Build Wealth Canada Podcast

Today’s guest is Jason Heath, one of Canada’s best known fee-only financial planners that you’ve probably seen in all sorts of media here in Canada over the years. He’s a Certified Financial Planner (CFP), has been providing financial planning for over 20 years, and is currently a personal finance columnist for the Financial Post, MoneySense, and is also a regular contributor to RetireHappy.ca. I’ve been reading his insightful financial planning articles for years, so it’s really great to have him on again, and in this episode, we get his perspectives on: How much do you actually need to be financially independent here in Canada and have the option of retiring? What is the process that should be undertaken to figure this out? Next, we get his take on how to live off your investment portfolio by withdrawing a sustainable amount every year, along with some alternatives to the 4% rule (which as you likely already know, has some limitations). We actually go through the process and calculations that he does annually with clients to ensure that they are withdrawing a sustainable amount from their portfolio every year, and we discuss how you can do it yourself in case you’re purely DIY and want to do it all yourself, and not have to meet with a financial planner every year. Also, since Jason has been doing fee-only financial planning for over 20 years, we talk about the patterns that he’s noticed between those that are successful financially in and in life, long term, vs those that are not. From those, we hone in specifically on the things that you and I can actually control and do in our own lives, to help get us there too. Enjoy the episode, it’s great having you here, thanks for tuning in, I hope you leave the show a rating on Apple Podcasts or Spotify, and now let’s get into the interview. Questions Asked: When somebody is trying to determine how much they need to be financially independent and have the option of retiring, what is the process that should be undertaken to figure this out? One strategy that has really peaked my interest and that I think can be highly relevant for those that have hit their financial independence number, is doing some sort of variable withdrawal strategy with a spending ceiling and floor. When a client comes to you and says that they don't just want to use a fixed withdrawal strategy like the traditional 4% rule, and instead would like to be able to take out more when the markets are doing well, and are okay withdrawing less when the markets are not performing well, is there a certain variable percentage withdrawal strategy that you have found to work well, along with any particular rules for a spending ceiling and floor? or is there maybe something else entirely that you prefer recommending to clients? What is the process and calculations that you do annually with clients to ensure that they are withdrawing a sustainable amount from their portfolio every year? My understanding is that the ideal way to tackle this, is to work with a fee-for-service financial planner like yourself or somebody at your firm, where every year the numbers get updated in the financial planning software for that person's particular situation. Then the expertise and analysis of the Financial Planner is used to determine what the withdrawal rate should be for that year. Is that the ideal way you'd recommend that it’s done? For those that are more on the DIY side and do not want to meet with someone annually, what approach or process do you recommend for them? For instance, maybe they just want to meet with a Financial Planner when there are significant life changes or financial events like an inheritance, the birth of a child, getting married, etc. You have been a Financial Planner for decades at this point and I'm sure with that level of experience you've noticed certain patterns when it comes to clients that are successful financially and in life, versus those that are not. Can you give us any insights in terms of the best practices or patterns that you've noticed from those that are financially successful and also appear to be happy and fulfilled in their day-to-day life? On the flip side, are there any common and/or major mistakes or regrets that you have seen clients have over the years that we can all learn from so that we do not repeat those mistakes in our own lives? In your practice, I'm sure you've helped clients of all different net worth sizes; from those struggling to very high net worth individuals. What have you noticed that the wealthy do that the poor or middle class do not? You have been in this industry for multiple decades. Would you be able to recommend some resources online that you find to be reliable and reputable sources of information, for those that like to continue to educate themselves when it comes to financial planning, retirement planning, and investing in Canada? Tell us more about where we can see your work and tell us more about your practice.

With the significant increase in interest rates over the past year, and with home buying and selling season right around the corner, I thought it would be great to have our resident mortgage expert on the show, to go over the implications of this higher interest rate environment that we're in.  Whether you’re getting a new mortgage, or are considering refinancing, we tackle whether you should go with a variable rate or fixed rate mortgage in this current interest rate environment. There could also be some new mortgage rules coming out this spring as well, so we cover what those are so that you can be better prepared.  You might have also been experiencing quite a bit of a payment shock if you hold a variable rate mortgage, with a drastic increase in your monthly mortgage payments. And, if you’re a fixed rate mortgage holder, then you’re not out of the woods either, as when your mortgage inevitably comes up for renewal, you might very well be forced into a much higher rate on your new mortgage than what you’ve been used to over the past few years. We’re going to cover this new challenge that you may be facing, with these higher rates, along with some things you can do to lower your monthly mortgage payments, despite these increases in rates. Our Guest: Our guest today is the show’s resident mortgage expert, Sean Cooper. He's who I go to and who I send friends and family to for any mortgage related questions. Sean is the bestselling author of the book, "Burn Your Mortgage". He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. These days, Sean’s helping others burn their mortgages too, as an independent mortgage broker. Sean has offered to answer for free, any questions that you, the Build Wealth Canada listeners have. I’ve set up a special page for him so all you have to do is go to buildwealthcanada.ca/sean, and there you can send him a message with your questions. Or, if you prefer, you can even pick a time on his calendar for a phone or video call to get your questions answered with him live, for free. Sean is a licensed mortgage broker too so I definitely also encourage you to reach out to him if you’re looking to get a new mortgage or if your mortgage is coming up for renewal, as at the very least he’ll be able to provide you with a short list of the best mortgages that he’s been able to find across all of Canada from the 60+ lenders that he monitors. None of this costs you anything, and there’s no obligation to get your mortgage through him or use any of those suggested mortgages. At the very least, you’ll get some good education and research on the top mortgages available in Canada right now, you’ll learn what to look for when choosing your next mortgage, and you can always decide later whether you’d like him to help you with the process, or if you want to do it all yourself. It doesn’t cost you anything regardless. Questions from the Episode: In 2022, the Bank of Canada raised interest rates 8 times. The prime rate went up a whopping 4%. So far we have already seen one increase of the prime rate in 2023. As someone that’s in the industry, what are you hearing and what do you think is in store for mortgage rates in 2023, 2024 and beyond? With all these mortgage rate changes that we’ve seen in the recent past, what are some considerations when choosing between a fixed rate and a variable rate mortgage? What’s happening in the real estate market right now (so the first quarter of 2023 which is when we’re recording this episode)? And is now a good time to buy a home? I heard there could be some new mortgage rules coming out in the spring. Can you tell us about those and how they may affect buyers?  For anybody new to working with a mortgage broker, can you speak to how it works, and whether you have to pay for the services of a mortgage broker? What are some ways to qualify for a higher home purchase price, despite the new pending mortgage rules?  A lot of people are facing “payment shocks” right now. If your mortgage is coming up for renewal in the next few months and you currently are locked into a low fixed rate, you can expect your payment to jump at renewal. What are some things you can do to lower your payment back down?

It's RRSP season here in Canada. Remember that March 1 is the deadline for contributing to an RRSP, and have it count towards your 2022 tax year.  Also while we’re on the subject, remember that your TFSA contribution room grows every year, and for the 2023 calendar year, you now have an extra $6,500 that you and your partner can contribute each. That's $13,000 total if you both max it out. Last year the limit was $6,000 per person so the government did increase that by $500 per person for this year.  I find that these are things that are easy to forget as life gets buys, but I always have reminders set up for these things as, especially in the case of the TFSA, it’s always nice to put in the effort to max that out so that you can get that tax-free growth on that new money invested, all year long. Since it’s RRSP season, and tax season is coming up, I thought it would be worthwhile to have another successful Canadian Financial Planner on the show, so that we can get a good second opinion on: ·         How much do you need to be financially independent and have the option of retiring? ·         What are some of the sustainable withdrawal strategies that you can use when you’re ready to start living off your portfolio? ·         What is the process and calculations that should be done annually to ensure that you are withdrawing a sustainable amount from your portfolio? ·         And, since our guest has been in the financial planning industry for decades at this point, I ask him if he’s noticed certain patterns when it comes to clients that are successful both financially and in life, versus those that are not. This way we can pick some lessons learned from others, apply them to our own lives, and hopefully avoid some completely avoidable mistakes that others endured before us. Before we get into the interview, I wanted to invite you to a free webinar and Q&A that I’ll be doing with the actual co-creator of the TFSA. He’s the former Chief of Staff for the Minister of Finance in Canada. His name is Kevin McCarthy, and if you’ve ever had TFSA or RRSP related questions, or would just like to ask the creator of the TFSA your questions, you can do so at this webinar. I’ll be there too obviously and so after Kevin goes through his educational presentation where he goes over the RRSP and TFSA fundamentals, as well as the tax deductions and tax credits available to us as Canadians, we’ll then have a live Q&A with him and I and so you can ask him or me your questions when it comes to personal finance, investing, financial independence and retirement, living off your investments, etc. The session is on February 23, 2023, and it will be recorded so even if you can’t make it live, you can still signup to be emailed the replay once it’s released.  Also, Kevin has informed me that anyone attending live will receive a downloadable version of his and his team’s proprietary Income Tax and RRSP Tax Savings Calculator. The link to sign up for free is BuildWealthCanada.ca/webinar. I look forward to seeing and interacting with you there, and now, let’s get into the interview!

In this episode, I interview one of the most experienced Canadian financial planners that I know, and who I tend to go to when I have any complex tax and financial planning questions. His name is Ed Rempel, and in this episode, we tackle: How to determine how much you need to be financially independent? What are some sustainable withdrawal strategies that you can use to not run out of money when you’re living off your investments? How to pay less tax here in Canada And much, much more.  Thanks so much for tuning in, and please remember to leave a rating on Apple Podcasts or Spotify if you enjoy the show.  Here are all the questions we cover in the interview: When somebody is trying to determine how much they need to be financially independent and have the option of retiring, what is the process that should be undertaken to figure this out? What are some of the sustainable withdrawal strategies that you recommend, for those looking to live off their portfolio? Have you ever used some type of variable withdrawal strategy with your clients where the amount withdrawn every year to live off the portfolio varies depending on how the markets did that year? Have you ever done any sort of variable withdrawal strategies like using a spending ceiling and floor for the year? For those that don't feel comfortable going with 100% equities, what do you recommend? Do you change your recommendation depending on what is happening in the bond market? (like with the recent drops)? What is the process and calculations that you do annually with clients to ensure that they are withdrawing a sustainable amount from their portfolio every year? When it comes to tax planning and making sure that we’re paying the least amount of tax when living off the investment portfolio, are there any strategies or approaches that you’d recommend? For those that want to read or watch more of your research and insights, what’s the best place for them to go? You have so many resources on your website, a YouTube channel with how-to's, where people can learn all about creating a financial plan. Why is it important to also work one-on-one with a financial planner like yourself for example? You have been in this industry for multiple decades. Would you be able to recommend some resources online that you find to be reliable and reputable sources of information, for those that like to continue to educate themselves when it comes to financial planning, retirement planning, and investing in Canada?

Today we have another financial independence case study to learn how a real-life couple here in Canada were able to reach their financial independence number by the age of 34. We talk specifically about the practical tactics, strategies and mindset that you can apply in your own life, to help hit your financial independence number quicker. Or, if you’re already at financial independence, these tactics can further help solidify and enhance your net worth and that extra financial cushion that’s always nice to have, when you’re living off your portfolio.  Our guest today is Kyle Prevost who I have run the Canadian Financial Summit with for the past 2 years. What makes Kyle unique with his financial independence story, is that he and his wife were able to get there on two teacher salaries.  Oftentimes when we hear these stories of couples who have achieved financial independence early, they are often engineers, programmers, or other high paying professions which makes achieving that early retirement number easier. In Kyle’s case, they were able to do it on two teacher salaries instead, so we’re definitely getting a nice unique perspective here. This interview and presentation that Kyle prepared was actually one of the bonuses that we offered to Canadian Financial Summit attendees who bought the All-Access-Pass so you’ll hear him reference his slides at a few points during this talk, but don’t worry, all the lessons and advice still make total sense without the slides.  Enjoy the interview and presentation! Resources from the episode: The live Retirement Planning Workshop on November 29th at 1pm EST is over at BuildWealthCanada.ca/workshop The Canadian Financial Summit mentioned on the episode is over at BuildWealthCanada.ca/summit You can see more of Kyle's writing over at milliondollarjourney.com Questions from the episode: 1) Kyle, for those not familiar with you, let’s just start with the usual first question in a job interview - “Tell us a little about yourself”. 2) You recently reached financial independence - tell us about what that term means to you, and what your plans are in terms of work going forward. 3) Tell us what you think your keys to financial success were. 4) How did you and your wife Molly earn money after leaving university? 5) Let’s peak inside your portfolio, and tell us how you invest. 6) To wrap up, just to give folks a broad overview on what the financial independence by 34 road map has looked like for you and Molly, can you sum up how you two were able to do it?

Many Canadians tend to dabble in at least a bit of active investing, picking individual stocks, even if they consider themselves primarily total market index investors. As long-time listeners of the show know, I personally only do total market index investing through ETFs, but I think it’s important to stay educated and hear the other perspective of how and why active investors choose to invest the way that they do.  This episode is going to be a bit of a hybrid because our guest today, Braden Dennis, is an active stock investor who owns an investment research platform called Stratosphere.io. He’s also the host of the Canadian Investor podcast, and with these two companies, it appears that he’s already hit financial independence at a really young age. So, in addition to asking him about how one should research companies if they want to buy individual stocks, we also get into one of the ways of reaching financial independence and early retirement quickly, which is by starting your own business. Interview Questions: What would you say is your investing style and what made you pick that over total market index investing? When I speak to a passive vs an active investor, one of the main things that they seem to think differently about is the efficient market hypothesis. Can you explain what that is for anybody not familiar, and what is your take on it? Bonds have really taken a hit lately, making many investors wonder whether they should instead do GICs, stay the course, put more into equities (despite those falling recently as well), using a high interest savings account, or using some other investment vehicles. What are your thoughts on bonds and fixed income, and what do you personally do in your own investment portfolio? If you were 5 years away from retirement, would your answer be different? As someone that is very active in the investing and personal finance field, I imagine you have things pretty planned out and optimized when it comes to the most efficient way to get to your financial independence number. What are you personally doing in your investment portfolio, personal finances, and life to get to that financial independence number as quickly and efficiently as possible? What keeps you going since it sounds like you can technically just fully retire now and never work again? One of the ways that I’ve seen you move to your financial independence number quicker is by starting your own businesses, which I see are there to help you and other active investors like yourself. Can you tell us more about the tools and businesses you’ve developed? I noticed that you’re able to search for index ETFs in Stratosphere too. Does your tool do anything for ETF investors or is it primarily for those that want to research individual stocks? If somebody wants to do some stock picking, even if it’s just for a small portion of their portfolio, where do you suggest they go and learn? Where did you learn? Which investment account would you recommend Canadians use if they are going to do any stock picking?  

Today we have a case study of someone that was able to pull off an early retirement (we get to learn how he did it, and apply those lessons to our own life). He also wrote a book that I personally consider life-changing, in particular when it comes to financial independence, early retirement, and achieving happiness.  His name is Jordan Grumet, and his book is called Taking Stock, A Hospice Doctor's Advice on Financial Independence, Building Wealth, and Living a Regret-Free Life. I highly recommend you check out the book. I wish I had it when I first set out on my financial independence journey, and I’ve also found it helpful in designing the lifestyle that we want, in this semi-retired life stage that we’re in right now.  In addition to the book, in this interview, we also cover: How Jordan was able to achieve financial independence at such an early age How he figured out whether he had enough to retire How he ensures that he’s withdrawing a sustainable amount from his investment portfolio and not depleting it prematurely Tips on how you can reach your financial independence number quicker, and much more. Questions Covered: For anybody that is hearing you speak for the first time, can you take us through your financial independence story, the path you took to get there, how things actually changed for you once you hit your financial independence number, and what you’re doing now? When you were on your way to financial Independence, what is the process that you did to figure out whether you had enough to retire? Now that you have hit your financial independence number, what is the process that you do or the calculations that you do to ensure that you are withdrawing a sustainable amount from your portfolio every year? (ex. variable percentage withdrawal, 4% rule, spending floor and ceiling, etc.) Are there any online tools or calculators that you like to use or that you found helpful when it comes to figuring out your financial independence number and your sustainable withdrawal rate from your portfolio? For those that are still working towards reaching their financial independence number, are there any specific tips that you can give them that had a substantial impact on your own life, that helped you get to your financial independence number quicker? Once you hit your financial independence number, what were some of the mistakes you made that you think could have been avoided knowing what you know now? One of the fascinating things that I recall hearing from you when you were being interviewed by Paula Pant, is that you actually went through depression once you hit financial independence. I think this sounds very surprising to most as the underlying assumption that I think most people have of financial independence is that once you reach it, you quit your job, and you have all the time and money you need to focus on being consistently happy. What triggered that depression in your case, and what can we all learn from that experience so that we don’t fall into that same trap? For me, as somebody that is not in the medical profession, being a doctor seems like one of the most meaningful and fulfilling careers that one could have as you are literally saving lives, or at the very least, vastly improving the lives of others in a significant way when conducting your craft. Yet, you decided to move from that to the field of communication via your book, podcasting, speaking and writing about matters relating to personal finance. Did you ever feel like you were helping less, or not achieving your maximum amount of positive contribution to society by focusing on personal finance instead of saving lives and healing others as a doctor? (i.e. If we achieve fulfilment and happiness by serving others, wouldn’t the medical field be the way where we can have the biggest positive societal impact?) In your book, you talk about focusing on enjoying the journey instead of the destination by focusing on “the climb” (striving toward our own unique purpose, identity, and connection). Can you explain what “the climb” is, and how can it be applied by those on their way towards financial independence, and those that are already there? Speaking of your book, can you tell us more about it, and what listeners can expect to get out of it?  After achieving financial independence, we have all this time to do what we want and on the one hand, we want to enjoy what we worked so hard to achieve. However, if we just live a life of pure relaxation and hedonism, that ends up being very unfulfilling, and it's easy to start to feel anxiety and potentially depression because we are not achieving our potential, and not living a life where we are working towards something that we find meaningful and fulfilling.Have you figured out a way to achieve balance in this regard where you still get to enjoy the fruits of your labour from achieving financial independence (pure fun and relaxation), while also filling your time with challenging activities that bring you joy, fulfilment, and meaning? How do you deal with any anxiety that comes from opportunity cost while financially independent? For example, the internal dialogue of: “I deserve to relax as I just finished doing meaningful thing X and I should strive for work/life balance, but that means that I’m not working on Y which is a great opportunity, which could be lucrative and would help a lot of people.”(i.e. If you take on too much, you end up getting burnt out. At least that’s what happened with me post-FI). In terms of maximizing happiness and fulfilment, is there a routine that you follow during any part of your day that works well for you? Or, do you take a more fluid, go-with-the-flow approach, where things are more spontaneous? (i.e. Morning routine, and how structured to you keep the rest of your day?) What have you found to give you the most fulfilment, whether it's pre-financial independence or post financial independence? As someone that used to be a full-time doctor, I imagine you have a wealth of knowledge when it comes to maximizing one’s longevity. Can you give us some advice on that? Tell us again where we can find your book, as well as all the other educational content that you produce.

One resource that I check out every year is MoneySense’s “Best ETFs in Canada” guide. They bring on a panel of experts to find Canada’s top ETFs for DIY index investors (like myself). I found this guide extremely helpful when I was first getting started in investing, and now, many years later, I still read it when it gets updated annually, just to be “in the know” of what’s happening when it comes to index investing in Canada, and to stay up to date on any significant changes like the updated fees, new ETF offerings, and any changes to existing top ETFs that you and I have in our portfolios already. This podcast interview is different from you just reading the written version of the guide because we actually do a deep dive into the different ETFs that are in the guide.  Definitely check out the written version of the guide as well, especially since it has some really useful tables that nicely summarize what the top ETFs are, in the different categories. But, definitely still listen to this interview as the writer of the MoneySense guide is on the show today to dive deeper into the findings, along with one of the top panellists and experts, Ben Felix from PWL Capital to provide his analysis on the different top ETFs. Questions Covered: Bryan, can you start by telling us about your background, as well as this annual initiative led by MoneySense to determine the best ETFs in Canada? Ben, can you tell us a bit about your background and the work that you do? Bryan, how does voting work among the panellists before an ETF is admitted as one of the “Top ETFs in Canada”? Bryan, there are a lot of different investing strategies out there. When you and the panellists are evaluating what the best ETFs in Canada are, what is the goal and strategy that you are all focused on and what kind of investor is this top ETFs list for? Ben, before we get into the results, what should someone do if they are holding a past ‘top pick’, and now they no longer see that pick on this year’s list? In other words, when should we actually really consider swapping to a completely different ETF if we already have a good diversified index portfolio in place? Ben, when it comes to switching from one ETF to another, what are the trading costs that we need to be aware of? The $5-$10 trading commissions are the one I think most people are familiar with, but what about the bid/ask spread, how much of a cost impact does that have? And are there any other costs we need to be aware of, when for example someone is tempted to switch ETFs because let’s say, a top pick for this year has a slightly lower MER? Top Canadian ETFs: Alright, let’s take a look at the top Canadian, total market, index ETFs that give you exposure to the Canadian stock market. I noticed that all three of the top picks have the same management fee. We have BMO with ZCN, Vanguard with VCN, and iShares with XIC. Ben, BMO’s ZCN and iShares’ XIC look almost identical to me. Are there any key differences between these two that we should be aware of? The other thing that jumped out at me is that Vanguard’s VCN has fewer holdings, 181 vs 240 compared to the iShares and BMO ETFs. Would this be considered a concern by implying that the Vanguard ETF is less diversified than the BMO and iShares versions? i.e. Why would you go with Vanguard when you can get more holdings and be more diversified with XIC or ZCN? Bryan, another top pick in this category is Horizons’ HXT ETF, which covers the S&P/TSX 60. You mention in the article that “it’s tax-efficient; and has a rock-bottom 0.04% fee after the rebate, until at least Dec. 31, 2022”. Can you explain what this rebate is, and why the “at least Dec 31 2022” timeline? Ben, Horizons has this unique tax structure with some of their ETFs, like HXT, where you don’t receive the dividend payouts as income, but instead they get added to the fund so that you instead receive more capital gains. I realize that I’m maybe oversimplifying things a bit here, but essentially by holding an ETF like HXT in a personal taxable or corporate trading account, some Canadians save money by reducing their clawbacks when it comes to things like CPP, OAS, the Canada Child Benefit (CCB), and avoid the high tax rate when investing in a corporate account.Now in the past, the government closed this, (what I would consider a) loophole, but Horizons figured out a way to restructure their ETFs so that Canadians can still get these tax savings.This raises the concern of: What if the government changed things again, closes the 2nd loophole, and Canadians that were holding Horizons ETFs like HXT start selling off ETFs like HXT in large quantities because it no longer has this tax advantage? In this scenario, would the ETF plummet in price? Or no, because the ETF is still holding companies (in a way), and it’s not like the value of all those companies will drop because there is a massive sell-off of the Horizons ETFs. The last time this closing of the “loophole” happened where the government changed the rules, I recall Horizons doing a press release where they said that if they can’t find a workaround, they may have to close down those ETFs. If that was to happen in the future, would Canadian investors be hurt by this? Bryan and Ben: The other concern with HXT, is that it is only 60 Canadian companies, and I think most Canadians (myself included) would rather go for the total market approach with an ETF like ZCN, where they are now getting the entire S&P/TSX index with its 240 stock holdings.Do you think this tradeoff is worth it? (where you’re getting less diversification, but some potential tax savings and/or clawback reduction on government benefits). Bryan and Ben, most Canadians do have a home country bias when it comes to their investment portfolio. Even when we look at asset allocation ETFs from all the major providers, they definitely hold more of Canada than Canada’s percentage of the world equity markets. Why is that, and what is your stance on what percentage Canadian stocks should make up of a Canadian DIY investor’s investment portfolio? US Market ETFs: Alright, let’s jump to the US market. XUU still appears to be the favourite here among the panelists, as far as Canadian listed, US total market index ETFs go. The runner-up seems to be VUN which is comparable in terms of US stock market representation, but has a higher fee of 0.15% vs XUU’s extremely low fee of 0.07%.Do you guys have any thoughts and comments on this one? International ETFs: Alright, let’s jump to international stocks. Can you give us your thoughts on these, while touching on some of the nuances when it comes to choosing the different combinations, from the different providers, when it comes to emerging and developed international markets?

If you’ve done any sort of research on index investing and ETFs, then I’m almost certain you would have heard of Vanguard, as they are one of the pioneers in this space. They have a very impressive massive following in the US and have really established themselves in Canada as well, where they are the 3rd largest ETF provider.  I always wanted to interview them because I’m sure, like you, as one invests, you begin to wonder about certain things when it comes to index investing, and ETFs in general.  I’ve been accumulating this list of questions for them over the years and it’s exciting to finally get a chance to interview them.  Questions Covered: Asset allocation ETFs have become incredibly popular here in Canada so I thought we could start our conversation there.First, for anybody just getting started in DIY investing, can you briefly explain what asset allocation ETFs are? One of the key appeals of asset allocation ETFs for many Canadians, is that the funds within the ETF are automatically rebalanced. Therefore, DIY investors don’t need to use tools or a spreadsheet to do this themselves. How often are the Vanguard asset allocation ETFs rebalanced? And when we have something like the large but brief crash from COVID, are the asset allocation ETFs rebalanced at a different interval during such significant events? A dilemma that I’m sure many Canadians face is whether they should use an asset allocation ETF for their entire portfolio, or whether they should split it up and buy individual ETFs instead, to get a slightly lower cost and increased tax efficiency by being able to place the individual ETFs in the account type that is most efficient for that ETF. Is there a certain threshold in terms of portfolio size, or something else where you think Canadians should consider switching from an asset allocation ETF to individual ETFs? When it comes to your asset allocation ETFs, I noticed that your allocations definitely differ from your main competitor iShares. Can you take us through how your asset allocation ETFs are different from iShares, and why you believe your methodology is superior? DIY Investors that classify themselves as total market index investors often hear that their equity asset allocation should be based on market cap weights. For example, since Canada is only 2.4% of the world markets, then only 2.4% of our portfolio should be in Canada (source). However, when we look at the asset allocation ETFs of Vanguard (and your competitors), we notice that Canada is overrepresented (i.e. a home country bias), and the US is underrepresented with respect to just their market cap weights. I know there is a reason you do this and Vanguard has done research on this so can you take us through why your weights don’t actually try to exactly match the market cap weights that we see across the world? One particular ETF that I’m sure has caught the attention of many retirees (or soon to be retirees) is the Vanguard Retirement Income ETF (VRIF). Can you explain what this ETF is, and the pros and cons of using it vs just holding a more traditional core total market index portfolio (like VGRO or VBAL for example). One of your popular ETFs is VUN (the Vanguard US Total Market Index ETF). Traditionally, Vanguard and iShares tend to have almost identical fees (MER), when it comes to total market index investing. However, I’ve had several listeners ask why in the case of VUN, its main competing ETF (XUU from iShares) is at a 0.08% MER whereas Vanguard is double at 0.16% MER. Now I realize that these are both still really low MERs, especially when we compare them to traditional mutual funds that tend to have MERs of 2%+, but I was wondering if this uncommon discrepancy in fees is something that is on Vanguard’s radar, and is Vanguard considering matching iShares like it has in the past with many of its other ETFs? This next one is a bit technical, but for Canadian investors that are really trying to optimize their portfolio: Whether stocks are held directly or through an ETF in another country like the US becomes important, due to the two layers of withholding tax that we have to pay if we’re holding international stocks through a US listed ETF. With the Vanguard international ETFs (VEE and VIU), are the international companies now held directly instead of through a US listed ETF? And if not, is that something that Vanguard is looking into changing in the future so that Canadian investors no longer have to endure those two layers of dividend withholding tax? Vanguard is seen by many Canadians as the pioneer when it comes to passive, total market index investing, especially with your founder Jack Bogle being such a strong supporter of total market index investing. I noticed however that Vanguard also has an active investing division. Can you tell us more about that as typically active investing is viewed by DIY passive index investors as the complete opposite of passive total market index investing. Why does Vanguard believe that having a combination of both active and passive funds plays a critical role in a well-diversified investment portfolio? Can you tell us about the different resources available on your site for investors?

Today I have Brandon Beavis on the show who runs one of, if not THE largest YouTube channels on investing, specifically for Canadians. He has over 187,000 subscribers, and also runs the channel with his dad who has decades of financial planning experience here in Canada.  Since Brandon and I have each been optimizing our finances and investments for so long, and since we each specialize in this, we thought it would be fun to do a collaboration where we each share how we’ve optimized our investments and finances so that everybody watching on his channel and listening on my podcast can get two different perspectives and ways of doing things. Then you can pick and choose whatever you think is a better fit for you, and what you think will have the biggest impact on your finances. Come join me at the Canadian Financial Summit: Before we get into the show, I wanted to invite you to join me, for free, at the Canadian Financial Summit this year. It’s a fully online educational event, you can stream all the talks for free, it starts this October 12, 2022, and you can get free tickets to stream the talks for free over at BuildWealthCanada.ca/summit.  We have over 35 speakers this year, there are already over 22,000 Canadians registered for the event, and we'll be covering investing, real estate, financial planning, early retirement, and much more. We've got some really high-profile guests again this year including Brandon Beavis and Benjamin Felix who each run one of, if not the largest YouTube channels in Canada on investing. We have Rob Carrick from the Globe and Mail, many of the top writers from MoneySense are presenting, along with some of the largest Canadian personal finance bloggers and writers like Robb Engen, Mark Seed, Ed Rempel, Jason Heath, and many more. Here's the link for your free tickets: BuildWealthCanada.ca/summit.  I hope to see you there! And now, let’s get into the interview.