Unpublished submission to MONEY Magazine
“Using Other People’s Brains” or “Taking a Board of Directors Approach” or “Leveraging Your Human Capital/Resources” are just a few examples of different ways to say the same thing. The meaning behind these sayings is quite simple, seek the individuals that have a reputation of being the best in any endeavour that you yourself have an interest in and then use their experience to guide you along the way. By surrounding yourself with the best brains in any field you will add a tremendous amount of knowledge that will help you move in the direction of your goals. Successful individuals recognize the need for this approach especially when it comes to the business of money. With the many different financial aspects that you would need to include in the vast world of money, one would need more than one professional to guide you through the maze.
One of the professionals that I had added to my roster of brains back when I was aggressively building my financial planning practice was Mr. Gordon Pape. Gordon is a well-known Canadian author who has considerable expertise in personal finance and investing. With a list of accomplishments and a biography longer than the 750 words that I am entitled to write in this publication I can tell you that Gordon’s long and distinguished career has included writing and co-authoring many books and guides with total Canadian sales exceeding one million, he is an editor and publisher, contributor and columnist, political activist, and frequent guest on national television, radio and to top it off, father, grandfather and all around family man.
One of the articles that Gordon penned, which I happened to have shared with my clients as an extension of my own brain power, was an article entitled “Blind Love”. It was published in the FINANCE. VOS FINANCES section of an investment magazine that I cannot even recall at this time, nor do I have the exact date of the publication, however, with a reference to “an end of December 1988” in the article, I am sure it would have been published early in 1989. One of the main suggestions of this article was the idea that GIC’s, which actually paid something in those days, should be held within a tax shelter which would eliminate the income tax factor until the money was going to be withdrawn. That was an incredibly powerful idea at the time.
With interest rates much higher than at present, it was a wise move to place interest bearing investments in a tax preferred environment so that the fully taxable earnings would be compounding free of taxes. The article also discusses the risk elements of increased inflation and taxation associated with owning GIC’s as a long term investment and offered suggestions as to how to use them most effectively. Great tips for the advisor who wanted a good reason to keep in touch with their clients with ideas that were beneficial to them.
What has Mr. Pape been doing more recently? Glad you asked. Gordon gave me the opportunity to catch up with him at his home just before Christmas. Even though he had plans prior to and after our meeting he treated me like we had been long lost friends and we had a wonderful and un-rushed talk about RRSP’s, his latest book on the subject, “RRSP’s The Ultimate Wealth Builder” which was released on January 7th, financial advisors, planners and a bit on leveraged investing.
Gordon believes perhaps even more strongly now that RRSP’s offer the average Canadian great benefits. With questionable pension practices resulting in plans falling short of their requirements, he feels that many individuals should utilize RRSP’s to bridge the gap that may not be filled by those plans. He stresses that it is incumbent for younger people to make contributions as early as possible so that compounding can really take effect and that reasonable returns of approximately 6% can be attained without risk over the long term.
We discussed the fact that he is not a great believer of leveraging capital for investments as he feels that most people are psychologically not equipped to accept market crashes. With home ownership, when house prices plunge, people are more inclined to live in their houses as their homes versus holding onto a leveraged equity portfolio that has dropped substantially in value.
Recognizing that it was critical for consumers to seek out financial advisors who really demonstrated their financial knowledge, experience and prowess, over the advisor that may not be as knowledgeable and perhaps more commission driven, we agreed that the mutual fund industry has a responsibility of regaining the confidence of the public by adhering to better practice standards. Better definitions for Financial Literacy and Competency, full, plain and true disclosure which should never be compromised, and standards for being able to provide alternative strategies and product solutions, not just for what you are licensed to sell, but to seek the advice of other specialists, all for the purpose of bridging the ever widening gap to helping people reach their financial targets.
Thank you for your continued efforts and sharing your wisdom Mr. Pape. I wish you continued success.
Copyright 2013 Richard M. Kiernicki. All rights reserved.
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