Jumping in

In addition to marital relationships, canines, hormones, RVs, condos, Trump and occasionally truck nuts, this pathetic blog talks about investing. And taxes. Assets, retirement planning, balanced portfolios.

It’s shocking how little people know about this. Schools don’t teach it. TNL@TB just wants to sell you stuff. Same with your cousin who got a job last year flogging insurance. Or mutual funds. Finding credible, indie info about building wealth and avoiding taxes is almost impossible. As a result most of us just borrow a pile and buy real estate. Or we confuse investing with gambling on the stock market (Mars). Or flee risk to become savers – risking running out of money (Venus).

This confusing world of money is overwhelming a lot of Canadians. The evidence is everywhere. Household debt’s off the charts. RRSP contributions have crashed. Four in ten think their TFSA is just an emergency savings account. We’ve borrowed $300 billion against real estate, plus $1.6 trillion in mortgages. A scary number say they’re just one missed paycheque from doom. People are retiring with unpaid debt. And seventy per cent of us have no corporate pension.

Over the last 11 years this blog has addressed such things with nauseating repetition, about 80,000 dog pictures and endless emails from people who truly, deeply, madly need help. But, sadly, most Canadians will never come here, and continue to make near-fatal mistakes with their dough.

Included will be legions of Millennials who have matured into Class A skeptics, trusting algos more than they do actual people. This has led to the rise of robo advisors like Wealthsimple. Now the banks are into it, with SmartFolio at BMO and InvestEase at the Royal Bank, for example. The appeal is obvious – put money into a computer-generated portfolio that buys negotiable securities, automatically rebalances and is cheap.

The robos first appeared a decade ago and there are now 100 of them in over a dozen countries managing about two trillion dollars. That sounds like a lot, but it’s actually 1% of the wealth management business. In Canada WS has about 150,000 clients with an average of $30,000 invested.

This week there was interesting news. RBC launched its robo last year. Given the size and clout of the bank it was expected to quickly attract a mess of moisters eager to grow their tax-free savings. But, nope, didn’t happen. The bank’s head wealth-management guy admits “only a small portion” of the population is interested. “We haven’t see Canadians run to it,” Doug Guzman says of the robo business. “Maybe it’s not as big a proportion of humanity as we once thought.” Bank of Montreal, which has been roboing for three years now, is believed to be in the same boat. TD is also in this space, but no word on how that bank is faring.

Why is robo a bust?

Maybe Mills don’t have enough money to seed portfolios. Perhaps they’re too indoctrinated into buying condos and swallowing mortgage debt. Maybe they’re a jaded bunch of emerging socialists who think a sharing economy with more government is the antidote to Boomer-dominated capital markets and the mindless pursuit of mammon.

But, nah, I doubt it. They love money, too. It’s more a matter of knowledge.

Financial illiteracy is the disease that may hobble Canada. Why would the robos – which offer a no-hassle, low-cost, no-frills, no-advice, eight-clicks-and-you’re-done investing experience – be wilting? Because most people (and especially the kids) have no idea what investing means. Eighty per cent of all TFSA money is in cash or GICs. People in their forties are lugging around student debt. Young adults hobble themselves with mortgages and condo fees when they could rent for half the cost and be building liquid assets. Couples pay more tax and increase risk by not combining their finances or investing together. And everyone buys high, chasing stuff that goes up, while selling low in fear.

Robos are fine. If you have a modest amount of money, then jump in. It’s better than getting stuck with a few bank mutual funds or seeing your money rot in a HISA. It’s a step up from throwing your cash at some wonky weed stocks, getting into crypto or striving for real estate you can’t really afford.

For those with a few hundred grand, life is probably more complex and you could use advice on tax avoidance, retirement strategies and how to escape the consequences of rampant financial ignorance. They’re coming. A fee-based financial advisor (with a fiduciary responsibility) is not for everyone. But this blog is. So next time, bring your kids.