You Need a PFA!

A new food store opened in our neighbourhood.  I decided to check it out a number of months ago. As I walked through the doors of the modern palace, sunlight streamed through the windows. It certainly looked nice.

I started toward the first aisle, but was greeted by a very young man in a crisp dark business suit.

"Hello, and welcome to JBFE. Come into my office and we will discuss your food needs" he said, offering me a too firm handshake and a smile.

"I just came to sort of browse the store...." I mumbled.

With self-assured confidence he smoothly declared "I am Mr. Stuart Foodee, PFA, WKWE and I will be your Personal Food Advisor.  Now if you just step into my office, I will help you decide which of our foods are best for you."

I tried a few more objections. but soon I was sitting in his office, the other side of a glass desk, my eyes fixed on a painting of a carrot on the wall, right next to his PFA certificate.  I noted that the date on it was five days ago.

Mr. Foodee smoothly continued... "First, you need to fill out some surveys  before we can design your personal food plan and portfolio."

"My food portfolio? But I just wanted to look around today" I protested.

"Food is very important, literally a matter of life and death. You can't just rush in and buy things. You need a personal food advisor to help you make good choices.  Food is complex, there are literally hundreds of thousands of choices.  We at Elite Foods want to help you navigate those choices, and I am your Personal Food Advisor. Now let's get started, Bobby."

No one had called me Bobby since I was six.

"Now, how many meals a day do you usually eat, Bobby?"

"Uh... 3 I guess" I answered. "Very interesting" he commented.

The list of questions continued....

"Would you rate your food knowledge as novice, intermediate, expert or advanced?" I admitted I was novice.

"Do you prefer environmentally sensitive food choices?" I thought I should say yes.

"What is your monthly salary from all sources?"

I looked at him quizzically and protested "But I just want to maybe buy a few items here."

Mr Foodee did not skip a beat, "We can't help you make good food choices unless you are open with us, Bobby. Look around, you can trust us, we are professionals."

"Now we need to evaluate your food risk." he continued.

"Oh, like how concerned I am about pesticide residues?" I said, for the first time seeing some potential value in this conversation.

"No" my PFA replied "Let me get at your food risk through these questions.  Would you rather have fine delicacies on the first two weeks of the month, if it meant you had to eat less later in the month?"

I mumbled some reply, and he gave me a food risk tolerance score of 71.

Eventually the interview process was over, and Mr. Foodee declared that he was finished. The printer buzzed and he printed out some forms, but I was not allowed to see them.

With relief I turned to finally explore the store, but he firmly blocked the way.  "You don't need to enter the store, in fact we can't let people do that, I mean you need us to decide what your food needs are.  Food is complex."

"If you just sign these three forms, everything will be set up. Oh and we need your credit card and SIN for our records."

"Maybe I will come back, I'm not sure about this." I protested.

"Billy, we are professionals. I am your Personal Food Advisor. We offer hundreds of highly differentiated mutual food services here."

Eventually I signed the forms, and was given some pamphlets on thick glossy card stock. I left, not sure what had just happened.

A week later a courier arrived at my apartment, with a tiny food basket in crisp white lining.  I admit, it did seem exciting.  The custom labels looked nice, although the products really did not seem a good fit for what I liked to eat, at least the ones that I understood.

Also, when I looked at the receipt I was shocked by how expensive everything was. Plus I was charged 3% more for management fees, plus a front end food fee, I guess for the analysis of my needs by my PFA.  There was also a fee because apparently my account was a small one.  And a few other fees.

I went in the next month to cancel the food service, but somehow I got persuaded to instead meet with a Vice President Client Services.  Wow, a VP seeing me on my second visit, they did really care about me!  I admit, it all seemed very professional.

The Vice-President had me do another survey, or maybe it was the same survey over again,and gave me more glossy brochures, and I signed something else. I mean who was I to know about my food needs and all the choices?  I mean food is complex, you know.

Still, a month later, after seeing how much more expensive food was than at my old store, I went in, determined to cancel the service this time. I discovered that I had a DSC.  I had never heard of those before, but I guess they are standard in the food portfolio business. It turns out that if I cancel in less than 7 years I need to pay 6% of my annual food costs to cancel the service.  Food service is complex.

Oh well, those baskets are pretty nice.  And I did get to meet another Vice-President! They seem to have a lot of vice-presidents.

I pretty much just have enough money each month to cover my apartment and the food service, but really that simplifies my life.  No need to choose where to go or what to buy any more.  I can't believe that I used to manage without a Personal Food Advisor. I mean food is complex! It is calming to have  my PFA make all the decisions.

I realize you may have questions, but please ask Mr. Foodee, my PFA.  I lately, have had trouble thinking for myself.  Not sure when that started, a few months ago, I think.

I went to the library the other day to see if I could get a self-help book, but when I asked at the desk for a personal library assistant to select the book that was best for me and sign it out for me, they just sort of looked puzzled and referred me to the reference desk.  I went home without any book, feeling a little sad, but not sure why.

This posting should not be considered professional food advice.

Review: The 3 Simple Rules of Investing

Link to purchase book.

A few months ago I read the excellent book, The 3 Simple Rules of Investing, by Michael Edesess, Kwok L. Tsui, Carol Fabbri and George Peacock. In their book, they make the startling statement that "everything you've learned about investing is wrong".

So what are their three simple rules?

1. Simplify Your Options
2. Look Only Forward
3. Tune Out Noise

You will need to read the entire book to hear their rationale, but not surprisingly they favour broad, low cost index funds over specialized investing instruments.  They also favour a long term approach, and to 'tune out' the vast majority of advice you will hear or read from financial writers and advisors.

By look only forward, they warn against placing too much faith in how a certain fund has done in the past. As we all know 'past performance does not guarantee future results'. For example, as David Berman (among others) has written, the simple strategy of investing in the Canadian big bank that performed worst in the past year, yields better results than trying to pick the best bank stock in more sophisticated ways, or holding a basket of banks.

As well as their three simple rules, the authors identify seven deadly temptations.   Some of these are obvious and widely accepted, such as 'Don't try to beat the market', while others may seem contrary to common sense.  They urge small investors to not follow what most wealthy and sophisticated investors do. This is not because it would be difficult or impossible, but rather because most high worth individuals use high powered financial advisors and typically pay large fees for expert advice. There is little indication that this advice has resulted in better investment returns. Warren Buffett has emphasized this point in his 2017 statement, making the claim that high worth individuals have spent $100 billion in unnecessary fees.

While I would not agree with everything in the book (for example, I believe they argue for too much simplification), I do support the main tenets. I certainly recommend that you read this book as one part of your investor education. As one Amazon reviewer has written "If you read only one investment guide in your life, make it this one elegantly boiled down to the essence of what makes sense and makes money."

I agree 100% with their statement: "Don't trust it all to the expertise of someone else". Indeed my decision to start this site was largely because I fear that too many trust too blindly in investment advice. You can, and should, learn about your financial options, and you should take ownership of your financial future.

It's interesting that they also warn about over reliance on modern 'scientific' financial theory. That will be a topic for some future column.

Some of their advice is very practical, and can be immediately applied to your portfolio.  They argue that it does not make sense to hold a large number of specialized funds for diversification, if in total they essentially mimic the entire equity market.  Why not just get one total market fund?

I highly recommend The 3 Simple Rules of Investing!

From time to time I will review investment books.  Have a favourite?  Why not leave a comment, and we will consider making it a topic for a future column (or if you prefer to review it yourself, we welcome guest posts.)  If you were going to read three Canadian investing books, what would they be?

This column is intended for education only. The reader is responsible for their own financial decisions.  The writer is not a financial planner and reading this column should not be interpreted as obtaining individual financial planning advice. For major financial decisions it is always wise to consult skilled financial professionals. While an effort has been made to be accurate, any statements of fact should be independently checked if important to the reader. 

Disclosure: I have read this book and have no association with the publisher or authors.  I did not receive a copy of the book, or any other benefit, for writing this review.