0:00

Trading volume

0:00

in December was 45%. Higher than

0:03

what you would typically see in

0:03

the old reality. During the peak

0:08

season, let's call it a peak RSP

0:08

season slowest month is 45%.

0:12

Higher than then like previous

0:12

records, right. So that's the

0:16

magnitude of this.

0:27

This is Erica Ehm. And

0:27

you're listening to the mostly

0:30

money podcast with Preet

0:30

Banerjee, when you could be

0:34

listening to my podcast the

0:34

reinvention of the vj, get your

0:38

priorities straight!

0:47

This is mostly

0:47

money and I'm your host Preet

0:49

Banerjee. Now on the show today

0:49

I'll be speaking with the

0:52

president of BMO investor line,

0:52

partly in response to a Rob

0:56

Carrick article in a tweet that

0:56

we were both tagged in, in which

1:00

a client of BMO investor line

1:00

was complaining about not being

1:02

able to get through to a

1:02

customer service rep to make

1:05

transactions in their self

1:05

directed discount brokerage

1:07

account. And I'll point out that

1:07

that seems to be a common

1:10

complaint across the industry.

1:10

So we're going to hear his

1:13

response to that. But first, I

1:13

need to make a disclosure of a

1:17

conflict of interest. I consider

1:17

Silvio to be a friend. And we've

1:21

worked together on some small

1:21

projects at his previous firm.

1:25

We share a love of motorcycles,

1:25

we bonded over that. And also

1:28

I've done some work for beemo.

1:28

In the past, I think before

1:30

Silvio was there. So let me

1:30

introduce my guest. He's the

1:36

president of BMO investment

1:36

line, Silvio Soares qu. And

1:40

Sylvia, thank you for taking the

1:40

time out of your busy schedule

1:43

to speak with me on the podcast,

1:43

and welcome to the show.

1:46

Hey, thanks, Preet, and thanks for the opportunity to talk through

1:47

this. I think it's an important

1:50

topic. And it's best for us to

1:50

be out here chatting about it,

1:53

so people have a better understanding of what's happening.

1:56

Yeah, and you know, I'll give some background. So there was a tweet from

1:58

someone who tagged as both and

2:01

they were talking about how they

2:01

had an issue talking to a

2:05

customer service rep about some

2:05

kind of transaction that they

2:09

wanted to execute or a question

2:09

that hey, I don't know exactly

2:12

what their issue was. But they'd

2:12

said that had been a couple of

2:15

days of trying, and the wait

2:15

times were at sometimes over an

2:18

hour each time. And as I

2:18

mentioned, Rob Carrick, arguably

2:22

the most influential personal

2:22

finance writer in Canada wrote

2:25

an article about this a month

2:25

ago. And it was an opinion

2:29

piece, which based on what he

2:29

had been hearing from readers

2:32

and seeing online, the number

2:32

one complaint against discount

2:35

brokers in general, seem to be

2:35

the long wait times to speak to

2:39

anyone across the board. Not

2:39

this is not just a beemo issued,

2:43

this was across the board. So

2:43

let me just start with your

2:47

response to that.

2:49

Well, first,

2:49

allow me to just acknowledge the

2:51

fact that indeed, the wait times

2:51

are long, they are a source of

2:54

frustration for our clients. And

2:54

we are disappointed to be in

2:58

this position and put our clients in a position where they have to wait so long at the

3:00

phones. And we are holding

3:03

ourselves accountable to close

3:03

the gap as a matter of fact, to

3:05

work smart and fast to close the

3:05

gap between capacity available

3:10

to to handle this level of

3:10

demand. So fully, fully

3:14

acknowledging that it is a

3:14

challenge has been a challenging

3:17

time, I would frame this with an

3:17

analogy of you know, we're faced

3:22

with a tsunami of demand. And

3:22

that's this tsunami is actually

3:27

flooded all boats. That's that's

3:27

what's happening right now. And

3:30

indeed, look, the reality is we

3:30

have to work on the boats

3:34

itself, making sure that we

3:34

reduce the wait times. The story

3:37

is also the tsunami itself, like

3:37

just the significant exponential

3:41

increase in demand is is the

3:41

root of of what we're facing.

3:45

What do you

3:45

think is driving all this this

3:48

demand right now?

3:50

We should really start with a bit of context, which goes a pre COVID.

3:51

Right, let's call it pre pre

3:55

last spring, which, you know,

3:55

seems like a very long time ago,

3:59

in hindsight, but adoption of

3:59

digital investing was already

4:03

growing, and it was growing at

4:03

an accelerated pace year over

4:06

year, you'd see more and more

4:06

Canadians adopt digital

4:08

investing. So we were already on

4:08

this, you know, accelerated

4:12

curve of adoption. what's

4:12

happened since March is that

4:15

curve has just exponentially

4:15

taken off. Right? And when we

4:21

asked people before, you know,

4:21

we expected it as you know,

4:24

preed we're passionate about

4:24

digital investing. I know you

4:26

are too. So we ask people, you

4:26

know, what's preventing you from

4:28

actually doing more of this

4:28

stuff yourself doing more of it

4:30

online? The number one answer

4:30

people provide in that context

4:34

is time, just lack of time,

4:34

right? Like I don't have the

4:37

time to actually make the

4:37

transactions make the trades I

4:40

don't have the time required to

4:40

build my level of knowledge. I

4:44

don't have the time required to

4:44

actually do all that research

4:47

and it is also a emotional

4:47

component to it. Right? I guess,

4:51

you know, if I had the time I'll

4:51

build my confidence and with

4:53

confidence, I would I would do

4:53

this more and better and more

4:56

often, right? So what's

4:56

transpired since March is you

4:59

know, people have have the time

4:59

to be able to make to ramp up

5:03

their knowledge. You know, we

5:03

call it always be learning,

5:07

right I, you know, investors

5:07

that have adopted DIY platform

5:11

self directed platforms are in

5:11

this like always be learning

5:14

mode feeding and curiosity to

5:14

learn about how to trade, how to

5:18

build their portfolios, how to,

5:18

you know, evolve their learning

5:21

from cash accounts to opening

5:21

margin accounts, trading and

5:25

options, right. So the the

5:25

difference breed, if I was to

5:29

sum it up is just people now

5:29

half the time to actually feed

5:33

that curiosity.

5:35

Yeah, and I

5:35

think along those lines, there's

5:39

so many people who are now

5:39

working from home. And that

5:41

tends to be people who are

5:41

working in a knowledge economy

5:45

type job in front of a computer.

5:45

And when you're at work in the

5:48

office place, it's hard to

5:48

execute trades, because people

5:51

can kind of see what you're

5:51

doing. But when you're at home,

5:53

you know, you could be on, you

5:53

know, the eighth zoom conference

5:56

call of the day, and you've got

5:56

a second screen or window open,

6:00

where you're executing your

6:00

trades. So I imagine just the

6:04

fact that so many people are

6:04

working from home, and that no

6:07

one is sort of monitoring what

6:07

they're doing at their desk,

6:10

also affords them the ability to

6:10

trade, which sounds like, you

6:14

know, this is behavior that I

6:14

don't know, is in alignment with

6:19

good investing principles. We're

6:19

going to talk about that. But

6:23

let's let's go back to this

6:23

issue about, you know, the

6:26

increased demand, and how this

6:26

has put a strain on the current

6:30

system. So you talked about pre

6:30

COVID, there being an

6:33

acceleration in digital

6:33

adoption, but then that hit an

6:37

inflection point, and really

6:37

increased after the lockdown

6:40

started. So can you give us a

6:40

sense to, you know, how long had

6:46

the long wait times been an

6:46

issue? Was it before COVID that

6:50

it started to creep up? And what

6:50

have the trends been in terms of

6:54

how long people are waiting to

6:54

talk to someone?

6:56

Yeah, let me

6:56

let me first started just by

6:59

adding some quants. And and just

6:59

a really size of that demand,

7:03

right. So you know, pre COVID,

7:03

you'd see an increase in

7:07

adoption of digital investing,

7:07

where new client growth would be

7:10

up by 15 to 20%. a year. Right?

7:10

I do. That's kind of the the

7:13

clip that we were seeing as far

7:13

as increasing adoption. what's

7:17

transpired since the spring is

7:17

the number of new clients is up

7:21

two and a half times compared to

7:21

previous years, right. So you go

7:24

from, you know, the 15 to 20%

7:24

range. And now two and a half

7:27

times, training activity is

7:27

actually up two and a half

7:30

times, we've had months where it

7:30

was up three times year over

7:33

year, just to stay on a trading

7:33

activity side of things.

7:37

December, which typically for us

7:37

pretty is a pretty slow month,

7:40

right? December was 45%. Higher

7:40

the trading volume in December

7:45

was 45%. Higher than what you

7:45

would typically see in the old

7:50

reality, during the peak season,

7:50

let's call it a peak RSP season

7:54

slowest month is 45%. Higher

7:54

than then like previous records,

7:59

right? So that's the magnitude

7:59

of this in January. So far,

8:03

we're seeing an increase of 30%.

8:03

Over December, like we're

8:08

setting new records on these

8:08

goalposts keep moving right. One

8:12

final a soundbite on that just

8:12

to give you a sense of the

8:14

magnitude, transaction. So this

8:14

includes, you know, fund

8:17

transfers, as well as account

8:17

transfers, they're up to five

8:19

times your

8:21

five time first

8:21

nine days of

8:23

five times,

8:23

first nine days of January. So

8:26

that includes January 1, right?

8:26

First nine days of January, we

8:30

had more transactions than we

8:30

did in all of January 2020. So

8:35

that's it. That's that's what

8:35

we're chasing, if you want to

8:39

think of it that way, as far as

8:39

demand is moving the goalposts

8:42

keep moving, and we have to ramp

8:42

up capacity to get there.

8:46

I have so many questions, I have so many questions. Do you have a sense

8:47

as to where the bulk of

8:50

transfers are coming from or any

8:50

trends, where you're saying, oh,

8:53

there's a massive increase in

8:53

transfers from these types of

8:56

institutions? Do you have any

8:56

anything you can share on that?

8:59

What time will

8:59

you see is not so much the types

9:01

of institutions but you know,

9:01

it's empowerment, you know, this

9:05

feeling of I'm in power now,

9:05

right? What time is a

9:08

superpower, frankly, right, to

9:08

to be able to make my own

9:11

decision. So you have some

9:11

investors that were you know,

9:15

delegating their investment

9:15

decision to either financial

9:18

planners, advisors in the past

9:18

or investing in products that

9:21

were that didn't require them to

9:21

be more hands on, you know,

9:24

package portfolios. That way,

9:24

you're delegating even that

9:28

investment management decision,

9:28

not just the advice component of

9:30

financial planners. So we're

9:30

seeing these clients and look,

9:34

I'm going to do more On My Own

9:34

right now. So that's, that's

9:37

part of the trend. The second

9:37

when you look at the makeup of

9:40

the client base on self directed

9:40

platforms, about two thirds of

9:43

the client base, I'm going to

9:43

say, you know, in the old

9:46

reality, two thirds of the

9:46

client base where clients over

9:50

55 Well, we've seen since the

9:50

spring, two thirds of the growth

9:55

is actually driven by clients

9:55

under 35. Right so you tend to

9:58

have more people that are new to

9:58

investing, the ones that were

10:02

already trading on the platforms

10:02

are consolidating their

10:05

investments, right. So if they

10:05

had cash and savings accounts

10:08

elsewhere, or different

10:08

investment accounts, through a

10:12

different approach to investing,

10:12

they're consolidating more

10:14

towards a self directed

10:14

platform. So those are some of

10:17

the themes that we're seeing.

10:18

And when it comes to people are making transfers, how long does it take

10:20

to complete a transfer? Because

10:22

I know that that's an issue

10:22

within the industry as well.

10:25

Usually, it's the relinquishing

10:25

institution that is kind of

10:29

holding things up as long as

10:29

they can. But how long does it

10:31

take to transfer account these

10:31

days? Well, look,

10:34

we're we're in

10:34

transition there, I should say

10:36

from, you know, the the old

10:36

process which everything has to

10:39

be mailed, right. So you know,

10:39

if that's the process that the

10:43

actual transaction lands in, you're looking at anywhere between four to sometimes eight

10:45

weeks. And there's also a more

10:48

automated process, which

10:48

actually makes it happen in less

10:51

than two weeks, right. So and

10:51

that continues to get even

10:54

better. So not all transactions

10:54

can go through the automated

10:57

process. So it does take a

10:57

little bit longer. And as you

11:00

can imagine, as you're waiting

11:00

for your funds to arrive, you

11:04

naturally would call them to

11:04

look for an update, right? And

11:06

you want to know what's going

11:06

on. And there's there's not a

11:09

lot of transparency in that

11:09

process as far as having really

11:12

good policies, aware where that

11:12

account transfers sitting every

11:15

day.

11:16

So we have Okay,

11:16

so we've got increased

11:18

dramatically increased trading

11:18

activity, we've got a lot of

11:20

people transferring accounts.

11:20

What do people call in about?

11:24

Like, I have to be honest, you

11:24

know, of all the discount

11:28

brokers I've ever used in? I

11:28

don't know, decades, I've never

11:32

called in for anything. But I'm

11:32

in the industry, or at least was

11:37

and you know, this is kind of

11:37

what I do. So I don't need as

11:39

much help, I would think as the

11:39

average person. But what do

11:42

people call into a discount

11:42

broker? About what are the

11:46

common types of customer service

11:46

questions?

11:50

will just based

11:50

on the sheer increase in demand,

11:53

I'd say there are questions that

11:53

you would have typically had

11:55

before, obviously, you know, at

11:55

a different magnitude different

11:58

level of volume, right then, and

11:58

these include, you know, how

12:00

long where's my transfer?

12:00

Where's my account transfer? How

12:02

long does this take the

12:02

conversation we just had around

12:06

that process. And you have

12:06

people that sometimes forget

12:09

their passwords, right. So if

12:09

you haven't traded for a long

12:11

time, forget your password, these are all just admin maintenance type of

12:13

transactions, we've done a lot

12:15

of work to make sure that the

12:15

online capabilities are simple,

12:19

intuitive, and people are aware

12:19

they can do this stuff online.

12:23

So we've navigated a lot of

12:23

these transactions and are

12:25

navigating a lot of these

12:25

transactions online. If I was to

12:28

sum up again, the theme as far

12:28

as why people are calling, let's

12:32

say, for one is leveling up. And

12:32

let me let me unpack that a

12:36

little bit. So we have a lot of

12:36

new investors that hadn't

12:39

invested in self directed

12:39

platforms. So either they, they

12:43

were new to investing all

12:43

together. So they're leveling up

12:45

now to say, Okay, I'm going to start investing. And I'm actually going to do this on my

12:47

own in a self directed platform.

12:50

So that requires you to build a

12:50

level of knowledge. And you ramp

12:54

up with a learning curve. From

12:54

that perspective, you have

12:57

another segment of investors who

12:57

again, we're delegating their

13:00

investment decisions to an

13:00

advisor, financial planner, now

13:02

they're saying, I'm going to do

13:02

this on my own. So they're

13:05

technically leveling up, and

13:05

also on a learning curve in that

13:09

journey as well. And then you

13:09

have people that had been

13:12

trading on a self directed

13:12

platform before, but maybe they

13:15

had a cash account, let's call

13:15

it a basic account, or RSP

13:18

account or a TFSA. What they're

13:18

saying now is, I want to do

13:22

more, right, and they're opening

13:22

up margin accounts. And they're

13:25

they're building capabilities to

13:25

to learn how to trade options.

13:29

So they're learning about that

13:29

process as well. So this

13:31

leveling up is actually

13:31

happening on such a broad range

13:35

of of investor segments, which

13:35

naturally leads to, to calls

13:39

into this, as you know, operate

13:39

on these platforms, we don't

13:41

provide advice. But when you go

13:41

through a learning curve, you

13:45

you want to you want to speak to

13:45

human right to actually give you

13:48

some validation and some comfort

13:48

in that process as well. So I

13:52

would I would sum it up with

13:52

that as the core theme for why

13:55

you're seeing, you know, the

13:55

increase in calls, obviously,

13:58

again, complemented the fact

13:58

that you just got to share

14:00

increase in demand.

14:02

And and how many

14:02

customer service reps did you do

14:06

you have right now? What are the

14:06

plans to address these wait

14:09

times? Are you doing anything to

14:09

ramp up capacity?

14:53

Yes, look, this

14:53

is our top priority has been our

14:55

top priority. So let me just go

14:55

back to a question you asked

14:58

earlier. And, you know, how long

14:58

have the wait time has been an

15:00

issue? When you look at the

15:00

average for 2020 calendar year,

15:04

our wait time average is 12

15:04

minutes, right? So we've been

15:08

hovering around 40 minutes

15:08

average at the beginning of

15:10

January. Just to put all that

15:10

into perspective. This the last

15:14

quarter of 2020 was when we

15:14

started seeing more of this

15:18

challenge coming through. So if

15:18

you think about what it looked

15:21

like for the first three

15:21

quarters of the year, we average

15:23

wait times in less than two

15:23

minutes, one minute and in some

15:28

cases as well. We had events

15:28

like march for examples on event

15:32

the third week of March where we

15:32

all started working from home

15:35

all of a sudden and things were

15:35

happening in the market. You

15:38

know that was that was a bit of

15:38

a week. That was an anomaly, I'd

15:40

say in the context of 2020, at

15:40

least the first half of the

15:43

year. We also had long wait

15:43

time, in an event going back a

15:49

couple years ago, when the

15:49

cannabis sector was was getting

15:51

prominence and trading and us

15:51

that sector was gaining

15:54

prominence. Right. So, but that

15:54

was an event, it had a start

15:56

date, and it had an end date.

15:56

Right, right. But beyond that, I

16:00

mean, you're looking at an

16:00

average of two, three minutes,

16:02

wait times. Now, average means

16:02

obviously longest call will be

16:04

longer than that. And you have a

16:04

big percentage of calls that are

16:07

under that as well. That's

16:07

that's where we stand. So it's,

16:11

it's been a more pronounced

16:11

challenge on the wait times

16:14

front, especially November,

16:14

December and kicking off the

16:18

year in January.

16:19

Now, you know,

16:19

when you are managing people's

16:23

accounts, there's a big responsibility in terms of security and the technology

16:25

infrastructure that you have. So

16:29

I imagine that your your call

16:29

service reps, were also sent

16:34

home to work from home in some

16:34

cases are not allowed to come

16:37

into they're normally where they

16:37

would work. So can you tell me

16:40

what that was? Like? Like, where

16:40

were the reps? Where are they

16:44

now? And how is that sort of

16:44

been a variable that needed to

16:48

be accounted for

16:49

the bulk of

16:49

that mobilization happen in

16:52

March and April, right, and 100%

16:52

of our agents were actually

16:55

working from a physical

16:55

location, physical contact

16:58

center, one in Montreal, one in

16:58

a couple in Toronto, and one in

17:02

Mississauga, as well. And we've

17:02

mobilized to have them work

17:06

remote. First of all, we still

17:06

had some folks work in the

17:09

physical locations, as we do

17:09

today. So we had to address the

17:11

spacing just for health

17:11

purposes, and making sure that

17:14

we had the right distancing

17:14

within our physical locations,

17:17

we have the capability now where

17:17

80% of our agents can work from

17:21

home. So there's also a bit of

17:21

rotation where some choose to

17:23

work from home and a rotate and

17:23

come into our front a physical

17:26

location, you know, every now

17:26

and then on a rotational basis.

17:30

That's where we are today, fully

17:30

activated. And if you think

17:35

about how fast that happened, a

17:35

metabolic pace that that needed

17:39

to happen in the first couple of

17:39

months. You know, that's, I

17:42

would say, We checked that box,

17:42

primarily, right? So what we're

17:46

facing now is not a matter of

17:46

navigating how we mobilize

17:49

remote work is just simply

17:49

keeping up and catching up to

17:53

the goalposts on demand that are

17:53

moving. And look, the other

17:58

question you asked was, what

17:58

have we done right to to

18:01

mobilize? And how do we ramp up

18:01

the staffing? We started this

18:04

back in the summer, right? So we

18:04

said a couple of things we need

18:09

to do. First of all, we need to

18:09

wrap up our hiring. And we need

18:12

to do more of more hire more

18:12

people in the old process, which

18:16

is, you know, hire, recruit,

18:16

first hire train in physical

18:20

locations and just do more of

18:20

that. That the magnitude

18:24

increase there is for four times

18:24

like we quadrupled the size of

18:28

new hires, from you know, this

18:28

entire process, starting with

18:33

recruitment, to hiring to

18:33

training, which takes months,

18:37

right. So think about that is up

18:37

for x, again, an exponential

18:40

increase in what we've done to

18:40

improve capacity. The second

18:43

thing we've done is looked

18:43

across the business, not just

18:45

our investment in business, but

18:45

across the bank to say can we

18:48

actually attract more talent to

18:48

actually help with the capacity.

18:52

The last training class we had,

18:52

the numbers increased seven

18:56

times from what we would have

18:56

typically had like this, the

18:58

training class that is actually

18:58

active right now. And we'll be

19:03

on the floor answering calls and

19:03

productive in the queues in a

19:05

couple of weeks. It's it's seven

19:05

times higher than what we had

19:08

prior to, to see and to speak in

19:08

demand. So we started this

19:12

process pre back in the summer,

19:12

we've been sprinting through the

19:15

marathon to make sure that we we

19:15

ramp up the capacity. And we've

19:19

also done on the hiring front,

19:19

we've actually changed how we

19:22

hire right. So it's one thing to

19:22

say we're going to do more of

19:24

the same internal process. But

19:24

we also activated what we refer

19:27

to as Street to screen. And this

19:27

is remote, remote recruitment,

19:32

remote hiring, remote training,

19:32

remote activation into the

19:35

queue. So you don't have to set

19:35

foot into context and it to be

19:38

able to do that. That's a

19:38

transformational process. And we

19:41

had the first class as part of

19:41

that new process actually

19:44

started training at the

19:44

beginning of January. So that's

19:47

what we've done on the hiring

19:47

front. And then he filled lobby

19:50

one. One more comment on this.

19:50

We also looked at how do we

19:54

contain and address more of this

19:54

demand online on the platform,

19:57

right? So we looked at all these

19:57

micro journeys that led to a

20:01

call. And we said we have to get

20:01

better at improving that journey

20:04

online, make it more intuitive,

20:04

and also build awareness that it

20:07

exists. All the efforts we've

20:07

done on that front as well as

20:10

simplifying some legacy process

20:10

just to make it easier. Some

20:13

things that we've done before we

20:13

said, you know, there's little

20:15

value in this and it's just an

20:15

impediment for our clients to

20:17

stop doing it. We measure our

20:17

trades to call ratio, just as a

20:22

measure of efficiency, the

20:22

trades to call ratio has

20:24

increased 65% as a result of us

20:24

being able to contain more

20:28

online. So we're, we're in we're

20:28

on the right track. The reason

20:33

why we still have a gap today is

20:33

the impact from that exponential

20:37

increase in demand has been

20:37

imminent. Right, and once the

20:40

goalposts move, you feel that

20:40

very same day, the impact from

20:44

our activities on capacity have

20:44

a bit of a time lag, right,

20:47

which you know, include

20:47

especially on the hiring fraud,

20:49

recruit, hire, train, and

20:49

license, right, like that's,

20:53

that's a nuance we shouldn't

20:53

forget in the context of our

20:55

agents. They also need to be

20:55

licensed and build their

20:58

proficiency requirements as well.

21:00

Yeah, I was gonna ask you, because so investing online is oio. Right?

21:01

So it's no it's not advice. So

21:05

sorry, order execution only. And

21:05

so people who who create an

21:09

account there, they are

21:09

basically taking all

21:12

responsibility for the riskiness

21:12

of their trades, and you are

21:16

execution services only for

21:16

those platforms. So when it

21:20

comes to the licensing that's

21:20

required for these reps, what

21:22

what did they need to what

21:22

license do they need,

21:25

what they need,

21:25

they still need to be fully iraq

21:28

licensed, so they don't provide

21:28

advice, but they have to go

21:31

through all the proficiency requirements, including the course on ethics, the Canadian

21:33

securities course, which which

21:36

has two parts to it, so they

21:36

have to be fully fully licensed.

21:39

And if they're supporting trades

21:39

and options, for example, they

21:42

also have to have that licensing

21:42

as well. So even though they

21:45

don't provide advice, the

21:45

proficiency requirements are

21:48

full fledged.

21:56

The conversation

21:56

with Silvio Stroescu continues

21:59

in a moment, but I wanted to

21:59

give a shout out to some

22:02

listeners who have left some

22:02

kind reviews for the show. Doug

22:06

M. 34. sg 183 60, Apollon seven

22:06

and Brent Goucher, thank you for

22:12

taking the time to leave ratings

22:12

and reviews on Apple podcasts. I

22:18

also wanted to let you know that

22:18

I just published a crash course

22:21

on what's really been happening

22:21

with GameStop. I'm sure you've

22:26

heard that name this past week.

22:26

I know you have questions. Why

22:30

has a mall based retailer have

22:30

physical copies of video games?

22:34

Some would argue assume to die

22:34

business model. Given that you

22:39

can download copies of video

22:39

games in order console's online.

22:43

Why they seen their share price

22:43

up as much as 10,000%. In just

22:48

one year, most of them in the

22:48

last month. What is a short

22:51

squeeze? What else is really

22:51

happening? So you can check that

22:56

out on YouTube. My main channel

22:56

can be found under my name,

22:59

Preet Banerjee. And before we

22:59

get back to Silvio, if you are

23:05

enjoying the content on this

23:05

podcast, I really do appreciate

23:09

it when you take the time to

23:09

leave a rating and review

23:12

wherever you get your podcasts.

23:12

And I don't run ads on the

23:16

podcast yet, but that might

23:16

change in the future. And in the

23:19

meantime, I guess I'll provide

23:19

some kind of placeholder and

23:23

kind of do some public service

23:23

announcements or something like

23:25

that, again, just as a

23:25

placeholder, so I don't know.

23:30

Get your prostate checked or

23:30

something. Anyways, back to my

23:33

conversation with the president

23:33

of BMO investor line, Silvio

23:37

Stroescu. Now, I want to just pull from

23:43

the headlines. So I'm sure

23:46

you're familiar with GameStop.

23:46

And the gamma squeezed that

23:50

almost bankrupted? I think, one

23:50

hedge fund I think it was Melvin

23:53

capital had to get bailed out by

23:53

some other hedge funds. Because

23:57

basically, I don't know if

23:57

you're familiar with the

23:59

redditors. On this, this Reddit

23:59

called Wall Street bets, have

24:03

pushed up the price of GameStop.

24:03

so high that it's it's forced a

24:08

short covering, and it's it's

24:08

kind of embarrassed, like these

24:11

professional, you know, money

24:11

managers. It's kind of funny to

24:15

watch. But there's so many

24:15

people who are subscribed to

24:18

that, that Reddit there, I think

24:18

there's like 2 million active

24:20

users or something like that.

24:20

And they are driving the the

24:24

market price for, you know, the

24:24

security and some other ones.

24:28

And so, when someone calls in

24:28

and do they, what's the training

24:34

around getting a call that says,

24:34

hey, I want to buy GameStop, I

24:37

want to buy call options? Should

24:37

I do that? Like, I'm assuming

24:41

they get asked, you know, hey,

24:41

do you think this is a good

24:45

idea? What's the training around

24:45

that for an order execution only

24:48

platform?

24:49

Well, look,

24:49

you're you're not diving deeper

24:51

into the, you know, whether you

24:51

should or shouldn't, right, but

24:54

what we do is we say, you know,

24:54

we grounded in principles,

24:57

right? So, you know, typically

24:57

would say like, Alright, so how

25:00

does that fit? You know, does

25:00

that fit with your plans? Like

25:02

we don't even get into how does

25:02

that fit with your plans? And if

25:04

you think, you know, if it fits

25:04

with your plans, and you've got

25:07

a deliberate reason for it,

25:07

then, you know, it's your

25:09

decision, right? So we don't get

25:09

into the advice on whether you

25:49

should do it, you know, should

25:49

do it. We do feel the effect of

25:52

it, right? So you do see an increase, you know, slight increase in volume as well and

25:54

those things do happen. But the

25:57

extent of it is just to make

25:57

sure that we just help

26:01

groundings in some principles,

26:01

right, as opposed to telling you

26:04

whether or not he should do it

26:04

or whether it makes sense for

26:07

him.

26:08

Yeah. Last thing

26:08

on this, this overall issue

26:10

about capacity. So you've you've

26:10

you mentioned that one class is

26:14

seven times the normal intake

26:14

for people that you're training

26:16

for this positions. Now, do you

26:16

have a sense as to whether or

26:19

not this demand is going to be

26:19

temporary? Or do you feel that

26:24

there's going to be a sustained

26:24

level for this type of trading

26:27

activity?

26:28

I believe that

26:28

it's, you know, what we're

26:31

seeing is not an event, right.

26:31

And I made reference earlier to

26:33

cannabis and I talked about

26:33

that, as an event, I get started

26:36

on x date, and it kind of, you

26:36

know, sizzled off on on this y

26:39

date, right? That's not what

26:39

we're seeing here. We're not

26:42

seeing an event, we were seeing

26:42

an acceleration of adoption. And

26:46

to me, this is an inflection

26:46

point in that adoption of

26:49

digital investing breed. So

26:49

that's, that that's our view for

26:54

it. Now, I don't believe we're

26:54

going to see to you know,

26:57

trading volume for January

26:57

become the norm, right. I mean,

26:59

right now, again, we just had a

26:59

new record. 30%, higher, right.

27:02

So I don't think this will be

27:02

the norm. But if you think about

27:04

where we were in the previous

27:04

peaks, and what I referenced

27:07

around RSP, season, and December

27:07

just blew out of the water, that

27:11

new reality, the new norm will

27:11

actually be higher than the

27:14

previous peaks. That's that's

27:14

where I see this landing up. So

27:17

it's somewhere between the

27:17

previous records as far as

27:20

monthly trading activity, and

27:20

slightly below the the peaks

27:24

that we're seeing. And I'd

27:24

argue, and I expect what we're

27:26

seeing in January and February will actually be our peaks, right? And that will level off.

27:28

beyond that. And the main reason

27:33

for that, and just informing

27:33

that perspective is, during the

27:37

the cannabis sector trading

27:37

event, right, you didn't see as

27:40

many new clients join the

27:40

platform, right. And if there

27:43

was a blip, and there was, it

27:43

wasn't as sustained right now

27:45

we're seeing this like two and a

27:45

half times increase in new

27:48

client during the platform. And

27:48

it's been happening, right and

27:50

continues to happen. And it

27:50

continues to grow. So primarily

27:55

based on that, and the sentiment

27:55

and and frankly, just some other

27:58

macro elements around all of us

27:58

have lived digitally for 910

28:03

months now. Right? And we likely

28:03

wolfer after a few more months,

28:06

right? So

28:07

has it only been

28:07

nine or 10 months, it feels like

28:09

forever.

28:10

It's just

28:10

reset, right? how we live our

28:13

lives and how we do things.

28:13

Right. So to me, this is this is

28:16

sustainable beyond what we're seeing.

28:18

Right now, there

28:18

have been other sort of

28:21

investment stories that have

28:21

been catching the eyes of

28:23

investors and headline writers.

28:23

Certainly with GameStop. We also

28:29

saw Bitcoin had another run up

28:29

and a bit of a drop as well. And

28:35

so when people have the ability

28:35

to access, you know, the markets

28:40

much more easily than they ever

28:40

had before, there are some risks

28:44

that people can do real damage

28:44

to their own portfolios. What

28:47

are your thoughts or plans on?

28:47

How do you address that? Because

28:51

certainly, there are going to be

28:51

some people who are just not

28:53

going to listen to advice,

28:53

they're going to listen to a

28:55

forum, or they're going to read

28:55

the, you know, their take some

28:58

kind of trading course and you

28:58

know, they're fine, they're big,

29:02

they're adults, they could do

29:02

that. But there are some people

29:04

are gonna say, Okay, I got

29:04

interested because of this

29:07

headline in Bitcoin or GameStop,

29:07

or people have been making a lot

29:11

of money even though the economy

29:11

doesn't seem to reflect that.

29:14

And they're now interested

29:14

enough to say, Okay, I want to

29:16

open up an account, I want to

29:16

empower myself a little bit

29:18

more. What can you do at a self

29:18

directed brokerage, to help

29:24

guide people who may be in need

29:24

of some help, but for whatever

29:28

reason, they're just not going

29:28

to go full service? They still

29:31

want to do it themselves. But

29:31

what what are their options? I

29:33

know that there are some guided

29:33

portfolios, all in one ETF

29:37

tickets, solutions, what have

29:37

you, what do you recommend to

29:40

people who are coming, but they

29:40

need just a little bit more than

29:44

just, you know, no advice? What

29:44

are the options? So first, look,

29:48

it's just,

29:50

I would phrase

29:50

it as grounded in Northstar,

29:52

right, like so first of all,

29:52

articulate what your Northstar

29:54

is. And I use grounding, in

29:54

Northstar deliberately, right,

29:57

so understand why you're doing

29:57

this in the first place. Right?

29:59

I you know, and it goes back to

29:59

having a deliberate perspective

30:03

on you know, why you're joining

30:03

the platform, why you're

30:05

investing in the first place,

30:05

and in many cases, and I suggest

30:08

even writing it down and

30:08

conversations that I have with

30:11

my friends, as well as, hey,

30:11

write it down again, write it

30:13

out for yourself, not for

30:13

anybody else, just write it

30:16

down. So you actually understand

30:16

why you started doing this in

30:18

the first place, and what your

30:18

intent is right off the bat. And

30:22

then we say, you know, the

30:22

tenants around investing, like

30:25

the principle that I've been

30:25

around for a long time, they're

30:28

still the same today. Right? I

30:28

mean, you know, fundamentals are

30:31

harder to pin down, you know, in

30:31

this market, right. But the, the

30:34

actual tenants of investing are

30:34

still the same, right. So think

30:37

about diversification, you know,

30:37

think about how do you make sure

30:40

that you crystallize your goals,

30:40

and what you're doing is

30:43

actually in alignment with those

30:43

goals. Right. So those those

30:46

standards still apply, Preet.

30:46

And that the third element of

30:52

this, I'd say, is just man, the

30:52

power of advice and that

30:54

importance of advice, like, you

30:54

know, if we're talking about

30:58

trends in self directed

30:58

platforms, I'll tell you, I

31:00

would complement that with the

31:00

need for advice is is even

31:03

higher now. Right. So what we've

31:03

done in the context of the

31:08

digital platform, you have folks

31:08

that are adopting self directed

31:11

platform because they want to do

31:11

more on their own right, and

31:14

they want to be able to make

31:14

their own decisions, but they're

31:16

also looking validation right

31:16

there, beyond just the

31:19

conversations around, helped me

31:19

understand and get more

31:22

comfortable to know what I'm

31:22

doing and how I should do this

31:24

stuff. They're also looking for

31:24

validation, we created a service

31:28

called advice direct. And in

31:28

this context, you actually have

31:31

advice. So we do provide you

31:31

guidance on how to build your

31:34

portfolio, how to make sure that

31:34

it's well diversified, how to

31:38

rebalance your portfolio along

31:38

the way to make sure that it

31:40

stays aligned with your goals.

31:40

So there's a digital tool that

31:44

provides you advice and guidance

31:44

on how to build and manage your

31:47

portfolio. And then you also

31:47

have access to an advisor. So

31:51

someone that actually can speak

31:51

to you and complement the actual

31:54

digital tools with with a human

31:54

being. The new ones here is that

31:58

you still place a trade yourself, that you're still working on the platform, making

32:00

the trade yourself but you have

32:03

the benefit of complementing,

32:03

you know, your your intent to do

32:08

more on your own with support

32:08

from this digital tool, and any

32:12

advisor. And even prior to prior

32:12

to spring and prior to March, we

32:18

saw adoption of that platform

32:18

growing exponentially as well.

32:21

And that continues. Right? So

32:21

it's it's just thinking

32:25

differently about how do we now

32:25

build services, and build

32:30

awareness of services that

32:30

already exist, and and make sure

32:32

that we're helping folks that

32:32

way. We also launched a

32:35

portfolio health check. So this

32:35

is something that we've been

32:38

working on since the spring

32:38

where we saw this happening, we

32:40

said, well, what's the next

32:40

step? You know, what would

32:42

investors look for beyond this?

32:42

And what would be the step after

32:45

that? So using some foresight

32:45

back in the spring, we build a

32:50

portfolio health check tool,

32:50

which helps you now run your

32:54

portfolio through this tool and

32:54

identifies First of all, it

32:57

asked you, you know, what are your goals, and remember the ground that we talked about, it

32:58

starts off with that to identify

33:01

why you're doing this in the

33:01

first place. So it helps you

33:03

with that self conversation of

33:03

grounding, and, you know,

33:07

grounding in your North Star,

33:07

and then it actually you put in

33:10

your holdings, and we then give

33:10

you an output that talks about

33:14

the health of your portfolio. So

33:14

are you well diversified across

33:16

sectors, geographies? Is your

33:16

asset allocation in line with

33:21

with your goals? And, you know, what does that look like

33:23

overall? So we've just launched

33:25

that a couple of weeks ago, and

33:25

it's available on our site,

33:29

happy to share a link so we can

33:29

include it for listeners of the

33:31

podcast as well, that said that,

33:31

you know, that's one of the

33:34

tools we keep, which can

33:34

complement what you have on the

33:36

platform. And and frankly, look,

33:36

we're seeing adoption of those

33:40

services grow advice direct, for

33:40

example, December record month,

33:43

as well, for new accounts and

33:43

client joining that platform.

33:47

And this tool, I imagine it

33:47

will, will get a lot of traction

33:50

as well.

33:51

Yeah, I think

33:51

that this hybrid model where you

33:53

have, you know, digital tools

33:53

with access to to advice seems

33:59

to be a model right for, for

33:59

growth, like that seems like the

34:03

next paradigm. But what about

34:03

coxes? There are a lot of people

34:07

who, whether different reasons,

34:07

people go to a self directed

34:10

platform, one is pure

34:10

empowerment, they just want to

34:12

trade on their own, their cost

34:12

might actually end up going up

34:16

versus you skip it, or they're

34:16

heavy traders. But there are a

34:19

lot of people who who move to

34:19

self directed platforms, because

34:23

they explicitly want to save on

34:23

costs. And so they might go to

34:27

either, you know, super long buy

34:27

and hold portfolio, buying

34:33

individual stocks and build out

34:33

a portfolio or they might use a

34:35

couch potato strategy with index

34:35

funds, what have you. But there

34:38

are a lot of people who are kind

34:38

of in between those extremes. So

34:41

So talk to me about what is the

34:41

cause for advice direct? And

34:45

what's the cause for this

34:45

portfolio? Check? Is that like a

34:47

free tool available on the

34:47

platform? Do you have to pay for

34:50

these two different types of

34:50

services? Talk to me about

34:53

costs?

34:54

Yeah, so look,

34:54

first, the portfolio health

34:56

check. It's a free tool. So you

34:56

plug in some information, you

34:59

know, we have some information

34:59

about your profile. And we we

35:03

guide you on how to identify

35:03

that Northstar and then the

35:06

output with with flags to say

35:06

look previous should be

35:10

reviewing your diversification

35:10

and so on all that is free. That

35:15

is a sliver of the portfolio

35:15

optimization engine that we have

35:20

within the advice direct so it

35:20

gives you a sense of a test

35:23

drive if you will, of what

35:23

advice to write could do for

35:25

you. But this component of it is

35:25

free now if you want to pursue

35:29

that further and set up an

35:29

advice direct account so you

35:32

have these types of

35:32

notifications and you know, I'm

35:35

telling you when you should make

35:35

some changes to your portfolio

35:37

because you need to realign with

35:37

your goals, then you'd go into

35:40

the full tool for advice direct.

35:40

The pricing for that is 75 basis

35:44

points and it's tiered as well.

35:44

So there is a cap once once you

35:48

get to a certain threshold of

35:48

investable assets, you know

35:50

becomes capped and that cap is

35:50

at 3700 3750 off top my head as

35:55

far as what what the overall cap

35:55

is so the more you have invested

35:58

in that the more you benefit

35:58

from from the service and also

36:02

from a pricing perspective. It

36:02

also includes a number of free

36:05

trades as well so you're not

36:05

paying for the fee as well as

36:08

trades right? So that's that's a

36:08

good combo there. Just you know

36:13

the if you look at who's trading

36:13

under selling During the

36:17

platform, a majority of the

36:17

investors are actually

36:20

investors, you know, the buy and

36:20

hold type that you reference,

36:23

right. So, you see, as far as

36:23

active traders, they're anywhere

36:27

between five to 6% of all the

36:27

investors on the platform and by

36:31

active traders, I mean, they do

36:31

more than 10 trades a month,

36:33

right? So the bulk of the

36:33

investors on the platform tend

36:36

to be more of the, you know, buy

36:36

and hold, rebalance longer term

36:40

investors.

36:42

Do you do you have a sense as to the average hold period, for someone on your

36:44

platform, like when they buy any

36:48

position, give any idea what the

36:48

average hold time is? Well, it's

36:53

obvious, if you're a long term investors, I mean, you know, these people are

36:54

holding until they reach their

36:57

goals, right. So So that's, I

36:57

would say, the bulk of it would

37:02

be that now average hold time

37:02

for security, I don't have the

37:07

breakdown of that to say how much they hold to the security because naturally, people

37:09

rebalance their their portfolios. But as far as how

37:10

long they stay invested in, you

37:13

know, how much to stay invested

37:13

and how that stays, you know,

37:16

consistent across, across their

37:16

tenure. You have more of those

37:20

buy and hold. Even in March,

37:20

right, when we saw a lot of

37:24

volatility, I mean, the activity

37:24

that happened was, you know, not

37:27

people just buying jumping in

37:27

and out of holding securities,

37:31

you also had existing clients,

37:31

especially retirees that were

37:34

actually de risking their

37:34

portfolios, right. So in that

37:36

case, it looked like they were

37:36

selling out, but, you know, they

37:38

were, they were de risking just

37:38

to have, frankly, more available

37:42

to them in cash. And, you know,

37:42

in many cases, while the

37:46

supplement retirement incomes

37:46

and making sure that cash is

37:48

there to be able to do that.

37:50

Now, speaking of

37:50

cash, one of the things that

37:53

we've noticed is that people are

37:53

looking at at this as kind of

37:56

like a tale of two economies,

37:56

you have people who have been

38:00

affected negatively the most,

38:00

they tend to be on the lower end

38:03

of the income spectrum, working

38:03

in retail jobs, the jobs most

38:08

affected by lockdowns and

38:08

restrictions, and they're been,

38:11

you know, completely decimated.

38:11

And then you have a lot of

38:14

people who are more kind of

38:14

white collar, who are able to

38:18

work behind a computer either at

38:18

from an office or from a home

38:22

office. And so they may not have

38:22

necessarily lost any income, but

38:26

they've lost the ability to

38:26

spend because they're not able

38:28

to travel. And for a lot of

38:28

people, you know, not traveling

38:31

is like, you know, five grand

38:31

extra in your pocket, not going

38:35

out to restaurants as often as

38:35

putting extra money in people's

38:39

pockets. So we see that there is

38:39

some people who are actually

38:41

sitting on a lot more cash than

38:41

they've ever had access to

38:44

before. And they're putting it

38:44

into their investment accounts.

38:47

Are they sitting in cash? Or are

38:47

they deploying that? Do you have

38:51

any sense of that.

38:53

So savings rate

38:53

is up overall, just to just to

38:56

build on your point as well. And I think that's a healthy thing. That's a really good thing. And

38:58

I think people are also reacting

39:00

to you know, the shock that that

39:00

we all faced in March and and

39:04

people that didn't have a lot of

39:04

savings for the emergency funds

39:09

top top to be able to withstand

39:09

that type of exogenous shock,

39:12

you know, they're they're ramping it up. So I think there's there's an element of

39:13

that as well. When you look at

39:16

our platform, the younger

39:16

clients, so let's call them

39:20

clients on a 35, which you and I

39:20

could consider ourselves in that

39:23

category. Once upon a time pre

39:23

but clients, younger clients are

39:27

actually deploying more cash if

39:27

you index to, typically new

39:31

clients come in, and let's say

39:31

they're bringing in 100,000, how

39:34

much 100,000 gets deployed, more

39:34

of the initial cash coming into

39:39

the account is being deployed by

39:39

the younger investors. Right. So

39:42

they're, they're looking for,

39:42

you know, time in the market, as

39:46

opposed to timing the market,

39:46

right. And then you also have

39:51

older clients, retirees in

39:51

particular, they've de risked,

39:54

right, so they have higher cash

39:54

positions, as we just talked

39:57

about, potentially think about

39:57

how do I supplement my incomes,

40:00

right. And the income that I

40:00

used to get from bonds and the

40:03

fixed income component, my

40:03

portfolio is not paying what it

40:05

used to. So I need to have some

40:05

cash to be able to supplement

40:08

that. And, frankly, you know, I

40:08

don't know how long this takes,

40:10

right. So I want to make sure

40:10

that I'm covered there. So let's

40:13

say, you know, those are smart

40:13

decisions, right? Again, you

40:15

know, it's not every single

40:15

client, but if you roll it up,

40:18

but you know, that's that's the

40:18

view that we see from a higher

40:20

vantage point. And then you have

40:20

some folks that are just looking

40:25

for opportunities, right, and just waiting for that opportunity. And I think, again,

40:26

to hold that this whole idea of

40:32

like timing to market actually

40:32

beats timing to market applies

40:35

to that. But I think for the

40:35

most part cash, just the role of

40:39

cash has expanded. And either,

40:39

you know, be able to protect

40:43

myself, supplement my income,

40:43

make sure that I have savings to

40:47

respond to exhaustion as

40:47

exogenous shocks, I see that the

40:51

role of cash has expanded and

40:51

over indexing towards people

40:55

that are holding cash is that

40:55

really, you know, those that

40:57

have to depend on that as far as

40:57

retirement income.

41:00

All right. We'll

41:00

leave it there. But I want to

41:03

thank you so much for coming on

41:03

the podcast and sort of

41:06

addressing the concerns that

41:06

have been raised by various

41:09

writers and people tweeting at

41:09

us both. So I appreciate your

41:12

candor in addressing that.

41:12

Interesting times to say the

41:16

least When this is all over, are

41:16

you going to? Are you going to

41:19

upgrade your bike? Or are you

41:19

happy with your bike? What's

41:21

going on?

41:22

Hey, look where

41:22

we're celebrating and what we're

41:25

celebrating, frankly, it's just

41:25

that bigger story of it's an

41:28

army of demand, right? I mean,

41:28

like it's a privileged position

41:30

to be in an industry that sees

41:30

the level of demand. So, so

41:34

super, super happy about this.

41:34

And thanks for giving me the

41:36

opportunity to jump on here. We

41:36

have to be responsive, as you

41:40

know, through social channels

41:40

and making sure that our clients

41:43

understand what's happening and

41:43

why and what we've done about it

41:45

just in terms of our

41:45

accountability. I'm not

41:48

upgrading my bike. Now I have a

41:48

bike that I'm happy with right

41:51

now. My goal would be to get out

41:51

there a little bit more and

41:53

write a bit more next summer.

41:53

And that's that's the goal for

41:57

the year, but it's not a year of

41:57

the upgrade. I actually,

42:01

I'm in right

42:01

now. Listen, I'm not allowed to

42:05

get a new motorcycle. What ended

42:05

up happening was my partner was

42:09

on the balcony and we overlook

42:09

the gardener. And I think you

42:14

know this but I had a Ducati and

42:14

it was stolen. And I've been

42:19

thinking about getting a new

42:19

bike to replace it and she's out

42:22

on the balcony I was in the

42:22

office and all all of a sudden I

42:24

hear just hear this this is yell

42:24

you're not allowed to get a new

42:28

bike. Like what the heck

42:28

happened? Someone just got

42:32

smoked on the highway, right

42:32

like in front of her like from

42:35

the balcony she could see So

42:35

that pretty much was the nail in

42:38

the coffin. I am not allowed to

42:38

get into the bike that she knows

42:41

of.

42:43

They're always they're always tracks right tracks are also an option,

42:45

right?

42:47

Exactly. Yeah,

42:47

exactly. There's private roads.

42:50

There's the drag strip, there's

42:50

dirt biking. See? Thank you so

42:54

much Silvio. It's, it's been a pleasure.

42:57

Likewise, pleasure to connect and thanks for the opportunity. Cheers and

42:58

keep safe.