A (2:57)

Totally. It's a cool thing to have for Matt, our producer, who's listening now. It's a cool thing for him to be able to work on and all the other people think that work on this thing because it's a fairly public brand, the podcast is. And Matt can tell us after we record if it's a cool thing to work on. But I'm guessing it is for advisors, too. We had someone from our team, Phil Briggs, who's been on the podcast before, he came with, like, hey, listen to this episode. And I had this idea. I had this client situation that was relevant. It was a cool thing. And I was like, hey, man, that's awesome. You should come on the podcast, talk about. That'd be super valuable for people to hear. And he's like, oh, that's awesome. I love it. I don't know if rewarding employees is the right way to describe it, but it's just like a very cool thing for other people at our firm to be able to participate in.

B (3:36)

Yeah. When you're focused on impact, which our team is, it's great to share stories and create more impact for more people.

A (3:43)

Yeah, that's a great way to describe it.

B (3:45)

All right, go to the episode.

A (3:47)

Let's go.

B (3:53)

Fire away. So this is something you had sort.

A (3:56)

Of in the can, I guess.

B (3:57)

It's a bit of a scramble, this week's episode. So I don't know how you pulled this rabbit out of the hat, but you did.

A (4:03)

We had a recording with a guest planned for today, and we will still have this guest. Come on. But they had a cold, so they wanted to defer a bit of a scramble to prepare an episode for today. And we had to record today because we have an employee summit later this week. We would have not had an episode if we didn't record today. But this is a topic that I had already written up for video on my YouTube channel. So it wasn't too big of a deal to get an episode ready to go. But the topic is, I guess people will know from reading the episode title before they started listening. It's about investment scams. Not really in general, although we will make some general comments. But it's about scams specific to our content and even more specifically my content. A lot of these scams are perpetrated through my content channels. Either impersonating me on Twitter, impersonating me by email.

B (4:50)

This is brutal.

A (4:51)

It is brutal using my YouTube channel to find people to try and scam and posting scam bait, I guess I could call them comments on my YouTube channel. I'm just going to talk about some of the things that I'm seeing happening, hopefully help people avoid getting scammed themselves. I think a lot of our listeners, I would guess, are on the savvier side, generally speaking. But if it helps them help someone else or identify something that may be happening to someone around them, then that's great. And obviously if it helps someone listening avoid getting scammed, that's even better.

B (5:23)

Do you find in general that your awareness of possible scams is higher now? I find now I'm much more skeptical just in general given all that's happening with AI.

A (5:34)

Well, yeah, I've got some comments on AI specifically. I think you got to be super, super careful. I think that's always been true. I've seen people using AI to literally clone my voice, to send someone a voice note in a direct message on Twitter trying to convince them that they're me. Stuff like that's pretty scary. So if you listener are currently taking trading advice from me on WhatsApp or on Telegram, you're being scammed by someone impersonating me. If I have emailed you from a Gmail address or I mean honestly from any email address to give you trading advice, which is not something that I give you are again being scammed by someone impersonating me and probably haven't listened.

B (6:17)

To all 366 episodes.

A (6:20)

That is true. I think that's why a lot of people send me these scam attempts because they do listen to our content and they know these are things that I would never say. And so they'll say, hey, someone who is clearly not you based on what they're telling me. I say that a lot, which is why I think we know about a lot of these. A lot of our community is savvy enough to know that they're scam attempts for sure. The other one is kind of funny, but also not it, because some people probably are being scammed by this. If you found your new financial advisor in the comments section of one of my videos and they are earning you huge profits by trading crypto and stocks, you're being scammed. I don't think it's possible. I really don't think it's possible because a lot of these scammers operate in other countries outside of Canada where our legal system couldn't do anything anyway, or do much anyway. I don't think that they can be stopped, which is kind of a sad state of affairs. But it is what it is. So instead we're going to talk about what these scams look like, what they're trying to accomplish, so that listeners can avoid them. These online investment scams are no joke in terms of the dollars. The Canadian Anti Fraud center Data show that $310 million were reported lost to investment fraud in 2024. But they also estimate that 90 to 95% of fraud goes unreported. So the actual numbers lost to investment scams each year are likely enormous. That's from a report from the Canadian securities administrators. In that report, they also say that successful disruption of fraud requires intelligence that sheds light on the means and methods employed by criminals, which is exactly what we're going to try and do in this podcast episode. I think that this is really important, this education about how the specifics of scams work is important because this type of education has been shown to reduce the effectiveness of scams. There's a 2014 study that shows that consumers at a high risk of being scammed who were educated about one of two different scams. So they've got high risk consumers who receive an education about one of two different scams. That consumer later receives a staged scam phone call. So a fake scammer, a scam scammer, if you will, that someone posing as a scammer calls them to pitch them on a scam. Now, those who had been warned about the specific scam that was later pitched to them were much less likely to respond to the scam than consumers who were forewarned about a different unrelated scam. So that specific scam education is helpful. Now, the study does find that education about the other scam did still have a positive impact. It still reduced the effectiveness of the scam, but education about the specific scam was much more helpful. So that's why we're going to talk about these specific scams instead of just talking about generalities. Now scammers, they're not very nice. I think everyone feels that who's been scammed or has seen a scam attempt. Scammers are not very nice, but they're also not idiots. You can see it. I mean, I'll tell a story I've got later, but they're not idiots. And they also use techniques that leverage human emotions to build trust. We see that the most probably explicit or egregious or both. Example of that is romance scams, which are just brutal, or grandparent scams. Those are also brutal. Exploiting the care grandparents have for their grandchildren.

B (9:26)

We've seen them firsthand. It's incredible.

A (9:28)

Yeah, it is incredible. Like the ones we just mentioned, they exploit points of weakness in their victims. One of the reasons that scammers impersonate someone like me is a technique called source credibility. They take advantage of the fact that people are more likely to believe others in a position of authority and to trust organizations that they perceive as legitimate. So by posing as Ben Felix, CIO at PWL Capital, that gives them the perception of legitimacy or credibility to their potential victims. They're leveraging, like we mentioned earlier, with the asynchronous relationship we have with our audience. Scammers try and leverage that to take advantage of that trust that we have, which makes it then easier for them to perpetrate their scam, which is just brutal. This is not just happening to me, which of course makes sense. Anyone with a little bit of credibility could have the same thing happen to them. David Rosenberg, who's a well known financial commentator in Canada, he's been around forever. For as long as I've been around. He's kind of a perma bear. His commentary is sometimes kind of funny. But anyway, he's a very well known financial commentator. Whether you agree with his commentary or not. He's recently gone public with an interview with a Globe Mail talking about scams that have been using his name. So he's an economist and founder of Rosenberg Research. Anyone that follows finance or the economy in Canada has probably at least seen his name. He's pretty prominent. So what he said is that ads appearing on Facebook and Instagram starting in March were promoting a fake investment program, falsely listing him as its administrator. He had tried to report the fraud to authorities, including local police and the Canadian Anti Fraud center, but he said to the Globe Mail that those reports largely went nowhere. So he got some combination of frustrated and concerned and decided he was going to go public with what was happening. To try and avoid people from getting scammed. So he told the Globe Mail that since he went public with this, he's heard from several individuals who have lost money to this scam for a sum that he estimates is around $1 million so far from people that he's heard from, which is wild. In this case. The scam is a pump and dump. And I've got another story about this later specific to me. But the scammers in this case were convincing investors to buy some obscure stock. So they're saying, join the David Rosenberg trading program or whatever, which is not a real thing, and then they convince them to buy some penny stock or whatever. Now you buy some amount of money in this super illiquid stock, what happens? The price goes up. The scammers say, look, see, our recommendation was right, you made money. Then they convince the investor to invest more money in the stock, saying that it's going to continue going up, which of course it does because it's a small illiquid stock. And then at some point when the price is high enough. So that's the pump, the first part, getting the price to go high. And then the scammer owns the stock. That's an important piece here. So they're pumping up the stock that they own by getting people to buy more shares of it. And then once the price is nice and high, the scammer sells their holdings, which causes, again, because it's a small illiquid stock, it causes the price to dump. So just a classic pump and dump.

B (12:29)

You pump, they dump.

A (12:30)

Yeah, exactly. I've got a pretty crazy story about that. I mean, not that crazy, but an interesting story about that in a bit. So that's source credibility. The scammers also use social proof, another one of the techniques that they leverage. And we see this in the YouTube comments example that I'll describe later, where they create the perception that a lot of people have had a great experience with a fake financial advisor to try and convince some unsuspecting victim who reads those comments to engage with that fake financial advisor. The scammers also play on common behavioral biases. They play on optimism bias, where people overestimate the probability of good outcomes and underestimate bad ones. Oh, I'm going to make a whole bunch of money with this advisor, with this trading scheme. The halo effect, where people quickly trust someone based on a positive first impression. That's probably also related to the other ones that we just mentioned with the credibility present bias, where people tend to maximize short term pleasure, like the potential for a big investment gain without fully considering the potential consequences regret aversion, where people worry about missing out on something like a big investment opportunity and representativeness, where people extrapolate general conclusions from specific data points like the recent returns of an individual stock. And that's like the pump and dump example where scammers will say, look, the stock went up. The victim is like great, but it's not real. I mean, it is, but it's part of the scheme. Before I get into the specifics of the scams that I've seen with respect to my content, I do want to say that I like you guys, you listeners. I appreciate you listening to our podcast and watching my videos, but it is extremely unlikely that I will contact you, to say the least, unless you're a client of PWL Capital, and even then it's rare. I don't have a lot of direct contact with clients at this point. We have teams of financial planners and portfolio managers who do an incredibly good job better than I could do dealing directly with our clients. I am not one of those people. I'm the cio, as people know from the introduction. If I do reach out to you, it will be from my PWL email address and it will not be to give you trading advice or to tell you to sign up for a shady investment platform. There are three main scams related to my YouTube content and this podcast. I guess just to my identity in general. There's investment group scams, which is similar to the Rosenberg one that I'd mentioned earlier. There are email impersonation scams that I've seen, and there are fake financial advisor pig butchering scams. These are all either using my name or using my YouTube channel. And the RationalReminder podcast comment section gets these scam comments too. They're just a bit easier to deal with because there aren't as many of them on my YouTube channel. It's honestly, other than turning comments off completely, I don't know how to stop them. Or having a full time employee that is only dedicated to removing scam comments.

B (15:22)

Can you tell if they're all connected?

A (15:24)

There's no way to tell.

B (15:26)

You can't tell by any signals. Interesting.

A (15:29)

I can recognize them within a second when I see them because they follow a similar pattern. I'll talk about that in a minute. But can an unsuspecting scam victim who just happens to stumble across one of my videos and scroll through the comments? I mean, I would assume that anybody who's spending a lot of time on Finance YouTube has gotten used to seeing these scam comments and probably can identify them. But I guess it doesn't take very many people not to be able to for the scammers to be successful. So we'll start with investment group scams. These are typically conducted on encrypted chat platforms like Telegram and WhatsApp. To start here, I'm not on Telegram at all. I do use WhatsApp to stay in touch with some of my friends, but I am not texting you on WhatsApp unless you're one of my close friends. And I'm not on Telegram at all. So if you're in a Telegram group or otherwise communicating with me on Telegram, you are 100% talking to a scammer, because I'm not there at all whatsoever, honestly. Same as WhatsApp. You know, if I'm talking to you on WhatsApp because you're one of my very close friends, I don't use it very much. It's just an easy way to stay in touch with some of my American friends when I played basketball and a few of my Canadian friends. But I don't use the platform very much, and I don't use it at all for any professional activities. These groups are posted online, they're shared online, and they're run by accounts that use the profile picture and name of someone credible, in this case, me. And what they do is they promise to include you in a community that's focused on trading stocks or crypto based on what they call rigorous research. Again, leveraging. You're getting Ben Felix's research, you're getting David Rosenberg's research, and they say that you're going to earn high returns by following the advice. I was sent a link to one of these WhatsApp groups. It was actually another Canadian advisor called me and was like, hey, I wanted to talk to you about an investment group that one of my clients was involved with. I was like, I knew immediately what it was going to be about. And so he told me that they'd joined this group and there were a bunch of people in there and that I was giving advice. And I was like, okay, yeah, it's not me. I get impersonated a lot, whatever. And I. And the guy was like, okay, good. I was hoping that's what you were going to say, because either you were going to say that or I was going to tell you that you're going to jail. And I was like, listen, I appreciate you calling, but there's not much that I can do about it. That phone Call is why I decided to do a video on this topic. I want to do something to address that. Real people. A Canadian person who's the client of a Canadian advisor who was able to find the real me and call me was in an investment group run by someone pretending to be me. Wow. Which is pretty scary. So I asked the advisor that had called me to send me the link to the group because the client had sent it to him. So I joined the group and I was contacted eventually. It took a while by one of the group admins and they were using my name and my picture. Such a surreal thing. I was kicked out of the group too. I didn't use my real name or phone number, but I was kicked out of the group. I asked why and they had a whole story about how they had to verify who I was and this group was only for their friends or something like that. So eventually I convinced them that I was a potential scam victim and they were willing to engage after that. But when I joined the group before I got kicked out of the group, it was open to join, but then I got booted. There were 90 people in it. I don't know if those were bots or real people, but I flipped through them. They looked to me like real people. They all had Canadian phone numbers. It was terrifying. If that is the case, there are 90 people in this WhatsApp group being scammer. It's really wild stuff.

B (18:46)

Could you call them out?

A (18:48)

No. So in the group before I was kicked out, you could only view posts from the admins. You couldn't post yourself. So I could have gone through each of those individual phone numbers before I'd gotten kicked out of the group and contacted them. I didn't know if they were bots or who's a scammer and who's not. And then once I got kicked out of the group, I didn't have anybody's number anymore. They contact me. At first I was like, did they figure out who I am? Or I just didn't know why I wasn't hearing from my own. But eventually they did contact me through a direct message and chatted for a bit. At first they were super standoffish, but then when they thought I might be a victim or potential victim, they started asking about my investing and what I do. Whatever I said, just whatever basic stuff. But I said I was struggling and looking for advice. They say they do rigorous research and eventually they pitched me on this specific stock.

B (19:37)

And this is all in your name.

A (19:39)

This person is using my name. Yes.

B (19:41)

So they're pitching you using your name. That's hilarious.

A (19:44)

Yeah, and I'm not telling them that I'm me, obviously, but yeah, my picture and my name still have their contact information in WhatsApp. I think they have my old title, Head of Research at PWL Capital.

B (19:55)

That's nuts.

A (19:56)

It is nuts. The whole experience was pretty surreal. And so eventually they pitched me on a specific stock. It's this obscure small cap stock. I'm pretty sure it's the same thing as the Rosenberg scam where they're going to convince me to buy this small, illiquid stock to pump the price so they can sell their holdings at an inflated value, causing the price to decline.

B (20:14)

So you didn't do your own pump then? Your own dump?

A (20:16)

Well, I thought about, do I actually do this? Do I actually buy the stock? But I don't want to go that far. I don't know what other layers there are. At some point the guy asked me to send a statement. I don't know if there's identity theft angle to this too. At first. Now eventually the guy turned on me. I started saying, I live close to one of your offices. Why don't I just stop by? And he got mad, started using profanity and told me to screw off, basically.

B (20:41)

Well, that's nice of him or her.

A (20:43)

Before, when they were trying to scam me, before they realized that I probably wasn't a good target, they were super smooth, super nice Toronto phone number, using my name and picture. As mentioned, they wrote perfectly. I don't know if they're using ChatGPT or what. Perfect grammar, articulate. If I didn't know factually that I was talking to someone impersonating me, the person would have. Based on their writing and based on what they were saying, they might have seemed credible. A scary thing for PWL is that they, not to me, but to the other advisor that alerted me to this situation, had done the same thing and talked to the scammer. The scammer had offered them up the PWL Capital website website when he asked where they worked. It's brutal. I would hope that this goes without saying, but it clearly needs to be said because these scammers are still doing this. Nobody has the ability to consistently identify stocks that will have high returns in the future. Trading individual stocks is extremely risky, as we covered in detail in a recent episode. And anyone confident in their ability to generate high returns from stock trading, that alone should be a big red flag. But especially if they want to share those high returns with you on WhatsApp, the rare talent, they are out there. We just had that episode with Martin Kramers. Those people are out there. The rare talent that is able to profit consistently in financial markets is not on WhatsApp or Telegram sending their trading strategies to Internet strangers. In this case, I followed the stock. I added the stock to my stocks app and I was just kind of tracking it. It didn't do much. They had given some ridiculous price target. It did go up after they had told me to buy it. I never actually bought it, but it did go up a bit. I can see the date that that group was created. I looked at from the date the group was created until some future date, the price went up a ton. And then last week it dropped 70% in a day. You can see this thing happening in real time. The group gets created, the stock gets pumped and then the stock dumps. It's crazy. And clearly because the pump and dump price action happened. Somebody was scammed somewhere. It's brutal. So that's the trading group scam, email impersonation scams. This was people sending emails to people posing as someone else. In my example, someone posing as me was reaching out to people who had commented on my videos. So this one's also brutal. If you comment on my video, your YouTube profile is visible and someone, some people have their email address available in their YouTube profile. And so the scammer is going through YouTube comments, clicking on people's profiles, seeing if their email address is visible and then sending them emails. It's brutal. And again, it's like using my content and channel and my name to try and scam people. So in this case, the email was thanking the viewer for their engagement on my YouTube channel and inviting them to chat. It's like ridiculous. But again, I appreciate people watching my videos and commenting on my videos very much. I will not send you an email thanking you for commenting and if I do, it won't be from a Gmail address. But I won't. I just won't do that.

B (23:38)

You just won't.

A (23:40)

This one, one of the people who had received this scam email replied initially because they weren't sure if it was actually me or not. At first they said they thought it was pretty cool. Then the second email, it started to get fishy, so they replied and the scammer sent a follow up offering to share a comprehensive walkthrough including actionable steps, key insights from the latest research, and some of the most promising investment opportunities with strong potential for returns. So again, all the hallmarks of a scam. I would guess this was another pump and dump just based on the promising investment opportunities comment. But this one I never followed up on because the email address that was being used was reported to and shut down by Google. Which is great I mentioned earlier, but I do want to mention again that on impersonation so that was an email. But I have heard from people who've gotten DMs, Twitter DMs with voice notes using my voice, an AI impersonation of my voice trying to convince people of my identity. And they could probably do it with video too. I've seen great realistic video avatars. If I ever DM you a video trying to convince you to buy a specific stock, you should know it's not me. So these scams are all bad. Brutal. But this last one drives me completely nuts. The YouTube comment section fake Financial advisor I'm pretty sure Pig butchering scam. I'll talk about what that is later. They drive me completely nuts because they will not go away every time I see them. When I'm reading through YouTube comments, I report them and block the user. But it doesn't matter because they're just going around. They go and create computer generated usernames and accounts and it's just impossible to stop them.

B (25:07)

Is this all automatic fraud that's going on or is there someone behind it, do you think?

A (25:11)

Oh, there's someone behind it 100%. I don't know who or where or how they're doing it, but someone somewhere is doing it. I interact with them. This is another one where I followed up on the scam to see what was going on here. These ones, in many cases they're identifiable easily because they're very general comments. It'll start off with a very generic statement, but I have seen some more recently that are very specific to the content, like the one on individual stock risk that we did recently. There are some of these scam comments. They'll have a few words or sentences that are related to the video and then they get into the scam content. They're still usually pretty generic. They often reference either a loss I lost $200,000 or a specific dollar amount that they've achieved. I just hit $3 million or whatever. I didn't dig into the psychology there, but I'm guessing there's some psychology behind mentioning those specific dollar amounts because they all seem to do that. Clearly the scammers have figured out some psychology related to that. It must be working or they wouldn't be doing it. Here's One example one of these scam comments. You can see how generic it is. This is a quote from the scam comment. This video really hit home for me. Retirement has been such a rewarding chapter of my life. My wife and I worked hard to get here and we're incredibly thankful for where we are today. Now we're debt free with a net worth of over $3 million. There's the specific dollar number and that investment income supports us every week. Now this was on my video on the historical comparison of renting versus owning in Canada. So in this case it's not at all relevant to the content, it's just super generic. But if you're reading through the comments and you see this, you might wonder how this person was so financially successful. And so this is where their so called financial advisor comes in. It's always a very specific full name. I think it's because links are typically caught in YouTube spam comment filters. Like I have a filter where any link can't be posted, it'll automatically get flagged and I never check the flag comments. If it's got a link, it's gone. It's never going to see the light of day. So the scammers figured that out. They don't post links, they post full names, first, middle and last name of the supposed advisor. Because then when you go and search it on Google you're not going to get a whole bunch of hits. What they do is they make a website using that full name so that searching that name brings you to a website. And that website is going to list credentials, testimonials, awards, licenses and all that kind of stuff. All fake. One really tricky thing that they do though, and I haven't validated that they'd always do this, but I have looked at a few where they did do this. They'll use the name of an actual registered investment professional so that the name shows up in registration searches. These are mostly US based, so it'll be like finra, but they'll link out to Finra Broker check. So they'll have this fake scam website with fake contact information, everything like that. But you can click on the Finra broker check link and it'll take you to the actual page for the advisor with this name. Super, super sneaky.

B (28:03)

So the name's not fake, the person is fake.

A (28:06)

Correct. They're just impersonating a real person. That specifically, likewise with using my name I guess is really problematic because one of the things that you can always do, and we've said this in the podcast many times. Cameron, if you want to verify whether someone offering you investment advice is legitimate, you can look them up on a regulatory website. You can see if they are registered to give investment advice in Canada. We have are they registered ca so you can search for the registration of anyone registered with securities regulators in Canada. But in the case of this fraudulent Advisor or my WhatsApp and email impersonator, that stuff doesn't really help. You go and look me up and yeah, I'm real, I'm registered, but if you're not talking to the real me, it doesn't help. What I would say is that professional financial advisors will probably not communicate with you through WhatsApp or Telegram or or an email address that is not associated with a registered firm. If in doubt, if you go to are they registered CA and look me up or look Cameron up, you'll see the contact information with the securities regulator for PWL Capital. Call that phone number and verify whether whatever interaction you're having is legitimate. Now, after years of seeing these comments, I recently decided I would contact one and see what happens. So I went on this fraudulent website and again, if anyone's concerned about security, I did use a throwaway email address from a privacy focused email provider. So I'm not concerned about them finding the real me. I reached out to one of these fake advisors and just said hey, I saw your name online. Wondering how this works, something like that. They asked me if I've ever worked with a financial advisor before. They asked me what active trading accounts I have. They asked my annual income and whether I'm an aggressive or reserved investor, the purpose of my investment and my investment budget. Pretty detailed. So I replied and they told me that they're taking their next batch of clients in Q2 2025 and that I could join that batch to begin investing and earning. And the pitch was that they are a multi market broker that trades across three different markets while majoring in digital currencies, of course. So I said I was interested, of course. And they sent me a PDF detailing the offering. And again, if anyone's concerned about security, I did not open the PDF. I only previewed it through that secured privacy focused email provider. Didn't download it. For anyone not aware that PDFs can contain malicious code, I have no idea what the actual scam is. Is it to get me to download the PDF? Well, I didn't do that, but it is worth being careful because PDFs can contain viruses and malicious code. Now this PDF that I received, it is honestly incredible. It's like a masterclass in what to look out for in an investment scam. Sorry for this word, Cameron. It contains huge amounts of financial bullshit. Now, if anyone, Cameron included, cringes at me using that word, good. It is defined in a 2022 academic paper, individual Differences in Susceptibility to Financial Bullshit as seemingly impressive verbal financial assertions that are presented as true and meaningful, but are actually meaningless. So listen to this. This is wild to read. So this is the explanation of the trading strategy from this advisor. Are you ready? Fire away. Strap in. Okay. The quid pro quo strategy functions through a simple economic law of substitute of goods, where if goods A and goods B are substitutes, a decrease in demand of goods A will result to an increase in demand for goods B. Similarly, taking into consideration the stock market and digital currency market are both substitutes as the typo there, as the offer similar services in the financial market, the economic law of substitutes will equally apply. Now, those words assembled in that way mean absolutely nothing. But they could sound smart. And hilariously, on this page of this PDF brochure, they have that trading strategy and then underneath it, where with no explanation for why, they've got a whole bunch of pictures of stock charts that happen to have gone up over some period of time. It's just completely ludicrous. That type of text and the stocks going up probably do act as a filter, where people without the financial knowledge to realize that it's bullshit are prime candidates for being scammed. This PDF also includes another classic scam attribute. It promises guaranteed profit without risk. Now, of course, most investors want to earn high returns, but they're concerned about losing money. The reality in financial markets, as listeners know, is that if you want the expectation of earning higher returns, you need to be willing to take more risk. Diversification can certainly mitigate the risk of total loss like you get with an index fund. Unlikely for a total market index fund to go to zero. But even the broadly diversified equity index fund can go through double digit percentage point drops pretty regularly and it may take years to recover, although that hasn't been the recent experience. But historically there have been many drawdowns that lasted for a very long time. That's just the reality of investing in risky assets. But humans find losses painful. We've talked about many of these in the podcast. There are lots of overpriced and otherwise suboptimal financial products that prey on this concern by promising investors downside protection. In this case, the advisor is offering a guaranteed monthly profit. Listen to this. Between 5% and 10% depending on the amount of investment capital and whether you choose a passive or aggressive investment approach.

B (33:23)

Can you imagine?

A (33:24)

I know. Let's take a moment with that information. If we take the lower end, 5% per month, that must be for the passive approach, not the aggressive one. I don't know. That's an annual return of 80%, which is pretty good for context on how good that is. The most successful hedge fund in history, or at least one of them. One of the most publicly known ones, the Renaissance Technologies Medallion Fund, which has been closed, by the way, to outside investors since 1993, has annualized historical returns around 66% before fees and 40% after fees, at least as of when Greg Zuckerman, who we've had in this podcast, wrote his book the History of that Fund and Its Performance. Now, I would say that it is implausible that Daisy on YouTube, who's the name of the commenter that wrote the comment we were talking about earlier, has just happened to find something better than the Renaissance Technologies Medallion Fund and is excited to tell you about it in a YouTube comment. Actually, guaranteed returns, properly guaranteed, at least in nominal terms, available through guaranteed investment certificates in Canada or certificates of deposit in the US Are way lower. Canadian banks GIC rates, depending on how long you're locking in for, are in the 3% to 4% range. Last time I checked, they're not 80% other than the guaranteed 80% returns. The other big red flag with Bitcoin, this one, is the claim that there's no downside risk, so they're guaranteeing the 5%. But the PDF also says that the broker has an alternative insurance that covers for any losses incurred while trading for a client.

B (34:51)

Wow, that's impressive.

A (34:54)

Should the profit realized in a month fall below the agreed percentage, this insurance will also make up the deficit. Now that of course, is not a real thing.

B (35:02)

People fall for this. Amazing.

A (35:04)

They must. The PDF finishes with a list of benefits of working with this advisor that remind me of the scene from Stepbrothers where they pitch prestige worldwide. You know what I'm talking about.

B (35:13)

It's been a long time.

A (35:15)

It's ridiculous. They say all these loosely related financial and business terms. This document finishes with something similar where it's like retirement mortgages, crowdfunding, investment advising, tax avoidance, college funds. It's just hilarious. For the record, real quick, tax avoidance is not something a credible financial planner is going to offer to anyone. Tax minimization stems from good financial tax planning, but tax avoidance is inconsistent with the overall spirit of the law. Just Another little red flag there. I was of course interested in signing up for these 80% returns, so I asked for the next step. After getting that PDF, I was sent another PDF requesting a huge amount of personal information. And I was told to sign up for three different trading platforms. Two of them were actual trading platforms, one was a crypto platform, one was a stock trading platform, and one of them was an extremely sketchy, presumably fraudulent trading platform. Now, it was explained to me that how this works is that the advisor would be copy trading my accounts. Now the next step would have been for me to open these accounts, add money to them, but I didn't actually go to that step because I didn't actually want to get scammed.

B (36:21)

So what do you mean by copy trading?

A (36:23)

They're trading in their accounts and then my accounts are set up in a way that copies the trades that they're making.

B (36:29)

But they've got trading authority on your account.

A (36:32)

I didn't dig into that. She was posing as a woman. They told me that they wouldn't have control of my accounts, but they would be copy trading. I didn't get this far to see how the mechanics would actually work. What would have happened, I think based on my knowledge of scams, is that the fraudulent account, the sketchy platform that they told me to sign up for, would have likely accrued large profits. The appearance of large profits and I would have been asked to add more money to that account, likely with a promise of doing so would increase my returns and then that would continue until I wanted to withdraw funds. At which point you realize that you've been scammed. Then at that point it's too late. So that's the pig butchering scam. They build trust, convince you that you're earning large profits, get you to add more funds, and then take you to slaughter. I don't know. What do you think so far?

B (37:22)

It's all crazy. It's amazing to me that people fall for this. It's amazing that you could actually set up an account on a legitimate platform and it doesn't get caught somehow. That's amazing to me.

A (37:32)

You mean that you can set it up on YouTube?

B (37:35)

No, no. That you could set up a legitimate account on some sort of trading platform and someone else is doing copy trades on that account in your name. You need to find out what the mechanics are because there's certain Know youw Client regulations that we all have to follow.

A (37:48)

I don't know if they would have actually done anything in the legitimate accounts. Maybe all the fraudulent activity would have happened in the sketchy account.

B (37:54)

Exactly.

A (37:55)

In the other account, I didn't get that far. Maybe someone with expertise in scams can tell us what would have happened next.

B (38:00)

But it's so interesting that there's people out there that could fall for this under your likeness because if you're a regular listener follower of your material, you would know that it's not possible. Obviously there's enough brand credibility around you. You're right. All it takes is one. One person falls for it. For enough money, it's all worthwhile. Just keep hunting for the person who's going to put in a million bucks or whatever amount of money. It's still mind boggling to me. And that's my earlier comment about. I go to so much now with this assumption that it's a fake. It's so hard to tell now what's real and what's fake.

A (38:35)

It's brutal. Scams are unfortunately part of life. They've been around forever and they're not going anywhere. And as I mentioned earlier, it seems to be next to impossible to stop them. One of the best defenses against scams, as we mentioned earlier, is knowledge of scams. If you know what the scammers are trying to do, you'll be able to avoid getting sucked into their traps. Now, unfortunately, the people who most need to hear this information will probably never listen to this episode. To address this, one of the relatively recent regulatory innovations in Canada designed in part to stop scams, is the trusted contact person, or tcp. Right now in Canada, licensed portfolio managers and investment advisors are required to ask. It's not a requirement for the client to have one, but you're required to ask the client to name a trusted contact person. And that is a person that the client authorizes to be contacted if their advisor is concerned that the client is being financially exploited. Among a few other reasons, like if they're unable to contact them for some other reason. So the trusted contact person, they don't have authority to trade in your accounts or give any orders or anything like that. But they're a third party that you, the client trust that the advisor can contact if they have concerns. So I would say that if a listener or a close family member of a listener or a client of PWL is working with an advisor, which obviously a client would be and does not have a trusted contact person, we likely would have asked you if you would like to have one. If you don't have one, I think it's definitely worth having just as a safeguard for stuff like this for elderly clients. We talked about this with Rob Carrick, about how they're being often underserved by the financial industry just with the complexity of being able to actually contact someone. I think particularly in that case, having a trusted contact person is a really nice additional layer of protection.

B (40:14)

I agree.

A (40:15)

That's it on scams.

B (40:16)

Be aware and be skeptical.

A (40:18)

Be skeptical. Talking to the scammers. On WhatsApp, talking to the scammers by email. It's brutal. It's awful.

B (40:29)

All right, you wanted to talk about financial planning.

A (40:32)

Hot Takes There was a topic created in the Rational Reminder community that took off, at least by Rational Reminder Community standards. It's got 161 comments as of earlier today, and it's probably a lot higher now in three days since it was posted. So the original post was from TALA in the community and they asked the community, what are your high conviction thoughts in finance financial planning that go against convention? So I'll read some of the earlier comments in this thread that had a lot of engagement, like a lot of likes and other reactions. I do apologize if there are any banger comments later on in the thread that I didn't get to. I don't know how far I read down, maybe halfway down. So here we go. Cherno Kicks, who's one of our wonderful moderators in the community, said this is his hot take. One should be more active in their bond portfolio when they reach retirement and reject modern portfolio theory for something more akin to liability driven investment. I think it's pretty good. I wouldn't disagree. We talked to Peter Mladina about that pretty extensively. John Cochran and Robert Merton would probably agree. It doesn't mean it's always practically feasible, but I think as a concept it makes a lot of sense. Libert45 said. If we agree that the goal of a government is to do things for the collective better than each individual could do on their own, it's reasonable to expect governments to care for retirees properly. They said. I don't think financial planning should have this much market share. I don't think it should have three pillars. Or should I say, I think the average person shouldn't need the third pillar, which is personal savings to retire. Government programs should cover 70 to 80% of wages with appropriate contributions, of course, and not their current levels. If I could resume in a sentence, I think they mean if I could reduce this to a sentence, I don't think the average worker should be able to understand Ben in order to retire in safety and dignity. Pretty good. That's a powerful comment And Canada's unique like that. I remember the first time that I talked to people from Germany who had come to Canada. They were a little bit perplexed at our system. People in Germany don't worry about this stuff as much. I don't know the details, but I guess their government pension scheme is more robust. Maybe a German person will correct me. Or maybe the people that I met from Germany, I don't know, weren't typical. But I just thought that was interesting that they were like, yeah, this is not something people can about that much in Germany. Having said that, a lot of people from Canada might give the same impression if they went to Germany and started talking to people. But they might not know much about investing either. Anyway, Asterix Legault said they have a few different hot takes here. Don't have more than one third of your portfolio in one country. This is obvious to me. To avoid concentrating risk in one set of institutions, one currency, one leader, etc. His convention is catching up though, with US underperformance. He's obviously saying having more than a third of your portfolio in the US might not make sense. Next one is emerging markets should have higher expected returns because of higher risk. That's not borne out by data. Asterix Legault is convinced that it must be true. Insurance. This is also Asterix Legault. You should have as little as possible. Only the most catastrophic risks should be insured. I would say for someone who's younger and working and not financially independent, well, disability on life, those are pretty catastrophic. If you have a portfolio of 100k plus and you're relatively young, any risk under $100,000 does not need to be insured. I mean like vehicle insurance you have to have, house insurance is probably more than $100,000 most of the time. Life and disability. Unless you're financially independent or not planning to earn money anymore, or probably more than that. I don't know what he's talking about then.

B (44:01)

But like waiving liability on your car or keeping liability, but waiving the collision on your car, perhaps write the car off, but if you end up causing serious injury to somebody else, or warranties.

A (44:10)

On stuff that you purchase wherever you're.

B (44:13)

Buying your toaster when you get offered.

A (44:15)

Yeah, that's probably good advice. In general, Asteroid Sligo also has his obligatory SUVs and pickup trucks are a scourge that needs to be eradicated.

B (44:25)

That's a hot take. A lot of people would not agree with that.

A (44:29)

It's an ongoing theme from Asterix Ligo in the rational reminder community saying that SUVs are just this symbol of overconsumption. DEF Patek's hot take was disciplined saving is 10 times more important than investment costs, which are 10 times more important than returns. Interesting one Nett said. Five different hot takes People would rather appear loudly rich than quietly wealthy. It's pretty good, they said. I used to think people with nice cars or trucks were wealthy. Now I just think they're indebted up to their eyeballs and stuck with a depreciating asset that no longer satiates their hedonistic tendencies. Homeowners have no idea how much owning a house costs.

B (45:08)

Absolutely.

A (45:08)

Yeah, I agree with that one. All they see is the purchase figure and sold figure. No other costs are assessed, tracked or calculated. That's pretty good. Investing should be boring. These are great. These aren't hot takes. Credit cards are great for points incentives if you pay the credit card off regularly and do not incur interest charges. Agree. AJLKMNJ says A hot take that alienates everyone Broad participation in index funds for the general public with voting shares is a safer way for workers to own the means of production than many proposed forms of socialism. It's interesting, I guess. You have to be able to accumulate shares in index funds. True. And index funds don't let you control the votes, I don't think. Although I think Vanguard piloted something or is piloting something that lets unitholders vote. Robert T. Who's always insightful in the rational minded community, says a few things here. They're all good though. Start with determining how much you need and when you need it, and then align savings and portfolio choice to those needs. Most people, including on this forum in the raushtramarder community, don't seem to do this. They just start with fund selection. Likely true, and I agree that's so.

B (46:15)

Much of this industry is predicated 100% all kinds of products. I mean, you and I go to conferences. It's all about the product providers.

A (46:22)

Start with a product.

B (46:24)

The margins in the product.

A (46:25)

Well, that's the thing with conferences is they're funded by the product providers because like you said, the margins in the product. This is still Robert T. Supersizing your lifestyle, including house cars, can undersize your savings. A quarter of physicians in their 60s have a net worth less than $1 million. 11% to 12% have a net worth less than $500,000. Person down the street pays $129,000 in property taxes per year just to live in their super sized home. Avoid the urge to keep up with the Jones. He has got links in his post to data supporting those claims. The largest tail of risk in your portfolio is non market risk. Severe health conditions, accidents, et cetera, and associated medical expenses in the US or divorce. So another really interesting one. The largest tail of risk in your portfolio is non market risk. When an investment is labeled dead, it usually is not equities. International value bonds. We've talked about that before. Patience is the ultimate alpha. Patience is hard. Endless tinkering and fund flip flopping is easy. Savings and tax management are underappreciated determinants of overall portfolio size. More effort seems to be spent on fund selection, but spending time on improving skills, earnings and savings rather than tinkering with fund selection has a higher return on time spent. Tax management, including optimizing use of tax advantaged accounts and investment options, can significantly reduce tax costs. Tax efficiency in taxable accounts usually means inactivity like that. Love this last one. This is the last one we'll read. Complexity does not equal Sophistication Hear, hear. Right. Wall street tries to sell complexity as sophistication. Who wants to be unsophisticated? Just like who wants dumb beta? There is a tendency for people as they age with all their worldly lived experience to simplify as the ultimate sophistication. There is some wisdom in that. I agree with that. Totally Nice.

B (48:15)

Great list.

A (48:16)

Cool topic. Like I said, it was at 161views last time I looked. I would guess that it has increased pretty significantly since then and if people want to check it out, of course it's at Community rationalreminder ca. You do have to apply the mod team is pretty good about getting approvals done fairly quickly, but I think there's just under 12,000 people in there now. I occasionally read LinkedIn, Twitter, personal finance Canada on Reddit, but the discussions that happen in the RationalMinder community. There's nothing else like that on the Internet that exists in the world. And I'm comfortable saying that, which is crazy to say.

B (48:51)

You and I are going on the road to meet some people. We're going to try to do it in August, but the dates didn't work out. But we'll be in Vancouver. It's around the 15th to the 17th of September and probably on the island as well in Victoria. So if you're in one of those areas, drop us a note. We're easy to find. We'll let you know what sort of thing we're going to be setting up. Probably be a rational Minder meetup of some sort. And then if you're an advisor in one of those cities and you want to kind of meet one on one, let us know. And we could certainly organize that because we are looking to get people on our team from different centers across the country. So after that, I think you and I will be hitting the road more often to different cities, which would be super fun.

A (49:28)

Yeah, it will be super fun.

B (49:30)

Since I've been putting out those LinkedIn notes, I'm hearing from so many people and it's interesting how many people, I guess the term is lurkers that follow us, listen to podcasts that say, well, I finally decided to reach out because of whatever the situation might be.

A (49:45)

I would also say that particularly for this topic where you're saying to people, hey, reach out if you want to talk about joining pwl, of course they're going to be anonymous and quiet about it because it's an employment issue. They'd be potentially leaving an existing employer to come to pwl. I've talked to a lot of people who I would not have guessed had been reading your LinkedIn posts who have reached out to me to talk based on your LinkedIn posts. It's a very interesting little dynamic there where you're striking some kind of nerve, where people are reading what you're posting and they're interested and they want to talk, but they're understandably very quiet about it.

B (50:21)

So reach out and hopefully we'll see you in beautiful bc, back to your home part of the country.

A (50:27)

My home part of the country. It's not formalized yet. You remember years ago I did that hike in Newfoundland.

B (50:32)

Yep.

A (50:32)

I might go and do that again in August.

B (50:35)

Wow. Same friend, same hike.

A (50:37)

I don't know if we'll go on the same route, but the same guy that I went with last time might recreate it. We still talk about it, however many years later, so we figured it might be time to do it again.

B (50:45)

We were down touring the Thousand Islands area on the border between Ontario and United States side. Boy, it's beautiful. Haven't been down there in a long time.

A (50:54)

Nice.

B (50:55)

But to be in the area on a July 4 long weekend to see the cottages and the boats and the people. It's spectacular, beautiful area. So that was super fun. All right, well, we'll see you in a couple days at Montebello.

A (51:07)

Yeah, we've got an employee summit for all of PWL and some of the one digital. It's going to be quite an experience, quite the event. The last time we did this. We were a lot smaller than we are now. I was going to say I don't think we've done something this scale, which is true because we haven't had this many people haven't been this scale.

B (51:24)

Yeah, it'll be amazing.

A (51:26)

Yeah, it will be all right.

B (51:28)

Anything else on your mind this week?

A (51:29)

No, I think that's good. I hope we have stopped at least one person from getting scammed.

B (51:35)

For sure. Okay, as always, everybody, thanks for listening. Great to topic.

A (51:39)

All right. Thanks for listening.

C (51:45)

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