Historical article note: This article was originally published on 2019-02-21. Rates, policies, home prices, statistics, product names and qualification standards reflect the environment at that time and may have changed. This archive is for historical record and general education only. It is not mortgage approval, investment, legal or tax advice.
During the Spring Festival, it’s inevitable to attend various gatherings with friends. After a few rounds of drinks, people start talking about common topics. The female guests like to discuss nutrition and children, while the male guests prefer to talk about national and international affairs. Investment topics are also frequently mentioned. Everyone seems to be groping in the dark, each sticking to their own opinion, but there seems to be one consensus: investment is for professionals, and if you don’t understand it yourself, just leave it to the experts. During the New Year, I’ll vent a little about the professionals I’ve encountered in Canada—let’s see if you’ve had similar experiences.
Let's start with the relationships among professionals I've met. There's a 'fear chain' among Chinese Canadian professionals, roughly like this: accountants fear insurance brokers because many new immigrants start their tax filings by the broker, but by the time they find a professional accountant, it's become an unfinished game of chess, and it's a dead game with no solution. Loan agents fear accountants, and clients' meager income leaves the accountant's Occam razor trimming the mortgage application very little. Real estate agents fear the driver's license; before the client even gets a driver's license, the house has already been bought, all thanks to the licensed driver. Sometimes agents also fear lawyers because some lawyers like to judge the house without understanding the client's affordability. Financial advisors also fear insurance brokers because they claim they can manage their own finances, and the products they invest in are products that can never be recovered in their lifetime, leaving the results for the next generation to verify. In communities, cross-industry robbery among professionals has become a beautiful sight; new immigrants who haven't experienced these hardships rarely become veteran immigrants. These jokes are told to let everyone know that there are many slash youths in Canada, but none like Susan Kuang, who are high-quality ones—they're all lacking in skills but still want to rob. The 10,000-hour principle says that skills acquired after birth require at least five years of practice to truly gain knowledge. People who hold multiple jobs actually don't have time to spend five years honing every profession. From my years of observation, people in the general trades only have an advantage over professionals in cross-disciplinary robbery, but their expertise and experience are far behind.
In Canada, 90% of professionals are self-employed, including dentists, lawyers, mortgage specialists, loan, real estate and insurance brokers, financial advisors, and study abroad and immigration consultants. Conflicts of interest between agents and clients are inevitable. The aforementioned cross-industry plundering is an extreme form of conflict of interest, but the biggest conflict of interest is the fiduciary responsibility issue between clients and professionals. You want professionals to be diligent, protect your interests, take care of your health, and increase your wealth, while professionals are calculating which product will give them the highest commission or income. Professionals who can place fiduciary responsibility above personal interest take time to find. This problem exists not only for new immigrants, but for everyone. Professional divisions are so specialized that it's impossible to know or do everything yourself, and it is necessary to entrust certain matters to professionals, making conflicts of interest inevitable. Methods to avoid major losses include: 1. Be wary of professionals recommended by your 'friends.' If the recommended professional is a relative of this 'friend,' then forget it; a professional you don’t personally use who is recommended to you is like a chef not eating their own food. 2. Professionals offering free services usually have other motives; for example, general practitioners who provide free tax services are thinking about other things. 3. Professionals who actively offer to give commission rebates should absolutely not be used; you are just a guinea pig for them/their career. 4. If professional services are needed, you must pay the appropriate price, and commissions should not be skimped on; necessary loyalty fees cannot be saved. If Accountant A charges $300 for tax filing, B at a supermarket helps you file for $50, and C offers free tax filing, what would you choose? Many people say that older Chinese immigrants in Canada bully new immigrants. If new immigrants do not seek cheap gains, no one can bully you. Take tax filing as an example; this is the most important and serious matter in Canada. Saving money on tax services and not hiring a professional to file your taxes is suicidal.
Self-employed professionals often juggle two roles: marketing themselves and providing professional services. Some accountants have many social and marketing activities and have no time to meet clients in person, leaving assistants to handle it; some financial advisors chatter endlessly about the stock market and neglect their clients’ investment portfolios in the long term. Professionals face a dilemma in allocating time and energy when attracting new clients and managing existing ones. My personal advice is to choose a management-oriented professional. The best way to understand a professional’s business level and competence is to browse the social media of your target candidates. If they are professionals, they should make some exposure in their circles, and by looking at their posts, you can tell if they are truly professionals or just professional marketers. Additionally, awards organized within the Chinese community lack particularly strict and transparent standards and are insufficient to prove professional competence, thus they should not be used as criteria for selecting professionals.
This involves professionals in investment and wealth management, including bank account managers, financial advisors/financial planners, loan specialists, insurance brokers, accountants, and lawyers. Except for bank client managers, the others are self-employed and earn commissions. Investors need to understand that their interests do not align with the agent's, and there are two conditions to achieve aligned interests: 1. paying market-level consulting fees, which can also be understood as loyalty fees; 2. finding an advisor whom you both trust and who is professional. Some people request service commission rebates from brokers, which is a disrespect to professional services and will exacerbate conflicts of interest under fiduciary duties, ultimately harming the client's interests. Trust is paramount in one-on-one services, followed by professional competence. No matter how professional the advice is, if you do not trust it, it is meaningless. Some people hire professionals they trust but who are less competent, and end up suffering losses. Therefore, for new immigrants who have just arrived and have few people they can trust, there is no need to rush into making major financial decisions.
When it comes to wealth management, due to the high level of specialization in various fields, there is a serious 'law of the hammer' phenomenon in Canada. Charlie Munger said that a person who only has a hammer sees everything as a nail. I have personally felt this deeply. Accountants, to prove their experience and professionalism, slash their clients' income drastically, showing how capable they are and how much tax they have saved for you. Yet the client still has a pre-sale property to pay for the next year, and this cut means the loan falls through. Real estate agents recommend properties with high rental income to clients, with two kitchens in the basement, but banks cannot provide loans for such properties. The important point, I repeat, is that professionals related to wealth management include: bank account managers, financial advisors/planners, loan specialists, insurance brokers, accountants, and lawyers. I suggest readers consult all these related professionals before making any financial plan over 100,000 yuan, to avoid making decisions that could ruin the overall situation by focusing on one aspect and neglecting others. Everyone is the captain of their own financial Noah's Ark, while professionals are just your sailors. If you do not decide the direction yourself and let the sailors row randomly, your ship will never reach the shore; it will only drift or spin in the water, and the bias of any sailor can capsize your ship, with other sailors unable to help. Investment is your own matter, not the professionals'. Those who give up their responsibilities as captain should not expect uncooperative sailors to row the ship to shore. From the perspective of investment methods, there are strategic investments and financial investments. Strategic investment refers to full-factor investment, not only putting in capital but also time, energy, experience, and networking resources—that is, personally operating the projects in which you invest. Financial investment means providing only money, not effort, and entrusting it to a trusted person to manage. If you are doing financial investment, the initial choice is the most, most, most important. Choosing the wrong person or wrong product can make a lifetime of savings go to waste and lead to the tragedy of having nothing in old age. What the captain needs to do is lifelong learning—to learn to recognize the right direction and to objectively evaluate the sailors.