A recent newsletter presented the story of a 31-year-old Vancouver resident who wondered if he should buy a house now or wait and save a bigger down payment. I asked for readers to weigh in and received roughly 2,000 responses back, which is incredible.
Just over 37 per cent urged this person to buy now, while a combined 40 per cent said the right thing to do is wait either a year or indefinitely. My gut feeling is that unless you’re able to comfortably afford a home now, waiting is the right thing to do. The current surge in the real estate market seems excessive, given the economic situation and the potential for a second wave of COVID-19.
But I totally understand the rush to buy out of fear of missing out later due to rising prices. If you’re in this group, recognize that you may have to give up the financial flexibility that allows you to own a house and to both save for the future and spend without taking on more debt.
We have an online tool to help buyers and owners see how well they can manage housing costs, saving and other household expenses. It’s called the Real Life Ratio calculator and you can find it here.
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Rob’s personal finance reading list
New all-time lows in mortgage rates
As a long-time rate-watcher, I find some of these numbers mind-blowingly low. Five-year fixed rates well below 2 per cent.
The next retail shortage
Part of life in the pandemic is guessing what items will be hard to find in stores – remember the toilet paper and flour shortage? CTV reports on what everyone will be buying as the weather cools.
'I know this might come across as a humblebrag…"
A recent grad who grew up in a low-income family uses Reddit to announce that they have paid off a $40,000 student loan. Lots of supportive comments – thumbs up on that.
Houses are hot, condos not so much
In the hot pandemic housing market, millennials are looking less at condos and more at detached homes in the suburbs. This explains the softness in the condo market, even as houses soar in price.
Guest Q&A
My guest this week is Poonam Puri, a professor at York University’s Osgoode Hall Law School and co-founder of the Osgoode Investor Protection Clinic. The clinic provides free legal advice to people who believe their investments were not handled properly and cannot afford a lawyer.
Q: The most recent annual reports says the IPC worked on 22 files and closed 11 of them. Tell us about your typical clients – age, background, financial status etc.
A: We provide legal assistance for some of the most vulnerable retail investors in the Canadian capital markets. A typical client is over 50 years of age and either retired or planning their retirement. The vast majority of these individuals have very little or no investment knowledge and therefore rely on others to advise them or invest for them. Most have lost all or a significant amount of their savings. They cannot afford a lawyer and often can’t make their way through the maze of our securities regulatory structure.
Q: Can you summarize the types of complaints your clients brought to you?
A: The most common complaint that the Osgoode Investor Protection Clinic sees is where advisers have placed retail investors in investments that are unsuitable for their risk profile. In certain cases, the adviser has pre-filled the investor’s forms with incorrect information or has not bothered to update their investments when they go through a major life change such as retirement, job loss or divorce.
We are also seeing many cases of investment loans that are offered to retail investors who do not understand the risks and cannot afford interest payments or capital calls when the market is volatile.
Sadly, we are also seeing cases of outright fraud, for example, with a fraudster abusing a position of trust to steal investors' funds. These fraudsters are not registered with regulators and have no intention of becoming registered. A key issue with these files is whether we can find a fraudster who has run off with our clients' funds.
Q: Do you see the complaints brought to you resulting from adviser greed, indifference, incompetence or something else?
A: We are seeing registered advisers who are indifferent – many of them are offering unsuitable investments or investments that are no longer suitable when there is a life-change event. We have seen unregistered individuals acting as advisers who are incompetent and greedy. They convince retail investors with low investment knowledge to put all their eggs in the same basket and place all their savings in very high risk products which are often illiquid.
Q: What should your first steps be if you feel you have lost money because your adviser did something wrong or inappropriate?
A: If you believe that your investments have been mishandled, your first step should be to seek help. Time is not on your side and you must act quickly. Make sure you can identify the issue, the timeframe and the amount of your loss. Collect your records and communications and try your best to pinpoint the exact problem and when it came about. Whether you contact the Osgoode Investor Protection Clinic to assist – we are currently accepting new clients – or seek to resolve the matter yourself, you’ll be most effective if you know what you’re looking for and you have documents and records to back you up.
Note from Rob: First steps to resolving an investment dispute on your own are to raise the issue with the branch manager at your adviser’s office, the firm’s compliance department and then an in-house ombudsman (for bank-owned firms). A next stop would be the Ombudsman for Banking Services and Investments.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
The money-free zone
If you need a feel-good song, you can’t do better than Move on Up by Curtis Mayfield. This tune came up on the back end of my morning run the other day and I pretty much flew home.
ICYMI
What I’ve been writing about
- The ‘decade of the home’ is coming – will young adults be locked out?
- Rob Carrick: Is 1% a fair fee for advice on stocks? (for Globe Unlimited subscribers)
- A new ETF offering 4-per-cent retirement income is going to be big (for Globe Unlimited subscribers)
Has the pandemic derailed your financial plan?
Get some FREE advice from The Globe and Mail about your unique financial situation by e-mailing finfacelift@gmail.com to be part of our Financial Facelift series. You can share your story under a false name and our photographers will obscure your identity in one of our trademark Financial Facelift photos. We’re especially keen to hear from the young, the struggling, the self-employed, the partially-employed, restaurant workers, freelancers, contract workers and small business owners. Hopefully our advice can help you weather these stormy times and help make sure your financial future is secure.
More Rob Carrick and money coverage
Subscribe to Stress Test on iTunes or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: How to survive the gig economy • How to get out of debt • Is now the right time to buy a house? • Crisis-proof your finances • Does investing change during a pandemic? • Can you afford to live downtown? • The cost of kids • Should you move back in with your parents?
- ✔️ A 10-point pandemic personal finance checklist: Create a "wartime" family budget; stop worrying about bank deposits; clean out your big-bank savings account; get relief on car payments; get preapproved for a mortgage; WFH? Save $1,000 a month; save, save, save; build resilience by not anxiety-buying; consider the cost of mortgage deferrals; get ready for the second wave of financial distress.
- 📈 Investing: The case for a tight portfolio of big blue chips dividend stocks; robo-advisers beat human advisors (and they’re thriving), why online banks that are better than the branch; is it time to invest your 2020 TFSA; don’t get your mortgage at a bank; why it’s so hard to invest in preferred shares; stock up on stocks to retire early; and are you following the 10-year rule with your investments?
- 💰 Saving: Food waste is wasted money; why you might regret that SUV and find out if CAA is worth it; juice your PC Optimum points; how an ex-Bay Street lawyer got out of debt; blindly easy tweak to your retirement investments to survive economic downturn; should you buy that latte?
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob Carrick