Financial Planning for Families with Sterling Rempel from Future Values Wealth Management of Aligned Capital Partners Inc.

In this episode of "Financial Planning for Families," we delve into the inspiring career journey of Sterling Rempel, a highly experienced financial advisor with over 25 years of expertise in the investment and insurance industry.

Join us as we explore Sterling's path from his early days in the corporate world to the bold decision of establishing his own advisory practice.

Show Notes:
Future Values Estate & Financial Planning

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https://www.achenhenderson.ca/

Transcript

Clayton

Alright, so welcome to this week's episode of Your Business Unleashed podcast. I am honored to have a friend, a colleague, and client on the call with us today. Who am I? I'm also a client of Sterling Rempel with Future Values Wealth and Estate Planning. Am I getting that right?

Sterling

It is. That's Future Values Wealth Management as well as Future Values Estate and Financial Planning. We have two sides to our business.

Clayton

Fabulous. Fabulous. So, we've been working with Sterling for a number of years and he's—sorry, I might make you blush a little bit, but you're sort of a staple in the investment and insurance communities in Calgary here. And you know, for the value of our listeners, I trust Sterling enough with my family's money. 

So, you know, that should say all you need to know about how much I trust this person on the other end of the podcast. So, thank you so much for being here with us Sterling today.

Sterling

Well, thank you. That's very kind of you to say, and I appreciate that.

Clayton

So, we often start by, okay, first of all, tell me about this office that you're sitting in. Cause it's pretty funky. Like what you got, you got some neat things going on there. So run us through your office and how this came to be.

Sterling

Sure. We're privileged to be in a heritage building on 15th Avenue, just off of 17th. So, I tell people that we are within crawling distance of the Ship and Anchor in the national pub. We've been here for six years now. This was—Mr. Heath built this building in 1911.

It's a character building. It's a heritage building. Mr. Heath was a tailor. And we are on the second level of this building. It was his home. Downstairs was his tailor shop and upstairs, I'm in, I believe, one of the bedrooms. We've got a fireplace. My lovely wife, an interior designer, has chosen the colors.

And we wanted to make it homey. We wanted to make our flat clients feel comfortable and in a homey environment so that it's perhaps the antithesis of a glass and steel downtown corporate office, because we really value the personal relationships with our clients. And so, we do everything we can to make them feel comfortable.

Clayton

Yeah, right on, right on. Thanks, Sterling. So, let's talk a little bit about your background and how, obviously, Wealth Management, Estate Planning, Insurance all that. I mean, a lot of those words make a lot of us cringe a little bit.

And because it's, you know, these are big, scary topics and it’s very complicated stuff. And all that, but you obviously took a liking to it some time ago. So, take us back to the beginning of your entrepreneurial journey and where you started.

Sterling

Sure, and if you ever want to shut down conversation at a cocktail party, just tell people that you're a financial advisor. And then they pivot back to my wife, who's the interior designer and always in that role, but I love what I do. I absolutely am blessed to be in the role that I am because I get to help people organize their financial lives and, and get to see that light in people's eyes when they know that they're going to be okay, and their families are going to be okay, and that they have sufficient for themselves and that they can continue to be generous and give to others and organizations that are important to them.

So how did I get here?  Many years ago, I went through a Finance degree in in the University of Saskatchewan. So, I have an honors degree in finance. My honors paper was the Miller Modigliani theory of capital debt ratios.

Clayton

Oh, boy, that sounds.

Sterling

Yeah, nobody ever asks so I have to always tell whenever I can.

But I graduated into the recession of the early 80s and couldn't find a job. I joined Paul Revere Life Insurance Company at that time as a Disability Insurance Specialist. And so, I was assisting insurance agents selling accident and sickness income replacement insurance to their clients.

And from there, I went from Saskatoon to Winnipeg and ultimately to the company's head office, where I trained the people doing that. Then I became the Director of Sales, the National Director of Sales, and was the corporate liaison with four of our insurance company partners, London Life, Mutual Life of Canada, Metropolitan Life, and Transamerica at that time.

We had parted ways in 94. I moved to Calgary, where our family always wanted to be.  Started with great with life. I was a Sales Manager. I was recruiting and training people in this industry. Then I became a Regional Life Insurance Manager. So, I was working on complex tax cases. And then eventually in 1999 said, that's it, I'm done with the corporate world and started my practice.

So, I'm in my 25th year of independent practice. And as a small business owner, I think I can relate to our clients because I know what it's like to have to make payroll on Friday. And you know that there's insufficient money in the bank. And so, you go through the highs and the lows.

So, I relate naturally to entrepreneurs who have gone through that journey and  can assist them in developing strategies to that.

Clayton

Let's go back to ‘99. That must have been terrible because it sounds like, you know, and you don't, I guess I didn't ask you to bring your T4 from 1999, but you're probably doing okay back then. And you decided to take the plunge and like, I mean, this is a big risk. Did you have kids by then?

Sterling

I had three children under the age of five. My wife was at home at the time. She was trained as an accountant, but she was at home with the children. I looked over the cliff and realized that I absolutely had to step off it, but it took me a year and a half of dithering to get to that point, and I knew I needed six thousand dollars a month of cash flow, and I had no idea where it was going to come from.

Clayton

Interesting. Okay. So, it’s interesting to hear you say that because when we started at Achen Henderson, George and I you know, we went, “Okay, what do we need to live here?” Right. That was our starting point. Just going after expenses, I want to make X. Okay. Well, that's nice that you want to make that. Now, what do you need? Right? And you know, it's a humbling starting point when you start from there going, okay, the goal is 6K per month. I need 6K per month or else my three under five year old children and my wife who's at home raising them is going to be pretty unhappy with me, right?

So that must've been a pretty scary time for you or, or did you, were you feeling good all the way through it or talk us through that a little bit?

Sterling

It was a difficult time. My wife was supportive and had been seeing my angst and hoping that I would be able to find the courage to make that decision.

But that doesn't mean that it was without its challenges. And so, we begged, borrowed, and borrowed some more-- didn't steal. But yeah, some months it was super tight. And then you go from being a pauper to a prince. And then that income roller coaster continues. And as many entrepreneurs find out, eventually it smooths out.

And as we have talked about in our mastermind networking group, you go from this raw fear of, “Okay, I've started this job for myself. How do I keep it going? And how do I just merely survive?”  

Clayton

Yeah

Sterling

There's a guy named Leon Danco since passed away who has written a lot of books on family business and succession. He talks about the curve that we go through, the wonder blunder thunder plunder stage where we wonder if we're going to survive, and we blunder our way through it and eventually get up that S curve to where we're thundering and then ultimately reaping the benefits from our business and we can stay there or we can continue the next S curve.

So absolutely. In early years, it was a challenge. 

Clayton

Where'd you get your first client?  

Sterling

Say again, please. 

Clayton

Where'd you get your first client?  

Sterling

The first two that I recall, one was a couple from our church who reached out to me, and the second was a call in to Great West Life where I had been working, and they handed those individuals over to me. 

Clayton

Nice. And how long would you say it took for you to be comfortable with the knowledge that this had all worked out?  

Sterling

Okay, so I'm in my 25th year now. Still working out. It's a truism in our industry that if one can persist 3 to 5 years, it tends to smooth out.

But that's an awful lot of Saturdays to go through and any number of different weeks to struggle through. So, I have a great degree of respect for people who start their own businesses, because I understand the persistence and the grit that is required to continue to persist in the face of often frustration and rejection.

Clayton

So, was it always Future Values?  

Sterling

I started the company in 1999 as Future Values Estate and Financial Planning. And that name kind of came to me from the heavens. It's a play on the financial term of future values as an opposition to present value. You know the stream of income. What's that worth today? What's that worth in the future? But also because of a play on the word values. 

Core values are very important to me, and it's one of the first things that we deal with in speaking with a perspective client. So that I can understand what's motivating them because we can talk about all kinds of different financial things. But if I can understand why a person wants to do something, which is as a direct result of their core values, well, then I can help provide them guidance along that route.  

Clayton

Probably helps, you know, pretty quickly too if you've got the right client.

Sterling

I would think so. There are times that simply we don't resonate, and the clients will recognize that, or all recognize that. And then if it doesn't fit, well, we can make suggestions as to where they could look to find what's best for them. But also, you know, we're supposed to talk with our spouses about financial matters often. Family lawyers tell us that finances and family household budgets are the biggest source of stress or a huge source of stress.

So, like, how do we talk with our spouses about these kinds of financial matters and where we put our money and how we spend it without getting into a fight? So, if I can start with core values from one partner and core values for another partner as well as their objectives and goals and overlay those, I can see where there's overlap that we can build on or the uniqueness that each brings, the differences. Sometimes that's where the fights are.  But again, it leads to a better understanding and a better starting place. 

Clayton

Sure. Yeah, it's interesting you say that because I don't think that you have ever entertained a financial planning call with my family without Erica being on the line.

So, you know, and that's something that I noticed that you almost insist on right out of the gate. But and you know, maybe we need to do a bit of an adjustment to your firm's name to be Future Values Financial Estate Planning and Marriage Counseling or something to that effect.

Sterling

Well, I'm not registered for that, and it comes at a different price point,  but there is a lot of emotion to this, and there's emotional answers to financial questions, and there's numbers answers to financial questions, and both of them are legitimate, but I need to understand both,  because  like a person could say, “I want to have this big house and I don't mind about the mortgage because I'm using other people's money” and their partner might say, “You know what? That makes me sick to my stomach because my folks always taught us don't owe any money. Or if I do pay it off as soon as I can.” And so, you can see that there's going to be a conflict between the financial and the emotional. So that's a huge part of it, of the work that we do with people. And I think it's the value that we provide as professional financial advisors that you can't get from an online app. 

Clayton

Yeah. Yeah. A lot of those conversations, I imagine, I'm speculating here, but I imagine that a lot of those conversations in a marriage, you know, they don't take place very often, right?  Because you don't even know the questions to ask, right? You don't even know the questions to ask. I didn't realize until, well, I don't know, not too long ago that my mother and my grandmother had sort of beat into me that debt is bad and pay off all debt. And so, I've always kind of been uncomfortable with debt. And, you know, that's on the flip side now, what I'm realizing now as a business owner is that's caused me to miss out on a few opportunities, hasn't it? You know, but I'm risk averse and that my risk tolerance, unfortunately, my risk tolerance, I think you can tell me lines up with my spouses. And so, you know, we're fairly aligned there, but I bet you that conversation doesn't take place directly in a lot of relationships and a lot of these conversations don't take place directly in a lot of relationships because they don't even know. They don't even know how to ask the question. And yet it's causing anxiety and conflict, and nobody knows why, right.

Sterling

And let me paint that picture. One partner comes home from a day at the office and the other partner has been at home with the children who have been screaming all day and they've got the flu in their runny noses. And everybody's beat. We have supper. We maybe take the kids to their activities. We fall into bed and then we roll over and have a heart to heart about our finances.

I don't think so. So yeah, the tools that we can provide to people can help provide them that forum to have that conversation. It's almost like a mediator where, “Okay, now we're going to take some time and jump into the important stuff that we know we should talk about.”  

Clayton

Yeah. Okay. Let's get back to your company.

So, we're 99. We're incorporated. We've got our first customers. It's a couple years of pain and Saturdays and anxiety. And you finally get rolling. Walk us through some interesting milestones. What would you say were the main milestones over the 25 years that really, you know, helped you understand and keep growing and keep going. 

Cause you know, sorry, I should pretext that with, you're fairly well known in Calgary. I would say like, you know, amongst circles, and I'd say you're fairly respected and liked and sorry if I'm making you blush, but how did that come to be? You know, what are the milestones that led to that? 

Sterling

That's an interesting question that I have to think about an answer to. I've always been a person who loved to learn. So professional education and pursuit of designations within my industry has been important. So, I had three or four important designations by the time I was 30 and have continued to pursue those. I'm going to be 61 next month.  So frankly, a career of learning. Second, I think I would say a focus on values that come from my faith background. And simply what I think is a decent way to approach people. If I have a good reputation, I appreciate that. And I absolutely don't want to take that for granted. So, seek to treat people with respect, and if we're not the right fit, well, then fine. There's lots of other people that we can help.

In terms of milestones. I think as an entrepreneur when I started, I took advantage of whatever opportunities I had to reduce my expenses. So, I had an office inside of the insurance company that I had worked with previously.  And I also accepted whatever leads they might have supplied. I ended up calling that my heroin because it was addictive, and it wasn't very good for me because those clients weren't necessarily the people that we fit best for. 

Clayton

Yeah, I mean, just to park you right there. I mean, that is such a common. We are still working on undoing that 10 years into our firm that we take at the beginning, you take anything you can get right and eventually you realize that that's not good for you and you try and work your way out of it, but you got to do it slowly.

And, you know, because you still want to have your values, mutual respect and respecting people and making sure you're not messing them up. And yeah, anyways.  

Sterling

Well, I sought to grow both organically with like-minded clients, but also through acquisition. So, over the years, I bought the client lists from eight or nine other financial advisors who had been retiring or ill and ultimately one passed away.

And again, that brought in a broad range of Canadians that we service. And there was a moral commitment that I felt towards those people-- to be able to provide service. So, I needed to staff up for that. I needed to have systems and processes and files and all of those things that come with that ongoing service.

So, we've got a broad base of people that we work with.  But really, it is a pyramid and my goal in my practice over the years that I've been, to work with those people with whom we have that values fit, but also where we can really contribute and make a difference for them. We can help any number of people, but can we make a substantial difference in their lives?

Those are the people that I want to work with, and I have colleagues that provide that ongoing service to the people who absolutely deserve it and need it. But maybe not from me. Maybe my colleagues are better served to or better able to service those people. 

Clayton

Yeah. Yeah. I guess, you know, I'd like to shift gears a little bit here.

I'm sorry. We should cap it off with, you know, in terms of your journey, you and I have been in a CEO mastermind for a couple of years now, and you've made some big shifts in your business. We're gonna talk about that a little bit later. But you're also stepping into sort of a neat new role nationally, right? Are you allowed to talk about that?  

Sterling

I suppose I can. We have two major professional organizations in our industry. There's Advocates, which is the Financial Advisors Association of Canada, as well a subset of that, that grew out of Advocates called CALU, the conference for advanced life underwriting, and that is the organization of leading financial advisors in Canada with a primary focus on the insurance applications. 

And so, there are 450 members, about 200 associate members and some provisional members. So, about 600-700 members of this organization. I'm privileged to be on the board. I'm the secretary treasurer. And now moving towards the annual conference chairmanship and then chairman of the board in two years. 

Clayton

Fabulous. So that's kind of a neat, you know, that just reaffirms the good work that you've done in this industry. This isn't an industry that you can't just get by and do the types of things that you've done and have the types of clients that you have. There needs to be trust more than anything. You sell trust more than anything, I would say, like would you say that? 

Sterling

Right, and I would respect that because sometimes people hear what it is I do, and they say, “Oh, you know, I'm all set up. I'm great. Thanks. Don't bug me. Don't start spamming me with emails.” And I respect that because whatever trusted relationship they have with their existing advisors, I want that same level of respect and relationship with our clients.

So absolutely. It's a very deep relationship because if I'm going to be speaking to you about your deepest hopes and desires for yourself and your family, that's a sacred position and I need to keep that private between us. And if other people learn of our conversations, it's because you told them not because I did, because there's way too much to lose.

Yeah, so absolutely trust is very important.  

Clayton

And so, to come into a chairman of the board position in CALU, you know, first of all, congratulations. In a couple of years, we'll formally congratulate you. But you know, that just speaks to me of your level of integrity and you’re standing in the community as a real professional.

So, you know, I appreciate that. All the stuff you've said so far, maybe we've got a few people listening who've gone, “yeah, yeah, roo roo crap, whatever”, you know, really talking to people and understanding their goals. And I've had a few people say that they do that as well, and it never really panned out.

So, I want to talk about why financial planning matters, why insurance matters and what investment strategies you dig. We're fairly aligned, I think on investment strategies, and you have to talk me off the ledge. Occasionally I just bought a bunch of Peloton, by the way. I'm sorry I did that in my private TFSA.

I just like the company a lot, and I think Apple is going to buy him this year. We'll see. That's a big maybe. And if they do, then I'll cash in large, and we can go to Mexico or something. But I want you to talk about those philosophies, why this stuff matters, but I thought what I would do is related back to my journey with you a little bit.

And again, I know you would never disclose this, so I'm going to. So, when we found you or well, rather, I think you were our client before we were your client, I think, and so thank you for that. When we decided to move over to you, my wife and I, I think between the two of us had money in a dozen different places from a few different employers, we were very underinsured and we had two young children and I didn't know why any of that mattered other than it was confusing and I didn't want to think about it and nothing was really losing money. So, I didn't really care, right? And when we came to you, the onboarding process was, it was a lot, but it was valuable. In that I could tell that you were asking questions and you had us fill out some forms to understand our family's net worth and what our goals were and all of that and what you came back to us with through that process was a plan and it added clarity and I'm an accountant.

I've been an accountant for a long time. I own an accounting firm. I understand money, but that's not personal financial planning. And that really, you know, when people ask me personal financial planning questions, my clients, I'm talking now, my answer is usually, “You should go talk to a financial planner. That's not what I do. I do taxes.” That's a different thing. 

And I'm not sure people make those distinctions. So here, let me make it for you. I'm a tax person. I didn't even understand our family's net worth, or we didn't really have a plan other than there's wealth accumulating somewhere and it's fine and that's that and so you came back to us and said, “Okay, well, here's where all your money is. Now we should do this with it. You know, from your various investments’ accounts from your employers over the year. Let's move all this into a centralized this and that and it aligns with your investment strategies in these ways. And by the way, you're missing a pile of insurance and here's why”, and it made a lot of sense when you explained it to me and light bulbs started turning on going, okay this is stuff that maybe I could have muddled my way through over six or eight months of dedicated resources or dedicated time, ignoring my family, having fights with my wife about it, et cetera, et cetera, and all of a sudden, here's this person who's come to me and said, “You know, if you want to be  a responsible member of your family, if you want to be a responsible father, here are the steps that you need to take. And by the way, I can get you better returns than your current investments. And here's some nice charts and graphs to prove that out.” And so, I really appreciated that. And so, when we talk about why does financial planning matter, why does insurance matter and why does it matter to talk about your investing strategy? Those are all just like, “Yuck. I don't want to talk about any of that crap”. But when I came to you, it made a lot more sense. So, I've done a lot of pumping your tires, but I'm doing this for the purpose of explaining to people what our journey was like and the light bulbs that turned on when we went through this.

And I'm not saying you got to hire Sterling, that's not what I'm saying, but these discussions matter with a good financial planner or looking at your insurance mix. Please share your perspective, Sterling on why financial planning matters, why insurance matters and what investment strategies you value.

Sterling

Okay.  Let me start by saying everybody is unique. We all have our own different situations, but we are remarkably similar in our paths. And so, our typical client is a self-employed person, potentially a professional who's built a business around that, whether they're a veterinarian or a dentist or an optometrist or whatever, they're running a small business.

And so, they understand the nature of entrepreneurship, but they all have the same questions and that's, “Will I be okay? Will I have enough? Is it going to last and then what happens if?” And so at the core of it, we are helping to consolidate, to organize people's financial lives so that we can answer those questions. 

And then we do that in 6 areas. We, first of all, find out where they're at. We develop essentially personal financial statements for people. What's the cash flow? What's the net worth? What's our starting point? And then that gives us an opportunity to track it over the years. 

I've tracked my net worth since 1999. And, you know, CEOs of corporations are paid big bucks to have a, like a 15 percent return on equity. So, what's our own personal return? On equity and 15 percent is a good target. Well, let's shoot for that. And I know that my personal net worth has increased on a compounded annual growth rate by 14. 3 percent since 1999. So, I am a little under target.  But at least I know the numbers. 

Clayton

Yep, data. 

Sterling

So where are we? Where are we starting from? Where do we wanna go? You know, do you actually want to retire? And if so, when? And what does that look like? Or do you want to have the option to continue to have your business and use that as a moneymaking opportunity to support your lifestyle going forward?

And where do your own investments play into that? So, kind of that snapshot of where we are and where we want to go. And then what are the risks that face that? Now, if I get too sick or too hurt to work, I had a cancer diagnosis over 5 years ago, and thank goodness all that is behind me now. But if you or your spouse or our clients get told, well, you've got a lump, well, what does that do for the family's financial future? Or you know God forbid the bus, the proverbial bus hits you. How's that going to impact your family and can they remain in their own world economically? So, the first is kind of that financial management, that snapshot.

Second is risk management. Third is accumulation. And philosophically, I think about short term, medium term, long term, and legacy. We're all told we should have some money in an emergency fund. So, if we do build that up eventually, we're going to have more than enough, and we spill that into the next bucket into the medium term.

That's not emergency funds, but it might be for children's education or for the new car or whatever. And then we fill up the third bucket of long-term money and eventually legacy money for our family and potentially charity. And if you don't do planning, it's going to be your family and the tax authorities, so we will help with that.

So financial management, risk management, accumulation, and then ultimately, once we have the funds built up over time, you're going to look to start pulling that. Well, even if you know that you're built-up RSPs and tax-free savings accounts and you've got nonregistered investments and you've got real estate, the question is, how do you actually pull from all of those different sources to have a sustainable retirement income?

Because our clients don't typically have pensions. They're not teachers or Canada Post employees or government employees with a great pension so they have to rely on their own resources. So how do you pull the money out of that? Well, philosophically, it's a reversal of that accumulation process.

We have one or two- or three years’ worth of safe money in short-term investments that they live on. That's going to be their paycheck for the next two or three years. And if I know that that's safe, well, then I can have cyber relief. Then I go to the medium term, and I replenish the short term with the medium-term money.

And maybe if I've got 1 or 2 years here and 3 or 5 years here, I've got kind of 5,6,7, 8 years’ worth of safe income. Then I can have the rest of my money in long term growth. And deal with that. Well, what if the market crashes just before I retire? Well, it doesn't matter because I've got that money sequestered for 8 years from now.

And in fact, if the market drops, that's an opportunity to buy into discount prices, financial management, risk management, accumulation, retirement along the way. It's tax minimization and then ultimately state and legal considerations that can include how is your corporation structure? Do you need family trust? Do you have a will? Do you have an enduring power of attorney? Do you have personal directives? Do you have a trusted contact person? 

If you go skiing and hit a tree and you lose your capacity to make financial decisions, or if you have creeping dementia, can I go to your spouse or your adult children and say, is this person still making good financial decisions? Because we don't want to have that person hit a financial disaster when they're most vulnerable. 

Clayton

Yeah, so I'd like to just park you there for a second, because this is maybe one of the biggest differences between having you as a financial advisor, and having somebody at your bank or something is you understand the flow of those things, and you insist on understanding the flow of those things for your customers.

And there's a big value to that, because you're almost assuming the role of sort of an advocate or a central authority for all these things as things unfold in people’s, in your clients’ lives. And so that doesn't necessarily mean you're going to have the will and enduring power of attorneys and review them and make suggestions on them.

You're not a lawyer, but you have a good network of lawyers and you're willing to work with other lawyers and all that. The difference here is I'm aware of all the things and so if you know if I got hit by a tree, for example, and Erica was a mess, you know you could be a phone call to help solving problems in that Rolodex, right?

And so, you know that's pretty great. I think that you know, again, we're back to peace of mind here, right? 

Sterling

So yeah, and that piece of mind is an easy term to throw around. But clients tell us that, you know, after we've gone through this that at least for one brief, shining moment in time, somebody else knows where everything is.

And if something happens, that person can be a go-to for the family because it's going to be a mess no matter what, for the survivors. So, if we can put that together and make it easier for people, well, frankly, that's just another expression of your love for your family by having all of your stuff together. 

Clayton

Yeah. So why should business owners care? Let's go to insurance for a sec. You know, what is a typical scenario you see of under insurance? Why does it matter and how do you solve it?  

Sterling

Well, I'm going to shift that a little bit because there's a personal answer to that and perhaps a more corporate focused answer to that. On the personal side is, do our families have enough assets or insurance proceeds so that they can continue in their own world economically, so that it's not my family who's going to have a go fund me page to survive.

And that's the typical or the common viewpoint. But on the other side, I see three things. One is that clients are facing an unexpectedly large tax bill that they do not know about, right? And I'll give you an example of that. Let's say I have 500,000 in RRSPs and my wife has 500,000 in RRSPs and if I die, you know mine go to her and hers go to me.

If we both die, that's a million dollars that's going to be taxed. And at the top rate in Alberta, a good portion of that's going to be taxed at 48%, 480,000 on our RRSP portfolio. So, we think, “Oh, good. Our kids are looked after because they got a million bucks there in our RRSPs.” No, they got 420, 000.

So, half of our life savings is going off to the government. I find that people are universally surprised and horrified by that. And so, they can say, well, you know, that's the price of living in Canada. That gave us good roads and good health care and good government. All of which could be disputed, but that's the price or we can look at different alternatives to use insurance or charitable giving or both to help mitigate that and transfer that 480,000 that would have gone to CRA to charitable organizations that are more aligned in our own value, because we know the money is going to be going away, or if it does go away, how can we replenish it for our kids? That's one less common use for life insurance. 

Clayton

Yeah, I think a lot of people just for the benefit of our listeners who might not understand, when you die, without absent the ability, you can roll stuff over to your spouse and not have a big tax bill.

And so that's available when you die. Everything that you own is deemed to be sold by you at fair market value, and that includes all your RRSPs come out, your RIFs, your house gets disposed of, there is a principal residence exemption, but your vacation properties, all your investments, your business. So, for example, if I were to die, we'd have to put a value somehow on my professional corporation, and I would owe tax on that at the moment I died. Notwithstanding, I could roll it to my spouse, but let's, you know, and so you go, that's a massive chunk of wealth that is being transferred to the government when we die. That's why life insurance matters, especially for corporate owners, right? 

Sterling

And that corporate value that's deemed to be there is assuming that you still have been there. It's not Achen Henderson without Clayton. It's Achen Henderson with Clayton. So that's a higher value because as soon as you're gone, the company values are diminished, but that's not how the government looks at it.

So, the second thing is that I don't see the clients optimizing their finances or their money in the best way. They've got money inside their corporation if it's not active business income or operating capital, it's going to be investment capital and it's going to be taxed at investment income tax rates at 46 and two thirds’ percent, as you well know. So how can we shelter some of that money? Sheltered both from tax, sheltered from creditors who might attack our business when they see that lump of cash. Can we move that into an individual pension plan? Can we shelter it inside a corporately owned life insurance policy. Are there other things that we can do with it to protect it from creditors?  So unexpectedly large tax bill, not optimizing their money management and then ultimately those both have the impact of reducing the value of a client's life's work. So, like, you want to maximize this for Achen Henderson, for yourself, for your family, for George and Carol and David and your colleagues. Because we want to build something that persists. We don't want to have that cut in half by government taxes.

So how can we optimize all of that and maintain and enhance the value? So those would be things that I would see that insurance can play a role in as well as simply understanding what the issues are. 

Clayton

Yeah, thanks. I think the other one just at a very basic level is key man, right? And so, you know, here's a key man is replacing yourself managerially, you need some money to go out and hire somebody to replace yourself managerially after you're gone. That's the reason. 

Another reason is buyouts. So, for example, I've got an agreement with my partners where when we go,  we have to have insurance and when we go the value of their share in our company is going to be satisfied with life insurance as opposed to my estate assumes my shares of this partner, you know, my shares of this company, and now my executor is doing business with my business partners, and that's not what my business partners want. They don't want to, they haven't chosen to be in business with Erica. They've chosen to be in business with me.  And so, insurance is a way to buy out those shares so that, your partners or your business partners don't have to be in a position where they are now in business with a party that they never chose to be in business with.

Sterling

Yeah, I'll expand that. George and Carol do not wanna be in business with Erica's new lawyer. 

Clayton

Yeah. Thank you. Yeah, I'm sure they'd love to be in business with Erica, right? If you're listening, Erica. So, yeah. Okay. Let's talk a little bit about…let's shift gears here and get back.

You know, we've talked a lot about financial planning and insurance. I guess just on one last piece on an investment strategy, your general philosophy for investing. You have talked me off the ledge of a few instant. You know what? I'm viewing is instant hit markets. Where, you know, maybe we can time it properly.

You know, I've come to you a few times, and I probably will continue to do it by the way, where I've come to you with, “Hey, there's might be a six-month opportunity to make some money here.” And you're always telling me not to do that. Talk me through that a little bit and what your investment strategy is with regards to that.

Sterling

I think it's great that you have maybe a plain money account with your tax-free savings account so that you can buy Peloton or other things, and that could well work out for you. But day traders and market timers are not the wealthiest people in the world. Who are the wealthiest people? It's people who own sustainable businesses, the Warren Buffett’s of the world, the owner of LVMH, Louis Vuitton, Moet Hennessy. It's how our clients make their wealth, whether it's in real estate or in their own business, it's actually owning productive assets. 

And so, I think that's the first opportunity for people to build wealth in their own company. And the second way is to do it by having ownership shares of businesses that are sustainable, that are durable, that are persistent, that are profitable, and they pay their owners a large and growing share of those profits through dividends. 

Now, if I needed that money in six months, I'm not necessarily going to put all of my wealth into businesses. That's again, where that short term, medium term, long term, but for your long-term wealth accumulation, the proven best way to build wealth is through ownership of profitable businesses bought at a great price.

Clayton

Right. And so, you generally advocate for not succumbing to these instant hit market fluctuations, which is a capital gains play. Generally speaking, where you go, you know, something is rising quickly and I want to catch that wave and then get out at the top, right? As opposed to, I'm going to invest in, I don't know, just pick a few, right? Like Canadian banks, all my Canadian banks have done okay, and they pay a great dividend or Canadian Tire, there's no recession that where Canadian Tire really feels it, you know, those kind of maybe they do, I haven't looked at their chart, but I go to Canadian Tire all the time. I have to, there's all kinds of things there that I need and it's not stopping even when there is a recession.

So, those are the kinds of companies that you're talking about, right? 

Sterling

Exactly, or railways that are absolutely essential to our economy in terms of transporting goods. They have incredible barriers to entry because how do you go about laying new track across Canada? You simply can't and so those organizations have got a great moat around them.

And you mentioned Canadian banks, you know, before COVID hit, Royal Bank was about 120 dollars in value, and then in March of 2020, it dropped to about 76 dollars. What was the difference between 120 dollars and 76 dollars in terms of the actual business of Royal Bank? Absolutely nothing. And if you could buy it at 76 dollars and write it back up, it's a great opportunity.

So that's where I'm saying, if things go on sale for whatever reason, why not take advantage of that opportunity? Now, I don't have a perspective on whether Peloton is a great investment or not, but if I were to assess that, I would look at how has it done through various market cycles, how profitable is it and how much of that dividend is coming back to you so that I could look at it in a sustainable lens as opposed to, “You know what? This might be the next game.” Stop. It's going to go up and plummet. 

Clayton

Yeah. Okay. Thanks. And by the way, you do sell funds and the fund company that you're aligned with, this is their investment philosophy, and that's why, you know, I'm a little more comfortable having my money in those funds than, say, with something with a different investment philosophy.

Sterling

So let me clarify, please. I am an associate portfolio manager. I have discretionary portfolios as well. We do have a great relationship with a value-oriented investment council firm. And we also provide ETFs and preferred shares and bonds and a broad range of investment alternatives, including real estate investment trusts and commodities and all kinds of different things. So, it's not just funds. 

Clayton

So, you've just put me into what I believe in.  

Sterling

I put you into what I believe in, and where the majority of my money is. About 70 percent of our clients’ money is invested in those areas. So, I'm eating the same cooking that I'm serving with my clients.

Clayton

Thank you. Let's talk about 3to5 Club for a sec.  So, we've been in this CEO mastermind for a couple of years. First of all, I'll tell you why I value having you there. You've been at this for 25 years and you, the perspectives that you offer and the questions that you ask to our fellow CEOs are very insightful. And there's a huge amount of value to having you there. What do you get out of it? 

And by the way, we call this 3to5. I'm a facilitator, but I'm just as much there to learn from people who are senior to me. So, you know, I get a huge amount of value out of it as well. So, what do you get out of it? 

Sterling

Interaction with like-minded people, accountability, and focus. I would say I've gone through any number of different business training programs and practice development and all kinds of things. And the information is all similar. It's perhaps analogous to my fitness regime or my lack of fitness regime.

If I have a personal trainer, I'm going to be actually doing some of this stuff, sure. Because I can go onto the internet and find a list of things to do, but that doesn't make sure that I'm going to be doing it. So, the focus within our 3to5 club based on Chuck Blakeman's book Making Money Is Killing Your Business, has been highly useful for me to think about, again, what are my lifetime goals? What's my big why? Why am I actually doing that? And that fits with my conversations with my client. And then what's my strategic plan for the next year, the next quarter, the next month? And then that aligns my team around a similar purpose. And so now I've been able to use that in a mentoring process with another colleague that I'm working with in Ontario.[MA1] 

Clayton

Have you seen some changes in your business since we started? 

Sterling

Absolutely, yeah. Well, our journey starts off with principles and processes and people. And so, to have a common language for our firm to talk about, that's been very helpful.  

Clayton

Yeah. Yeah. Us too. Exact same thing. All right. Sounds good.

So why would you say, why would you say a great accountant matters for your business?  
 

Sterling

I've been able to refer Achen Henderson to other individuals and other businesses because of the experience that I've had. In the same way that you've spoken nicely of our relationship, so too have I spoken of the relationship that I have with my accounting firm. 

Too often, professional advisors of any stripe tend to be reactive. They tend to be transactional. “Let's get your T1 and your T2, your personal and income tax returns done and out, and I'll talk to you in 12 months.” There isn't a focus on my business, or my client's concern with many of their accountants is that it is all reactive and not proactive.

Your organization is different. And so that has been helpful, been helpful for you to you know, tap me on the side of the head, sometimes hard about my bookkeeping and also to help me realize that I am spending time, wasting time, valuable time that could be delegated to somebody else. And so that has been helpful, but you started off by saying you're a tax guy, not a financial planning guy. I'm a financial planning guy, not a tax guy. And I'm not a lawyer. And I need those professional relationships. And you and I, as professional advisors, need to collaborate again along with our professional community so that we can benefit our clients. 

We don't all have the answers. Sometimes we view each other as competition, but we're not. We should absolutely be collaborating because we have complementary skills and complementary viewpoints, not competitive ones. And you and your firm get that. 

Clayton

Thanks. Okay. The quick three that I do at the end of every Your Business Unleashed podcast for a new entrepreneur starting out or an entrepreneur struggling, what are the big three to get them out of the hole? I hope one of those outside eyes, but we'll see. 

Sterling

Well, I would understand what the cash flows are, what the risks are and how you can pass off some of those risks.  

Clayton

So, data, better data in your business. 

Sterling

Well, understanding where you're starting, yeah.

Clayton

Yeah.  And was that three or was that one, understanding data risks?  

Sterling

No, what I said was understand your cash flow, understand what the risks are to that cash flow, and understand how you can transfer away some of those risks. 

Clayton

Fabulous. Thanks. All right, Sterling Rempel, Future Values Wealth and Estate Planning.

I missed a few words on the end of it. I'm very sorry. It's been such a pleasure to have you on the podcast. And for any listeners that want to reach out to Sterling, where can we find you?  

Sterling

FutureValues.com is our website and you can find me there. 

Clayton

Yep. You can also find Sterling through me.

Thank you so much, Sterling. This has been great. 

Sterling

I appreciate it. Take care.