Many years ago, when I realized how corrupt and self-serving the financial industry can be, I felt disheartened, disillusioned and thought about changing careers. At the time I had been working on the sell side of a major investment brokerage and I felt that my values had been sullied. About this time, the news was full of stories of scandal both in the business world and in the Catholic Church. From the coverage at the time, it seemed like all financial types were crooks and all Priests were pedophiles.
One day I ran into the Priest from my local parish. He is a man that I had always respected as liberal, smart and dedicated to serving his community. We got to talk and he asked me how things were going. I told him bad, I felt like I was in the wrong industry, and needed to change careers. I told him, “based on all the stories of abuse of trust in the news of late, it seems like both of our professions are hopelessly flawed.” Then Father Frank said something that changed my life. He looked at me and he said, “Do you not think that the world still needs trustworthy advisors doing this work?” “Well yes,” I said, “no doubt it does.” “Then go and be that,” he smiled.
These words reminded me that our human institutions will always be flawed, and there will always be a great need for honest, unbiased counsel. Over the past year and half since Juggling Dynamite was released, and I started writing the blog, I have heard from literally thousands of people all over the world. It has been truly over-whelming and completely unexpected. Most of them can never be clients of my money management firm, but all of them have questions. I spend probably a couple of hours each day, just answering emails and writing this blog to help shed some light. I now consider my profession my calling and my greatest honour to be of service.
One of the images that have stayed with me over the past few years is from the first Matrix movie. It is the scene where Neo wakes up in the grid of humans floating in liquid sacs and realizes that they are all connected in as living batteries to support the computers. He pulls the lines out of his arms and breaks free of the grid.
I have this same scene in mind sometimes when I think of how many people have increasingly come to support their financial institutions. I know this may seem like a weird connection. But if we think about all the fees and interest that workers have come to owe and pay every day to financial companies, you may see my point. If we think of how much of present GDP goes each day in debtor nations to support payments owed to their lenders, we see the point again.
Yes, I know we need a world financial system. I realize banks provide a necessary service and they should be paid for their service. I just want to see them (and their executives) make a little less and people keep a little more of their own.
So here is an aspect of that I want more people to consider. I am not sure how or if this applies to Americans, but I know it works in Canada. If you still owe a first mortgage on your home and you (or you and your spouse) also have savings in a Registered Retirement Savings Plan (RSP), that are at least the size of your mortgage, consider paying out your bank with funds from your RSP and hold your own mortgage. You will pay yourself the going rate on mortgages, which is higher than other fixed income and equities are paying at present. You will stop paying your investment broker fees on that portion of your retirement savings, and you will be channeling more of your own power into your grid rather than the financial industry.
Not too many people know about how to hold your own mortgage. Frankly, financial companies have no incentive to promote the idea since it cuts them out of revenue. But in many cases that I come across in emails and questions from my readers, it is an idea that will serve them well.
Here is a good summary of how it works. Given the low return, high volatility climate we currently have in world financial markets, holding your own mortgage and paying yourself going rates of 5 or 6% can be a no risk, smart, efficient for you, solution.
Cory’s Chart Corner
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