# Couch Potato for Hire



## Echo (Apr 1, 2011)

It looks like Dan from Canadian Couch Potato/MoneySense is partnering with a Toronto firm and offering advice to DIY investors who are interested in setting up an ETF portfolio with a discount brokerage. http://canadiancouchpotato.com/2013/01/14/couch-potato-for-hire/

Sounds interesting and I'm sure Dan gets a ton of email from readers who are looking for this kind of advice. Better to charge for this kind of personal advice than to give it away for free.

I noticed there was a dedicated page with more information, which states the cost of the service is $3k (plus HST). http://canadiancouchpotato.com/diy-investor-service/

What do you think, DIY investors? Is the fee worth it?


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## avrex (Nov 14, 2010)

Interesting.

1. Most people in this forum are 'true' Do-It-Yourself investors. They investigate / research / learn and set up their own portfolios.

2. Then there is the other type of person... 
This person basically wants to have someone else tell them /show them what to do. They don't seem to have the desire / drive to learn how to DIY themselves. Or perhaps they're intimidated. For this person, the 3k is probably worth it. 

This sounds like a good service for those people who've come to realize that they want to get out of their high cost mutual funds and into a more cost efficient ETF index based portfolio. For example, let's say a client has a $200,000 portfolio with an average MER of 2.00%. This service then converts them to an ETF index based portfolio with an average MER of 0.50%.

Guess what? This client has saved $3,000 in his first year and every year afterwards. I think it's worth it for that type of person. 

Good for Dan to recognize this need and develop a service for it.


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## Four Pillars (Apr 5, 2009)

Looks like a good service. The price tag brings to mind one of the problems with fee-only financial advice which is that it can be pretty expensive.

Ideally there should be different levels available which might make it more accessible to smaller investors just starting out with indexing. Ie with $100k or less.

I've considered becoming a financial advisor in the past since it would be a good fit with the blog, but face the same problem Dan mentions in that you have to get relevant experience which is really hard to get unless you want to be a mutual fund salesperson which is pretty much how every financial advisor starts out.


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## andrewf (Mar 1, 2010)

I think this is the direction the investment advice industry needs to move it. Advisors can provide useful service, but charging for AUM is illogical.

To me, it seems like they should offer ongoing help on a billable hour basis. The more service you need, the more you pay. I know there is likely some overhead with tracking clients, so perhaps a lower flat fee per year for this (a few hundred dollars) is justified.

Essentially, this is moving the service to an activity-based cost pricing model.


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## Belguy (May 24, 2010)

Here's my advice for potential 'Couch Potato' investors and I don't charge a nickel for it. First, set up an asset allocation appropriate to your risk tolerance and circumstances. Next, set up a discount brokerage account where you bank. Finally, invest in four or five of the broadest based, lowest fee mainly Vanguard ETF's using some combination of VCE, VTI, VEA, and VWO for your equity allocation and VAB for your bond allocation and put the rest in a HISA. Then, rebalance your portfolio whenever it gets significantly out of whack. Voila--you're done and you've saved $3K which you can then spend on yourself for a nice vacation to Florida or wherever.:biggrin-new:eaceful::tickled_pink::smile-new:


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## Spudd (Oct 11, 2011)

I think your second sentence is the part where the advisor can add value.


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## brad (May 22, 2009)

Actually an advisor can add value to every one of those steps. It's easy to forget that most people either can't or don't want to make the time to learn how to do these things. I remember that setting up a discount brokerage account took time and I had questions that weren't easily answered. Figuring out how to buy and sell ETFs was very intimidating at first and there was a steep learning curve. Rebalancing wasn't so simple either, especially with lots of conflicting advice about whether people should really continue to be buying bond funds today. 

When I think of someone like my sister, who works 75-hour weeks with lots of international travel and doesn't even have time to learn how to use her new cellphone, learn how to use the new versions of Windows and Office that her company installed on her computer, or learn how to set up the programmable thermostats in her house, a service like this would be perfect.


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## scomac (Aug 22, 2009)

Echo said:


> I noticed there was a dedicated page with more information, which states the cost of the service is $3k (plus HST). http://canadiancouchpotato.com/diy-investor-service/
> 
> What do you think, DIY investors? Is the fee worth it?


The question, more appropriately isn't whether you or I think this new service offers value, but, *does the target market think it offers value?*

This remains to be seen for a couple of very important reasons. First of all, you don't automatically get to the point where you realise that costs matters and there are superior options to the mutual fund model that is routinely pitched to know nothing clients of limited means. It takes some effort to make yourself aware of these facts and more importantly to realise that they matter. Typically, we don't see the majority of retail investors making this effort. Those that do, tend to gravitate to the DIY model which for the most part can be carried out alone with a high degree of success if one avails themselves of all the *free resources*, like this, that are out there.

The second issue is even more pertinent with respect to costs especially for those with modest assets. By-and-large, the vast majority of retail investors are unaware of how much they are paying in terms of trailing fees and commissions because they never see it come off their statements. There's lots of misdirection on the subject too when advisors claim that they are paid by the firm rather than the client. We still have a situation where far too many think financial advice is free. Are they going to willingly pay for what they think is free?

If I'm allowed to by completely cynical, I see this new service offering as a hook as much as anything to attract new clients who are convinced of the merits of indexing while lacking the necessary asset base to qualify for the firm's full service model. I would suspect that over time clients will be quietly offered the full service option once they qualify.

While this might appear to be a new departure for offering financial planning services, there are a number of planners across the country who have been offering fee for service for years providing clients with plans that they can then execute on their own via a DIY discount broker. The difference here is that this maybe the first time that such an offering has been advertised via social media networks.


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## fatcat (Nov 11, 2009)

in a crocodile pond, if you ask the average crocodile what kind of animals exist in the world
he is likely to answer "crocodiles"

we are a distinct minority in the investing world (though the momentum is on our side, our numbers are gaining)
it's easy to forget that _most_ people don't have any interest or aptitude in managing their money at all
they are happy to pay someone else to do it for them

i would say that cp is offering a good service, costly up front but should return the cost pretty quickly on a decent size portfolio

my reservations would be that unless he provides some ongoing year-after support, the type of person that would pay for this advice would not be the type of person that would pay attention to the ongoing needs of the portfolio, however minimal

i think most people (more than 50% by far) just want to put in as much time as it takes to open their statement every month and grumble or smile (as the case may be) and then go back to reading their book or watching tv


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## Canadian Couch Potato (Mar 6, 2010)

Thanks for your interest in the new service. I think it's important to stress (as some have above) that the target market for this service is not likely to be regular visitors to sites like this one. Experienced, committed DIY investors probably don't need help. But experienced, committed DIY investors also sometimes forget that they are in a tiny minority.

Also wanted to comment on the idea that "there are a number of planners across the country who have been offering fee for service for years providing clients with plans that they can then execute on their own via a DIY discount broker." Most planners are not licensed to advise on specific securities. But more important, we don't just hand the client a plan say "go away and do this," because most will never get around to it. What makes our service unique is we actually walk the client through all of the trades and implement the plan with them. That makes all the difference.

@fatcat: We agree, and there is an option for people who want ongoing advice, periodic check-ins, etc.


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## humble_pie (Jun 7, 2009)

the fee is certainly justified imho. I've assumed that he & the 2 financial planners at PWL will take the time to query & study each individual client plus the breadth of the client's life, including his spouse's investments as well as his children or plans to have children.

speaking of couples was there to be any reduction in fees below $6k for a couple attending together. 

how many hundreds of posters have we seen come to this forum & agonize over their etf formulas ? the stories are eerily similar. How to allocate, in which account to put US funds, how to select an etf when there are rival houses with similar products, how to rebalance.

i also agree that hi-quality advice for small & middle-sized retail investors is difficult if not impossible to find. Personally i feel that by going to a recognized talent like journo bortoletti plus 2 licensed planners from a highly reputable firm like PWL, the investor who wants everything set up properly & quickly is getting an excellent deal.

would i ? umm, options are way too fun. Sold my lonesome Goog this am. This one is a june 600 put. I took in $835 US for 15 minutes work. No rebalancing, no mumblety, no slippage, no emmee ares.


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## Canadian Couch Potato (Mar 6, 2010)

@Humble pie: Appreciate the comments. I'm happy to confirm that we treat a couple as a single client, so the the fee is unchanged at $3,000. And yes, we certainly spend a lot of time gathering each family's financial info in order to determine the appropriate target rate of return and asset allocation. That's a major part of the service.


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## Belguy (May 24, 2010)

I still don't get it!! Hasn't most of the necessary information been supplied on the Canadian Couch Potato website for free in the past? And now, they want to charge $3000 for basically the same information?

It's not rocket science!!


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## thenegotiator (May 23, 2012)

Belguy said:


> I still don't get it!! Hasn't most of the necessary information been supplied on the Canadian Couch Potato website for free in the past? And now, they want to charge $3000 for basically the same information?
> 
> It's not rocket science!!


3k dollars?:eek2::eek2:


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## Sampson (Apr 3, 2009)

Belguy said:


> It's not rocket science!!


Neither is building a house, but people still pay others to do that for them. In many instances, they pay hundreds of thousands of dollars. I don't know how much you used to earn Belguy, but if you priced it out, it would be worth my time to DIY and build my next house.


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## Jungle (Feb 17, 2010)

Trust me, you and I know many poeple that have ZERO interest in learning how to managing a portfolio and would suit an advisor to assist them. 
It seems simple to us, but confusing and overwhleming to some.


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## My Own Advisor (Sep 24, 2012)

I'm happy for Dan and I think this service will have many customers.

brad said it well above. Figuring out how to buy and sell ETFs was very intimidating for many people at first; DIY anything scares the heck outta most people. Managing your own finances, may be the scariest of all DIYs...

I suspect for those that want to learn, those that want to improve, they will definitely take advantage of this service. 

Kudos to PWL Capital for the partnership as well.


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## brad (May 22, 2009)

Belguy said:


> I still don't get it!! Hasn't most of the necessary information been supplied on the Canadian Couch Potato website for free in the past? And now, they want to charge $3000 for basically the same information?


No, there's a big difference: the Couch Potato site provides information. The service puts that information into practice. All of the information in the world is useless if you don't know where to begin or feel intimidated by it, or don't have the time to do it yourself. 

You can learn how to do almost anything on the internet. But people still pay other people to do things for them -- despite the fact that instructions are freely available online. Why? It all boils down to time, priorities, and motivation.


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## MoneyGal (Apr 24, 2009)

It's more than that though. When you work with a financial intermediary, they have a professional responsibility to ensure they are making suitable recommendations for you. This is accomplished in part by undertaking a thorough information-gathering process, and synthesizing the collected information to make comprehensive recommendations. 

As odd as it is to think about, you don't actually have this responsibility to yourself. So when you work with an financial advisor, the total burden of what they are accomplishing is greater than if you are doing it yourself. It isn't a straight service transfer, i.e., I can do my laundry myself, or I can pay someone else to do it, but what is getting done ("laundry") is the same in either case -- with financial stuff, "what is getting done" can, may and will vary significantly between a DIYer and using an intermediary. This is a significant reason for the "high" cost of working with an intermediary - you are transferring risk and responsibility to them, and that changes the nature of how the work gets done.


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## Belguy (May 24, 2010)

For a cost of $3K, I STILL don't get it!!:confused2::confused2:

Maybe I should go into the business myself for $3K each times a couple of hundred clients (I was going to call them something else), to recommend a 'Classic Couch Potato' portfolio, my retirement would be secure!!!


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## leoc2 (Dec 28, 2010)

I need an advisor to help my wife manage our potato if I pass before her. I wonder if that service is in the works? I may be a DIY investor but she is a DDIY (Don’t DIY) investor. hmmm


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## donald (Apr 18, 2011)

The only problem i see(i know zero about finance related business)is it is prob still to ''exotic" to the main stream(your target market-mid 5 figures,starting-out,maybe even more intimidating,etfs sound scary ect)

95% of the market your seeking doesnt even know what ''mer'' is let alone etfs.
If a person is already well versed about etfs,ect(and reads money sense ect)would they not be already outside your market?How are they(customers) going to ''find'' you outside in the ''real" world?

......just curious what the marketing stragey is?not sure if im making any sense--hope to build on referals?How are you going to advertise ect?interested in your business plan?if you would share.good luck/congrats.


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## doctrine (Sep 30, 2011)

I think for someone with more than $250k in assets who doesn't want to touch their investments, it's a good service. Especially the ongoing fees of 0.5-0.75%. Many investment businesses require 1% or more to manage assets. Of course for someone with under $100k in assets, its probably worth your time now to get started. 

Belguy, you're right that you can do it for cheaper, but some people don't even understand what an ETF is, yet make $100k+/year or more. This is a good service for them. But not for me - I'd rather take charge of all my assets, and get myself to retirement sooner.


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## Xoron (Jun 22, 2010)

Jungle said:


> Trust me, you and I know many poeple that have ZERO interest in learning how to managing a portfolio and would suit an advisor to assist them.


And some of us are married to them :chuncky:


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## brad (May 22, 2009)

Furthermore, think of the thousands of Canadians who pay overcontribution penalties on their TFSAs despite the crystal-clear guidance available online from dozens if not hundreds of sources. If couch potato investing isn't rocket science, what does that make keeping track of your TFSA? Clearly there are many people who would benefit from paying for some hand-holding and expert one-on-one advice.


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## kcowan (Jul 1, 2010)

I think the thing to remember is that many of us started by buying mutual funds. And we paid the commission of those funds salespeople in the process (as well as their MERs). Then when we got religion, we changed to our current mode. Add up all those fees and commissions and you will find that it is much more than $3k.

It will be good to see if this business model is successful.


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## BlackThursday (Apr 25, 2011)

I imagine a true couch potato would be revolted by this exploitative idea: why does one need an on-going service( at a modest quarterly fee) once one becomes a couch potato? (Do you re-balance continually?)

I imagine those who have not seen the light will also not see this idea: will they even know what a couch potato is let alone value a service to become one?

It is sad that someone is trying to turn what was an altruistic effort into a device for squeezing money from dumb/inept investors.
The only consolation is that it is so clearly a bad business idea doomed to failure.

(IMHO)


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## Xoron (Jun 22, 2010)

BlackThursday said:


> The only consolation is that it is so clearly a bad business idea doomed to failure.


IMHO I disagree.

Although I don't personally want to use the services, it would be perfect for my wife when/if I'm not around. Just to review our investments and make recommendations without any vested interest (similar to a fee only adviser).


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## leoc2 (Dec 28, 2010)

Xoron said:


> IMHO I disagree.
> 
> Although I don't personally want to use the services, it would be perfect for my wife when/if I'm not around. Just to review our investments and make recommendations without any vested interest (similar to a fee only adviser).


I agree with Xoron! Being close to retirement age means I have friends that are working out their retirement future. Many have not heard of CP investing. Many want to save $$$ by dumping their financial (mutual fund) planner but find the task daunting. I can now refer them to DanB and PWL. Great!


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## Xoron (Jun 22, 2010)

leoc2 said:


> Many have not heard of CP investing. Many want to save $$$ by dumping their financial (mutual fund) planner but find the task daunting. I can now refer them to DanB and PWL. Great!


I actually told my wife about PWL before this announcement by Dan. I told her "If anything happens to me, this guy at PWL (Justin Bender) is who you want to talk to". And yes, if I can get my friends / family to drink the "most mutual funds charge WAY too much" kool-aid, then this would be a great fit for them.


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## mrPPincer (Nov 21, 2011)

I think the vast majority of people that I know would benefit from something like this for a couple of reasons.

One is that the industry has most people thinking it's too complicated and dangerous to try doing it yourself.
Most people don't even want to think about it and are therefore being robbed blind by the MF industry.
Even though it seems like a no-brainer to me, if I try to explain it I can see their eyes start to glaze over.

The other reason is that most people are possibly not better off totally DIY without any outside help because I don't think they have the discipline to stick to a strategy, eg. asset allocation.
I think the majority of uneducated investors that have little interest in learning the basic fundamentals can easily get their allocations wrong or get sucked in by all the newsletters' latest hot picks, buying the hot stocks of the day and selling them when they panic etc. and end up losing long term in a number of ways, just due to the way the human brain is set up.


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## avrex (Nov 14, 2010)

Xoron said:


> Although I don't personally want to use the services, it would be perfect for my wife when/if I'm not around.


I agree. I am in the exact same situation.
She has zero interest. But a service like this would be perfect for her.


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## BlackThursday (Apr 25, 2011)

mrPPincer said:


> I think the vast majority of people that I know would benefit from something like this for a couple of reasons.
> 
> One is that the industry has most people thinking it's too complicated and dangerous to try doing it yourself.
> Most people don't even want to think about it and are therefore being robbed blind by the MF industry.
> Even though it seems like a no-brainer to me, if I try to explain it I can see their eyes start to glaze over.


Then they won't be interested to begin with. 



mrPPincer said:


> The other reason is that most people are possibly not better off totally DIY without any outside help because I don't think they have the discipline to stick to a strategy, eg. asset allocation.
> I think the majority of uneducated investors that have little interest in learning the basic fundamentals can easily get their allocations wrong or get sucked in by all the newsletters' latest hot picks, buying the hot stocks of the day and selling them when they panic etc. and end up losing long term in a number of ways, just due to the way the human brain is set up.


Then they will never see the value of becoming couch potatoes.

Just to reiterate the foolishness of this idea: if you don't understand the value then you will not be interested in the service. If you do understand the value then you will despise such an service as unnecessary and exploitative.

Hence: business idea doomed to failure.


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## avrex (Nov 14, 2010)

There are people that are accumulating cash, and don't know how to invest/allocate it.
They know they need to do something. They just don't know how to do it and don't have the time / interest to research it for themselves.

There will be lots of people who will utilize a service such as this.


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## Four Pillars (Apr 5, 2009)

BlackThursday said:


> Hence: business idea doomed to failure.


Addition and subtraction on an electronic device? Nah, that will never work...

The whole point in starting a new business is to do the ultimate marketing test and see if there is an economic demand or not.


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## humble_pie (Jun 7, 2009)

my goodness black thursday why so gloomy today is only tuesday.

word has it that more folks than ever before are milling around in discountland, quite unsure what to do for themselves.

the first tsunami into discountland were the folks escaping from 100% GIC investments.

the current tidal wave are the folks escaping from traditional mutual funds because they've gotten the memo that costs are too high while etfs are cheaper, therefore better. 

it's not a question of whether this new, hopeful, knowledge-hungry population of investors exists or not. They do exist, en très grand nombre, & all the discounters will tell you that.

a service like the one described here is properly prepared, staffed by licensed professionals from a respected firm, steered by the popular & knowledgeable mr bortoletti himself, offered at a can't-beat-this price. What's not to like ?

many new investors can hop on for a year or 2 or 3 to see how well they like & understand the brand-new experience of DIY. In their case, it will be quasi-DIY because they'll be guided & supported all along the way.

if they're happy & they like it, they can easily spend some time studying how to take over the reins themselves.

btw did everybody see that whopping bargain mentioned upthread ? couples are billed as only one person. This is a fine approach, it means treating the entire family as a wholistic unit. Chapeaux !


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## BlackThursday (Apr 25, 2011)

> They know they need to do something. They just don't know how to do it and don't have the time / interest to research it for themselves.


So, let me understand the point: "there are people who need to do something but are too bored or don't have enough time to figure out what it is so they will naturally subscribe to a couch potato service."?
Excellent.



> Addition and subtraction on an electronic device? Nah, that will never work...


And this point would be: "because there might be some apocryphal story about someone saying a calculator was a bad idea then this couch potato service surely must be a good one."?
I am amazed at the quality of discourse here.



> my goodness black thursday why so gloomy today is only tuesday.


Not at all gloomy. Just trying to get a simple point across ...rather fruitlessly .
However, I'm disappointed that even the advocates here, presuming they understand what a couch potato portfolio is, don't question why a couch potato service would offer a quarterly fee schedule.

And to all those who hope to coerce their "zero interest" widows into buying into this service from beyond the grave: I wish you well .


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## Belguy (May 24, 2010)

Many folks out there will spend more time trying to figure out what to have for dinner tonight, or which big-screen TV to buy, than they will spend all year at managing their hard-earned savings portfolio.

The financial services industry will always find new ways to exploit that.:upset::grumpy::sour:

As I've stated earlier, Couch Potato investing is not rocket science. If you are not prepared to spend a minimum amount of time at managing your investments, then you deserve to pay for your neglect in one way or another. 

Nobody should care about your money more than you!!!


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## Squash500 (May 16, 2009)

IMHO a total waste of $3390 including HST--LOL. Just picked up this new book from the library---Count on Yourself ---take charge of your money---by Alison Griffiths. I failed grade 10 math--yet I personally have a nice sized couch potato portfolio that I manage myself through discount brokerage. If I can do it anybody can do it.

The problem is that only 6% of the canadian population are even aware that ETF's exist. Financial advisors won't tell you because most ETF's don't pay them a trailer. This service could be a good idea....but maybe charge $1000 and not $3000. Again just my opinion.


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## Squash500 (May 16, 2009)

Belguy said:


> Many folks out there will spend more time trying to figure out what to have for dinner tonight, or which big-screen TV to buy, than they will spend all year at managing their hard-earned savings portfolio.
> 
> The financial services industry will always find new ways to exploit that.:upset::grumpy::sour:
> 
> ...


Totally 100% agree with you.


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## Sampson (Apr 3, 2009)

Why should teaching about the benefits of the Couch Potato style, or helping one arrange a portfolio be free?

Yes, the information can be had for free, but this is true of everything these days. Does the level and quality of service warrant the cost? Maybe, maybe not, but it certainly is an improvement over the type and quality of advice most investors receive. The question is how well will the service be marketed, because as Pie points out, it is a terrific opportunity for investors who have significant monies tied up with more traditional advisers (charging even higher fees) to set up DIY-style portfolios.

For someone with $250,000-$500,000 at a traditional brokerage, they are easily paying over 1% annually, they pay all the transaction fees, plus they often pay incentive bonuses. That easily equals more than a one-time $3000. How big is that market, I'm willing to bet it is large.


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## Sampson (Apr 3, 2009)

Belguy said:


> As I've stated earlier, Couch Potato investing is not rocket science. If you are not prepared to spend a minimum amount of time at managing your investments, then you deserve to pay for your neglect in one way or another.
> !


$3000 isn't a lot to pay for that 'laziness'.

Imagine all the hours we have spent learning about this. I still remember all your initial post Belguy, most people, even on this forum have spent countless hours learning. Why is paying money to get a fast start bad?


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## Sampson (Apr 3, 2009)

Squash500 said:


> IMHO a total waste of $3390 including HST--LOL. Just picked up this new book from the library---Count on Yourself ---take charge of your money---by Alison Griffiths.


Do you wrench your own car? Replace your own water tank? How about replace the shingles on your roof?

These are all DIY and save money - clearly not everyone does their own repairs, but they could. Same concept here.

Personally, it is refreshing to see someone try to help bring Canadians away from high MER paying MF-investing habits.


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## brad (May 22, 2009)

Here's a thought: instead of speculating endlessly whether this business model will work, why don't we shut up, wait a year, and find out? ;-)


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## Four Pillars (Apr 5, 2009)

BlackThursday said:


> And this point would be: "because there might be some apocryphal story about someone saying a calculator was a bad idea then this couch potato service surely must be a good one."?


Apologies BT, I should have been more clear. My point was that I think you are a troll.


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## KaeJS (Sep 28, 2010)

$3k?

For a losing portfolio?

Wow....


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## donald (Apr 18, 2011)

Its not like it is totally ''free"-the advice ect-If you buy subscriptions of finance related mags ect(like diy do,money sense,post ect ect)The paid jurno's have to deliever the content that the readership is paying for.

And the editor would demand(im sure canadian cp has made $$ writing no?)anyhow-it is a interesting concept.Writer/business-dual crossover-smart.he is diversifying


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## humble_pie (Jun 7, 2009)

the ongoing discretionary management fees - which are an option, they are not part of the basic service - such fees at .50-.75% sound reasonable but they are probably only part of the story. When all fees are added up, one arrives at an annual aggregate of roughly 1.00-1.50% imho.

this is more or less what private discretionary counsel charges for larger accounts of $2 million or more, including custodial services.

in other words what the hired couch potato is doing is scaling down the 1-1.5% fee level from bigger accounts to middle-sized accounts in the 200k-1M range.

this has probably been quietly done by some financial planners for several years; but here we have a well-known brand name popularizing this downward cost breakthrough.

how does one arrive at total fees of 1.10-1.50% for ongoing portf management under the hired couch plan ? like so:

- basic fee .50-.75%

- plus the etf fees which can run from .15-.65%, not necessarily including their portfolio trading costs

- also there will be TD institutional commissions when the couch potato is hired for discretionary ongoing portf management. I believe TD institutional commish runs at $29 per transaction, not the 9.99 or less that we are accustomed to.


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## Squash500 (May 16, 2009)

Sampson said:


> Do you wrench your own car? Replace your own water tank? How about replace the shingles on your roof?
> 
> These are all DIY and save money - clearly not everyone does their own repairs, but they could. Same concept here.
> 
> Personally, it is refreshing to see someone try to help bring Canadians away from high MER paying MF-investing habits.


 IMHO it's not really the same thing. With a mechanic or a roofer ---I'm paying for their expertise. I don't have the expertise or aptitude to repair my own car...no matter how many books I read. With a mechanic...I'm getting guaranteed value for my money----with these financial advisors---no guarantee whatsoever.

In fact....I could wind up choosing better ETFS then they do....make higher returns....and I'm not even licensed to sell financial products etc.

With the couch potato portfolio I could read a couple of books----like that Allison Griffiths example upthread.....and outperform these PWL capital advisors by just choosing etfs such as XIU and XSP etc. So basically I would have paid these advisors $3390 for no value whatsoever.


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## humble_pie (Jun 7, 2009)

squashy thursday maybe u could go away & write up a storm in finance for 10-15 years then spend another 2 years studying for financial planning accreditation then practice oh maybe 10 years in order to get valuable experience.

then u could come back here & tell about your superior performance.


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## Barwelle (Feb 23, 2011)

KaeJS said:


> $3k?
> 
> For a losing portfolio?
> 
> Wow....


Why the disdain for the couch potato? Better than stuffing it under a mattress. I generally like reading your posts Kae but not everyone can be (or care to be) traders or stock pickers.

I don't understand the negativity towards this idea. Everyone has strengths and weaknesses. There are people out there who aren't good at financial things. People who aren't the DIY type, whether it has to do with money, or not. Why does this mean they should have to suffer with crappy mutual funds?


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## Squash500 (May 16, 2009)

humble_pie said:


> squashy thursday maybe u could go away & write up a storm in finance for 10-15 years then spend another 2 years studying for financial planning accreditation then practice oh maybe 10 years in order to get valuable experience.
> 
> then u could come back here & tell about your superior performance.


 What I'm saying is how much experience do you need to pick such ETFS as the XIU, XSP, and XBB---pay $9.99 commission in discount brokerage and be done with it. With those three ETFS...I could probably outperform a lot of these finance guys who spend 10-15 years getting all this financial experience.

I'm not being a troll....I've just read such books as the naked investor----by John Lawrence Reynolds. I guess I'm just the type who thinks financial advisors are a waste of money. However...If it wasn't for ETFS....then my thinking would be totally different.


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## Barwelle (Feb 23, 2011)

Thing is, Squash, some people know nothing about finance. They _need_ some handholding.

They couldn't get through the first five pages of a finance book like you mention because it just doesn't interest them.

ETFs... indexes... discount brokerages... they don't know what these things are, and they couldn't care less.

But they know (or they've been told) that they should do something with their money, instead of watching it build up in their bank account, begging for them to spend it.

Where do they turn? They used to walk into the bank (or the bank would call them) and get signed up for crappy high-MER mutual funds.

Now they have a less costly and more sensible option in the form of this CCP/PWL partnership and some (most?) fee-only advisors.


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## Squash500 (May 16, 2009)

Barwelle said:


> Thing is, Squash, some people know nothing about finance. They _need_ some handholding.
> 
> They couldn't get through the first five pages of a finance book like you mention because it just doesn't interest them.
> 
> ...


Barwelle you make an excellent point. IMHO if these clients have over $400000 in assets then they should go to financial advisors such as John Hood or John Degoey---who are very ETF and index friendly. As I believe Humble Pie---said upthread----for people who have no financial knowledge or aptitude then that $3000 is just the tip of the iceberg.

IMHO if someone opened up the first five pages to JLR's--the Naked Investor.... and wasn't instantly riveted to all the financial fraud that goes on...then they would probably be better off just hiring an advisor. It would be like someone telling me that for $3000 they will teach me all about art galleries and opera etc. I happen to really dislike art galleries and Opera---LOL. I would lose interest in about 2 minutes.


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## MoneyGal (Apr 24, 2009)

brad said:


> Here's a thought: instead of speculating endlessly whether this business model will work, why don't we shut up, wait a year, and find out? ;-)


Because this is a discussion forum?


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## BlackThursday (Apr 25, 2011)

humble_pie said:


> the ongoing discretionary management fees - which are an option, they are not part of the basic service - such fees at .50-.75% sound reasonable but they are probably only part of the story. When all fees are added up, one arrives at an annual aggregate of roughly 1.00-1.50% imho.
> 
> this is more or less what private discretionary counsel charges for larger accounts of $2 million or more, including custodial services.
> 
> ...


I am not sure but I think that the above collection of words is attempting to address my point that a couch potato portfolio has no need for on-going management. 
But try to understand that whether the fee for on-going management is reasonable in your mind or not _is not germane to the criticism_: 
It goes against the whole nature of being a couch potato to require on-going management and it is reprehensible for a supposed couch potato service to offer it.



> Apologies BT, I should have been more clear. My point was that I think you are a troll.


Yes, well played sir. Calling me a "goofy stupid head" stunningly rebuts all of my arguments, explains your points clearly, and does you proud: someone who types into what one would hope is a respected financial blog (...and perhaps has aspirations of monetizing his efforts in a similar way?)

Anyway, I've said all I can say on the matter. I meant to express my opinion only once but felt compelled to answer the responses. I'll overcome that compulsion from now on and will leave the last word to you.


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## Belguy (May 24, 2010)

I am thinking of starting up a new service. Once an investor establishes his or her appropriate asset allocation using the services of a fee-only financial advisor, then they could use my service whereby I would recommend a Classic Couch Potato portfolio for them and instruct them on how to manage their portfolio going forward via periodic rebalancing when required.

What do you think would be a fair fee for me to charge for this service?

I am thinking maybe a one time charge of a couple of hundred dollars per customer as I wouldn't need to use much of my own time to service each client.

I figure maybe 15 minutes tops for each one.

I would be charging for my knowledge rather than for my time which would be minimal for each customer.

Or, is a thousand dollars an hour a bit rich?


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## Toronto.gal (Jan 8, 2010)

Belguy said:


> Many folks out there will spend more time trying to figure out what to have for dinner tonight, or which big-screen TV to buy, than they will spend all year at managing their hard-earned savings portfolio.


This is true.

*'A recent ING DIRECT survey revealed Canadian mutual fund investors spend, on average, 3.4 hours a year planning their mutual fund investments. By comparison, they spend more time planning a major technology purchase such as a smartphone, television or computer (5 hours), a vacation (6.6 hours) or a car purchase/lease (9.2 hours)'. 
*
http://www.newswire.ca/en/story/109...-purchases-than-their-mutual-fund-investments


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## My Own Advisor (Sep 24, 2012)

I just heard about that on L & O'L tonight. I'm actually surprised folks spend 3.4 hours per year (that much) thinking about their mutual fund investments! I would have guessed less actually.... 

For the record, I spend zero hours on my mutual fund investments


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## Toronto.gal (Jan 8, 2010)

My Own Advisor said:


> For the record, I spend zero hours on my mutual fund investments


You as well?


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## humble_pie (Jun 7, 2009)

brad said:


> Here's a thought: instead of speculating endlessly whether [stock markets] will work, why don't we shut up, wait a year, and find out? ;-)



each: great proposal

mods please shut down the forum & we'll meet again 15 jan/2014


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## Belguy (May 24, 2010)

But, touch wood, I might be dead by then!!!:upset:

Couldn't we hash it out now?:confused2:


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## Sampson (Apr 3, 2009)

humble_pie said:


> squashy thursday maybe u could go away & write up a storm in finance for 10-15 years then spend another 2 years studying for financial planning accreditation then practice oh maybe 10 years in order to get valuable experience.
> 
> then u could come back here & tell about your superior performance.


It really seems that some have been so 'anti-brain washed' into believing all folks in the financial services industry add no value and don't know anymore than the next joe. This notion is simply ridiculous. Pick up a volume of a CFA text or the Sweiser notes and you'll quickly understand how much these guys know.

Whether that knowledge improves you selection of ETFs? Give a reason why VCE is a best choice. Give me a reason why 25% allocation to Canadian equities is good. Perhaps one of the benefits of the simple couch potato portfolio is simplicity and it acts as an alternative to MF portfolios touted by banks. Show me data that the simple 4 product Couch Potato is the best. Its not there, it probably isn't the best, just a lesser evil than what average Canadians do.


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## Potato (Apr 3, 2009)

Belguy said:


> I am thinking of starting up a new service. [...] instruct them on how to manage their portfolio going forward via periodic rebalancing when required.
> 
> What do you think would be a fair fee for me to charge for this service?


Well, I charge $45/hr. Usually takes a few hours to answer their questions, walk through spreadsheets for planning and record-keeping, how to place trades, etc. I can totally see the demand for Dan's more fully-featured service (he's licensed so doesn't have to keep telling people to decide for themselves -- who wants that!), especially since his "brand" is a bit stronger than mine. Now, I have a day job and only do this rarely when I get a client, so I may be under-pricing a bit compared to what you could get with a certification (and would need with overhead and to make it a career).


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## andrewf (Mar 1, 2010)

I don't think anyone should conclude that the financial services industry is entirely a waste. Just a huge swath of it. So much of it is just marketing, rather than real services. But there is a core underneath all the crap that is absolutely vital. Unfortunately, the preponderance of crap has made it hard to get to get undiluted useful services the industry can provide, so people have been forced to wash their hands of the whole industry and learn to accept it.

If true financial advisors like this service take off, it will offer people another way. It will be a useful and valid choice for many.


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## KaeJS (Sep 28, 2010)

Barwelle said:


> Why the disdain for the couch potato? Better than stuffing it under a mattress. I generally like reading your posts Kae but not everyone can be (or care to be) traders or stock pickers.
> 
> I don't understand the negativity towards this idea. Everyone has strengths and weaknesses. There are people out there who aren't good at financial things. People who aren't the DIY type, whether it has to do with money, or not. Why does this mean they should have to suffer with crappy mutual funds?


I think Mutual Funds are better than Couch Potato (yes, watch the haters surface from the depths of CMF.......)

But why pay someone $3k? 

Pay me $2k, and I'll get a better return. :biggrin:

Should I start advertising?


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## Barwelle (Feb 23, 2011)

KaeJS said:


> I think Mutual Funds are better than Couch Potato


Please explain.


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## Squash500 (May 16, 2009)

Sampson said:


> It really seems that some have been so 'anti-brain washed' into believing all folks in the financial services industry add no value and don't know anymore than the next joe. This notion is simply ridiculous. Pick up a volume of a CFA text or the Sweiser notes and you'll quickly understand how much these guys know.
> 
> Whether that knowledge improves you selection of ETFs? Give a reason why VCE is a best choice. Give me a reason why 25% allocation to Canadian equities is good. Perhaps one of the benefits of the simple couch potato portfolio is simplicity and it acts as an alternative to MF portfolios touted by banks. Show me data that the simple 4 product Couch Potato is the best. Its not there, it probably isn't the best, just a lesser evil than what average Canadians do.


 I'll keep this as brief as I can. In a financial article I just read......it said that only 1 page of the current Canadian securities course is devoted to indexing. The reason being is that most financial advisors don't make money selling their clients ETFS or index mutual funds. Therefore active management becomes the default option.

Most financial advisors also have no fiduciary duty to the client. I guess what I'm trying to say ---is I'm just interested in making money not if a finance guy can memorize a CFA text or not---LOL.

IMHO one of the benefits of a couch potato portfolio is that it eliminates the financial advisor from the equation---and obviously his/her fees. It spoils it if you hire a financial advisor to buy ETFS for you. On a $400000 portfolio---$8000/year goes into your own pocket if you do things yourself....based on a 2% yearly advisory fee.


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## GoldStone (Mar 6, 2011)

KaeJS said:


> Pay me $2k, and I'll get a better return. :biggrin:


Give me a break. You trade 5K for a $15 profit.

Get back to me when you reach six digits. I want to see how well your trading scales.


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## KaeJS (Sep 28, 2010)

Barwelle said:


> Please explain.


XIU ETF: 4.88% Return for 2012.
XIC ETF: 4.39% Return for 2012.

BMO DIVIDEND FUND: 6.93% Return for 2012.
TD DIVIDEND GROWTH FUND: 10.06% Return for 2012.
CIBC DIVIDEND GROWTH FUND: 7.9% Return for 2012.
RBC CANADIAN DIVIDEND FUND: 10.71% Return for 2012.

Is this good enough?


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## KaeJS (Sep 28, 2010)

GoldStone said:


> Give me a break. You trade 5K for a $15 profit.
> 
> Get back to me when you reach six digits. I want to see how well your trading scales.


What's the difference?

That's why people talk in percentages, and not dollars. The whole purpose is that the returns will be to scale.

What was your return last year?


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## Four Pillars (Apr 5, 2009)

KaeJS said:


> XIU ETF: 4.88% Return for 2012.
> XIC ETF: 4.39% Return for 2012.
> 
> BMO DIVIDEND FUND: 6.93% Return for 2012.
> ...


Kae, did you just make up those XIU and XIC return numbers?


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## slacker (Mar 8, 2010)

Four Pillars said:


> Kae, did you just make up those XIU and XIC return numbers?


I think CCP and PWL would know how to calculate return on investment properly.

Well, for 3k, they damn well better.


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## KaeJS (Sep 28, 2010)

Four Pillars said:


> Kae, did you just make up those XIU and XIC return numbers?


That's what the iShares website says if you look at the chart for December 31, 2012.


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## Barwelle (Feb 23, 2011)

KaeJS said:


> XIU ETF: 4.88% Return for 2012.
> XIC ETF: 4.39% Return for 2012.
> 
> BMO DIVIDEND FUND: 6.93% Return for 2012.
> ...


Comparing one year of returns, and cherry picking certain funds, isn't a true or fair comparison. You know better than that, Kae.


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## Sampson (Apr 3, 2009)

Squash500 said:


> IMHO one of the benefits of a couch potato portfolio is that it eliminates the financial advisor from the equation---and obviously his/her fees. It spoils it if you hire a financial advisor to buy ETFS for you. On a $400000 portfolio---$8000/year goes into your own pocket if you do things yourself....based on a 2% yearly advisory fee.


As I understand the service, this is not what is being offered. I would propose the following scenario is more akin:

$400000 portfolio - pay 1-2% annual fee for advisors help, plus and fees on the products they sell you
or
$400000 portfolio (where you paid the exorbitant fees above) - then pay the single onetime $3000 for these educated individuals to help you transition into a place where you could DIY.

Obviously complete DIY is the cheapest option, but I think it is a little reactionary to believe the people can't add any value. Obviously Dan has been giving free advice away for ages, but have you read some of the comments in his blog? It is clear there are lots of people that either don't fully understand what is being read, or make little effort to learn. Those people will gain from the service.

Back to the mechanics analogy, what value do they add that can't be learned from a book, on youtube, or some other free source? There is very little that one can't easily do on their own, yet common things like mounting/unmounting tires, change engine oil, air filters, cabin air filters, draining/flushing and refilling liquids including coolant, changing brake pads, brake rotors etc can easily be done by ones self. There can be an upfront intimidation if you've never touch a wrench, but all those things are easy as pie and can save a car owner thousands of dollars over the life of a car. Yet mechanics thrive and charge $50/hour.


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## Squash500 (May 16, 2009)

Sampson said:


> As I understand the service, this is not what is being offered. I would propose the following scenario is more akin:
> 
> $400000 portfolio - pay 1-2% annual fee for advisors help, plus and fees on the products they sell you
> or
> ...


Sampson you make some good points and this has been an excellent thread so far. I guess what I'm trying to say is due to the fact that indexing is so unpopular in the financial industry ----I don't think this business will be a success. Very few advisors in Ontario index---John Degoey, John Hood, PWL Capital--I'm not sure who else? Andrew Hallam is another author who wrote a book about indexing.

If these clients pay $3000 for a one shot deal....chances are a lot of these clients will need ongoing advice---for example---when to sell etc. Therefore the fees paid to PWL capital will get higher...again what humble pie said upthread. Just changing the subject a bit....do you notice how many add on services that Ms Clough has to add on to her service to justify her 1.5% on clients with over $500000.

If I had over $500000 ---I certainly wouldn't pay an advisor at least $8000 every year to buy the XIU for me etc. I would hire my own lawyer to do my wills....and my own accountant to do my tax return. I hope I'm wrong....but I can't see this $3000 business being a winner financially.


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## lonewolf (Jun 12, 2012)

I think a better service to offer the coach potatoe investor would be an auto trader so precise parameters could be set for an account & @ discount commisions the account would be rebalanced Any money added to the account from a pay check or whatever should be able to set up with some type of an auto buy with in precise parameters. With modern technology the industry is kinda behind the times if someone can charge $3000 for it.

Credit unions should maybe try to offer this service for its clients for a low fee or for free & help them get set up with some type of service that would rebalance @ discount brokerage prices & letting modern technology do the work.

For those that dont have the time, energy & or disapline to do it themselfs it is often better to pay someone to do it for them & Canadian Coach Potatoe would be offering a valuable service to them.

I think competition & modern technology will make it so the cost will only be discount brokerage commisions & perhaps the commision will even be gone someday & only a member fee will be charged if investors can cut out the middleman & deal directly with the exchange i.e., (binary options)


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## humble_pie (Jun 7, 2009)

BlackThursday said:


> I am not sure but I think that the above collection of words is attempting to address my point that a couch potato portfolio has no need for on-going management.
> But try to understand that whether the fee for on-going management is reasonable in your mind or not _is not germane to the criticism_:
> It goes against the whole nature of being a couch potato to require on-going management and it is reprehensible for a supposed couch potato service to offer it.



thursday my fee message was addressed to the ether in general & not to any particular biscuit. Someone had mentioned that cp/pwl fees will be only .50-.75% & for some reason the pie decided to chew on that bagel, because aggregate fees are going to be higher.

i do not believe the word "reprehensible" applies to the couch potato's new business proposal & i wish you would amend or remove this word. You know very well that all investment portfs require attention as time passes. The only way to escape is by buying an annuity & even then one should keep an eye on if not worry about the solvency of the issuer.

there are plenty people who like company when they invest. What i see, what i hear is that many are crowding into discountland now who'd still be happy to pay for an old-fashioned know-your-advisor one-on-one approach, at least for a while.

the cp/pwl team are not the first to scale 1-1.50% annual fees down to mid-sized accounts on either side of 500k. BMO discount broker is introducing a hybrid advisor for their new online clients who are feeling overwhelmed. Already this tells me that their marketing department has picked up the need for advice among a significant number of discount clients.

the new bmo service will charge 1% of MI. Clients who then invest in etfs will also be paying the etf MERs, of course. So this service will work out to be slightly more expensive than the cp/pwl model.

bmo's new advice direct service will also be less personalized than cp/pwl. I for one believe that a large part of couch potato's appeal to this forum is that many people are already so familiar with the CP website & have grown to greatly respect couch guru dan bortoletti. I think his personal imprimatur is a critical part of the new brand's appeal.

also among discretionary investment counsel who have been utilizing 100% or close to 100% etfs in their strategies for many years are venable park based in barrie ontario & jc hood in pickering. You are saying that john degoey is another. I don't know their fees but would imagine they run somewhat higher than the proposed cp/pwl model, although less than traditional mutual fund fees.

thursday, if you already support hood, degoey & park, why would you criticize or forecast gloom for cp/pwl ? this does not make sense ...


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## Xoron (Jun 22, 2010)

Barwelle said:


> They couldn't get through the first five pages of a finance book like you mention because it just doesn't interest them.


Tried to get my wife to read this:
http://www.moneysense.ca/2011/10/26/moneysense-guide-to-the-perfect-portfolio/

No dice. Few pages in and she's bored, and wants to move on to something else. Highly educated (P.Eng), but *NO* desire to know anything about stocks / etfs / couch potatoes.


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## andrewf (Mar 1, 2010)

KaeJS said:


> XIU ETF: 4.88% Return for 2012.
> XIC ETF: 4.39% Return for 2012.
> 
> BMO DIVIDEND FUND: 6.93% Return for 2012.
> ...


You're kidding, right?


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## Four Pillars (Apr 5, 2009)

KaeJS said:


> That's what the iShares website says if you look at the chart for December 31, 2012.


No it doesn't. You obviously don't follow the markets very closely if you think those numbers are correct.


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## andrewf (Mar 1, 2010)

I checked the iShares site.

XIU 2012 NAV performance was 7.87%
XIC was 6.89%


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## mrPPincer (Nov 21, 2011)

Dividends stocks are having their day in the sun right now because people have been seeking alternatives to the present low interest rate environment.
The large cap tsx etfs and the dividend funds in the above comparison used different selection criteria for their holdings.
A more fair comparison might use a dividend etf.


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## Barwelle (Feb 23, 2011)

Since we are cherry picking: BMO's Canadian Dividend ETF (ZDV) performance in 2012: +9.72% vs the quoted 6.93% for BMO's dividend mutual fund.

Or how about BMO's low-volatility Canadian Equity ETF, ZLB? +13.92% in 2012.

Or how about we make a legitimate comparison by taking the aggregate performance of the mutual fund industry and comparing it against a couch potato portfolio, over a long period of time. I don't know where to find it, but it is often said that somebody's done this research. Anyone know where to find it?


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## Belguy (May 24, 2010)

You can't compare short term returns to justify investing in any given fund. As they say, every fund has it's day in the sun and last year's top performers could very well be this year's dogs. You have to compare longer term returns. Also, much to my previous frustration, I found that fund managers often leave to retire or go elsewhere meaning that past performance becomes even less relevant. I used to find myself chasing around after these 'hot' managers before I realized the futility of that. Also, it became apparent to me that such managers did not maintain their superior performance over the longer term anyway.

And then, I saw the light and sold my managed funds and have invested mainly in index products ever since.

I am never impressed when someone tries to compare the results of managed funds versus the product that tracks the same index using either short or long term data.

For me, I just am satisfied to invest in the indexes and not knock myself over the head because some managed funds outperform it over any time frame because most of them will not and picking one that might is like throwing darts at a board.

If you can be satisfied with achieving index returns, you could always end up doing worse as the vast majority of investors ultimately discover. The earlier in your investment career that you can grasp this concept, the better off you will be in the long run.

And remember, fees matter and can have a long term devastating affect on how much you end up with for your retirement. Always strive to keep your fees as 'little' as possible and trade only for rebalancing purposes.


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## KaeJS (Sep 28, 2010)

andrewf said:


> I checked the iShares site.
> 
> XIU 2012 NAV performance was 7.87%
> XIC was 6.89%


Maybe I looked at the wrong spot on the chart/website. I was at work when I was checking.



Barwelle said:


> Since we are cherry picking: BMO's Canadian Dividend ETF (ZDV) performance in 2012: +9.72% vs the quoted 6.93% for BMO's dividend mutual fund.
> 
> Or how about BMO's low-volatility Canadian Equity ETF, ZLB? +13.92% in 2012.
> 
> Or how about we make a legitimate comparison by taking the aggregate performance of the mutual fund industry and comparing it against a couch potato portfolio, over a long period of time. I don't know where to find it, but it is often said that somebody's done this research. Anyone know where to find it?


In either case, the point I was trying to make is that some MF's beat some ETF's and vice versa.


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## Barwelle (Feb 23, 2011)

KaeJS said:


> some MF's beat some ETF's and vice versa.


Oh, sure, I won't argue that. But I don't think that was the point you were trying to make. Let's go back to the start.

Your initial post called the Couch Potato strategy a losing portfolio. Then you said:



KaeJS said:


> I think Mutual Funds are better than Couch Potato (yes, watch the haters surface from the depths of CMF.......)


What makes the couch potato strategy a losing portfolio, and what makes mutual fund investing better than the couch potato?


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## KaeJS (Sep 28, 2010)

I think Couch Potato is a losing strategy in comparison to an active trading strategy.

Between Couch Potato and Mutual Funds, I guess it's more just my own opinion. I don't like ETF's. They are just too slow moving and have low volume. I prefer Mutual Funds.

But of course, it does not mean a Couch Potato can't beat a Mutual Fund investor. They certainly can (and do). I just think to spend $3k for that advice is not really advice at all for the most part....


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## brad (May 22, 2009)

KaeJS said:


> Between Couch Potato and Mutual Funds, I guess it's more just my own opinion. I don't like ETF's. They are just too slow moving and have low volume. I prefer Mutual Funds.


I think you're criticizing a strategy that you don't understand. It is entirely possible to pursue a couch potato strategy using mutual funds; I did for about 10 years.


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## My Own Advisor (Sep 24, 2012)

The majority of mutual funds are losers to the index they follow, over a few years let alone a decade or so. There is tons of research on this issue. Mutual funds are bad, period.


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## brad (May 22, 2009)

My Own Advisor said:


> The majority of mutual funds are losers to the index they follow, over a few years let alone a decade or so. There is tons of research on this issue. Mutual funds are bad, period.


But if you're talking about TD's e-series mutual index funds, or if you look at Vanguard's index mutual funds in the United States (not available here, but they have very low MERs, lower than many Canadian index ETFs), I don't think you'll necessarily find this is the case.


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## andrewf (Mar 1, 2010)

Index MFs will tend to underperform index ETFs, but then ETFs may have additional costs (commissions and spreads). Tax differences are often discounted, but in nonregistered accounts, ETFs can be much more tax efficient than MFs.

But yeah, Kae is confusing the bucket with what's in the bucket. He doesn't like index funds. ETFs make better buckets than MFs, for just about anything you want to put in them.


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## brad (May 22, 2009)

It's worth noting that in the States, couch-potato investors scratch their heads at Canadians and our fixation on ETFs, because Vanguard index MFs are so cheap that few people feel compelled to buy ETFs. It's a whole different world down there.


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## Belguy (May 24, 2010)

Yes, but Vanguard ETF's are even cheaper than Vanguard mutual funds and so why not choose the former?

Also, I never looked upon a portfolio of managed mutual funds to be a 'Couch Potato' portfolio. I thought that only index products qualified?????


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## Belguy (May 24, 2010)

By the way, perhaps a dumb question but how is the yield determined for any given ETF?


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## Sampson (Apr 3, 2009)

I bet you Dan and his associates could answer that question


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## brad (May 22, 2009)

Belguy said:


> Yes, but Vanguard ETF's are even cheaper than Vanguard mutual funds and so why not choose the former?
> 
> Also, I never looked upon a portfolio of managed mutual funds to be a 'Couch Potato' portfolio. I thought that only index products qualified?????


Index funds are a type of mutual fund, just as index ETFs are a type of ETF. Not all mutual funds are managed, just as not all ETFs passively follow an index.

As for the Vanguard index mutual funds in the US, the reason they're more popular than ETFs is that you don't need to open a brokerage account and pay trading commissions, so you can contribute every month or every week if you like. And you don't have to worry about buying whole shares -- if you have $5,000 to invest, you can invest $5,000 without having to figure out share prices etc.

It's simpler, and therefore more accessible/available to the masses.


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## fatcat (Nov 11, 2009)

Sampson said:


> I bet you Dan and his associates could answer that question


yes, i agree i bet he could and i am enjoying immensely that it is being asked by a guy who questions the value of the guy that _can_ answer the question that he (belguy) can't :encouragement::chuncky::tongue-new: ...

i have always assumed that the etf takes in yield and then subtracts fees and makes it's own distribution ... the yield would be based on the distribution divided by the nav


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## lonewolf (Jun 12, 2012)

Belguy

If there is a commision charged on buying & selling a Vanguard ETF & not on the Vanguard mutual fund then for small accounts it might be more prudent to use the Vanguard mutual fund.


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## brad (May 22, 2009)

lonewolf said:


> Belguy
> 
> If there is a commision charged on buying & selling a Vanguard ETF & not on the Vanguard mutual fund then for small accounts it might be more prudent to use the Vanguard mutual fund.


The other thing to consider is convenience. If people will contribute more to their retirement because it's easy (automatic monthly contributions, withdrawn from their paycheque, directly deposited in a Vanguard index mutual fund), the mutual fund will beat the ETF hands-down every time for those people.

Remember that, as the saying goes, we are the virtuous minority preaching to an undisciplined majority. Strategies that might appear second nature to us don't work for most people.


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## kcowan (Jul 1, 2010)

ETFs = Good
MFs = Bad
is about as productive as saying
Train = Bad
Car = Good
There are no absolute truths in investing. I appreciate those taking the time to express alternate viewpoints.

Now that there are so many ETFs, it is easy to construct a bad portfolio without doing due diligence.

For those starting out, TD eSeries makes more sense than ETFs, for example. For many of the same reasons that Vanguard makes sense in the US. But I don't have the patience to always correct the many bad posts here. Plus I have belguy on Ignore.


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## andrewf (Mar 1, 2010)

That there are bad ETFs does not really contradict that for most MFs, there exists an ETF that does the same thing cheaper/better.

Lack of due diligence can hurt you with ETFs, but it can hurt you as much or more with MFs (no due diligence can mean buying 7% DSC funds...).


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## Belguy (May 24, 2010)

"Plus I have belguy on Ignore."

Thanks!!!:encouragement:eaceful::untroubled::joyous:


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## CanadianCapitalist (Mar 31, 2009)

andrewf said:


> Lack of due diligence can hurt you with ETFs, but it can hurt you as much or more with MFs (no due diligence can mean buying 7% DSC funds...).


I'm not sure about this. You are probably thinking of ETFs that are probably popular in this forum. I can't think of any traditional mutual fund (the ones with DSC and 2.5 percent or higher MERs) that are as destructive as leveraged ETFs from Horizons.


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## brad (May 22, 2009)

andrewf said:


> That there are bad ETFs does not really contradict that for most MFs, there exists an ETF that does the same thing cheaper/better.


And this does not contradict that MFs can be more effective for some people than ETFs. For example, if person A sets up an automatic $500/month payment to a TD e-series MF (investing $6,000/year), and person B puts $500/month in a HISA to build up to a once-a-year contribution of $6,000 (to reduce commission charges) to a comparable ETF, but then gives in to temptation to spend a third of that $6,000 on a vacation or a new computer, the benefit of the ETF is negated. Many people have trouble saving unless the money goes somewhere inaccessible; a big pile of money sitting in an accessible account tends to be raided for other things. 

Apples to apples comparisons make sense for evaluation purposes, but real-life circumstances do not always reflect theoretical ideals. This is why many Americans find it preferable to invest in Vanguard index funds than their comparable ETFs, for example. They're worried that they won't have the discipline to meet their goals unless the money is withdrawn automatically every month.


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## andrewf (Mar 1, 2010)

There are leveraged MFs too, in the US if not in Canada.


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## Belguy (May 24, 2010)

Belguy said:


> By the way, perhaps a dumb question but how is the yield determined for any given ETF?



I found lots of answers via Google at NO COST!! No need to ask an advisor!!

http://www.etftrends.com/2012/07/how-to-measure-an-etfs-yield/


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## andrewf (Mar 1, 2010)

Since most of these non-savvy investors are going to be saving in a tax shelter (RRSP/TFSA), they can continue to make scheduled periodic automatic contributions. I think the temptation to syphon some off to consume (vacation etc) is reduced when it is inside such an account, even if it is in cash.

I think the biggest problem is not following through with investing the lump sum due to fear/uncertainty. Investors will have much the same problem with rebalancing MFs (sell winners to buy losers).


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## Squash500 (May 16, 2009)

Just out of interest....I found out what fees John Degoey charges for financial advice. He works for Burgeonvest Bick Securities and charges 2.5% for assets under management. I'm a big John Degoey fan...I've read his book and most of his articles....but IMHO that 2.5% fee seems a bit high.

I guess because he's always on BNN....he can now charge these high fees?


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## fatcat (Nov 11, 2009)

i think that for beginning investors with minimal capital and minimal skills, opening a mutual fund account at td and buying e-series is one the very best ways to begin ... you can get decent diversification, virtually zero- maintenance other than some rebalancing and low costs

i agree that condemning any investment vehicle outright is a mistake


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## Squash500 (May 16, 2009)

CanadianCapitalist said:


> I'm not sure about this. You are probably thinking of ETFs that are probably popular in this forum. I can't think of any traditional mutual fund (the ones with DSC and 2.5 percent or higher MERs) that are as destructive as leveraged ETFs from Horizons.


I totally agree with you....that the Horizons ETFS are totally destructive. However IMHO getting into a DSC mutual fund is a total nightmare...given the choice I would much rather get into a high MER mutual fund. At least I could bail out of this high MER mutual fund quickly if need be without incurring a penalty.

With the DSC mutual funds you are basically a prisoner for seven years to that particular MF company--LOL.


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## Squash500 (May 16, 2009)

fatcat said:


> i think that for beginning investors with minimal capital and minimal skills, opening a mutual fund account at td and buying e-series is one the very best ways to begin ... you can get decent diversification, virtually zero- maintenance other than some rebalancing and low costs
> 
> i agree that condemning any investment vehicle outright is a mistake


You have to be careful though....as the mutual fund reps at TD will do everything in there power to sway you away from buying these td e-series mutual funds. Reason...very little money in it for TD.


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## andrewf (Mar 1, 2010)

I'm not totally dismissing MFs. There are some very few MFs that are reasonable. None of that changes the fact that for many/most people, ETFs can be a better way to execute an diversified index portfolio.


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## Belguy (May 24, 2010)

You can always mix a few managed funds into your mainly index portfolio by using ETF's for your 'core' holdings and managed funds for the balance of your portfolio for such allocations as small caps and emerging market investments where a professional manager might add value. 

Why not set up a 'Watchlist' at www.globeinvestor.com/watchlist and compare some highly rated managed funds to the ETF's which track the same indexes?


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## scomac (Aug 22, 2009)

fatcat said:


> i think that for beginning investors with minimal capital and minimal skills, opening a mutual fund account at td and buying e-series is one the very best ways to begin ... you can get decent diversification, virtually zero- maintenance other than some rebalancing and low costs
> 
> i agree that condemning any investment vehicle outright is a mistake


Not only that but you will actually end up further ahead than someone who chooses ETFs and save up the money, before making a cost effective purchase. You need to put a calculator to this, but it proves out.

For the comparison, I selected an individual who wants to invest $5000 annually in an RRSP. The alternatives are bi-weekly investment in a classic couch potato (4 component equal weight) using TD eFunds versus an annual contribution into a similar portfolio constructed of iShares CAD$ ETFs held in a discount brokerage RRSP account. If we assume an average market return of 7.5% for the portfolio and then subtract the fees for the net return of 7.0% for eFunds and 7.25% for iShares. The additional compounding from bi-weekly contributions quickly overcomes the cost drag of the higher MERs and actually results in an annual gain for eFunds of $197.72 over an above the annual iShares contribution model.

For those with either limited assets or those willing to make small regular contributions the mutual fund model can be economically superior to ETFs despite higher MERs because the other costs associated with ETF transactions can quickly overwhelm any perceived cost advantages.

[Added] You can increase the frequency to a once a quarter contribution with ETFs and still not match the CAGR that can be had with the eFund option and that is assuming you can make each transaction (16 total) for $10 each. For those with small portfolios, that's not an option. If your faced with $29.99 transaction fees than you are only going to be worse off with ETFs by trading more frequently.


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## andrewf (Mar 1, 2010)

As long as it is in a registered account, so you won't face a huge CG to transition to an ETF portfolio. MFs also have tax costs that you are not factoring in.

How sensitive is this calculation to rebalancing freq? If you were to do quarterly purchases, the benefit of the additional compounding would shrink precipitously (sub $50, say).


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## scomac (Aug 22, 2009)

andrewf said:


> As long as it is in a registered account, so you won't face a huge CG to transition to an ETF portfolio. MFs also have tax costs that you are not factoring in.
> 
> How sensitive is this calculation to rebalancing freq? If you were to do quarterly purchases, the benefit of the additional compounding would shrink precipitously (sub $50, say).


If you have enough assets to justify the use of ETFs in terms of implementation costs, then that would be the vehicle of choice. But, we're not talking about that individual. We're talking about the individual that is just getting started or the individual who is building a portfolio with frequent contributions of relatively small amounts. These people typically are saving in tax sheltered vehicles, so your tax concerns are irrelevant.

With respect to rebalancing frequency; whether you use ETFs or mutual funds, you are creating a tax event if done in a taxable account. In registered accounts it's a non-issue. What is an issue though, regardless of account type is that every incidence of rebalancing incurs a transaction fee with the ETFs, you have no such fee to deal with using the mutual fund option. The more activity that takes place in terms of inflows, outflows or rebalancing the greater the burden that ETFs must shoulder in absorbing costs that aren't covered in their MERs that you don't have to bare with mutual funds.


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## Toronto.gal (Jan 8, 2010)

I must say that the title of this thread is funny; by definition of it, the cost should be very inexpensive.


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## andrewf (Mar 1, 2010)

Going from 1 transaction/year to 4 means $4.95 to $19.80. The $14.85/0.0025 mer differential = $5,940. 

I think we're splitting hairs. You can invent scenarios where MFs might be more cost effective, but not by much. If your account is this small, you can feasibly use just a single Canadian equity ETF and keep your fixed income in a savings account. But for someone who has an account this small for more than a year or so, maybe they are not going to be doing much in the way of serious saving...


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## scomac (Aug 22, 2009)

andrewf said:


> Going from 1 transaction/year to 4 means $4.95 to $19.80. The $14.85/0.0025 mer differential = $5,940.
> 
> I think we're splitting hairs. You can invent scenarios where MFs might be more cost effective, but not by much.


And you can "invent" scenarios where ETFs are more cost effective. Not everyone has $4.95 a trade, in fact that will rule out the majority. As long as you keep making small regular investments, the mutual fund model I presented will prevail. The point is, which is more likely to be to better advantage for the average person. Provided you're talking about the individual I described -- and there are lots that fall into this category -- they will be better served with eFunds. I'm not spending my time to convince you, it's for the benefit of others that might have been swayed into ETFs by blanket statements that aren't correct across all scenarios.


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## andrewf (Mar 1, 2010)

In that case, I'll agree that for portfolios that are currently small and will remain small (will not grow beyond perhaps $100k) and are invested in registered accounts, e-series MFs make sense.


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## kcowan (Jul 1, 2010)

David Chilton Interview
Chilton and Lang take on O'Leary

Not sure if these have been posted. How the Wealthy Barber keeps his wealth.


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## Squash500 (May 16, 2009)

kcowan said:


> David Chilton Interview
> Chilton and Lang take on O'Leary
> 
> Not sure if these have been posted. How the Wealthy Barber keeps his wealth.


Thanks for posting this.....much appreciated.


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## none (Jan 15, 2013)

Great videos. Thanks!


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