Bitcoin, again, it’s a Ponzi scheme because, again, it doesn’t create value.

It’s supposed to be a store of wealth, but that is really dependent on everybody believing in it. And right now, it’s where all of the biggest frauds are occurring. Everybody’s going to jail. It’s not an investment. It’s not a replacement for anything, in our opinion.

So you come to me, no. I’m gonna make fun of Bitcoin. And if we can’t be friends, we can’t be friends.

Josh Sheluk: Like Elon Musk and Bitcoin?

Kathryn Toope: I mean, it’s already first big points yesterday, so it’s not like No. No.

Colin White: And that and that’s fine. Listen. I’m interested in talking to people

Kathryn Toope: who are completely against it because he grounded. So

Colin White: Yep. I’ll listen. And you you you can reach out to me. I will tell you the same thing in any forum you want me to tell you in front of any room because if we can’t be friends, I can’t we can’t be friends. We don’t need to get along.

There we go. So I’m sorry. We’re gonna ask an Elon Musk question.

Josh Sheluk: Go. He still believes it.

Colin White: Oh, of course he does. He’s got so much money.

Josh Sheluk: Is he a fraud?

Colin White: What’s that?

Josh Sheluk: Is he a fraud then?

Colin White: Oh, that’s a bigger is Elon Musk a fraud? That’s a bigger question. Josh, you wanna take this one? Come on. You know you want to.

No? You’re playing Josh’s music.

Josh Sheluk: Elon Musk also wants to

Josh Sheluk: put people on Mars in the next couple days. So

Josh Sheluk: he’s also a guy that he can’t really trust everything that he says. He’s built tremendous businesses. He’s made a tremendous amount of wealth for himself, but it doesn’t mean that everything he does is right and that we should believe everything that he says. He’s also a guy that was promoting a social media platform called Signal

Josh Sheluk: a couple years ago. Have you ever heard of Signal? No. No.

Josh Sheluk: No. No. But when he when he posted something on Twitter at the time about Signal, the stock price rocketed it up. And then it crashed back in because nobody used it. He’s also a guy that bought Twitter, which was maybe one of the most dumb financial decisions anybody’s ever made on a whim.

I think he got drunk one night and posted something on Twitter that he was gonna buy Twitter. And sure enough, there he is having basically burned 1,000,000,000, 10,000,000,000 of his own dollars. So, fortunately, he’s got $300,000,000,000. If he burns a couple billion, it’s not a big deal.

Josh Sheluk: But you got to admit he is a genius. Right? Like, he’s able to, you know, put the rocket down, you know, exactly

Colin White: as a buck. He wasn’t flying the rocket. Like, he wasn’t in it.

Josh Sheluk: I I believe there there are probably some aspect of brilliance to him. How he’s built he’s built some amazing businesses from basically nothing. So there are some aspects of brilliance to him, but that doesn’t mean you should do everything that he tells you to do. I

Josh Sheluk: love that.

Colin White: Now he flew the rocket. Okay. Now I’m impressed. But it no. Josh Josh is right.

He made me he makes a very good point. There are people who he’s brilliant because you and I are sitting here talking about him. That’s his best accomplishment. He has everybody talking about him. Right?

That he’s made himself relevant. He’s not talking about me. I might be right, but he’s not talking about me. Right? So he wins.

Like, I couldn’t let you off the hook, Josh. You didn’t even mention Tesla. Anyway, sorry. Did you have

Devin Cattelan: Oh, I was just maybe just one point. One point on the marijuana stock. So there is over 23100 automotive companies in North America in the turn of century, and now there’s really 3 north, automotive companies in in, North America. So just because you’re first out of the gate doesn’t mean you’re necessarily gonna be a successful business long term, and we we invest in successful businesses.

Colin White: And as long as Josh is our CIO, I don’t think we’re allowed to invest in Tesla. I think it’s it’s actually in the constitution somewhere. That’s not true.

Josh Sheluk: I have I have an open mind.

Colin White: Mind. Alright. So everybody’s going, well, I can’t go and get financial advice. I’ll do it myself. Nope.

Nope. We we got you there too. So the do it yourself world is, hey, you’re gonna watch a 30 minute video on foreign exchange trading. We’re gonna set up an account for you, and you’re gonna be a millionaire. Nope.

You’re not. Absolutely not. You there’s no. There’s 1,000,000,000,000 of dollars flowing all over the planet chasing foreign exchange. Supercomputers, geniuses are out there.

And somebody’s gonna try to convince you that in your weekend, you could read the Globe and Mail, sit down and trade foreign exchange and make money at it reliably. Just know. You’re the product. They are selling you the dream, and they want you to participate in it. And they’re trying to make it look fancy.

Robinhood is another good example. So you have all these trading platforms now where they have zero cost trading. So you can sign up for an account, buy whatever stock crosses your mind, and there’s no cost to it. Alright? Alright?

So this is a bit of a convoluted story, so put your hand up if I lose you. So Robinhood was one of the first in a big way to come to market with the idea of, hey. There’s no commission here. And they attracted a great following. Now the way they do that behind the scenes is they sell their order flow.

They take all the orders of people who buy and sell stocks on their platform, and they sell it to a hedge fund. That hedge fund basically skims off all of those orders. They don’t use the word skim because that’s illegal, but they have a system where they place those orders in such a way that it’s profitable to them. Okay? So the client of Robinhood is that hedge fund, not the people trading on the platform.

Now let’s take a pin in that story. Let’s go over this story. GameStop. Everybody remember GameStop, or is that already gone from everybody’s head? GameStop was the corner store where you used to go buy your video games.

And big, mean Wall Street was pushing it out of business by shorting the stock, and they were gonna put them out of business. Well, the geeks got together and said, no, you won’t. And they started trying to drive the stock price up in order to punish Wall Street. We’re not gonna let you take away our childhood. We’re not gonna let you take this away from us.

So this fight broke out. And, goddamn it, the kids won. Like, they actually busted a bunch of the trades that were put on that stock, but Wall Street wasn’t happy about it. All of a sudden, when you’re on Robinhood, you were having trouble buying shares of GameStop. They had a system outage.

They had a problem with the volume. They had this. They had that. Well, the same hedge fund that was buying the order flow was the same hedge fund that was actually trying to short the stock. All of a sudden, that platform didn’t work for the intended purpose of the people.

So again, if you didn’t pay to be there, you’re the product. And there’s a you don’t understand the conflict that’s behind it, or the problems you can get into. There’s a a reaction of people that if I don’t trust anybody, I’ll do it myself and I’ll be fine. And there’s a whole industry that says, yes, you can. Let you do it yourself.

But it’s not necessarily any safer. It doesn’t necessarily have any fewer conflicts in it. Oh, titles. This is fun. You can call yourself pretty much anything.

I know of people who walk around with cards in their in their vest saying, hey, I’m an estate planner. I’m a divorce specialist. I’m, you know, alternative investment specialist. None of those are controlled titles. Accountant is not even a controlled title.

In Ontario, God love you, you did get it right. Financial planner is now a controlled title, so we’re making some progress. But there’s a lot of things out there that don’t make any sense when it comes to titles. When I joined a firm, I took a look and people were calling themselves a senior investment adviser. And I said, oh, what what does it take to be senior?

Thinking it was number of years experience or a credential, $50,000,000. What? If you have $50,000,000 under management, we will call you senior. Oh, that’s nice. So when you see senior on somebody’s card, that doesn’t mean anything other than they maybe were good salesman.

For those with a memory that goes back far enough, it used to be vice president was a title given out by the bank. So if you worked for a bank brokerage, you could become a vice president with no responsibility other than selling. That vice president title was based on assets. Now the regulators, God love them. There was a rule against it now.

They caught that one. Oh, no. Come on. You can’t call yourself a vice president and just sell mutual funds. Okay.

Okay. You got us. So vice president is one of the controlled titles now. And if somebody does not have corporate responsibility, they cannot use it. Senior investors, etcetera.

So this brings up something that I wanted to to to bring up because see these two titles and the difference between how they’re used because a portfolio manager in our world is a controlled title. In order to call yourself a portfolio manager, there are steps that have to be taken. So to be an investment adviser, you can go off in 2 to 3 months, do a couple of courses, apply for your license, sit in an office, and begin to give investment advice. The standard you’re held to is a suitability standard. So if I recommend an investment to you, it has to be suitable.

Right? Josh, can we use the exam you want I wanna use your example. Can I use your example that you’re gonna use tomorrow? Which which one? The 85 or the 95 year old guy?

Josh Sheluk: Yeah. Of course.

Colin White: So suitable means if I sit here with Dan and Dan is he’s allowed to be 5% high risk. Okay? And only 5% of his account is high risk, I’ve done my job. Now that high risk could be wackadoodle crazy. Does it could be Bitcoin.

It could be anything. Right? Sorry. I I know our relationship is in a bad spot. I get it.

But that’s a suitable investment. Okay? As a portfolio manager, it’s a fiduciary responsibility. Is it in the best interest of the client? That’s where that falls down.

And I’m gonna butcher the telling of this because this is such a great story. We had such a laugh over it the other night, but we had a Josh had a client come in to the office settling their father’s estate,

Josh Sheluk: I believe. You tell it.

Colin White: I want you to tell it. Yeah. I was gonna keep butchering it until you did.

Josh Sheluk: So, client of ours, his father-in-law passed away, and he called me. And I knew he had passed away because we’ve met him about a month ago. And so he called me last week and said, my father-in-law has passed away. We’re We’re trying to get money at the credit union settled as part of the estate settlement, but they wrote us back this letter and I don’t understand it. So apparently, the father-in-law who was 93 when he passed away, he had purchased preferred shares of the credit union.

And if you don’t know how a credit union works, basically the customers of the credit union actually own the business. So credit unions sell their preferred shares to their customers, and that means you own a little bit of a, a share of this business. And he said, what I don’t understand is is this. They said they wrote the letter back to me and said, yes. We do have a clause that allows us to redeem these preferred shares when somebody passes away, but it’s at the approval of the board directors.

So in this case, we don’t have your $150,000 to send back to you. We’re just going to hold it until the 4 year, redemption freeze is is off that percent of preferred shares. So this guy at the time was 91 when he bought these preferred shares that were potentially locked up for 4 years. And the client said to me, why would his advisor recommend this? And I said, oh, an adviser recommended

Josh Sheluk: this.

Josh Sheluk: I suspect that that adviser was either compensated or incentivized to sell the preferred shares of this business, which by the way were shit investments to begin with, and never should have even positioned us to somebody who was 90

Colin White: 1. So you have a guy that shouldn’t be buying green bananas, locking him up in a 4 year investment. At 91 years of age, you don’t have that much road ahead of you. Locking anything up for 4 years doesn’t make a sense.

Josh Sheluk: So they had to wait for 4 years? Yeah.

Josh Sheluk: Well, to be determined?

Colin White: To be determined, we’re working with it.

Josh Sheluk: Yeah.

Colin White: But it’s it’s a complication. You’re right. Sometimes you can get those things undone, but it’s at an effort that sometimes is successful, sometimes is not.

Josh Sheluk: They might give the money back early and forego the $6,000 of interest that they owe them.

Colin White: Oh, yeah. Sorry. They’ll end up winning. There you go. My mic froze back on

Josh Sheluk: now.

Colin White: So that interrupted my story of investment advisor versus portfolio manager. To be an associate portfolio manager, that’s 4 to 5 courses depending on how you do it and a minimum of 2 years of relevant industry experience. You wanna be a full portfolio manager, That’s 4 years plus those courses. So in order to be a portfolio manager, the barrier to entry is much higher. I haven’t seen figures recently, but something less than 10% of Canadian investment advisers get to that level.

It’s extra work to get there. But if you’re talking to somebody who is a portfolio manager, there is a significant difference for what it took for them to get there to get to that point.

Kathryn Toope: Is there any other differences other than education of different responsibilities? I always thought the portfolio manager is a person that took different things and put them

Josh Sheluk: together to

Kathryn Toope: make some kind of,

Colin White: So it allows you to do discretionary money management, which means I sit down and I build a profile about you. We understand your goals and then I just go away and I move the investments around in alignment with what you’ve asked me to do. So it’s a discretionary money manager. Right? And that’s for part of people’s wells that we would do that kind of thing.

As an investment adviser, every time I wanna make a change, I have to call to you, explain to you what an inverted yield curve means and why the the the election that just happened in Japan matters and ask for your permission to make a change. You don’t care about any of that stuff and I need to manage your money, so it’s more difficult to do it that way. So yes, we do have discretionary responsibilities and again, we’re held to a fiduciary standard. Is it in the client’s best interest? And Bitcoin is never in the client’s best interest.

I’m sorry. I can’t I can’t I can’t stop. Really. I’m sorry. I hope you packed a lunch.

Any more questions on this before I move on? Crackdowns. So you guys probably saw in the news recently where TD paid the largest fine in the history of fines. I think it exceeds even the biggest fine outside of any industry. That’s north of $3,000,000,000 that they got caught.

They plead guilty to a felony offense of money laundering. Like, we’re not talking allegations. We’re talking they plead guilty. They got caught completely money laundering for the cartels in the US. And the court transcripts are out, you can read them.

What this does is shine a light into corporate governance, and you need to be careful about corporate governance. Because some of the largest, the most prestigious organizations can still fall prey to the same kinds of conflicts. I’m not saying that they’re all bad or you shouldn’t trust any of them, but you should not trust them without question. There should always be a question because these things do happen at a very high level. They have been not only fined over $3,000,000,000 in total, they have been restricted by the US the SEC in the US and not allowed to grow.

They’re not allowed to grow their assets until they are told otherwise. Like, it’s not even a time period. Did they announce the time period, Josh? I didn’t see a time period. Yeah.

Basically, you guys can’t grow until we decide we’re not angry with you anymore. So the whole

Josh Sheluk: business has been completely curtailed. They also wrote

Colin White: a fine for $70,000,000 because for a completely curtailed. They also wrote a fine for $70,000,000 because for about a 5 year period,

Josh Sheluk: they were allowing people with do it yourself accounts to buy

Colin White: mutual funds that paid a trailer fee for advice in an account they weren’t allowed to give advice on. Alright. So that’s the first of the the class action lawsuits to be settled. That was a $70,000,000 check. Alright?

But that was something that was happening in the industry. And I was watching it going, come on, guys. Is anybody watching? They watched. Eventually, they got around to it.

And 10 years later, they they lost a court case. And I guarantee you they made more than $70,000,000 off of it. The other one that they had to write a check for was the, allowing their staff to communicate via WhatsApp and some other technologies that just are not allowed. And, again, all of these represent very significant flaws in governance and execution. So that’s some of the stuff that has happened.

Does anybody have any questions about anything else they’ve heard recently regarding lawsuits or what’s going on? Did you have any? Well, keep going. Alright. So VeriCann is oh, Bitcoin lady.

Yes? 0. They’re too greedy. Like, there’s still money there. They’re they’re the 10th largest.

Last I saw the 10th largest institution in the US, so they are very significant. It’s the issue in the US is that they weren’t as profitable as Canada before, and now with these restrictions, they’re gonna be even less profitable. So they’re gonna be looking for ways around that or ways to change that. And what that’s gonna manifest itself in, I’m not sure.

Kathryn Toope: Oh, so it doesn’t impact

Colin White: Canadian operations? Well, the Canadian operations have to pay. That’s all common shareholder. Right. So it’s it’s affecting the operations and that they no longer have that 3,000,000,000 in capital.

So that’s an effect. Mhmm. You know, make sure you pay all your all your account fees on time.

Josh Sheluk: Can any of the other banks get mailed in that?

Colin White: Yes. There it is not but not to the same level. You know, what the what what the what the TD was found not not that I’ve seen. What TD was found to have been doing was knowingly accept money for money laundering and and just turning a blind eye to it, and they plead guilty to it. I haven’t heard any other institution at that level.

There are other institutions that are under investigation for any money laundering issues, but nothing is as egregious as what went on with TD.

Josh Sheluk: Is it a few individuals at the top that were doing this, or was industry wide in the team?

Colin White: If you read the court case, it’s fairly damning right across the board because it involved people at the front lines not doing what they needed to do, and the people who saw them not doing what they needed to do, not putting a system in place to catching it. Right? So it involved a number of layers in order for it to reach the level that it did. But it was, according to the court case, known at very high levels within the firm that this was a weakness and a problem. And the issue with money laundering is if you’re bad at it, you don’t get a little bit more money laundered.

You get all of it. Criminals are smart people. They’re gonna find the weak link, and it’s all gonna flood there. And that’s what happened.

Josh Sheluk: I have a question. Sure. I hear all these things about buying the $3,000,000,000 Where does the money goes to? Like, even all this matter and all this, they get fined 1,000,000,000 of dollars. Mhmm.

Where does this money goes to?

Colin White: Different depending on jurisdiction. In Canada, some of it can go back to make making the the investors whole if it was something that was done to investors. So there are sometimes that’s where the money goes. Other times, it goes to education programs. I can’t comment on what the SEC is gonna do with the money.

They might be building a building. I don’t know. I don’t I don’t know the US system well enough to answer that question. I know in Canada, it can vary depending on jurisdiction and and how the fine was levied. But disgorgement

Josh Sheluk: all this like Facebook. Okay. Buy $3,000,000,000. Nothing happens to stop the proposal. Microsoft Yep.

So on and so forth. Where does the money

Colin White: go? Well, now you’re talking about the European Union, and I really am out of my depth. So can we talk about Bitcoin

Josh Sheluk: some more? Company being fined, you know, this 1,000,000,000 of dollars, but It’s to make everybody feel good

Colin White: because the people who are responsible for what went on probably aren’t in the same roles anymore, but it’s supposed to make else feel good. We’ve done something about it and maybe deter the next group from trying it. You know, that’s the the most direct answer. And I can’t comment on how the European Union works with any authority. So so VeriCann, we’re built different, and we’re probably way over time, but I’ll try to wrap it up.

So VeriCann was born out of being noticing all this and deciding, okay, how do we do this different? So within our firm, there’s nobody who has a sales target. Nobody is paid on commission. Nobody gets paid based on type of product sold. Everybody is on a flat salary plus an annual bonus based on how we all do.

So nobody’s sitting across the table from a client or prospect at any moment in time with their paycheck affected by the outcome of that meeting. You can’t be thank that’s the first round of applause that I’ve gotten. Thank you, sir. And it is a grand social experiment that if you take good people and you let them do good things, you can run a business. And so far, it’s kind of working out.

We’re attracting a lot of talent, especially the younger generation tends to be way more have more morals than maybe the older generations. So, you know, a lot of people are coming and trying to do the right thing, which has been really exciting for us. But that is the basis of the firm. Like, when you talk to anybody on my team, nothing you decide in front of them is gonna affect their paycheck.

Josh Sheluk: What’s the corporate what what is your corporate ideal? I mean, what what’s your targets?

Colin White: My my target is to see how many people we can save. We don’t we don’t subscribe. Like, I I haven’t announced I want to open an office in Calgary next quarter and then just shoehorn something in. Our phone rings, we answer the phone, people ask us questions, and the business grows. So we’re not trying to do anything more than that.

If somebody calls up and wants to do something and I don’t have enough people to do it, then we don’t do it.

Josh Sheluk: Well, what are your metrics? I mean

Colin White: So when everybody signs on in the morning, their dashboard is here are the clients we owe a phone call to. Based on our service model, here are the people that we need to talk to today. And the job is contact all those people and see how they’re doing. Offer a meeting. See if they’re okay.

See if there’s anything we can do to help. We’re a service organization. And when we come out to do events like this, we’re trying to educate. So you’ve been to a few of the events now. There hasn’t been a sales pitch.

This is as close to a sales pitch as we’ve ever come. We’re selling the firm here. But when I went out and made fun of marijuana, I’m just making fun of marijuana. So we do these things to try to educate people. So it it demonstrates in everything that we do and everything we say that we’re aimed at a different target.

Josh Sheluk: Where are your veterans?

Colin White: How many people did I save? How many people didn’t walk into a bank branch today at 85 years of age and get sold an RSP? That’s my metric. That’s what gets me angry. That’s my metric.

How many people how many times can I stop that from happening?

Josh Sheluk: Why why are

Colin White: you being so mean? I’m trying I’m I’m trying to save all the people, but they insist on time off and having families and stuff. We’re just just we’re trying to stay as busy as we can and get out to as many people as we can. Like, it’s it’s nothing more complicated than that. So thank you for making me feel bad.

Oh, I have a question at the back for mister yes. Answer questions or I’m still continuing? I both. Ask away.

Josh Sheluk: Okay. Devin, are you there? Do you remember a couple of weeks ago when I, when I looked at to you, have you guys recommending these 2 because you make more money out of them? And then you explained to me that they are made up of several others, which you said it had one area.

Devin Cattelan: Yeah. Yeah. So that’s a that’s a good question. So oh, sorry. Sorry, Mel.

I’ll cut you off there.

Josh Sheluk: I’m just saying, this is an example, of where my thoughts were and and what Santa Claus is saying. Hey. That’s true. That’s the point. I didn’t know that.

States and all their advertising on companies, and this is one company that’s we are a fiduciary and and not like other companies that recommend a lot of products. They make money when you make money, and and this is, this is on the same wavelength. So Yeah. Yeah. So, this is on the same wavelength.

So

Devin Cattelan: Yeah. Yeah. So a couple years ago, the team, designed 2 funds, and the idea behind those two funds was to bring down cost for clients, help with trade execution, and simplify tax reporting. We don’t receive any compensation from those funds, so all the savings that are and there was administrative and operational costs that we’ve absorbed. And the sole reason for doing is because we thought it was what what was best for clients.

And so all those cost savings have been passed on to clients themselves. So that’s why there’s 2 line items. There’s the 2 funds there. We hold underlying holdings in those 2 funds, mutual funds, ETFs, individual stocks. But the reason we did though we’ve created that structure was to pass on the benefit to clients.

Does that answer the question?

Josh Sheluk: Well, it does. So I was just I was just comparing to my question to you with the perceived conflict of interest, and then Santa Claus is explaining very detailed conflict the types of conflict of interest that is so subtle, very few people, I guess, or or I was not really aware of.

Devin Cattelan: Mhmm. Well, there I was at one point so there are there are, companies like ours that have designed those funds and charge a management fee, and that’s something we don’t do. So it’s Yeah. It’s, we just it’s not right.

Josh Sheluk: Yep. But you guys are on the, you know, at the desk or wherever constantly looking for, watching, the the the companies go up and down, etcetera. It’s a lot of work. Do we do we have them on payroll,

Kathryn Toope: Catherine? No. No.

Josh Sheluk: Really, it’s a lot of work. I hope you’re paying them well for this.

Colin White: I I I have to. Like, they’re they’re buying houses and having families. It’s expensive stuff. No. To your to to Devon’s point and just to reemphasize, we took that route because we could get for the stuff we wanted to do, we could get some better pricing.

We could get better execution. We could manage the investment better. We chose not to charge extra for

Josh Sheluk: it. Yeah.

Colin White: Because we’re already we were we used to hold all those individual investments in everybody’s account, and that was a mess for a few different reasons. So we just simplified it. We didn’t charge anymore. Now there’s some underlying administrative cost to set something like that up from accounting and legal and stuff like that. But if we can get a better deal on an investment, those savings go right into the the into the pool.

So the all of our clients see a piece of that. And my money is invested in exactly the same pools you guys have. So my money’s in there too. You could not have more of my attention. Like, there’s just no way I could be paying more attention to this.

Right? So the it it is a perceived and the way and the reason we have the 2 pools is there’s different clients with different risk profiles. Some clients, the weight changes between the 2, But those are not the only 2 investments we use. So we do use GICs from time to time. We use daily interest savings accounts.

Other things depending on the client situation.

Josh Sheluk: Now the next question I ask you is what what happened in the, magnified in the industry that caused you to explain conflict of interest? Were there a lot of questions? Was there too much fraud going on you decided on your own? Or were there a lot of questions proposed to to to to Vericand and you had to straighten it out? I don’t know if that came across Yeah.

Colin White: We were all offended by it and decided to try to do something about it. And it took us some time to get organized would be the full answer to your question. For those who who followed Flash Boys and Brad Katayama, Brad Katayama was the guy from Waterloo working in New York who discovered high frequency trading when he was working for RBC. So he noticed the conflict in the trading. Brad’s reaction was, this isn’t right.

I’m gonna go form my own company where that’s not the case. And he has his own exchange sitting out there. He has a tiny little corner of the market, and people care about what he’s talking about, and the rest of the industry just is what it is. We are the spark to hope to ignite the flame. Like, we’re sitting in our corner.

This is our business model. People appreciate it. We’re great. And as if we’re right and the social experiment pays off, it’ll continue to grow.

Josh Sheluk: Yeah. I’m closer to, to Topical, so

Colin White: you can

Josh Sheluk: set up

Colin White: a desk there. What what what do you want in your business card? Because titles, we can just make the title out. Senior vice president. Senior vice president.

Yeah.

Josh Sheluk: I got you. Here.

Colin White: I got you. Alright. So this is the slide that we’ve had to ask us how we do get paid. So if we’re running a discretionary account for you and it’s under $3,000,000, we’re 1 and a half percent on the first 500,000, 1 and a quarter percent between 500 and a 1000000 and 1% over a 1000000. 1 and a half percent

Josh Sheluk: of what? Only one time in the period.

Colin White: Sorry. Thank you. Because people have thought that was a monthly fee. No. I don’t charge you 1 and a half percent a month because that’d be really good for me.

It’s 1 a half percent per year of the money that is in the discretionary portfolio. Alright? So when we do our discretionary money management, that’s the fee schedule. If you come into us as a family group over 3,000,000, there’s a different fee schedule that applies. You do a mortgage with us, and our mortgage team is proudly represented here today.

Mortgage industry is a commission based industry for sure. So the way it works with us is that commission just goes to the firm. The person writing the mortgage is not receiving that commission. So, yes, we do profit when we sell you a mortgage. That’s how that game gets played.

Similar to insurance, the insurance industry pays a commission, and they pay different commissions depending on product. And that is unbreakable. Actually, by statute, you’re not allowed to rebate that commission in some provinces. So that is the way so we get paid a commission if we put an insurance policy in place. That goes to the firm.

It doesn’t go to the individual. So it doesn’t form the part of anybody’s compensation. Our firm currently has 10 owners within the firm that participate in the net profits of the firm, so we’re widely held within the firm. Yes.

Kathryn Toope: So how do you incentivize the among these great advisors?

Colin White: You’ll you’ll have to ask them. Dan is gonna Dan is one of them. So here we go. Dan, you’re on the spot.

Josh Sheluk: I work for a number of Agronom firms, and you can tell the culture change and the culture difference of being there. You can tell how much the senior portfolio managers give to us. And again, it’s that culture value of client first that we love being a part of. I know that, Amanda actually has similar stories about, certain, mortgage adviser she used to work for that’s very similar.

Kathryn Toope: Yeah. So Dan and I actually started around the same time. I think it was the same

Josh Sheluk: week, actually.

Kathryn Toope: And what brought me to Barrican is in the mortgage industry, it’s very much a eat,

Josh Sheluk: wait,

Kathryn Toope: pill. And, yes, it’s potentially a lot of money, but the amount of bad advice that’s going around in the mortgage industry is absolutely insane. We do get paid by the banks, but there is mortgage agents out there that’ll add commissions on top of it. It’s an extremely greedy and unnecessarily unnecessary products within the whole industry. So coming here and learning too about the investments and how actually helping the clients at their core with their investments, with their financials is actually gonna improve, not just putting them in the home that they qualify for.

And it was just a significant cultural cultural difference.

Colin White: Thank you. Thank you. My favorite story from my mortgage team was when they were going through their training, there’s something called continuing education. The industry requires you to be continually educated. Most of our mortgage team is also licensed to do insurance, so they are licensed insurance agents as well, so they understand insurance really well.

But to become a mortgage broker, they had to go through a 1 hour mandatory course in mortgage life insurance. The course was 50 minutes of talking about the trip you could qualify for and 10 minutes on where to find the form. That was their continuing ed. And I word for word that’s how it was explained to me. So no.

People wanna do good things. Alright. There’s there’s enough of them out there that wanna come do good things. That’s who you’re gonna meet. So and taxes.

Don’t forget taxes. Claudio, the tax expert’s with us today. We do tax returns. If we do a tax return for you, we’re gonna charge you for the tax return. So we will charge you a flat fee.

You’ll know what it is up front, and we get paid that way as well. So we don’t get kickbacks from any any of the companies. There’s no other source of income for us other than what I’ve just described. And if you’re ever dealing with us and you want an answer to something, ask. We’re gonna tell you.

Josh Sheluk: Where do clients see their fees gone?

Colin White: Depends on the product. And if

Josh Sheluk: On the investment side.

Colin White: Yeah. So the management fees are reported on your statement every month. It’s a separate line item by account, I believe, is how it’s in there. So you should be able to see exactly what you’re paying us. It’s right there.

And right now, you’re happy because your account’s going up, but that fee will still be there when your account’s going down. So I wanna prepare everybody for that as well. Alright? But you’ll see it there every month. And that’s the 1.5 and 1 a quarter and 1%, that’s all annually.

I had a couple clients convinced I was charging it to the monthly, and it’s like, no. So here we are, the Vera Can Group of Companies. 2 years old now. 2a half?

Kathryn Toope: Just yeah. 2a half.

Colin White: 2a half. There we go. Investments, mortgages, insurance, financial planning, and tax prep. So that’s what we’ve been able to put together so far. Stay tuned.

I haven’t checked my

Kathryn Toope: email while I’ve been

Colin White: up here. Thank you. And are there any questions we haven’t gotten to? Of course. Are there any are there any other questions?

Josh Sheluk: We just actually updated our wills. Okay? I figured it is. And immediately said, our instructions to the investigator was that the investment should be definitely Barakat. Mhmm.

They live in Calgary. When are you gonna open that office?

Colin White: Well, it just got closer.

Josh Sheluk: I’ll tell you what I wanna make this card later. Okay?

Colin White: Okay.

Josh Sheluk: Seriously, we can’t Yeah. No. And comforting to

Colin White: to do that. And it’s it’s humbling because that’s a lot of pressure, to be honest with you. You know, we are licensed in Alberta, and we do do business in Alberta, and we could end up with an office there for sure. But I’m not sure what the statues are in Ontario, and I’m not sure that that’s binding in your will. But it’s thank you for putting it there.

Josh Sheluk: Just a note.

Colin White: We’ll do our we’ll do our best to sue if they don’t give us the money.

Josh Sheluk: I have a question. What kind of

Colin White: growth has So two and a half years ago, we were still an adviser group with IA Private Wealth, and we took the break to go start our own firm. January of this year, we were about 800,000,000 in assets under management. We sit today at about 930. So this far into the year, our headcount from an employee perspective is up to 42. So we are I don’t know where we would have been 2 years ago.

Help me. Anybody in the room? Where were we 2 years ago? Around 30. Around 30.

Thank you. It’s it’s been very, very consistent. And every month, we have more money coming in than going out for clients, which is always a danger because old people tend to spend money. So on a month Where

Josh Sheluk: is that money where are those clients coming from? Are they coming through contacting you or to to contact some other customers?

Colin White: Do Or A lot growth on A lot of referrals, but also some of the fine work that Catherine’s been doing about getting her name out there in in a good way. So we’re getting a lot of traction that way as well. But the the story kind of sells itself because people hear the story, and it’s a story they’re not hearing other places. So we get a lot of curious people. Now how many curious people turn into actual clients?

There has to be a fit.

Josh Sheluk: We get a similar story with Fisher. We’re fiduciary.

Colin White: The fiduciary part of it absolutely is the same. It’s

Josh Sheluk: very similar. So

Colin White: There Wondering

Josh Sheluk: what that

Colin White: Yeah. There’s a couple of there’s a couple out there like, Nikola would be get getting in similar, but again, family tightly held, and they do have investment product they manufacture. So So they they have that that doesn’t make them evil. Nothing I’ve pointed out makes any individual person or company evil. It’s just you need to understand that they that that it is there.

But a fiduciary, yes. There’s other portfolio management groups out there for sure, and that is a similarity to us in Fisher and us in Nicola and us in other groups like that.

Kathryn Toope: Colin, could you touch on why, an established adviser might join us?

Colin White: A lot of established advisers are trying to retire. I mean, this firm has been built. We’ve done over we’ve done a dozen deals across Canada. So, like, our offices in Nelson, British Columbia and Powell River, BC, are both offices that we purchased from from retiring advisers. And, you know, we’re a good fit for the adviser that, you know, sees value in what we’re doing and is afraid of what the firm might do, you know, because the firms can be a little predatory when they come in and take over somebody’s business.

So, it’s a combination of things, but it really depends what a departing adviser is looking for. So we it that is the backbone of the firm. We have grown very substantially over the years. We’ve got a couple of deals very close right now because there’s a lot of advisers that are trying to get out. The industry is way different than it was in the nineties.

I started giving financial advice before the Internet. Walking around with a briefcase full of paper, giving financial advice. Yeah. Thank you. Thanks.

Thanks for laughing at me. You know, so people who get into the game at that point in the game today, it’s a dramatically different game. And there’s a lot of people.

Josh Sheluk: Counting all these young people like all of them, you know, people going taking that business on, growing the business Yep. From people that are retiring? Yep. Yep. The advisers that are retiring, slowing down.

You know? So we we we get a lot of

Devin Cattelan: traction on on that front.

Josh Sheluk: And that’s one of

Colin White: the reasons, you know, again, attracting young talent. You know, the young up and comers, you know, like these guys. Right? So we’ve really built our shop to be here for another 20 years. And we’ve and we’ve kept the ownership internal, so the firm is owned internally.

There’s 10 members of the staff who own the whole firm. There’s no external shareholder, and our goal is to keep it that way. In fact, our shareholders agreement says that. So we wanna keep it intact so that it’s here. And the really great news is these guys are all breeding, so they all have kids.

So we have a succession plan to our succession plan.

Josh Sheluk: Yeah. Sure. Right? Yeah.

Colin White: Yep. Yeah. Well, you weren’t really acquired. You were folded in. Folded in.

Josh Sheluk: He was acclimatized as well. That’s right. Through his dad’s principles. Thank god you were.

Colin White: Individual small, medium sized businesses, depending on what they’re looking for. You know? So we we do get involved in the estate and corporate planning. We work with lawyers and accountants on structure and tax planning and things of that nature, all that kind of stuff. We’re a bunch of geeks.

We like that stuff. The more complicated, the better.

Josh Sheluk: I am used to, let’s say, an over, position person like yourself. Yep. And I’m very interested. I’m quite impressed with all the young people you have, and that’s pretty unusual for me. How is how do you you how did you or your group choose these younger people?

They have some knowledge, but everybody has some knowledge. How did you choose them?

Colin White: It was mutual. I I’ve I have gone out and we have gone out in the world, and I’ve told exactly the story I just told here today. And then this person says, hey. That’s kinda cool. And they walk over.

Josh Sheluk: I might have missed it.

Colin White: No. No. But no. The whole story about putting the client first, getting rid of the conflict Right. We tell this story all the time.

Josh Sheluk: But do you not have a measurement for some like a trick question? And if they answer that, maybe you’re on the right track?

Colin White: Alright. You wanna hear the tea? So I met a gentleman. This is this is how it happens, and it happens different. But this is one example of how it happens.

There was a I went to a presentation. It was a garbage presentation from somebody I didn’t care about, but it was convenient. I felt obligated. I went and I got into an argument with the guy beside me and we had a really great argument. We both thoroughly enjoyed it.

Well, turns out he was a portfolio manager at RBC Dominion Securities. Well, we enjoyed that argument so much that he called me up the next day and we had another argument. And then he made an investment recommendation for us that was shit. So I blew it up and sent it back to him. We had a great conversation.

So the conversation kept happening until he said, well, you guys really are doing what I think should be done. You know, we should keep talking. It’s like, holy crap. We’re now we’re now talking about you joining us. So his final interview started at 3 o’clock in the afternoon, myself and Dan, the other founding partner at the office at 3 o’clock in the afternoon, reviewing all the final details we wanted to go through.

Well, we were still talking at 5, so we went down to a restaurant. And then we were still talking. So we went up to a bar and had a had a had another beverage there. So it’s 3 o’clock in the morning. We’re standing outside of a pizza joint, having spent the last 12 hours together hashing everything out.

Where do you stand on everything you believe in and what’s important to you? At the end of that exercise, we both nodded up and down and go, yeah. We really can’t argue about anything else. We’re we’re on the same page. So it’s finding that fit.

It’s about knowing who you are, what your principles are, and being able to express that to somebody And not being afraid to anger somebody just a little bit if you need to.

Josh Sheluk: So it’s quite surprising to see your ability because you’re a mid senior age and you’re

Colin White: You’re calling me old in, like, 18 different ways. And I may be wrong in that one. So I might I might be being stupid right now. Oh, thank you very much. I genuinely thank you.

But it’s when when you have a purpose like this, like, what’s my metric? It’s like, how many 80 year olds do they keep from going into the bank to buy an RSP? I’ve seen that. And that just played up my doubts now. Pick your title.

Like that

Kathryn Toope: you’re giving, why you shouldn’t be investing it in time? 70? You’re

Colin White: not allowed to when you’re 80. When you’re 80 years old, you can’t buy an RSP.

Kathryn Toope: It’s okay. But 80?

Colin White: Sorry. I should have explained that. You you cannot own an RSP after age 71, basically. Yeah. Right?

So if you’re 80 years old and you go into the bank teller and say, I wanna buy an RSP and that bank teller, they do this. Take the money and put it in an RSP account that they open for them. And I have to fix it.

Josh Sheluk: As as an older person, I would I would think that most would look at senior advisers. Say, hey. I’ve got more confidence in that senior person because they’ve seen the things.

Devin Cattelan: They’ve seen

Josh Sheluk: history repeat itself over and over and over again.

Colin White: I’m so glad we’re

Josh Sheluk: A lot of young people have not seen that. Yeah. Not seen no recessions in oil and energy.

Josh Sheluk: All this stuff that’s happened

Josh Sheluk: Yeah. Over 60 years.

Josh Sheluk: Yeah. That so

Josh Sheluk: you gotta have a lot of confidence in people. That’s what happened.

Colin White: Well, no. And and and and I’m glad we’re recording this because this is a great question. Because we actually are a team. Because nobody here owns a client. Nobody owns a book.

Nobody owns an investment. So when Josh and I sit down and talk about something, I get all of his smarts that he has from his experience, and he gets all my experience. We did a whole podcast on Nortel. I live Nortel. Like, I I had clients with money in Nortel, and he read about it in his books.

Right? So we had a conversation about it, and I could add a little bit of color because living is different than reading about it. But because Josh doesn’t own you as a client, I don’t own you as a client. You get the benefit of both. Right?

Because if you wanna if you wanna have a meeting with absolutely. Get put on the schedule. You wanna meet with Josh? What was that the client said that time? Josh was too city.

Wanna talk to the country guy. So you’re gonna hear the same story. Right? It it’s it’s not gonna be a different story. We argue behind the scenes.

Josh Sheluk: Well, I’m looking at, like, you have history. But sometimes history is not

Josh Sheluk: I’m looking for ideas, new, new things to say. Maybe this is maybe it’s not gonna repeat itself. Maybe it’s not gonna happen. Yep. So that’s why I’m okay with,

Colin White: you know, all the groups

Josh Sheluk: that you have. I said, well, it’s new ideas. It’s young. I call them young kids, but it’s younger people that have different ideas and different ways of seeing.

Colin White: Yeah. Well, I had to stop calling them kids because they have kids. That’s why

Josh Sheluk: I apologize.

Colin White: I apologize. I mean That that’s pretty much the demarcation. Like, I stop calling you a kid when you have a kid. Talk

Josh Sheluk: talk about our investment committee. Why? People that are on it

Josh Sheluk: and Why?

Colin White: Is this your investment committee? We’re really stretching time, guys.

Josh Sheluk: Way invested so what Colin is talking about is nobody really makes investment decisions on their own in our work. Right? It’s all collective and everybody everyone of our clients from coast to coast, from top to bottom, they all get the the same 2 funds in some way, shape, or form in their portfolio. And what goes into making decisions for those two funds is we have an investment committee usually between 7 10 people that sit together every Thursday morning, and we talk about what’s going on in the world and what’s going on

Josh Sheluk: in our client portfolios.

Josh Sheluk: And sorry, Collin, but I think you’re the oldest member of the investment committee.

Colin White: I am now. Yeah.

Josh Sheluk: And and believe it or not, I’m not even close to the youngest member of the investment committee. So we have a wide range of different ages on that committee from mid fifties to mid twenties. And that, I think, gets to to the element that you’re talking about with we have fresh ideas. We have smarter people than me that are are, you know, doing new things, that are looking at new things that come with the correct perspective. And we have older, more experienced individuals on that team as well.

I went I went to

Josh Sheluk: visit the doctor. He basically gave me the same person. Share. They’ll be able to share experience on a Thursday meeting. K.

It’s basically the same with Crespi. I’m sure he’s told there. Many, many, many people. That really turned me off. Give me, you know, give me some new thought or some don’t just give me the standard.

Kathryn Toope: No. What turned you off was we owned real estate, and he wanted us to sell the real estate to put it into investments. Mhmm. And that’s when, you know, I said, we don’t want all the eggs in the same basket. Mhmm.

Josh Sheluk: Why do you think he recommended that? When he wanted more money in his pot. Probably. He wanted more money in his pot. Probably.

He wanted more money in his pot. He wanted more money in his pot. He wanted more

Josh Sheluk: money in his pot. He wanted more money in his pot. He wanted more money in his pot. He wanted to wanted more money

Kathryn Toope: in his pot. Oh, he did. Yeah. Yeah. So so I

Josh Sheluk: I think we take a lot

Josh Sheluk: of pride in having an investment committee that has

Devin Cattelan: a diverse set of backgrounds, diverse

Josh Sheluk: points of view. It’s funny over time, you get to see who is more, risk averse on the team and who’s more comfortable with risk, and those people balance each other out. So it’s truly a committee, and it helps us get to better results than I think any one of us could individually.

Colin White: So the the key to wealth is not blowing it up. It’s not about having the one right idea. It’s not about the one new thing. It’s about not blowing up. If I lose you 50% of your money, I gotta make a 100% to break even.

We run money not to blow it up. We’re okay that we’re not overweight Nvidia. We’re okay that we miss, you know, Bitcoin’s rally if it’s currently rallying. That’s okay with us. So the only price that you have to pay for being here is filling out this form that’s being given to you because this is how I I choose what we do next.

Right? So please give some thought and fill this form out. Sorry. One more question.

Josh Sheluk: Yeah. Do you experience more about mortgage?

Colin White: More about mortgages? Oh,

Josh Sheluk: yeah. Okay.

Colin White: Well, so we broker mortgages now. So if you’re in need of a mortgage, you can call us and we will put you in touch with our mortgage team who was oh, she’s over there now. And we broker mortgages with all of the major institutions so we can actually put a mortgage in place for you.

Josh Sheluk: Yeah. And you can transfer for the from the bank to to the

Colin White: Yeah. Breaking a mortgage comes with fees and transferring a mortgage. There’s different ways you can do it, but our mortgage team would be more than happy to help you out for sure. Okay. So alright.

Listen. I’m not going anywhere, but let’s cut it so that the people who wanna leave can leave. Thank you very much for coming out. Thanks for all your question and engagement. I really appreciate it.

Have a safe drive home.