# Do You Advise Others?



## Janus (Oct 23, 2013)

Let me start with a recent experience.

I moved to Hong Kong recently, a place where taxes are low but life is *expensive*. With a decent salary and a lot of motivation to keep expenses in check (thank you RDPD), I've managed to keep on track with my savings goals - however I've noticed that almost everyone here in their 20s is either broke or in serious credit card debt. 

A friend of mine recently started talking to me about money, and after I told him about some of my thinking on savings and investment he mentioned that he's deep in debt - credit cards, student debt, even money borrowed from friends. Since then I've been helping him figure out how to get rid of his debt, and more importantly, we've talked about it enough that he's now motivated to change his behaviour (i.e. blowing $ on booze and nice food) which was the problem in the first place. 

It's felt really good helping my friend, and within a month he's completely changed his direction (if not his personal balance sheet - that will take time). He's excited to start tackling debt, with the goal of nearing the zero-debt point so he can start investing in mutual funds and stocks.

Money is a taboo topic and I was surprised that my friend was so honest about his situation. So my question to you all is: as people who clearly spend time thinking about saving and investing, how many of you mentor others or compare notes with others in real life? What have your experiences been like?

Janus


----------



## Video_Frank (Aug 2, 2013)

My older brother switched from an advisor to self-directed using advice from CCP and others. He talked to me about switching from my financial advisor to self-directed. He told me I would have to find my own reasons to do it. It took me about two years of reading and back-and-forth questions before I became convinced that a couch potato portfolio would be better.

Now I have people asking me about index investing. I answer their questions & point them to some good resources (like Dan's excellent guide to investing). They will come back with questions along the way. However, it's up to them whether they choose to change or not. I don't push, I simply answer questions and direct them to sources that affected my decisions.

My brother & I talk all the time about our portfolios and possiible changes. We use each other as sounding boards for ideas. It's very helpful.


----------



## mrPPincer (Nov 21, 2011)

The number of people that I know in real life that are genuinely interested in learning this stuff that I can compare notes with & share knowledge I can count on the fingers of one hand, maybe two if I count people I very rarely see.

For everyone else I've found it's not worth the effort, they are content with their 2.5% MER mutual funds or their mountain of credit card debt, & would probably resent any attempt to help, eg. get them into a lower cost product and the market takes a downturn and suddenly it looks like they got ripped off, forget it.

Nice to see your friend does actually seem to want to learn, in my experience it seems most people are driven by momentum and habit or stubbornly cling to their own ideas or think it's too complicated to learn.


----------



## Four Pillars (Apr 5, 2009)

Good comment VF. 

I think it's important to note that answering money questions from an interested party or talking about money with a like-minded friend is a totally different ball game compared to trying to convince someone that they need/should change their financial habits.

I have no problem with the former, but I don't bother with the latter unless I think it will help - which is never.


----------



## Oldroe (Sep 18, 2009)

I worked in a huge factory were there was a definite class structure. I was the bottom rung production.

It was really funny to have tradesman sneak around to ask the weird guy reading all those crazy books about financial stuff. Even plant mangers engineers were just as baffled.

I always made sure they had the right information and let them make their investments.


----------



## Janus (Oct 23, 2013)

mrPPincer said:


> The number of people that I know in real life that are genuinely interested in learning this stuff that I can compare notes with & share knowledge I can count on the fingers of one hand, maybe two if I count people I very rarely see.
> 
> For everyone else I've found it's not worth the effort, they are content with their 2.5% MER mutual funds or their mountain of credit card debt, & would probably resent any attempt to help, eg. get them into a lower cost product and the market takes a downturn and suddenly it looks like they got ripped off, forget it.


I agree entirely. I was pretty blown away that my friend admitted his problem and was so eager to change. I think my timing might have been serendipitous.



> I think it's important to note that answering money questions from an interested party or talking about money with a like-minded friend is a totally different ball game compared to trying to convince someone that they need/should change their financial habits.


I had assumed as much. It's good to hear the success stories, that's what the thread is for.

Oldroe: good on you for being a hub of information.


----------



## SpendLessEarnMore (Aug 7, 2013)

Oldroe said:


> I worked in a huge factory were there was a definite class structure. I was the bottom rung production.
> 
> It was really funny to have tradesman sneak around to ask the weird guy reading all those crazy books about financial stuff. Even plant mangers engineers were just as baffled.
> 
> I always made sure they had the right information and let them make their investments.


ditto I work in a warehouse at the bottom rung as a material handler. I like talking about stock trading/investments and managing debts with whoever is interested in hearing. I would never offer advise on a forum though just my experiences. Obviously a lot more qualified people on this forum than me.


----------



## donald (Apr 18, 2011)

No,not really,other than a uncle who is a C.A(he does my taxes for my business and helped me switch over to self direct/move out of mutual funds ect)
I have several friends who own businesses and we do talk about business often though(general).
With the exception of those few friends i don't bother(not that anybody listens to me anyways lol)Several of friends are in the throws of life(somewhat newly married,one or 2 kids ect are a typical canadian,lucky to have a couple hundred a mth after all their expenses.
Not worth it to talk about personal finance(they do know that i have some wealth though esp compared to them)
The investing side of personal finance(esp the financial markets)is so vast i have enough on my plate,learning as i go.if i did open up my mouth it might be like the blind leading the blind lol.


----------



## fraser (May 15, 2010)

Only if they ask and never, never any advice on specific investment strategy. But perhaps general comments on allocation.

I may recommend a book, suggest they review their MERs or fees, or understand what motivates their financial advisor-if they have one. 

I have no interest in convincing someone to change their financial mismanagement. It seems to me that if they really want to change they will. If not, why waste my breath. For many it seems to be a lifestyle choice.

There is not much you can do with someone who blindly goes ahead and buys into exempt market security because their best friend's second cousin, the house painter, says it is a sure bet and guaranteed to boot. Or those in our area who are buying boxes of Iraqi dinars because their nephew, who knows absolutely nothing about finance let alone FX, tells them that this is the road to riches and HE knows. And the ones who consistently max out their credit cards and overdrafts will probably always do so which is why I like Canadian bank stocks.


----------



## underemployedactor (Oct 22, 2011)

Ditto fraser. I find that unsolicited financial advice gets the same kind of reaction as unsolicited relationship advice. Sooner or later it'll probably cost you a friendship. There is a great deal of messenger shooting in emotionally sensitive areas.


----------



## andrewf (Mar 1, 2010)

This is why resources like Dan's guide are so useful. You can offer it as a third party resource. People seem to respond to that a lot better than a peer telling them they are making financial mistakes.


----------



## james4beach (Nov 15, 2012)

I used to tell people before the 2007 crisis that they should avoid all American financial and REIT companies like the plague, but generally nobody listened to me -- except clients for whom I provide bond research and had told to avoid Fannie and Freddie bonds (these clients were eternally grateful of course).

When it comes to friends & colleagues though, many people turned on me in a shoot-the-messenger sort of way. People don't like being wrong and they don't like when they end up looking silly... it's embarrassing. The credit deterioration was so obvious in 2007, and I was telling all my friends, yet very few people appreciated my warnings. Instead I heard things like "why are you so negative" and "Citigroup can't possibly collapse, they're one of the biggest banks in America".

It left me with the feeling: next time, I'll keep it to myself. Let people figure it out themselves.

Of course I've had trouble keeping it to myself, and I still come on these forums and rant and rave about how highly leveraged the Canadian banks are (and how dangerous it is for our banks to have 30:1 leverage) and how a couple Canadian banks became de facto insolvent in 2008, yet it never made the press, and everyone (including expert analysts and government officials) lie to Canadians and say our banks were solid through 2008 -- which is untrue since a couple basically collapsed and they all required massive bailouts. And the bailouts were secret, undisclosed, and largely came out only because Bloomberg used Freedom of Information requests to extract bailout data from the Federal Reserve and then we discovered -- shockingly -- that Canadian banks were among the top recipients of bail out aid.

And then on forums like these I just hear, "you're a fear monger" and "you're so negative" etc. People want to dismiss legitimate, important information? FINE.

I understand now that nobody cares about hearing about risks. We just close our eyes and repeat the mantra ... the canadian banks are the safest and best investments on earth ... and retirees go and load up their portfolios with risky bank stocks, and we'll just assume it will all be OK and we'll just ignore the 30:1 leverage (or in the case of National Bank, 36:1 leverage)


----------



## the-royal-mail (Dec 11, 2009)

^ interesting post. When you talk about our bailouts, are you referring to the $20B from the feds around 2008 or 09? I remember that.

A panicked society is a very dangerous thing, so the language of the BOC, Finance Minister etc tends not to be alarmist. It's good to keep your eyes open and stay aware but it is generally difficult to change someone's mind if it's already made up.


----------



## Retired Peasant (Apr 22, 2013)

Dan who?


----------



## james4beach (Nov 15, 2012)

It's much more than $20 billion. I'm thankful to the high heavens that the Canadian Centre for Policy Alternatives actually wrote a report on this, so I can point people to it instead of looking like a tin foil hat lunatic
http://www.policyalternatives.ca/publications/reports/big-banks-big-secret

When I talk about bailouts for the Canadian banks I'm talking about a total peak of $114 billion in emergency lending/support which is summarized in Figure A, page 6 of that report.

The other noteworthy point is that three banks, CIBC, BMO, and Scotia, received peak government support that exceeded the value of the company. This effectively indicates a complete bail-out by government. 3 of the big 5 banks were completely underwater during the crisis.

Quoted from the report: _"However, in contrast to the official story Canada’s banks received $114 billion in cash and loan support between September 2008 and August 2010. They were double-dipping in not only two but three separate support programs, one of them American."_

Yes the ministers and Carney were obviously trying to prevent panic, but they went far in the other direction and directly lied about the financial condition of the banks. Carney continued to lie until his retirement, always saying the banks were on solid footing during the crisis. It's just not true!


----------



## james4beach (Nov 15, 2012)

Another beef of mine is that the banks themselves lied to their shareholders. They did not disclose their true financial condition! This is illegal.

Shareholders should not be tolerant of that. Who invests in a company that lies about their financial status? And why has nobody called them out on it? This is why I never would invest in the Canadian banks. You can't trust the financial statements of the banks.


----------



## james4beach (Nov 15, 2012)

I think the word for it is *denial*, by the way.

Canadians hold tons of bank stocks and like the dividends. They want to believe these are safe investments especially as they enter retirement. So instead of being critical of the financial condition of the banks, they want to believe that the banks didn't come within an inch of their lives, didn't go underwater (as CIBC, BMO and Scotia did) and are great investments going forward.


----------



## HaroldCrump (Jun 10, 2009)

James4, to clarify one thing - if credit and derivatives markets are frozen (as they were between Oct 2008 and March 2009), _any_ bank will become insolvent.
A bank is a leveraged entity - you freeze the international credit and derivatives market, that is like cutting off the supply of oxygen to the brain of a living organism.

What happens to a uranium producing company if nuclear reactors are outlawed?
What happens to an oil sands energy company if fuel from the tar sands is banned by legislation?

The way to have banks that will not have a solvency crisis in a credit freeze is to have near 100% reserve requirements and to separate retail banking from investment banking.
There is not 1 country in the G20 that has any of those 2 regulations.


----------



## james4beach (Nov 15, 2012)

HaroldCrump I don't think that's true

Why did the credit unions not require bailouts? Some of them are very large... I deal with a credit union with over $1 billion in assets and they have some derivatives (interest rate swaps) too. It didn't require Bank of Canada support, Federal Reserve support, CMHC support. As far as I know they didn't even draw on Credit Union central for credit.



> The way to have banks that will not have a solvency crisis in a credit freeze is to have near 100% reserve requirements and to separate retail banking from investment banking


Credit unions are leveraged (certainly don't have 100% reserve requirements), and they have some derivative exposures as well. But only the big Canadian banks needed massive government bailouts.

As for investment banking, yes it should be separated out. The current structure is an abuse of the safety mechanisms meant for depository institutions


----------



## andrewf (Mar 1, 2010)

Retired Peasant said:


> Dan who?


Dan Bartolotti, aka Canadian Couch Potato.


----------



## Oldroe (Sep 18, 2009)

All this wasted energy on banks. The next financial crisis will new car loans 0 down 94 months sound familiar.


----------



## dBII (Mar 12, 2013)

Ahem...just to get the train back on the tracks, I am truly amazed at the number of people who are in tough straits financially that have no real plan. Bringing these sorts of things up without being asked though just creates tension, so I avoid that. I also keep my financial situation fairly confidential. To do otherwise would seem like bragging. I don't have a great deal of experience, but the experience I do have I share on anonymous forums. That way I get the warm and fuzzy feeling that I may have helped someone out and don't have to worry about getting sued if things turn south. I don't know if I should feel bad about doing that.


----------



## AltaRed (Jun 8, 2009)

dBII said:


> Bringing these sorts of things up without being asked though just creates tension, so I avoid that. I also keep my financial situation fairly confidential. To do otherwise would seem like bragging. I don't have a great deal of experience, but the experience I do have I share on anonymous forums. That way I get the warm and fuzzy feeling that I may have helped someone out and don't have to worry about getting sued if things turn south. I don't know if I should feel bad about doing that.


No reason to feel bad about that. People come here because they are already interested in learning and it IS anonymous advice, or better yet use of the word opinion, or recommendations. They should know that anonymous recommendations are just that (especially since non-licensed people cannot technically/legally advise). 

Your approach is similar to mine. I generally stay out of opining or recommending anything of substance to anyone I know unless they ask the questions first. When I do so, it is pretty general based on rules of thumb with recommendations to spend some time on financial forums. There is no reward getting one's butt in the wringer.


----------



## Canadian (Sep 19, 2013)

The only person I really advise and discuss finances with is my partner. Even that - it took a couple years before we started having real conversations about investing, personal finances, and retirement. I finally had him sell most of his mutual funds and open a self-directed RRSP. I've been giving him advice on stock purchases - and he's been happy with the results - but I'm still trying to have him understand and accept risk management and asset allocation. We also have different views on budgets and frugality sometimes - he's shocked at how little I can spend by doing small things, without "going without."

As far as other friends - I have one who owns multiple rental properties and we talk loosely about the pros and cons of incorporating. I know all of my friends invest - either through an advisor or self-directed but such topics very rarely ever surface. I love discussing these topics but it's awkward to bring up if the other party isn't comfortable or interested in having the discussion.


----------



## Janus (Oct 23, 2013)

fraser said:


> I may recommend a book, suggest they review their MERs or fees, or understand what motivates their financial advisor-if they have one.


I think that's a great place to start.

It appears unanimous - no unsolicited advice. I guess it just shows how open my friend was about this whole thing, a very healthy decision on their part.


----------



## NorthKC (Apr 1, 2013)

As a CA, I get asked for advice all the time. Lots of time, it's general advice that they can find themselves but just needed guidance or to give them a heads-up on any rebates in their field that they may not be aware of. Anything more than that, obviously, I have to start charging them. They don't like it when I start doing that but do understand why I have to do that and every single one of them have never regreted paying me for detailed information from a person that they trust that saved their financial life!

Lots of time, they just need a confirmation that their information was correct and up-to-date.


----------



## Sampson (Apr 3, 2009)

I have some close friends with whom I have given advice and it was well received.

I typically try to shy away, especially family and those friends who I know are unwilling to heed the advice. I find those people want an answer without understanding the situation and without a thorough analysis, advice can be misunderstood.


----------



## mcoursd2006 (May 22, 2012)

One should never give out advice unless it is solicited, of course. That much we can agree on. I have had a few friends and colleagues ask me about things such as fixed vs variable mortgage, early retirement package, and things of that nature, and I'd do some rudimentary math to show them the options. Generally speaking though, it's not common place. Money and finance is still subject that people don't feel comfortable discussing.


----------



## Eder (Feb 16, 2011)

I give a few close friends advice as well as my kids...as far as I can tell none of them take it.

I regularly read this forum...find an interesting topic on which I have strong opinions...write a long post and then delete it instead of posting.


----------



## Canadian (Sep 19, 2013)

NorthKC said:


> As a CA, I get asked for advice all the time. Lots of time, it's general advice that they can find themselves but just needed guidance or to give them a heads-up on any rebates in their field that they may not be aware of.


I'm in a similar boat. I often have friends ask me about taxes or incorporating but the conversation seldom gets into personal situations. I usually recommend doing an official consult with the firm if they are serious about it. When it comes to personal finances, however, such topics remain untouched and taboo.


----------



## uptoolate (Oct 9, 2011)

mrPPincer said:


> The number of people that I know in real life that are genuinely interested in learning this stuff that I can compare notes with & share knowledge I can count on the fingers of one hand, maybe two if I count people I very rarely see.


This is about where I stand and also agree with Four Pillars comment. One colleague I have that enjoys talking about this stuff and we have some fun with it and compare notes. We pick up some useful tidbits from each other and serve as fact and reality checkers. I have always been pretty much an indexer while he has much more stock picking experience. We're both big savers and know that the most important cards we hold are our frugal lifestyles. Occasionally, I'll recommend a book like Dan's guide, The Millionaire Teacher or The Four Pillars of Investing to someone who is already interested. Most everyone else seems to be living the life and be happy with big MERs and fees on AUM that make me shake my head. To each their own.


----------



## fraser (May 15, 2010)

I think that if someone is truly interested in changing or improving their situation they will at least do some research and either borrow or buy a book-whether it be basic financial management or investing. And if they are not motivated to do even that, they I believe they are either too lazy or not sincere about listening to advice or making changes in their life.


----------



## 6811 (Jan 1, 2013)

fraser said:


> I think that if someone is truly interested in changing or improving their situation they will at least do some research and either borrow or buy a book-whether it be basic financial management or investing. And if they are not motivated to do even that, they I believe they are either too lazy or not sincere about listening to advice or making changes in their life.


fraser, I agree with your comments. I am not a teacher so when asked for advice I will ask basic questions and recommend a book I've read that I think suits the situation. (I used to lend out a copy of the book but found it was not often returned and after a while became difficult for me to replace.)


----------



## alingva (Aug 17, 2013)

Janus said:


> Let me start with a recent experience.
> 
> I moved to Hong Kong recently, a place where taxes are low but life is *expensive*. With a decent salary and a lot of motivation to keep expenses in check (thank you RDPD), I've managed to keep on track with my savings goals - however I've noticed that almost everyone here in their 20s is either broke or in serious credit card debt.
> 
> Janus


The same situation is in every country you go - debt, debt, debt. Watch a movie on youtube to understand why, called 'money as debt', explains the situation.


----------



## wendi1 (Oct 2, 2013)

I do give out advice, but only if asked. And I agree that it does not seem to be followed very often. I am surprised at how much terrible information is out there (one guy I work with thought his RSP withdrawals would be tax free!).

However, I do owe a big debt that needs to be carried forward, because someone else has helped me a lot with my finances. Oddy, he is not rich himself, but I enjoy learning from him. I would never have figured out that stupid ACB thing without him.


----------



## marina628 (Dec 14, 2010)

I have been asked for advise many times but very few ever follow it.I have one friend who for last 2-3 years asks me for same advise over and over but she is not really willing to put in the hard work and change her bad habits so I don't even bother.I have two true great friends who are investors and self starters like myself and we do chat about the markets every morning over coffee even though 99% of my portfolio is boring vanilla .


----------

