WARNING: Wealthstreet Investment Seminar

UPDATE OCTOBER 26th 2009: As of a couple of weeks ago, Wealthsteet’s phone number has been disconnected and the company is apparently out of business. I have no information about how to get in touch with Dave Jones, nor what this means for investments on the Wealthstreet Dragon Fund, a fund operated by Dave Jones. This blog entry has a comment that seems to indicate the Dragon Fund may still be intact, but I don’t know whom to contact to get further information. Some further updates on this can be found here.

UPDATE: This blog post was originally written in February of 2007. At the time I was quite impressed with WealthStreet and Concrete Equities. Now, as of May of 2009, I’m very concerned for my Concrete Equities investment after reading this forum thread. I certainly don’t believe everything I read online, but there are enough red flags to warrant significant concern. Most concerning of all to me is that Dave Jones has recently stepped into the role of CEO at Concrete Equities. How can I expect fair and impartial advice from Wealthstreet regarding my investment in Concrete Equities if the same man is running both? I can’t, and that’s very troubling to me. My “Wealth Coach” at Wealthstreet no longer works there, and no communication was sent out to his clients informing them that he was leaving. I had to call Wealthstreet and find this out when I asked for him and was informed he no longer works there. I would advise extreme caution regarding getting involved with Wealthstreet at this time.

UPDATE #2 (August 20th, 2009): The forum thread at Canadian Business I linked to above is no longer valid. It has been deleted, and my post in those forums asking why the thread was deleted, was itself deleted. This is called “a clean up” – someone is trying to erase all traces of this issue online. Lawyers and accusations of libel are involved. Thankfully, you can still get some of the discussion via Google’s cached version.

On Saturday, February the 3rd, I spent six hours in a investment seminar put on by Wealthstreet, a Calgary company that I’d been hearing about for years and meaning to get in touch with. I’m better than most with finances, but I have a firm belief that you should do what you’re good at and avoid what you’re not good at – and for me, that means seeking advice from people who do this for a living. I bought stocks all of one time in my life, and I lost money on it.

We’ve done some work with World Financial Group (WFG), but over the past year I’ve become increasingly disillusioned with them. Our consultants are the nicest guys in the world, but niceness does not a balanced portfolio make. The WFG plan had us sink 100% of our money into a single mutual fund, and after a few months I gave my head a shake and realized how exposed we were because we had almost no diversification (Enron stock holders unstand this now). I took some steps to correct that, but ultimately things still aren’t right – and that’s why I found this Wealthstreet seminar so fascinating. I’m indebted to my parents for inviting Ashley and I to attend this with them – it was a real eye-opener. After the first half was over I made an appointment to meet with a Wealthstreet advisor to re-work our portfolio (meagre though it may be).

I’m publishing my seminar notes for two reasons: first, so that people searching for Wealthstreet can find this blog post and see my positive experience with their seminar. Secondly, even for those people reading this blog that live outside Calgary (which is most of you), I think you’ll find many of the basic financial concepts to be sound no matter where you are in the world. It’s certainly worth thinking about your financial future no matter how young you are, and simply shoving all your money into RRSPs (or 401K’s if you’re in the USA) isn’t a good long-term solution.

I’ll make one caveat about my notes: they might not be 100% accurate, so don’t take them as such. There was a great deal of information, and I may have gotten some of it wrong. Besides, what kind of a person takes financial advice from a blog? 😉

Dave Jones, Wealthstreet CEO

• Family is important, the allocation of time should be focused 99% on everything else in your life, 1% on focusing on your investments
• “You don’t get a mulligan when it comes to your retirement.”
• You should have four to seven income streams in order to retire
• 40% of Canadians have made an average of three withdrawls from their RRSPs
• IBM sold to Lenovo because they couldn’t afford the pension for their own people
• Pension Crisis is looming: too many people retiring, not enough growth in the funds to compensate for the amount of draw from pensioners
• Bullet Proof 50% of your portfolio, Growth & Income 40% of your portfolio, 10% speculation
  If you speculate with 10% of your portfolio, and only 5% performs, it might out-perform the rest of your portfolio
• Your house an as asset must be put to work – you can’t eat a doorknob
• 1 in 7 Albertans will be the victim or attempted victim of mortgage fraud
• House rich, cash poor: people who own a house worth a great deal, but they can’t afford the property taxes
• Personal savings as a percentage of disposable personal income is -5%. Someone who earns 100K a year is spending 105K
• 10% of the world owns 90% of the assets…Trump and Kiyosaki worry that 1% of the world will eventually own 99% of the assets

Kevin Poelzner, Vice President, Nesbitt Burns

• Investment planning is like a pyramid: the most stable assets (savings account, company pension, insurance, etc.) form the base. As you go higher up, the risk is higher but the proportion of the total is less
• The cycle of market emotions: optimism, excitement, thrill, euphoria (maximum financial risk), anxiety, denial, fear, desperation, capitulation, despondency, depression, hope, relief, optimism
  Retail Investors chase returns, buy and sell short term, and act on emotion. Institutional investors consider both return and risk, and invest long term with broad diversification.
• A loss of 50% requires a gain of 100% in order to just break even
• The need to diversify is indisputable
• The best way to ensure you own the highest performing investment is to own all types of investments
• Growth investing does well over time, value investing does well over time – but not necessarily at the same time
• Owning too much of one type of security is fatal flaw for your portfolio: investing in the TSE, with 300 total securities, 1/3rd of the total TSE was made up of Nortel…which fell by 99.5% in value. This killed the overall TSE value
• Segregated Portfolios: the client owns the securities within the portfolio
• Mutual Funds: the client owns units in the overall fund, which is made up of various securities
• Flowthrough: began in 1954. Purchasing results in lowering your taxable income level.

John Mackay, Mosaic

• Private Equity: investing in companies that are not listed on the stock exchange. Traditionally has been for investors with high net work – minimum buy in is usually $2 million or more
• When you’re buying private companies, you’re buying them at a wholesale cost
• The stock market is the retail market (7-11), the private market is like wholesale (Costco)
• Because you’re buying the company wholesale, you have an opportunity to watch the company grow, then the company can sell to a bigger company or go public
• Mosaic decides where to invest based on long-term uptrends in commodity prices
• They have the goal of 10% profit for clients before management shares in the investment
• We’re in a long-term bull market for commodities in Alberta
• Canada is a great place to invest, particularly Western Canada. Copper, wood, diamonds, uranium, etc.
• Canada has its fiscal house in order: we’re growing the fastest of the G7 countries
• Canada is the only country in the G7 that has a budget surplus, and we’re politically stable
• Three secular bull markets in the 20th century: 1906 to 1923, 1933 to 1953, 1968 to 1982.
• Average length of a bull market is 17 years
• A new bull market started around 2000
• Political stability decreases as the price goes up in most countries around the world
• Mosaic’s general acquisition criteria involves looking at enterprises valued between $5 million and $25 million, have demonstrated the ability to generate free cash flow, have durable competitive advantage in an attractive industry, have ongoing participation of key senior personnel, have opportunities for organic growth, and have immediate and longer term accretion to distributable cash
• They only look at companies where there owner is not key to the functioning of the business. If the company gets bought out, and he leaves, the company doesn’t have the ability to continue generating money at the same rate
• 7100 companies in western Canada with revenues between $5 and $25 million (“SME’s”)
• 34% of SME business owners are looking to exit in the next 5 years
• 66% of SME business owners are looking to exit in the next 10 years

Manulife Investments

• Biggest concerns and challenges for retirement: longevity, out-living your money
• A 65 year old has a 71% chance of reaching 80 years old, 33% chance of reaching age 90, 16% chance of reaching 95
• Your savings may not last through retirement
• Diversification is a sound investment strategy, but still contains some risk
• Insurance law states that the money goes to the beneficiary outside the estate, which makes them creditor-proof

Blair Robertshaw, Blue Water Resort Development Inc.

• 12 to 14% rate of return
• Investment paid out by the end of 36 months
• Paperwork is not yet final (problem with the marina being up to spec) so they couldn’t make the offering to the audience

Dave Jones, Concrete Equities

• Commercial Real Estate Development
• Castleridge Plaza (55 Castleridge Blvd. NE). 85,000 vehicles per day traffic counts. Servicing a trade area of 150,000 people. $50,000 buy in. Tenants: 40% local, 17% medical, 43% national/international. 56% of leases come due over the next five years.
• Management Team: Dave Jones, Vinny Aurora, Dave Humeniuk
• Millrise Plaza – 95% ROI, Deer Valley Station 95% ROI, SNC Lavalin 109.6% ROI
  15 year window of extreme growth and opportunity

Dave Jones, mPowerTec Point of Sale Machines

• Financial de-regulation has taken hold in a significant way
• Offers individuals a way to earn income from the debit/credit machines
• The de-regulation in 1996 provided an opportunity for non-financial institutions to own financial transaction processing equipment
• In 2010 fraud liability shifts to the merchants
• 800,000 terminals in Canada need to be replaced to be Smart Chip compliant
• 55% of mPowerTec’s revenue goes to the owner of the machine
• $3500 per unit

Principles of Wealth, Calin Lawrynowicz

• Be smart, plan to be rich
• Protection = Structure
• It’s not what you make, it’s what you keep
• Taxes: planned in advance, structured in advance, income after tax is key. Expenses vs. expenditures. Tax reduction, tax deferral
• Corporations: Everyone Should Have One
• Benefits of a corporation: tax reduction, tax deferral, income splitting, separate legal entity, survives death, will can avoid probate, separates personal wealth, protects from creditors, better than insurance. Better than proprietorship, better than partnership, avoid personal bankruptcy.
  Corporations are not very expensive to create, the benefits outweigh cost
• Trusts: similar to corporations, involves ownership transfer, still largely allows control. Not subject to probate tax, highly useful and adaptable.
• RRSPs: an element of planning, an element of protection, like another “pocket”. They offer tax reduction and tax deferral. They’re not just for retirement. RRSPs should be in safe investments – you cannot write off losses.
• Contracts: know your needs, know the risks, know the costs, know the guarantees, know your “fallback”.
• Every contract is, in essence, an insurance contract
• Structure can protect you from things that go wrong
• Building Real Estate: value appreciates, capital gain, tax exemption for home, inflation protection. Equity can be leveraged, best cost financing, invested leverage fully deductable
• Insurance companies make money with our money , as do banks – they leverage the money we give them to make them more money
• You shouldn’t pay for services where no value is provided

Daniel Serruya, Director of Sales, Straight Line Investments

• Like a GIC, the rate of return is guaranteed
• Commercial Mortgage Investments
• Straight Line Investments is an Equity Lender (they care about the value of the property) NOT covenant lenders (they look at the individual, their credit rating, and determine an amount that they can securely lend)
• 6% return on 1 year, 7.25% return on 3 years, 8.5% return on 5 years
• 100% RRSP and RIF eligible
• 5 year 8.5% GIC will close on March 1st, 2007
• Guaranteed Investments (Plan A): all investments are registered on title, Safe Swap guarantee (if one property is having difficulty, the investor’s money is transferred to a new property), Maple Trust (Scotia Bank), Law Society of Upper Canada, REBBA, FSCO (Financial Services Conditions of Ontario), Supply and Demand, transparency.
• Value Added Services: wills and powers of attorney, estate planning, trusts, incorporations, tax planning (off shore).

Kevin Bennett, Manulife Bank/ManuOne

• We often meet our needs by borrowing: automobile, university, furniture, home, raising children, home renovations, recreational property, income interruptions, etc.
• The average Canadian manages nine different banking products across two banks
• 6% on net daily borrowing, 3.75% on net daily positive balance (market rates for both)
• Managed Borrowing: borrow only what you need, low interest rate is applied to ALL borrowings.
• “Lock-in” up to 75% of the credit limit (value of your house)
• Add savings to reduce debt and interest costs
• Know exactly where you stand every month
• Use sub accounts to track specific finances
• Costs $14 a month (cheque writing, fund transfers, bill payments)

Dave Jones, Wrap Up

• Calgary is building on a $4.7 billion boom
• 11% airport traffic up, more people coming in and out
• Calgary office rents are higher than Toronto
• The US produced 18% of the oil for the world in 1972, in 2006 they’re producing 10%
• Don’t hesitate, go out there and reach for it!