Is the debate over renting vs. buying a home really over? Featuring Rob Carrick (EP.172)

Key takeaways

The debate on whether renting or buying is better should consider practical financial implications, with many factors at play beyond just immediate costs.
There's a growing trend of generational wealth transfer, meaning many young buyers are receiving support from their parents to enter the housing market.
Recent banking regulations may limit the options available to clients, pushing them towards independent financial advice.
Robo-advisors are gaining traction in Canada, reflecting a shift in how young investors approach wealth management.
The unpredictable nature of markets, inspired by recent trends, calls for careful and rational investment strategies.

Summary

Introduction and Recommendations

Hosts Benjamin Felix and Cameron Passmore welcome Rob Carrick from The Globe and Mail back to the show for episode 172. They kick things off with some engaging recommendations of books and shows, including 'Impeachment', Charles Ellis's 'Capital: The Story of Long-Term Investment Excellence', and Robin Wigglesworth’s 'Trillions', discussing their book's focus on the index revolution. They also mention personal anecdotes about shows being watched at home, establishing a comfortable rapport as they transition into more serious topics.

Study on Renting vs. Buying

The conversation moves to a contentious study by Royal LePage comparing the experiences of homeowners versus renters in Canada. Rob critiques the methodology, highlighting how the report falsely favors ownership by excluding principal repayment from mortgage costs. He mentions that statistical comparisons often overlook opportunity costs for renters who could be investing their money elsewhere, emphasizing the importance of recognizing that renting can be a valid financial strategy.

Banking Reforms and Trends

The discussion shifts towards recent regulations impacting Canadian banking advisors. Rob shares insights on new 'Know Your Product' rules and their implications, which include the restrictions from banks that discourage the proposal of third-party funds. These moves confuse clients and limit their options, impacting the professionalism of financial advice across the industry. The hosts and Rob delve into how these banking practices could potentially drive clients to independent financial planning firms.

The Changing Landscape of Investing

Rob comments on the broader changes taking place in the investing landscape, specifically regarding the growth of robo-advisors and the increasing acceptance of index-based investing. He acknowledges that while Canada has made progress in adopting these investment strategies, cultural barriers remain. The conversation reflects on how social media and online trading platforms facilitate widespread trading among the public, drawing parallels to past economic cycles.

Generational Wealth Transfer and Housing Market Observations

Another significant part of the conversation highlights generational wealth transfer, noting that a notable percentage of first-time buyers receive financial assistance from their parents. Rob cautions that the housing market in Canada may be becoming increasingly exclusive, with implications for those unable to afford homeownership. He presents his views on Sweden's historical housing prices and suggests that Canadians should remain mindful of potential market corrections.

Final Thoughts and 'Talking Sense' Cards

As the episode wraps up, the hosts engage in a fun round of 'Talking Sense' cards with Rob, exploring personal questions about possessions and lending, leading to interesting discussions on happiness linked to money. They conclude with commentary on Robert Kiyosaki's looming economic disaster predictions, recommending a more prudent and measured approach to investing, and citing the importance of rational thinking in financial decision-making.

Show notes

Today we welcome Rob Carrick back to the show to talk about a range of interesting topics, focusing on the Canadian housing market and some of the recent developments from the banking and investment space. Rob has such a balanced and measured approach, qualities that are visible in his long-standing work at The Globe and Mail. We start today's episode with some fun recommendations of books and TV content, before diving into the meat of our conversation. Rob weighs in on the range of perspectives on whether to rent or buy, offering the assurance that renting is a completely acceptable way to manage your needs and means. He also comments on the utility of robo-advisors, the impacts of the recent banking regulations, and shares his surprise at which of his articles have proved most popular. We always feel like we should have Rob on the show more often, and this episode is such a good argument for that very idea. So, to hear all Rob has to say, be sure to join us today.

Key Points From This Episode:

This week's book and TV recommendations; Impeachment, Capital, Trillions, and more. [0:00:39.2]
A call for applicants here at PWL Capital, and some recent reviews for the show. [0:07:17.7]
Looking at an excerpt from Azeem Azhar's book, The Exponential Age. [0:11:45.4]
A recent study comparing renting and buying in Canada. [0:18:18.6]
Rob's observations on the new banking rules in Canada and what they mean for the advisor community. [0:29:27.2]
Thoughts on trends in the banking space and the roles of financial professionals. [0:36:07.1]
Canada's adoption of indexing: measuring the speed of changes in the country. [0:38:38.7]
The role of robo-advisors and why Rob believes strongly in their value. [0:41:48.5]
Rob weighs in on the debate of buying versus renting property. [0:44:39.6]
Generational flows of money from boomer parents to millennial and Gen Y children. [0:50:52.3]
Rob's message to Canadians feeling like they are stuck renting. [0:54:24.1]
Some of Rob's most popular articles from over the years. [0:55:20.7]
Lessons from Sweden's housing market and considering Canada's possible future. [0:59:03.6]
A round of Talking Sense cards with Rob dealing with most prized possessions, lending, and happiness. [1:02:26.3]
Assessing some of Robert Kyosaki's recent comments on a looming crash. [1:08:29.1]
The present is exciting in finance; why Rob is enjoying the ride. [1:14:22.5]