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The Everyday Millionaire and Mindset Matters Podcast
TEDM – Craig Skauge – Your Hub for Smarter Real Estate Investing (Episode 216)
00:56:16
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- [00:00]
Craig Skog
Foreign.
- [00:04]
Patrick Francie
Hi there and welcome to the Everyday Millionaire podcast. My name is Patrick Francie and I am your host. And I want to begin by saying thank you for listening. On this show I am having conversations with seemingly ordinary individuals who have achieved some amazing and extraordinary results in both their life and business. My intention is to inspire and help you learn and grow by having my guests share their journey of how they face and overcome their challenges, but also how they celebrate their many wins. And now let's get on with this show and have a conversation with today's guest. My guest today, Craig Skog, is a powerhouse in the world of private capital market. He is a visionary leader, a trusted voice in regulatory circles and someone who's been shaping the future of alternative investing in Canada for many years. He was named one of Canada's top 40 under 40. He's the president and CEO of Olympia Trust Co. And he is a key architect behind the Private Capital Market association of Canada. So if you've ever wanted to unlock the full potential of private investments, navigate the shifting regulatory landscape or capitalize on emerging wealth building opportunities, this is a conversation you don't want to miss. Craig's going to unpack a bunch of details, break it all down for us. So let's get into it. Let's roll. Craig Scob, thank you for joining me today. Olympia Trust, thanks for being here.
- [01:42]
Craig Skog
My pleasure. Thanks for having me.
- [01:44]
Patrick Francie
So we got a lot of ground to cover, Craig. And you know, of course you're well known as the CEO of Olympia Trust, but let's kind of get into the conversation and start with if somebody asks you what you do beyond being the CEO of Olympia Trust, and not just beyond, but within the context of Olympia Trust, how do you answer that question? Like what are you up to today?
- [02:06]
Craig Skog
Well, you're a good chunk of my day. I oversee some other businesses in the Olympia family. So I, you know, I, you know, meeting with my executive team regularly and going over kind of their strategic for their various departments really. I, my role is kind of dual running Olympia and then and being an advocate for the, the private capital markets and alternative investing. I did that for years through various advocacy associations in, in Canada and, and now kind of just do my own thing and, and get my name out there and the, the ideas and my thoughts out there in, in different forms like, like, like your webcast here.
- [02:49]
Patrick Francie
So when we talk about Olympia Trust, you know, if somebody says, well, what does Olympia Trust do now? I'm a client of Olympia Trust by the way, and so I'm fairly familiar with what Olympia is all about. But if somebody's asking you, well, Olympia Trust, what do you do or what is that? How are you describing that?
- [03:07]
Craig Skog
Well, ultimately, I mean our largest division by quite a long, long margin is, is our private RSP division. So registered retirement savings accounts, tax free savings accounts. For Canadians. The differentiator is that we hold the products that just about no other financial institution in Canada will hold. Now the tax act says that these are eligible investments but for various reasons, either infrastructure wise or just lack of incentivize or lack of scale wise. Hardly any other financial institution will hold the types of securities we hold other than for the wealthiest investors. So we're talking shares in private companies, shares in private mutual funds, trusts, ARMs like mortgages, all the stuff that doesn't trade on an exchange, non bank product, so non mutual fund products. So all the odds and ends that are allowed to be in your rrsp. But that doesn't mean that people will take them. We will take them.
- [04:08]
Patrick Francie
So when I think about Olympia Trust, I consider, you know, when you go into that registered funds, Olympia Trust is, I'm going to say a go between for the investor who says I want to look after my own, I want to take responsibility for looking after my own RSP and I want to be able to move that money into again to an eligible investment and do that in a way that isn't going to trigger taxes. As in I'm not drawing my money out of my rsp, although I am, I'm taking responsibility for managing it myself. I'm going to go through Olympia Trust to move it into whatever investment vehicle I'm choosing. Is, is that a relatively accurate statement?
- [04:51]
Craig Skog
Yes and no. All the accounts that people open here are self directed but a good number of them have, have registered financial advisors attached to them. They're just not affiliated with us. So we kind of act as a back office for multiple securities dealers in Canada. These are specific dealers called exempt market dealers. So they have registered advisors. Ultimately the client's deciding what they go into, but it's typically with the advice of a registered individual. Having said that, some individuals just, yeah, they open it and they say, you know, I don't want to have an advisor at a bank anymore, I don't want to have a managed portfolio somewhere. I want to do, maybe it's just a portion, maybe it's all of their rsp, but I want to do it myself and pick my own investments for better or for worse. So Olympia's role is really just taking clients money, putting it where they tell us, again, provided that we're given evidence it's an RSP eligible investment, and then it goes good, bad or ugly, and it's up to the investor. We just charge fees for what we do and really have no percentage of profits or anything like that. We don't get a management fee because we're not managing the account. Decline is.
- [06:06]
Patrick Francie
So then when we look at, for example, because this is a context of real estate, at the moment, we're talking about real estate investment. And I'll use Equiton as an example. They're one of Rain's trusted partners in terms of a reit. And so if I wanted to take RSP Capital, move it into Equiton, I may use Olympia Trust, as that is. Is calling it a portal. Would that, is that appropriate? Or how, how would you describe it?
- [06:34]
Craig Skog
We're a custodian, really, is what we are. So we would take the client's money. They would either open an RSP and make their contribution as contribution season. So perhaps they make their contribution here, or they might transfer existing RSP funds from another institution. And then they would instruct us to invest the money with Aquaton. And we fundamentally act as an intermediary. We give that money to Equiton in exchange for a certificate or an ownership entitlement in whatever entity it is that the client chose to invest in. And then as Equiton pays dividends distributions, we give those back to the client's account. We keep a segregated account for each individual client with their assets, be it securities, cash, or combination of both.
- [07:22]
Patrick Francie
So that I think, does that really describe the role of what you do now? When we consider, you know, if I'm looking at taking RSP capital and do you do. Does it, does it always have to be, I guess, eligible for rsp? So are you part of that filter that's saying, okay, these actually, you can't, or you can move your money into that. This is not RSP eligible, or it is, you know, what role do you play in that regard?
- [07:51]
Craig Skog
I mean, ultimately the, the, the, the risk is on the client as to whether it is or not. But we do. Do we do an intake of every given file. We're provided with evidence that it is RSP eligible. We're given typically tax opinions from legal counsel indicating it is our RRSP eligible. We review the documents and then we do make a call as to whether or not we agree with the opinion. And ultimately, again, the onus is on the client. But I mean, historically, if we approve it, there's a Strong likelihood that it does qualify. And typically the issue is that this is just not well understood. It's black letter law and the Income Tax act that private mutual fund trusts, mortgage investment corporation shares are RRSP eligible. And there's other types of adjustments as well. It's just that the banks won't take them or post them on their website. So people don't know that they exist. And then they question if they're eligible. When we have products that have been in accounts for 20 years that are RSP eligible private securities, they're just not well known. So we do an intake, we review a file, we're given evidence, and that's really for us to meet our obligations with cra. The CRA may ask us, why did you take this product in? We have to give them evidence as to why. And then for the client, they need to do their own research. But typically once it's on our shelf, it's basically deemed to be eligible to be held in the plan.
- [09:15]
Patrick Francie
Okay, so as we kind of unpack this a little bit more, when we look at what Olympia Trust does, Craig, and of course what you and your team support, if we're looking at, we'll call it Trans or Opportunities in Exempt Markets or Private Capital. So can you give for our listeners some, I guess, definition, if you will, of what is an exempt market and what they mean by private capital? Can you give us some kind of definition of that?
- [09:44]
Craig Skog
Yeah, I mean the two terms are fundamentally interchangeable. Exempt market goes back to prospectus requirements. Securities historically reissued under prospectus, which is a very long winded document that's blessed by the securities Commission before it goes to the public. So an exempt market securities anything that's bought from any way other than under a prospectus. But really we're talking about private market securities. So what those are, is there securities that are typically issued directly from a company or an issuer to the investor via mechanism, like an offering memorandum. So it's a document that's not reviewed by the securities commission in advance. Where the private comes in is that the securities are not listed on an exchange and they're not freely tradable. So typically when you invest in an Equiton, for example, you are into that entity for the duration of the deal. So that may be that they're doing a development and until the development goes all the way through, you are in it. There's sometimes limited liquidity provisions in some of the offerings. It varies from deal to deal where an investor may be able to get out under certain circumstances, but Typically you're kind of in it for the long haul. Now that kind of works well with RSPs because that's typically money that people aren't using today. So the RSP marries very well with the private security because there's that ability to be patient. You know, if a real estate deal needs seven years instead of the projected five years, that's typically okay because again, that RSP wasn't intended to be used in that timeline. Having said that, an 85 year old should be perhaps a little more careful about investing in something that has no liquidity. So it varies from client to client. But we've historically seen a really good marriage between patient money being RSPs and patient products being these illiquid securities. Now, part of what that also goes into is there isn't the reporting regime that there would be under public securities. So the amount of information that investors get isn't as regular, but it's far from none. They do get regular annual reports, they get material change reports. So private issuers do a good job of keeping in touch. It's just not to the same extent as public companies. I would note, however, that, you know, there's a lot of public companies that give out a lot of information and theoretically have liquidity because they're public, but their shares fundamentally don't trade. So there are some private securities that would have far more liquidity than some public securities. So again, there's a whole world of thousands of products, public and private. No two are the same. But we're generally talking about deals that you're in it for the long haul and that's all fully disclosed to the investors up front so they understand what they're going into.
- [12:42]
Patrick Francie
So does Olympia Trust play a role or, you know, part of your team? Where, for example, if I am in fact a, you know, somebody that's looking to launch a, I don't know, a real estate deal, let's say I'm going to build an Aplex and I'm raising capital and you know, I want to develop this particular piece of property. I put a plan together, I put my numbers together and would I be in fact, you know, having a conversation with somebody at Olympia Trusting? Here's the deal. This is what I'm trying to do. Or do you literally go, I'm that part of it is we're not interested in, that's not our game, or that's not what we do. It's not that we're not interested in, it's not what we do. So you're not Giving any kind of guidelines to potential developers in the case of raising capital for a project.
- [13:30]
Craig Skog
That's correct. We don't, we don't give any guidelines or advice. We, we typically at most would refer those people to, you know, legal counsel that we're familiar with. There's lots of lawyers that we work with that understand how to structure these deals. So we typically refer them to a lawyer and they take it where they may. We really, our role doesn't begin until there's a finished, fully baked product that they want to have on our quote unquote shelf and they submit all their legal documents, legal opinions, and then we take a look at it. But we don't really give them advice. So, oh, I would structure it this way or that way. That's up to, you know, to the developer, the speculator, the flipper, whoever it is, it's up to them to get their own advice external from Olympia and then bring us back that fully, fully baked product.
- [14:22]
Patrick Francie
So what are you seeing these days, you know, when you look at the real estate market and, or just overall what's happening in Canada over, well, let's say since 2018. Let's go back to 2018 to, you know, 2025. What have you noticed, if any of trends or shift of trends or how opportunities are showing up differently? Are you able to kind of, I don't know, quantify or qualify some of the things that you're noticing given what you guys do?
- [14:51]
Craig Skog
Quantify is challenging because we've made three acquisitions over that duration, so our numbers have been kind of skewed based on, you know, buying other books of business. But there's certainly no decrease in the demand for private, private investments. You know, the markets have had a great run, but that makes people nervous too. You know, where they start to question if perhaps they shouldn't be putting some money into something that's not quite as volatile. Really what we've seen is a, a maturation of the marketplace. You know, historically when the private market rules. If as they were started, the idea was, you know, advisors would be say, hey, you know, look at all these great private deals I have. You should put a bunch of your money here now. It's kind of a much more balanced approach that's out there. Is it? The message that's out there is that private investments should be a portion of a well balanced portfolio. You know, the old 60, 40 bond equities portfolio doesn't really exist anymore. So it's not to say, hey, why don't you completely change what you're doing and throw all of your money into private capital. It's saying, hey, maybe you should have a few green bananas in your portfolio that are a little bit longer term in nature and maybe that aren't tied to an exchange. You know, just find a local deal management team that you understand that's doing things that you understand, which is why real estate works so well. Most Canadians understand the real estate market, you know, reasonably well. So we're seeing a growth in the marketplace. We're seeing advisors from more traditional asset classes looking at it as well. You know, the narratives out there that this is where the smart money goes, you know, the endowment funds, the pension funds. So why can't retail investors do it? Well, it's a different game for retail investors than it is for the pension funds. But the same idea holds true for retail investors, which is maybe having a little bit of your money outside of the markets is a good idea, but it's just like picking stocks. You got to find the right ones. But there seems to be an increase in appetite. There seems to be kind of smaller deals, I would say. And historically there were a lot of evergreen funds. There's still some evergreen funds in our marketplace that are constantly raising. They got long term track records and attract capital. But we're seeing a lot of smaller deals, you know, $10 million kind of deals as opposed to $50 million kind of deals, which I like, because that keeps people, the smaller the deal, the more in touch with your money you are.
- [17:18]
Patrick Francie
So in this conversation, Craig, like, can you. If some of these, you know, those who are listening to this right now and saying, okay, well, how does this apply to me? So if I'm asking you the question, who would be a potential client? Like, I look at it from this place, from. Here's how I would describe it. You know, being in the industry and doing what I've done over the past 25 years, I often come across people who are, gosh, you know, I see the opportunities in real estate. I just don't have the capital, you know, the, the liquidity to actually invest in that. And then the next question is, is, well, do you have an rsp? And they go, well, yeah, but how do. I can't get it out of, you know, I can't do this on my own. Like, I can't do that. I can't get my capital out of my RSP into this particular deal. And then they don't realize that Olympia Trust is a vehicle to do that. That would be one client. I'm assuming that that kind of profile, if you will. And then those who are wanting to raise capital and saying, well, how can I actually facilitate somebody getting their RSP capital into my project? Those are be high level definition of a couple of different Olympia Trust clients.
- [18:27]
Craig Skog
Not the first one. I mean, using your own RSP doesn't really work. You know, you kind of can't put your own RSP into your own product.
- [18:33]
Patrick Francie
Product, sorry, let me just clear that. I'm not intending for it, I'm not intending for it to be my own deal. I'm saying I'm looking at different. I'm looking at the real estate market knowing or believing that it's a good place to put capital. And I'm looking at all these opportunities that are out there because I know other investors who have projects that they're building. Back to your point, they're trying to raise 10 million and I'm looking at that going, how do I get my capital into those things? And Olympia Trust would be then that vehicle, that person needs to know that, yeah, you can actually get your RSP into that deal arm's length.
- [19:12]
Craig Skog
Sure, sure. The question is they have to find the deals first, right? Like as much as Olympia has a broad shelf, we don't, we don't advertise what that shelf is. So when an investor comes to Olympia, they have to kind of have an idea of where they want to go. You know, we have investors who phone us and say, can I get a list of the mortgage investment entities you have on your shelf? And the answer is simply no. We, you have to go find one. Whether it's through Google or other means. Go find that entity on your own. But we are ultimately the end of the day, we become that conduit to get their RSP into that deal. A lot of deals are RSP eligible and if they're not, they could become RSP eligible again. That's through creation of a mechanism like a mutual fund trust or otherwise that even if you want to use your Canadian RSP to invest in US real estate, you could do that. But there has to be, you know, a legal entity that is structured in a specific way to get that money eligible in the first place. So what I would say we're going to have a webinar upcoming in, in March where we're going to highlight, here's how this works like that, that individual who maybe doesn't have enough money but has an idea. Show them the strategies as to how they can raise money. Show them where they can raise money before tipping into the World of securities legislators or if they want to go full blown and raise that $10 million, how they can go do that? You know, it's, the idea is to just take some of the tribal knowledge we have and show the marketplace how it works and at least if nothing else, give them familiarity. So when they come across an Equiton or what it may be, they have a bit of a basic understanding of what that structure is and how it works from, from an RSP perspective.
- [20:49]
Patrick Francie
So really when you're, what you're built to do is also provide, I guess, the guidelines and how somebody might do that because the, I guess we'll call it the regulatory landscape or compliance needed for investors. So, you know, there's a lot of, I guess there's a framework, there's rules, there's regulations, there's swim lanes within the securities regulations in Canada that really, you know, have an impact on private investment. So part of what you do in a case, in this, in this case a webinar, you're providing the education, the framework, giving people the understanding of what needs to be done in order to raise that capital, how to do it, what they need to make sure that they're not offside, commitments, promises, what they make. Don't make those kinds of things, I'm assuming.
- [21:34]
Craig Skog
Yeah, I mean, expertise is needed. Right? Right. Generally you see one of two things. You see somebody who goes and raises a bunch of money because they just think that you're allowed to do that. Well, you're not. There's actually rules governing your ability to go raise money. Alternately, you see people that think, I'm not allowed to raise money. I'm, I'm not a securities dealer. I'm not a broker, I'm not a. Well, there are rules that allow you to go raise money. It just depends on from who and under what circumstances. Then at the same time, as well, I'm not public, so I can't raise money from RSPs. Well, hey, you can. You just have to structure something the right way. So we're bringing together a group of people smarter than me to kind of explain those rules and say, hey, you know what, here's a trigger point where you are into the world of securities Commission. Right. And generally speaking, you are. But here's where you maybe, maybe you need a dealer, you need a securities dealer to work with you. Hey, if you want to be using people's RSPs, here are the types of structures that allow you to do that. So just giving kind of a high level overview of how this works because it is, as are many things that involve expertise. It's a gray area. Right. Whereas all too often we, we see people that think it's black or white. Right. They either you're just, it's Canadian, you're free to go raise money, or. No, no, I don't go raise money. There's actually kind of a middle ground. You just need to know where to step and where to not step. And that's just some kind of insight we're hoping to give, give the. Those that attend the webinar.
- [23:02]
Patrick Francie
So you've done, I guess, a lot of work with regulatory bodies over the years. And how have you seen things change over, I don't know, the past 10 years, five years? Like, where have we come to. Because this has become a far, I guess, more. I don't know if it's a more public or we're starting to see more of it. So at some point it's become a thing, you know, where maybe 10 years ago, seven years ago, five years ago, it wasn't. And you've been in this industry a long time. How have you seen it change and what have you done in terms of shaping the industry?
- [23:36]
Craig Skog
Yeah, I've worked, I've worked with, on three committees. Two on the Ontario Securities Commission, one with the Alberta Securities Commission. They all started after regulatory reform, which was in 20, 2010. So it's actually longer. It's more like a let's go, let's. I've been doing this for 22 years. Let's, let's go the whole span. So, you know, kind of 2007, 2008, 2009, there was a lot of money being raised in the exempt market. It was totally unlicensed. You could sell cars one day and sell securities the next day. Advertisements in the newspaper and everywhere. Now this kind of happened everywhere except for Ontario. Ontario didn't have rules that allowed for retail investors. Only the wealthy could invest in private securities. Well, what could happen when, you know, unsophisticated people were raising money without rules? Lots of bad things happen. So, you know, thankfully, the regulators had the foresight that they created a regulatory framework called National Instrument 31103 that came in place in 2010. It said, look, if you're out raising money for private securities, you need to be licensed, you know, as an advisor. There needs to be a firm, there needs to be, know your client, suitability, all of those things. Well, that really shrunk the market because some individuals that were great at raising money weren't willing to be held under Regulatory constraints, ultimately that was probably good for the industry. But what happened is there was a huge tightening in the industry. There was a lot of consolidation, a lot of groups. You know, we saw a lot of mortgage entities merge because they didn't have the size and scale to be full on securities dealers by themselves. And we saw the amount of money being raised kind of not dry up, but it got there was a lot less. The rules were new and they were fairly strict. The rules have evolved over the last 10 years and there's been a lot of clarity provided. You know, the regulators were never out, they were never against people raising money. They just wanted to make sure that the investors knew what they were getting into. They knew if there were conflicts of interest, you know, if somebody was raising money for themselves as opposed for a third party. We saw a lot of groups raising money for third parties for the longest time and sometimes that didn't work out very well. So it's kind of come back where groups are raising money for themselves to some extent. They're just disclosing that, hey, I'm raising this money for me. And now the guys raising the money or the guys using the money and that connection typically has done a better job of avoiding things like fraud. So we've seen kind of an acceptance that it's okay for people to raise money with conflicts of interest. It's okay to raise money if you're the dealer and the issuer. That's okay as long as you're disclosing the client, that you're on both sides of the deal. So it's a long winded way to say that it's evolved kind of back to where we were where we in 2010, where we had guys raising money for themselves. But now it's with the benefit of regulatory infrastructure. So the clients are still getting the benefit of know your client suitability and they're getting the full on disclosure of, hey, there's some conflicts of interest here, which the world of securities is full of those. I mean, when the royal bank sells you Royal bank mutual funds, guess what, that's a conflict of interest. So when a real estate company has a real estate EMD raising money, that's okay, it just has to be disclosed. So the market seems to have grown up. You know, unfortunately there's been a lot of hard lessons learned. Dealers have learned the type of guys they don't want to raise money for. They've learned better mechanisms as to how to structure deals. So it's a much more mature marketplace. But I think it's generally much more accepted by regulators now. This market was never meant to be this big. It was never meant to be mainstream. Prospectus exemptions were meant for public companies to not have to do a prospectus every time. Really what wasn't understood was that private investment, the private community, the business community, the small business community wanted to raise money too. So they started using these tools to raise money. What also was missed is that they could use RSPs just like public companies could. So the rules have always been there. They just haven't built been well understood. And now they are and it's kind of spreading. And app has investor appetite seems to be. Seems to be quite robust for private securities. The idea of illiquidity isn't as scary to people as it used to be. You know, they just want to. People want to be in touch with their money and understand what their money is doing. And private securities, I think, do a better job of that than public securities.
- [28:13]
Patrick Francie
Fantastic. Okay, along the line, what I want to ask you is that when we get into this whole regulatory part and you brought it up in terms of EMD or exempt market dealer. So if I'm a developer, I've got this project I'm going to do and I need to raise a few million dollars for this particular project. Do I have to have an EMD on my team somewhere along the line that actually is speaking with investors? And do I need an offering memorandum in every case? Like, what's the structure of all this?
- [28:47]
Craig Skog
Come to the seminar. You know, it's, it's never a cut and dry answer. It depends on who you're raising money from. Because you can raise money from friends and family and business associates without an offering memorandum. How do you define a friend that's not always cut and dry. A Facebook friend is not a friend. You know, one of the smartest lawyers I work with says, well, if you, if you showed up at your friend's, if you showed up at somebody's house, would you need directions to their bathroom? If not, they're probably a friend. If you do, then maybe they're not. Right. There's no definitive way to define that. So that depends on who are the people you're raising money from. How often are you raising money if you're constantly raising money? Sure, you're a real estate developer, but you're constantly raising money. You're doing a deal every quarter. Well, then you would hit what's called the business trigger. You're in the business of issuing securities, so you need to be registered. Now it doesn't mean you yourself necessarily need to become an emd, but you need to work with one. You know, there are certain groups who provide kind of an EMD as a, as a service model. Lastly, like, you know, the guy who's raising money on a one off time, he may not need to, but the second he's raising money from a friend of a friend, then he needs an offering memorandum. Unless of course, that friend of the friend is accredited as in a highly or higher net worth individual. So it's, it's not really cut and dry. So that's kind of why we're having a longer webinar on this topic is to go through those various circumstances because that's where it's the gray areas that get people tripped up. Right. And there's a lot of gray, you know, it might be that, hey, I did a, we did a real estate, we did a little raise of 3 million bucks in, in January, February. But oh man, this great deal came up in July and we wanted to go raise money again. Well, now you're getting closer to regularly distributing securities, even though it's a different deal and maybe your audience, your nets, you're casting a little bit wider of a net to get investors. And it's at what point you've gone far enough that you need to get into that world of registration. But again, there are dealers, you know, doesn't mean, doesn't mean you need to become a dealer yourself as a real estate developer. Because you're a developer, you don't want to be a, you just have a list of contacts. You want to be able to go out to those contacts and raise money. Well, that's where some of these dealers come in, that they handle the compliance. You bring the clients in, they ensure the suitability and so forth. Or perhaps one or two of your people become registers as advisors with that firm. But you yourself don't need to become a full fledged dealership because that's not your business. Your business is turning raw land into houses or whatever it may be. So that's why we're having a, you know, a bit of a longer winded webinar with, you know, lawyers, EMDs on the webinar, kind of giving an overview of, of what this world looks like.
- [31:42]
Patrick Francie
I love the thought process that and what you're doing in terms of the webinar, you know, within the rain community. You know, one of the foundations that we have is treat your real estate investing like a business. Now there's the do it yourselfers that are just going to go in and they're going to buy that one or two properties and they're going to kind of do their thing and that's fine. But this really is building a business because you're going to raise capital for an investment opportunity for others and you have to treat it like a business, which means you need to step into the world of getting the education and the support you need to pull that off. And that's where these webinars and this educative component that Olympia Trust is bringing to the table really impacts those who want to grow their business, who wants to expand on what they're doing in the real estate world, knowing that there's still lots of opportunity there to do that. So what do you see as let's say we'll, we'll call it the biggest opportunities in private capital market for investors and, and let's say business owners today. Is it just in the real estate market or do you play outside that, that you see opportunities or is this the wheelhouse that you play in?
- [32:46]
Craig Skog
I wouldn't go so far as to say what I think the best opportunities are, but there's lots of really unique ones that are beyond real estate. Real estate is the bread and butter for sure. You know, there's lots of income producing funds that are industrial or commercial or residential. There's lots of development deals that are out there. There's lots of mortgage funds that are, you know, just on the debt side. Some of them are more conservative than others. I invested in one the other day. That's just a pool of first mortgages, you know, so I don't know what kind of apocalypse has to happen for me to lose all my money. But I still signed all the forms the regulators said I had to, to get in. Mindfully, I didn't have to sign any form when I lost 20% on Nvidia in a day. But that's, that's a story for another time. No, there's a lot of cool deals like what's, there's a dental fund where, you know, this group's just recognized the ability to go up with, with dry powder. They raise a lot of money first and they go buy dental clinics, you know, and they streamlined dental clinics in, in, you know, Western Canada and they bought a bunch of them, you know, so you're into the dental business. If you go into this fund, there's a really unique fund that's buying music. They, they go buy music for streaming, you know, so they've bought and part of Taylor Swift's original Catalog, not the re recorded one. And anytime somebody listens to an original Taylor Swift recording, these guys get paid and the investors get paid. You know, ultimately, the thing about private securities is that what the opportunity is is that when Donald Trump tweets something or a new Chinese AI investment comes out, the value of your REIT doesn't drop suddenly because there's a sentiment that says maybe things are going to go bad. You know, the value of your investment is based on how many people are in that building paying rent and what's the forward look on interest rates. Right. Like your value is actually tied specifically to that asset, not to the noise that's going on in the marketplace. You know, a lot of things have adjusted this past week and they adjust every day based on things that are seemingly totally unrelated. You know, so that's the opportunity of private investing, is that you're getting into something that. Yeah, you don't get those upswings either. You just get a peace of mind that, hey, I'm in this investment. Like this Mick, I invested in. It really couldn't be more boring. They have all first mortgages, so if somebody doesn't pay, they're going to own the property and then become a reit and they'll get rental income instead of interest income. But it just plugs along. Some years it might make 7%, some years it might make 8. It ain't ever going to make 20, but unless there's an apocalypse, it's not going to lose 20 either. It's just boring. It's steady. And that's also why it does work for retirement accounts in a lot of cases is it's just steady, predictable income beyond the 1% that people were earning from the banks for the last 20 years, with obviously the exception of this window of higher rates. Right. So private capital isn't necessarily sexy. It's not meant to be. It's. It's kind of the opposite of what people may think.
- [35:51]
Patrick Francie
Well, we used to always use the phrase, if you want investments to be exciting, then you probably need to reconsider why you're in that investment. If you want excitement, go jump out of an airplane. If you want your investments, they should be boring. That's just a way of looking at things. So given the amount of time you've been doing what you've been doing within Olympia Trust, have you started to notice some trends you look over the past 20 years, but even the past few years, are you seeing any emerging, emerging trends from your perspective, given what Olympia Trust does?
- [36:24]
Craig Skog
Well, I mean, we're seeing younger investors take note. You know, they're, they're. Then historically, you know, historically we'd have people in their 50s and their 60s as our average account holder. We're now seeing people in their 30s, you know, and into their 40s, but, but as young as 30s or even 20s opening accounts with us to invest in something private. The, the value of an advisor giving stock tips is becoming less and less because people go to Reddit for advice now instead of a, an advisor on what they want to pick, they buy ETFs instead of mutual funds. So, you know, the, the average industrial day is more educated and exposed to more information than they've ever been. So they are less likely to need help to buy public things that they can buy through a well simple or an RBC app. They're less likely to get advice for those. So they're looking for advice going into things that are a little more novel, like private securities. Unfortunately, the trade off is that, you know, private securities have a higher regulatory threshold, so the smaller investors are getting left out. They may have an appetite, but the compliance regime doesn't make it really feasible for a lot of EMDs to take on smaller investors. You know, regulatory regulators have thrown out things like crowdfunding, but those don't really make a meaningful difference for entrepreneurs or investors. The amounts of money that people are allowed to invest are so small. So there's a, there's an increased demand and desire from smaller, younger investors. But the, the regulatory regime hasn't caught up. I would say. Having said that, there is good work being done by regulators, some more so than other. The Alberta Securities Commission's kind of doing a great job to create prospectus exemptions for smaller investors, more educated investors, some of them based on, hey, if you know about oil and gas, you can invest in an oil gas deal. Maybe it doesn't necessarily mean you have to be wealthy. Do you understand oil and gas? That could be a proxy for whether or not you should be able to invest and creating rules that are more friendly for entrepreneurs to go raise money, you know, without this regulatory regime. So we're kind of the pendulum shifting. It just seems to be shifting more regionally and not nationally. But hopefully, you know, the OSC was 30 years late to adopt the OM exemption. It took a lot of pushing and shoving out there to get them to let retail investors in and all. And hopefully they'll pick up some of the good work being done out west to make it even more free for entrepreneurs and accordingly then more free for investors.
- [38:52]
Patrick Francie
Yeah. So when you look at what's happening right now, we often hear the term a great wealth transfer. You know, when you look at the number of boomers that are, you know, kind of going into your point, you know, they're into those retirement years, they're just entering those retirement years and. Or they're seeing the end in sight now. You know, are you seeing that transfer of wealth be bigger? As in people are looking at it going, I need to get better returns, given inflation, given the cost of living, given the fact that we're living longer, I got to re examine where my capital is sitting. And so are you seeing that as a, as a trend where we literally are talking about that transfer of wealth? Is that something that you see an impact on?
- [39:38]
Craig Skog
I'm sure that plays a part in it. I mean, I think in people's psyche in general, there, there is a lot of years where people were earning 1% or less at the bank.
- [39:47]
Patrick Francie
Right.
- [39:47]
Craig Skog
And they're recognizing now that was under the understanding that that money was very safe, which likely was. But not keeping up with inflation is pretty dangerous too. So I think people are seeking out safe havens for their money where maybe they don't need to hit a home run, they don't need 20% a year. Maybe if they make 6 or 7% a year just off of passive rental income, that's more than enough, you know, and so we see people seeking that out with their retirement savings. That's what we see. But I imagine that same concept in theory is happening as people are starting to inherit wealth. Right. Depending. It all depends on the amount that you inherit, obviously, or the amount you invest. People that are already wealthy aren't trying to knock it out of the park, they're just trying to not lose it. But they're also trying, I think people want to earn more than what they're being given at the bank. People are becoming more in touch with their money, more aware of the way that the world of money works. See, there's still a long way to go in terms of financial education in this country, but people are more in touch, so they're seeking out alternatives, you know, safe alternatives.
- [40:58]
Patrick Francie
Sure. When we look at what's happening today and, you know, is there a. Just based on your experience, Craig, you know, and I know this isn't any kind of advice. I mean, we talk about getting the education, seeing what Olympia Trust can do for you in terms of your business of investing in real estate or for investors who are looking to say, oh, I can explore these other opportunities to put my capital to work, et cetera. But is there any kind of guidance you would give anybody, whether it be that business or that investor? What is kind of your go to advice that you say, you know, here's the top 1, 2, 3 things before you make any move. Here's what you need to do, is have you got like a call to action in that regard?
- [41:42]
Craig Skog
Do your homework. You know, it's, it amazes me the amount of bootstrapping that investors are willing to do when things go bad. Oh, man, they will go to the ends of the earth researching and, and digging into the people that they invested their money with to make sure that it, you know, everything was above board. Well, do your research in advance. If you're given an offering memorandum, read it, read it. You know, look into the risks of the deal and see if they actually are true. You know, look at the track record of people. Look to see if they say they're licensed. Make sure that they are licensed. Like, do your due diligence up front before you make your investment, not on the back end. You know, I've seen it all too often where people, you know, they lose their money, whether it's for a business risk or fraud or otherwise, and then they go dig. Look up front, make sure the paperwork's good up front. You know, look into the entities you're investing with to see their reputation. You know, try and understand the structure. Are you secure? Just because you're told you're secured, does that mean you are like, try and actually understand where your money's going into? Right. Don't just look at a glossy brochure that says 12% and decide that's a good idea. Actually do some due diligence and make sure that you understand what you're getting into for the, for the developers, the, the dreamers. Go, you know, again, do your research, but don't be afraid. You know, there's too much fear in that. This idea that you're not allowed to go raise money, you are allowed to go raise money. You know, the rules are there that allow you to raise money. Being private, it doesn't mean you can just go have people sign a napkin and get their capital. But it's not overly prohibitive to, to go raise money. You know, you can hire a lawyer, hire an accountant, come to our seminar as a start to understand kind of a broad overview of how this world works. But you can go raise money. Now you're into the world of other people's money, which means scrutiny. But as long as you do what you say you're going to do. There's no reason why you shouldn't be able to go raise money and, and kind of pursue whatever your next venture is.
- [43:56]
Patrick Francie
As we start to kind of wind things down, Craig, I want to just shift the conversation a little bit. Let's give our listeners a little bit more insights into who Craig is. So Craig, you've been doing this, you said 20 some years. Give me a little bit of background. I mean, how do you kind of, how did you morph into the role that you're playing today?
- [44:16]
Craig Skog
Well, I finished university business degree in early 2000s. And Olympia was started by my father. And I got two job offers. One in the music industry, which I loved, and one was to come work for my dad and I. I'd gotten an MP3 player at the time and I saw that the retail music industry was circling the drain. So I decided to come work for my dad. Him and I weren't, you know, super close, but I knew he was a businessman. I didn't know much else. I didn't know what Olympia was. And Olympia was small. We only had 19 staff when I started. Today we have, you know, 300 and change. We had 500 accounts back then. Today we have 145,000 accounts. So I started here and he said, well, you do mortgages and RSPs. And I said, I was 22. I said, I don't really know what either of those things are because what the hell did they teach you in business school? And he threw me a copy of the Income tax Act and said, go figure it out. So I spent two years talking to mortgage brokers in Western Canada. They were, you know, a lot of them were doing private mortgages through people's RRSPs. You know, it's something I didn't touch on enough, which is, you know, showing people how they can just do a one off deal where they can use their RSP to lend it to another Canadian that's arm's lengths from them and they're secured by a piece of real estate. You know, it's, it's a pretty cool little trick. So I spent, you know, better part of two years doing the dog and pony show in Western Canada, meeting a lot of guys who had mortgage investment corporations and trying to get them to use our RRSP accounts instead of Canadian Western trusts who we, who we bought out last year. So that was good. Finally that came full circle and then we realized there's only so many mortgage brokers to talk to. So we looked at my dad's background, which was he raised money for oil and gas deals as I was growing up, using prospectus exemptions and RSPs. And we said, well, what if we could take that knowledge that he has and spread it to the broader business community? So. So we did that and seemed like there was an appetite from the business community to use RSPs for deals. But this was during those dark, unregulated days. So a lot of the entrepreneurs who ended up raising money either lost the money through bad management, fraud, whatever it was. So a regulatory shift was on the horizon. And through working quite extensively with regulators on a opposition and on a cooperation side of things, new rules came into play that have been evolved over the last few years. And I kind of took the position that I should be a good advocate for our clients. It's hard to stand up to a regulator when they regulate you, whereas the securities commissions don't directly regulate us. So I kind of became the. The swords. The sword swinger for the industry. And I've worked extensively with regulators on crafting what's a pretty good rule book. It's not perfect, but it's pretty good. And, you know, it's just the marketplace has grown as it's legitimized. You know, there's more people willing to raise money for private companies, and there's more people willing to invest, and we've kind of been a centerpiece in that marketplace. I've learned a lot. You know, I was pretty naive in my 20s. By my 30s, I thought I had it figured out. Still didn't quite have it figured out. Now in my 40s, I think I understand the markets pretty well and understand the balance between capital formation and investor protection, and that if that balance is as close to right as it can be, it serves the market pretty well, both investors and entrepreneurs. And we're as close to the sweet spot as we've probably ever been. And Olympia is fortunate enough to be kind of a important service provider to those people. Now, my role, you know, admittedly, as we've grown, I'm doing less of the entrepreneurial stuff I like, which is working with guys that want to raise money and showing them how to do it. I did a lot of that. I, you know, worked with hundreds of promoters over the years, showing them, you know, these tools. And now I run a financial institution. You know, we administer 13, $14 billion worth of assets. So that's tiny compared to the big banks, but it's big enough that I have to have my eye on the ball in terms of the operations of our company. So it's where things like this webinar my. My chances at Funnet to actually do the things I like, which is teach people. Because today there's a lot of. Lot of work on compliance and ratio, capital ratios and. And risk and compliance and running an fi, which is not as fun as being an entrepreneur. But I, I take a lot of pride in the fact that, you know, we've grown a fairly large company and. And I've been running it now for a fairly close to 10 years, and it has grown into something we're really proud of and we take seriously. But unfortunately, that takes away from a lot of the fun, which is working with, you know, people like yourself and spreading the good word about how these tools work.
- [49:24]
Patrick Francie
I love it. You know, I think there's such an interesting point of what Olympia brings to the table. Right. You are a resource, your source. You're actually a hub of bringing business, you know, entrepreneurs together with investors, and I love that. But, you know, you're really stepping into. Not that you haven't before, but, you know, part of what we're doing here is to give people insights into Olympia Trust to you as the CEO, but into the educative component of it that opens up the doors of opportunities for entrepreneurs. And so as we kind of look at what Olympia stands for is really the kind of the benchmark for regulation, for doing it the right way, for supporting the success of both the entrepreneur and. And the investor. I'm wondering if. I don't want to put you on the spot, so I'll give you a minute to think about this, Craig, but if you look at, you know, this many years into it, and given what you've done, you've sat on boards, you've been part of creating regulations or, you know, actually having conversations about it. But if there was 1, 2, 3 top mistakes that business owners, entrepreneurs make, or top 1, 2, 3 mistakes that investors make, can you kind of coordinate that? Is there two or three things that would bring attention to those common mistakes or oversights that people make?
- [50:43]
Craig Skog
Yeah, I mean, I think, to touch back on what you said, like, Olympia is a hub, but we've seen the successes and failures, and unfortunately, in our role as kind of an intermediary, we don't really. We don't really have any sway in whether people do good or bad, but we have seen a lot. Right. And. And that's where I can say, from an entrepreneurial perspective, the biggest mistake I've seen with guys raising money is biting off more than they can chew. You know, sometimes groups go to the market with an idea and it's a really great idea, and investors just throw capital at them and sometimes they take in more investor money than they should, you know, and, and that leads to, that never leads to good outcomes. You know, they, they, they've never raised money before and all before, you know, they have $5 million of investor money and if it has a, you know, a 6 or a 7 or an 8% hit drag on it because they're, they promise that to the investors. Well, Jesus, they sometimes try and get creative and that never goes right. You know, so pace, proper, pacing yourself as an entrepreneur is really important. And whether that's in real estate or any other aspect, I mean, again, if you, if you say you're going to go start a private mortgage fund and you're going to get people 9%, well, you got to get that money deployed pretty quickly, which sometimes means bad decisions are made because you're trying to earn a yield. So pace yourself. You know, that's, that's, that's number one from an investor perspective. I mean, this is the oldest adage in the book, but if it sounds too good to be true, it is. It's not. It probably is. It is. You know, I mean, we've seen, not through Olympia, but I mean, just through watching the regulatory landscape. People invest in products that have absurd returns, you know, with no risk. That world doesn't exist. This is me saying it, not the securities Commission. The world of exponentially high returns with no risk does not exist. Now, having said, don't believe everything you read. Some exam products that you have to sign the form like this first mortgage mic that said it was super high risk. It's not super high risk. It has different risks in public securities, but it's not any more risk. You know, look at track records, look at the management team, look at the background of these groups and, and make informed decisions to investors. That's the biggest thing. Make informed decisions. Read up as much as you can and don't rush into anything. You know, that's another thing for investors. If there's a panic to get in, maybe you should just wait. You know, don't make them same mistakes in the private markets that you make in the public markets. I mean, people go again, stocks just going up and up and up. So people invest, they panic, they make a rush decision and then it's going down, down, down. So they sell. Well, don't do that in the exempt market. That exists too, where there's a rush And a pressure to get into something that's also a red flag. You know, read up on the securities Commission's websites. The OSC has a great industrial education website. I think it's Get Smart about money or it talks about the things to watch for. Watch for those things, you know. But there are lots of good private opportunities. So it's a world so worth exploring, you just have to spend the time on it. You know, it's never, it's always been surprising to me how somebody would, let's say they go invest $50,000 from their RSP. So that's after tax money because they. It's. It's in the rsp, right? And they got a deduction, whatever, but they earned that 50 grand. They may have had to made 75 to make that 50. At the end of the day, after taxes, they'll go in. So that's hours and hours, that's weeks or months of work. And they'll go invest it in an afternoon without doing any research. Like, look at how hard you had to work to make that money. And spend a little bit of time ensuring you make an informed decision when you go into something. Right. Don't be afraid to go into something, but do your research first. Right? Because there are a lot of great groups in this market and there's some that are less than stellar. So make sure you understand the difference between the two. And then to the entrepreneurs, again, just don't be afraid. You are allowed to raise money. Just make sure you get legal counsel. Make sure they're good legal counsel that has expertise in securities law. Not all lawyers are created equal and then hit the ground running.
- [55:04]
Patrick Francie
Fantastic. Craig, I want to say thank you for your time, your insights into what Olympia Trust does, what it means for entrepreneurs and investors, and the opportunities that exist out there. You need the education, of course, you are hosting a webinar. And within our community, we're supporting that. We believe so strongly that the education is the foundation for making really great decisions and getting the maximum returns on investment by doing it the right way and following the rules. It's always the game we got to play.
- [55:38]
Craig Skog
Yep.
- [55:39]
Patrick Francie
Thanks a bunch, ladies and gentlemen. Thank you for listening. If you found value in the podcast, please take the time to rate and review and share with others. Share with your friends as it is my goal to always improve and to provide the highest value for you, the listener. If you have any comments, suggestions or questions you'd like answered, please email me@ceoraincanada.com that's ceorincanada.com. i look forward to hearing from you. And until next time, Patrick O.