As I write this, we’re in the middle of what feels an awful lot like a world-changing event. By the time you see these COVID-19 top reads, we might be already experiencing some kind of recovery, thanks to our doctors and nurses working the front lines, our communities banding together (at a safe distance) to pick up groceries and otherwise care for each other, and hopefully our businesses and governments doing the right thing not just for the bottom line, but for everyone. I think especially of our gig and contract workers, people experiencing homelessness, and those in crowded shelters and inadequate reserve housing. Mr. Rogers told scared children to “look for the helpers,” but he told us adults who grew up with him to be the helpers. 

Do what you can with what you have to be the helper.

All of this to say that this month’s reading list is heavy on investment and COVID-19 writing, and a little light on everything else. If you feel overwhelmed by all of this [gestures at everything], please take this as a permission slip to stop reading right now and focus on whatever helps you get through this, which might include a list of silly things to do at home or virtual therapy to name two. 

If you’re up for it, my top three picks for this month's investment and COVID-19 top reads include:

1. A compassionate reminder that it’s okay to not enjoy this kind of market turmoil

2. A reminder that preparing for COVID-19 (and how to do it) is an act of kindness and not a weird survivalist thing

3. Reflections on what the Teck decision could mean for a government focused on a just transition to the green economy.

If all that wasn’t enough for you, we have:

• A reminder that precious little should prompt you to alter your investment policy

• An investment advisor’s list of tricks clients should watch out for

• A deft articulation of why siding with the government doesn’t mean they’re siding with you

• A reminder that a jump out of cash and into a long-term investment plan never feels good

• For the first time ever in the history of Top Reads (we think) - a cartoon! 

Happy reading!

This part, it’s not so fun

From James Osborne

“It’s okay to admit that this part is not fun. No one wants to see stocks fall this way (even us young folks who will ultimately benefit from being able to buy more and more stocks at last year’s prices). Seeing huge red numbers inflicts panic in our hearts, and because we have terrible brains for investing, brains that were designed to run from every threat on the savanna, we can only assume that TERRIBLE DANGER LURKS AHEAD.”

Read the full article here.

Preparing for the coronavirus to strike the US

From Zeynep Tufekci

“Preparing for the almost inevitable global spread of this virus, now dubbed COVID-19, is one of the most pro-social, altruistic things you can do in response to potential disruptions of this kind.”

Read the full article here.

Teck decision opens the door to renewed conversation about transition

From Hadrian Morton’s-Kirkwood

“The case for government management of the transition to a cleaner economy is especially pertinent in the social context. When private investors pull out of fossil fuel projects it may be a win for the land and the climate, but the burden often falls disproportionately on fossil fuel workers, their families and their communities.

“The federal and provincial governments have key roles to play in:

establishing clear timelines and plans for the phase-out of fossil fuel production (as they did with coal power), instead of leaving it to the whims of the market; supporting displaced workers with social security, retraining and career support; and, investing in new industries that create good, green jobs in the communities where they are needed most.

“It is becoming increasingly clear that the transition to a lower-carbon economy is coming, regardless of the protestations of regressive Canadian politicians. As the CCPA has long argued, a just transition to a cleaner economy is an opportunity to minimize the harm and  maximize the benefits to workers of the shift away from fossil fuels.”

Read the full article here.

You can read this month's entire list below:

Tricks (Witting or Not) that Investment Advisors Play | Meg Bartelt

“To a meaningful extent, the investing puzzle is “solved:” Own a broadly diversified portfolio at a low cost, and don’t touch it.

“So, if someone is creating a portfolio for you that you cannot wrap your head around, first, of course, ask questions. And if you still can’t understand it, then that’s a problem.”

Picking Bad Stocks | XKCD

“I was born for this!”

It's Too Late | Blaire DuQuesnay

“Sometimes you get punched in the gut. Other times you get punched in the gut every day for months on end. Running away when the market rolls over rarely leads to a positive outcome. I have spoken to countless investors sitting on the sidelines, nervous about the market making all-time highs, not wanting to buy in before the next crash. Do you think they are excited to buy stocks now? Will they be ready if the market drops another 20%? Not likely.”

An Open Letter to “Angry Settlers” | âpihtawikosisân

“We have been experiencing a steady erosion of labour rights, rights that were hard fought for, and hard won. At the core of that steady erosion is the manipulation of public opinion, which invariably paints labour actions as “threatening safety.” How? By withdrawing labour, health workers “threaten” public health, striking teachers “threaten” the ability of parents to work and put students at academic risk, picketing construction workers “threaten” the economy, etc etc.

“More and more we have seen governments tabling back-to-work legislation, and criminalizing labour actions, all in the name of “public safety.” The particular bargaining unit in any given situation is demonized: they are greedy, lazy, paradoxically “essential” while also being completely replaceable and unimportant.

“I point all this out to show you that any segment of the population can be rendered “the enemy,” even those who are supposedly “protected” by unions. Those without robust labour protections are even more vulnerable to the rhetoric of “public safety.’”

Your Portfolio Was Built for This | Ashby Daniels

“Here’s the key: If you have appropriately allocated your portfolio to account for these all-too-common-and-expected market corrections, then the answer to the “What should you do?” question is to keep going to work, or playing golf, or reading books, or whatever. Anything but turn on the TV, lest you risk making a decision you will most likely regret.”

I’m delighted to present you with another financial planning case study as part of this year’s theme. This one was drawn from a mash-up of typical clients and scrubbed of identifying detail, because privacy.

Remember, I’m writing these case studies to illustrate the value of financial planning centred around the unique life story and personal values each person brings to the process. I also want to demonstrate how the decisions one person makes in light of those values might be very different than the decision you would make in the same circumstances. 

What follows isn’t meant to be universally applicable advice. The solutions articulated below were designed for the client, and while you may see yourself in some of the details, these are the recommendations that created success for her. You should seek professional advice before applying these solutions to your own situation.

Zoe Retires Alone

After Zoe’s husband, Wash died, she was worried. Suddenly becoming a widow at age 55, receiving a big lump sum from insurance, and not knowing what to do next left her feeling insecure, overwhelmed, and embarrassed. 

Although Zoe was the one who paid the bills and managed the budget, she felt like she hadn’t paid enough attention to their money over the years. She had “only” paid off their mortgage and contributed regularly to savings invested at the bank. 

After losing her husband and moving, Zoe’s lifestyle hadn’t quite settled into a predictable pattern of expenses. Her income was coming from a patchwork of survivor benefits and she was topping up her pensions from the insurance money. This money was still sitting in a savings account at the bank because she didn’t know what to do with it. Her uncertainty and lack of knowledge about her investments led her to believe that she was just bad at money! 

There are two things you need to know about Zoe, though: 

First, she’s a master of living within her means. For the 25 years leading up to this period of disruption, she kept her expenses safely below her (sometimes quite low) income. She had the bare minimum amount she could live on down cold. 

Second, she is an enthusiastic student. Although she had a dim (and incorrect) view of her own money management skills, she came to me keen to learn. She had already spent some time investigating how well her bank-managed mutual funds had performed over the years and how much she was paying in investment fees.

Zoe came to me with two questions, one very specific and one very broad: 

1. How much can I spend every month? 

2. My bank is offering me a discount to invest the insurance money with them. Is that the right choice for me?

I was keen to help Zoe realize just how well she had actually managed for all those years, and to build a simple plan that Zoe could follow with confidence. 

Testing her portfolio

The first thing I did once I received Zoe’s information was to figure out two things: 

1. If she was receiving value for the high investment management fees she was paying, and

2. If the amount she needed to withdraw from savings was likely to work, given the amount she was starting with and her asset allocation.

I found that Zoe was paying more than 2.5% for her mutual funds, and receiving no guidance beyond fund-picking in return. The fact that Zoe came to me to ask about investments was a pretty good indicator that the advice she was supposed to be getting in return for her fees was insufficient. 

The next step was to prepare a shortlist of investment managers that charge reasonable fees (including discounted fees for higher account balances, similar to what Zoe’s bank was offering) and consistently deliver valuable advice. I helped Zoe find a match for the kind of advice-relationship she wanted at a cost that made sense.

The difference between what Zoe would have paid at her bank and what she is paying to her new investment manager is $9,500 per year!

Next, I examined the amount of money Zoe had between her investments and the insurance proceeds. I tested how much she could withdraw from her portfolio under a variety of scenarios that included:

• Contributing more or less of the insurance proceeds to her investments and leaving the rest in cash

• Reducing the cost of her investment management in the future

• Changing the balance of stocks to bonds 

• Living much longer than the average life expectancy for women her age

• Facing spending shocks, like long term care

I found that Zoe had a good chance of making it through retirement without spending her whole portfolio if she simply stuck with her bank and added her insurance money to her current investments. However, this would only work if she didn’t live much longer than age 94 and didn’t have any increased healthcare or nursing costs as she aged. 

I also found that Zoe had a great chance of living comfortably through her whole retirement when her annual investment management costs were reduced by 1% and she withdrew 10% less from her portfolio each year.

Qualifying for Allowance for the Survivor

Knowing that Zoe is a widow with relatively low income, I looked to the Allowance for the Survivor program. I checked to see if there was any way to boost Zoe’s government benefits during the years between age 60 and 64, and reduce the amount she had to withdraw from her own savings over the same period. 

Zoe’s qualifying income was projected to be slightly too high to qualify for the Allowance, but fortunately she also had some unused RRSP room. Making contributions to her RRSP at age 59, 60, and 61 will reduce her qualifying income for those years and result in just over $35,000 in tax-free income she would have otherwise had to withdraw from her savings. 

Deferring Canada Pension Plan and Old Age Security

With a $35,000 boost from government benefits, Zoe had that much less to withdraw from her portfolio. The next thing I looked at was when Zoe should apply for her own Canada Pension Plan (CPP) and Old Age Security (OAS) benefits to see if that decision could reduce her portfolio withdrawals even more. 

Zoe’s income from her survivor benefits was too high for her to qualify for the Guaranteed Income Supplement, and she only had enough RRSP room to qualify for the Allowance. This means that the common strategy of applying for CPP and OAS as early as possible to keep taxable income down and increase income-tested benefits wasn’t going to produce much of a result. 

Deferring benefits as late as they could go, however, did produce a result! Zoe would:

• Wait until age 70 to start collecting CPP and OAS benefits

• Withdraw from her RRSP while she waited 

Resulting in:

• A 45% increase in OAS benefits

• A 36% increase in CPP benefits from age 70 on

This scenario would ultimately reduce the total amount she would have to withdraw from her portfolio over her retirement. 

And - bonus! - these higher benefits at age 70 were actually more than the amount she estimated to be her minimum comfortable standard of living. She could leave the rest of her portfolio alone after age 70, and let it act as a reserve that she will be able to draw against to protect her from spending shocks. 

I tested this scenario in more detail, and found that with lower investment fees and increased government benefits (resulting in the same amount of spending but lower portfolio withdrawals), Zoe’s plan was likely to work. I drafted an annual review strategy to check in with Zoe’s income, spending, and portfolio each year. 

Building Confidence

Zoe’s reaction? She’s delighted with a concrete monthly income that’s substantially more than she thought she’d have. She’s happy to have found an investment manager that communicates regularly and provides the simplest, clearest statements and client education we’ve ever seen... All for less than half of the cost she used to pay each year. And she’s grateful that I planned from the start to review her progress regularly.

She’s not quite as confident as I think she’ll become, though. From my work with similar clients in the past, I think it will still take a few years yet before Zoe truly understands that she didn’t mess up for all those years and is really, actually going to be okay in the future. 

It’s unfortunately common that single women in their 50s come to me doubting their own competence, even in the face of evidence that they’ve done extraordinarily well for themselves despite often very tough circumstances. 

Building these women up is one of my favourite things to do as a planner, and I’d love the opportunity to do the same for you!

Until I read Living Your Dream by Larry Wilson, I hadn’t found an all-purpose personal finance 101 book that delivers practical information in enough depth and breadth that I could responsibly recommend it. I’m happy to say that this streak has ended, and would recommend this book to almost everyone (with a few caveats, because do you even know me?)

Almost anyone with a passing interest in personal finance has a story about that one book that opened their eyes or changed their behaviour and will enthusiastically recommend it as the best one for everyone else to start with. Mine’s The Wealthy Barber Returns, in case you were curious. But once you’ve read one or two (or 24) of these books you realize that - similar to other experiences - the book is important to you because it was your first, and might not be as universally relevant as it used to seem. 

Many of my clients come to us after doing their best to figure out what they should do on their own, and their first stop has almost always been one of these books. Sometimes that’s great, other times the book they stumbled upon or that was pressed into their hands by an over-eager relative has done material damage that we have to undo before they can move forward with a realistic financial plan. 

The books that do damage are ones where the author has  clearly never advised an actual human being about finance before, equates wealth exclusively with success, worth, and intelligence, assumes that their own white, middle-class experience is universal, or advertises itself as “a practical guide to personal finance” or some such but leaves out whole sections of relevant information without bothering to explain why. 

The few truly great books I’ve found have zeroed in on handling one particular aspect of personal finance really well without pretending that it’s the only thing you need to master for a successful, fulfilled life. These include: 

• The Value of Simple, by John Robertson, which focuses on choosing and executing a self-directed investment portfolio that suits your circumstances and plan, and prioritizes good enough simplicity over perfectly optimized complexity. 

• Living Debt Free, by Shannon Lee Simmons, which focuses on getting and staying out of debt without any of the usual finger-wagging and shame

• Retirement Income for Life, by Fred Vettese, which focuses on enhancing the amount, safety and tax-efficiency of retirement income (but only for people who aren’t or can’t be eligible for the Guaranteed Income Supplement)

• Your Digital Undertaker, by Sharon Hartung, which focuses on managing your own estate planning as well as your executor’s job in administering it as two separate but related projects, complete with project management checklists

• Worry-Free Money, also by Shannon Lee Simmons, which focuses on the fact that how we spend our money can be shaped by our unconscious defaults or our conscious values, and how to structure our spending to avoid the former in favour of the latter.

In Living Your Dream, Wilson does a great job addressing every key area of personal financial planning, starting with the choices you make throughout your life and moving into the details of spending, debt, investing, taxes, retirement, insurance, Wills, trusts, and substitute decision makers. With a few notable exceptions (below), Wilson goes as deep into each topic as is necessary to help readers understand not only that the right answer for them depends, but what it actually depends on. 

You won’t walk away from this book with a fully articulated financial and estate plan, but - provided you pay attention and keep your learning hat on - you’ll have zeroed in on the key topics that matter for you and be ready to take the next crucial steps of developing your own financial plan, evaluating what help, if any, you need from professionals, and a basic understanding of what said professionals should be able to do for you to be worth engaging.

Who should read it?

This is a solid book that manages to address almost every area of personal finance (even the ones that often get ignored), digs deep enough to be useful, points out other resources to dig deeper, and consistently repeats the message that rules change and you have to be actively engaged in your own planning, even when you’re working with professionals. There’s no other real contender with this breadth and depth, and almost everyone will benefit from not just reading it but taking the time to absorb it. 

It does, however suffer from two key weaknesses that take some of the shine off of it for me. 

First is the problem of tone, in which the author valiantly tries to downplay his privileged position in society as a white, able-bodied man of a certain generation by using the word “modest” about himself, his choices, and the choices he thinks are right for you to make, while presenting the inevitable calculation of how much you could have earned in the stock market if only you didn’t buy fast food, “fancy coffee”, or smokes and invested the money instead (dear lord in heaven can someone please use golf games and trips to the cottage to make this point some day?) and offering advice like “pick the field of study that resulted in the highest earnings for graduates in the past.” OK boomer.

The second weakness is that Wilson, like so many people in the financial advice profession, seems to think that personal finance isn’t a topic that people who are disabled or have a low income are interested in. 

Wilson himself articulates the difficulty in writing a universally relevant book about personal finance in Canada in his introduction like so: 

“Much of what I have included in this text is based on my opinion, which in turn is based on my education and experience. I don’t know about you, but I have been known to make the odd mistake, and it could well be proven that some of what I am presenting here turns out to be suboptimal in one way, shape or form. Ths book covers topic areas that, if discussed in a fully comprehensive manner, would require several volumes. Clearly, this book is too succinct to offer fulsome coverage of all the topics touched upon. I will, within these pages, point you to the right direction to obtain further information where I feel it is important to do so.” (Emphasis mine)

Whereas there’s not even a single mention of Registered Disability Savings Plans, and only a brief slide by the Guaranteed Income Supplement with no additional resources offered (like John Stapleton’s guide for Low Income Retirement Planning), Wilson spends a whole page on avoiding the Old Age Security clawback and even offers eight tips for arranging your other sources of retirement income to do so. 

According to the 2019 Report of Federal Expenditures 1.2 million individuals claimed the Disability Tax Credit in 2015 (some of those claims are doubled up since this credit can be shared between the eligible person and a spouse or parent). That same year, 2.1 million people receive the Guaranteed Income Supplement. 

In 2017 only 600,000 people over the age of 65 had their Old Age Security benefits clawed back. (Source: Statistics Canada.  Table  11-10-0239-01   Income of individuals by age group, sex and income source, Canada, provinces and selected census metropolitan areas)

Author friends: Your feelings about what’s important to include don’t enter into it. Stop spilling ink on helping 600,000 people keep benefits they aren’t entitled to at the expense of the 3.3 million people who need more help than they’re getting right now.

If you only have time to read one chapter:

You’re going to roll your eyes at this further evidence of my bias as an advice-only financial planner but I’m going to recommend Part IX - Professional Advice. This is an outstanding overview of the advice landscape in Canada, and the value of assembling a professional team who will uphold your best interests over theirs.

If that answer doesn’t satisfy, Wilson has done a remarkable job summarizing the takeaways for each chapter, so a quick flip through the book should result in at least one chapter that really speaks to you.

If you only have time to read one paragraph:

"You need to be an active participant in this exercise if you want to get the end result you desire for those people and organizations that are important in your life. You don’t need to be intimidated going through this process - lawyers rely on clients to make a living and are likely to need your business more than you need any particular one of them. You are the boss. You decide who you want to work with."

(You can read this paragraph specifically about the Will planning process; however, I think it’s relevant to any exercise in obtaining professional advice. You need to be engaged in the process in order to get anything actually useful out of it, and you need to choose a professional that recognizes and welcomes that fact or find another one)

(Chapter 35: The Will, page 783 iBooks version)

If you only have time to read one sentence:

“One certainty is that your financial life will happen; it is entirely your decision if it happens on purpose or by default.”

(Chapter 1: The Limitations of this Text, page 32 iBooks version)

As we wait for winter to loosen her icy grip on our hearts and sidewalks, let’s take a moment to be grateful for the extraordinary amount of excellent information available to read...indoors. (Except if you live on the West Coast and have been enjoying spring since January and are too busy cavorting under cherry blossoms and what-not to waste time reading.)

While the sheer volume of financial writing can be overwhelming (which is why I curate this list for you each month), there is an increasingly diverse set of perspectives available to learn from. There is also a correspondingly diverse set of topics...which benefits everyone! 

This month, the three articles you can’t miss include some fascinating research from our friends at The Decision Lab on the value of thinking about why before we think about how. Superb information from Owen Winkelmolen about increasing government benefits with strategic RRSP contributions. And finally, a secret from Meg Bartelt, one of my new favourite bloggers: you, the Client, are the Expert in your own life, and the Hero of your own journey. 

If you get through those and are still cowering away from winter behind your windows, take a deep breath and check out:

• How Mint is happily collecting all your data and not giving much at all back anymore (if they ever were)

• A straightforward explanation of sequence of returns risk

• How mindfulness discourages people from looking beyond their own work ethic to overcome collective suffering

• How high expected returns can royally screw you

• A reminder that you probably own too many shares in the company you work for

• Why we tune out those closest to us and how it makes us (and them) lonely, and, finally

• What we mean when we talk about market cycles.

The Decision Lab

From The Decision Lab

"In particular, thinking about why we might do something instead of how we might do it causes us to be more rational. Taking that perspective lets us feel more in control of our finances, budget better, save more—and ultimately achieve more of our financial dreams."

Read the full article here.

How RRSP Contributions Affect Your Government Benefits

From Owen Winkelmolen

Owen is one of the only people I know paying close attention to the effective tax rate of families. If you haven’t started paying attention to him yet, you should.

Read the full article here. 

Confessions of a Comprehensive Financial Planner

From Meg Bartelt

“All us humans already know pretty much everything we need to. We know the essential elements of our ideal life. We know almost everything we need to do to live that life. And we know what the obstacles are and how to overcome them.

We just haven’t been given the space, time, and empathy to figure it out before. Most importantly? We have the motivation to do all those things because we can tap into that emotion around that ideal life…and that motivation is something I could never ever give someone else as a financial planner.”

Read the full article here.

You can read this month's entire list below:

The sad state of Intuit’s Mint | Rob Pegoraro

The value of Mint is the tremendous amount of behaviour data its harvesting from you for free. What incentive do the owners have for improving the user experience?

Volatility & Risk Part 2: Sequence of Returns Risk | Loonie Doctor

“When cash is being added or taken out of an account, then it does change the outcome. Money being added isn’t exposed to the returns that predate it and money that is taken out does not get the returns that follow. Hence, the sequence of returns before and after cashflows can make a difference in the outcome.”

How mindfulness privatised a social problem| Hettie O’Brian

“Purser argues that mindfulness has become the perfect coping mechanism for neoliberal capitalism: it privatises stress and encourages people to locate the root of mental ailments in their own work ethic. As a psychological strategy it promotes a particular form of revolution, one that takes place within the heads of individuals fixated on self-transformation, rather than as a struggle to overcome collective suffering.”

Not-so-great expectations: The curse of high expected returns | Daniel P. Egan

“The connection between expected returns and financial planning means that clients with more-optimistic advisors are likely to save less. Not having to set aside as much sounds great—until the plan fails because the high returns never materialize.”

Some Bull Market Reminders | Ben Carlson

“The market cycle looks something like this: markets go up for a long time, which eventually leads people to become complacent and take too much risk, which eventually leads them to over-correct when the inevitable downturn comes, which tends to go further than fundamentals warrant, which leads people to become too conservative and take too little risk, which eventually leads to the inevitable recovery when things get less bad and ultimately we start the cycle over again with another recovery.”

You’re Not Listening. Here’s Why. | Kate Murphy

“But what is love if not a willingness to listen to and be a part of another person’s evolving story? A lack of listening is a primary contributor to feelings of loneliness.”

Do you have too many shares in one company? | Jason Heath

“It may seem more comfortable to invest in something you know—like shares of your employer—than other investment options. But remember, not only the success of your shares is tied to the performance of your employer, but even your bonus or your job itself could be at risk if the company goes through tough times. If you did not work at that company, would you have bought those shares in the first place?”

Catch all six seasons (but no movie) of the beloved podcast Because Money here.

Season Six: January - March 2020, with co-hosts John Robertson and Chris Enns

Season Five: October 2018 - June 2019, with co-hosts John Robertson and Chris Enns

Season Four: September 2017 - April 2018, with co-hosts Kate Smalley, John Robertson, and Chris Enns

Season Three: October 2016 - May 2017, with co-hosts John Robertson and Chris Enns

Season Two: September 2015 - March 2016, with co-hosts Jackson Middleton and Kyle Prevost

Season One: November 2013 - February 2015, with co-hosts Jackson Middleton and Robb Engen