Last weekend (Nov 19-20) I went to the Canadian Personal Finance Conference (#CPFC16) for the first time. I flew from Calgary on the Friday night, staying there for the weekend and returning back to Calgary on Sunday after the conference.
So what did I learn from the conference?
Well a blog post will not do it justice, but here goes. The roster of speakers for the two days were amazing. If you are a Canadian PF blogger, I highly recommend attending this conference next year. Not only was it a great event for networking, but there was a wealth of information from well know and respected people in the industry. The roster of the speakers can be found here.
Even though each speaker came with their own unique take on personal finance and focused on different aspects of personal finance, I wanted to summarize four major themes I got from this conference. Although there were more than 4 themes, these were the ones that stood out to me.
Rethink Housing for Millennials
The conference included a housing panel discussion with 3 experts in the industry. Canada has over a 70% home-ownership rate, (higher than in the United States) and some millennials are having a hard time breaking into the market. Here are some notable things that were discussed about home-ownership by the panelists and the audience:
- Millennials may need to rethink the length of time they stay in ‘starter homes’. The average length of time people stayed in starter homes was 3-5 years. Rob Carrick from the Globe & Mail believes that millennials should look at 10 years’ time horizon for their starter homes moving forward. With that being said, avoiding homes that do not allow your family to grows (i.e. buying a 1-bedroom condo if you want to start a family within the next 10 years). Alternatively, buying homes that are too big and would take your family years to grow into is not a good use of financial resources either. Most of the panelists agreed that appreciation of homes will be moving slowly so constantly moving every 5 years or so will eat into equity and possibly leave one in a worse financial situation than before.
- Millennials living in highly priced housing markets like Toronto and Vancouver may need to consider renting indefinitely. Similar to New York city, home-ownership may be unaffordable for most if prices continue to increase without incomes increasing.
- Millennials may need to save up longer for their down payment. With stricter lending requirements that have come out this year and increasing house prices in major cities, millennials in these regions may need to prolong entry into the housing market until their late 30’s or early 40’s. With the life expectancy increasing to age 80 and up, one panelist felt this is not too big a problem.
- Rob Carrick, from the Globe and Mail believes that we need to look at housing as a part of a bigger picture and financial decision. Including how will homeownership affect our lifestyle, what we are able to do and not do. He also believes that house prices become a bubble when people are speculating to buy a house and invest.
- What was surprising was that all 3 panelists liked the new mortgage lending rules put in place this year, including those that work in real estate. In hot markets like Vancouver and Toronto, the rules may help to cool down house prices without causing a crash similar to what was seen in other housing markets in 2008-2009.
- One panelist also mentioned that if you are a diligent saver and investor (balanced, passive and long term), over time a renter will have a higher net worth than one who owns. This argument had mixed reviews with some for and against this argument. They also did mention however that most people buy a home for more than just an investment, there is emotional and intrinsic component to it as well.
- One panelist suggested that parents should not be pushing their kids to get into their first home as soon as they land a full time job after post-secondary. Give them time to discover their life goals, get comfortable in their roles and explore life before making such a major commitment. Mentioning that when baby boomers were first buying homes, home ownership was more or less a sure bet to build wealth for some of the following reasons:
- Boomers: affordable prices, high mortgage rates (which kept house prices affordable), more employees (both public and private) with defined benefits pension plans (which ensured a steady stream of income at retirement and transferred the responsibility of saving for retirement 100% to the employer), steady employment (one or two employers throughout their lifetime), less competition reducing the need to be mobile (without the internet, expertise was localized). Contrast this to millennials:
- Millennials: higher house prices with stagnant incomes (due to a weak economy), lower mortgage interest rates (which has increased the price of a home because one can afford more house with the same amount of money), less than 20% of employees with a defined benefits plan (which means that steady income at retirement is not guaranteed and the responsibility of retirement savings has shifted to the employee), not so steady employment (multiple employers throughout a life time), more competition (the internet has allowed for cheaper outsourcing of work, automation and a more competitive market for all).
- Overall takeaway was that the new rules and slow economy (stagnant incomes) in Canada will affect the extent to which house prices rise as well as the speed in which millennials can own a home in highly competitive markets.
Personal Finance is Behavioral
- Preet dominated this space with a great 1-hour presentation on why we are so bad with money and how behavioral finance can help change this.
- He talked about how our brains were created to piece together information as quickly as possible as a survival mechanism. The area in the back of our brain makes split second decisions with minimal information so we wouldn’t die…back in the day. Fast forward to the 21st century and this part of our brain will still kick into gear unless we consciously activate the front of our brain which is made for logical reasoning and decision making.
- He talked about how anchoring plays a big part on the financial decisions that we make and how companies and sales people know this. He used a few examples to show how anchoring is so powerful. The one that stuck with me the most was an experiment conducted by a bank to see how much people would put into their credit cards to pay back their debt. One group was given their credit card statement with the minimum payment amount due on it. This minimum payment amounts served as an anchor so most people in that group paid the minimum or slightly more. The other group was given their credit card statement without a minimum payment amount due. This group paid a significant amount of their debt back. For this group, the balance due served as an anchor to the financial information they have in front of them. I thought this was fascinating and explains so much, like:
- Why car dealerships tend to price their vehicles based on affordable monthly payments and not the full price of the car over the term of the loan.
- Why credit cards only give you the minimum amount due
- Why lenders only concentrate on one’s ability to make the mortgage payments each month when deciding how much credit to extend for a mortgage
- He had a lot more interesting behavioral finance experiments to share, backed my statistical data. It was a pretty cool presentation and I think the entire audience was engaged.
Millennials want quick, easy and fair banking
- Different fintech apps and CEO’s of online financial organizations like Wealth Simple, EQ Bank and CoPower were speakers and they shared a lot of great information on where banking and investing is going.
- There was a general consensus that millennials want banking that is simple, quick and fair. Wealth Simple offers a simple way to invest and a quick way to get started. The CEO of Wealth Simple Michael Katchen mentioned that people don’t want to spend a long time signing up for an investment account. They want something that is quick, hassle free and easy to use. His organization prides in offering all of these to their customers.
- It was also interesting to learn that EQ bank doesn’t issue any debit cards to their customers, everything is mobile, through Apple or Android pay etc. 80% of their customers are under 40 years old. I thought that was interesting.
Being an entrepreneur and having an online business is a lot of work
I have so much to learn in terms of online businesses, and it can feel intimidating at times, but I thought the information was great. Here a few things that stuck with me:
- Decide what you want to be well known for in your field. When you pitch people what your online business is all about, focus on what problem you are trying to solve for your audience.
- When you first launch your online business, focus on one or two social media platforms before branching out. Get comfortable with these platforms.
- Don’t be shy to ask for lots of favors from other people in your industry. They may say no, but you need to be ready for rejection as an entrepreneur.
- Always make sure your business is generating multiple income streams. Never rely on just one income stream to build your business.
- Always know what your margin is (the percentage of your revenue minus expenses). You should be able to answer what margins your business brings in less than 2 seconds.
- Stay on message, stay consistent, relevant and engage your audience.
- If your online business is running a loss after 9 months, shut it down.
- Always be authentic when sharing your story.
There is so much more that could be shared about the conference, but these were my main take-away. There are no paid endorsements in this post or anything like that, I just really wanted to share with you my experience at this conference. It was a blast!!
(image on post is a stock image & not from the conference)