Episode 31 - The Best Strategies for Young Canadians to Build Wealth with Madison Mailey

May 1

In this week's episode, Nicole and Greg speak with Madison Mailey, a wealth and insurance advisor at Scotia McLeod. Madison, an Olympic gold medalist in rowing, shares her journey into wealth management, emphasizing the importance of financial literacy and proactive planning. The discussion covers strategies for young Canadians to build wealth, including the use of financial tools like the First Home Savings Account and the Home Buyers Plan. Madison also addresses the impact of technology and social media on financial decisions, advocating for informed, professional advice over online trends.

Transcript:

Nicole 00:00:02 Hello and welcome to your Estate Matters with your hosts, my colleague Greg Brennand and myself, Nicole Garton of Heritage Trust.

Greg 00:00:09 Your Estate Matters is a podcast dedicated to everything estates, including building and preserving your legacy.

Nicole 00:00:16 If it's estate related, we'll be talking about it. We're having the conversations today that will help Canadians protect their families, their assets and their legacies tomorrow.

Greg 00:00:33 With us today on Your Estate Matters is Madison Mailey, wealth and insurance advisor at Scotia McLeod. Madison followed her parents footsteps by joining Scotia Wealth Management in 2021. She now manages the team her parents built over 38 years of dedicated service to trusted clients as a wealth and insurance advisor. Madison plays a crucial role in delivering personalized strategies and trusted advice. Known for her tenacity, professionalism and vibrant team spirit. She helps clients achieve financial success through well-managed risk. Today, Madison has returned to her North Shore roots, working at West Vancouver Scotia MacLeod office as a wealth insurance advisor. She holds a Certificate in Advanced Financial Advice and proudly serves the community on the CMC's Arts Center Board of Directors and the BC Women's Foundation Health Care Emerging Leaders Group, and as an ambassador for Backpack Buddies, addressing childhood food scarcity.

Nicole 00:01:35 To Madison, thank you so much for being here with us today. Do you want to share your journey to how you arrived at becoming a wealth manager with Scotia?

Madison 00:01:43 Thank you for having me. My journey goes back to being born into the family business. I grew up with my mom and dad saying that it was the best job in the world. They Actually met each other and fell in love at Scotia MacLeod. And so my dad actually trained my mom. And then I was a very active young girl. And I fell into the sport of rowing. And it opened up a lot of doors for me. And I got a full ride rowing scholarship. Got to go out to the US. And in my third year there, I did a family business course. And I worked with an incredible professor. And she helped me write a succession plan for my family business. Everything was pushed back probably five years because I didn't think I would go to the Olympics. And end up on the national team in Victoria for that stint.

Madison 00:02:43 But it was actually a great time because I got to hone many of the skills that I've transferred into my career. Now, through being a high performance athlete and high performance human being. And yes, and I did all my securities licensing courses while I was rowing so I could come in guns blazing into the role. And now I am the team lead of my wealth management group called the Mailey Rogers Group. And we're a team of five. We have great experience, but a lot of energy. And what I've heard recently is you want two people to be younger than you, your wealth advisor and your doctor. And so hopefully I'm helping with one of those two things in my client's life.

Nicole 00:03:28 So you're being modest. You have an Olympic gold medal?

Madison 00:03:31 Yes. I did end up winning an Olympic gold medal with my teammates in 2021. And it was a wild journey with the postponement of the Olympics and then it being the first spectator free Olympic Games. My poor mom and dad wanted to hop on a shipping container to go to Japan to watch me.

Madison 00:03:52 But it was a wonderful journey.

Nicole 00:03:54 And you mentioned the skills from that experience transfer to what you do now. Can you tell us more about that?

Madison 00:04:03 So in our job I would say the most important thing is understanding our clients and what they need. We meet so many different types of people with varying risk tolerances and communication styles and fears. And our biggest job is to really allow them to sleep easy at night, knowing that their money that they've worked so hard in building is working hard for them, and then essentially looking at the bigger pieces of planning. And that's where working with your firm is so wonderful, with estate planning and maybe some insurance tools and banking needs to make sure everything works for them. So they're not thinking about it, and they can enjoy being retired and doing what they want to do. And so the biggest piece is people and rowing is, you know, used in marketing is probably the most team-based sport.

Greg 00:04:58 I was just gonna say it. It's in every office. It is a big poster.

Madison 00:05:02 The rowing shell.

Greg 00:05:03 Yeah.

Madison 00:05:03 Because I have one. Or if it was just me in the boat, I would go in a literal circle. So I consistently have to rely and depend and trust in my teammates. And that's really hard to do when you want to win at the Olympics. And so that builds over time just like any client relationship. But I brought those foundational skills of, you know, hard work showing up doing what's best. Having really a lot of integrity, but also really working with others and trying to understand what they actually need. So showing up on the day they can actually perform. And it's different for every teammate that you step in a boat with. And it's different. Every table I sit with, with a client of how that meeting should go in their head and how it's actually going to go and what outcomes they want.

Greg 00:05:55 When you're advising service, do you think millennials and Gen Z approach finance is different than earlier generations?

Madison 00:06:04 Yes. So when I came in here, I was asked what generation I am, and I am a millennial.

Madison 00:06:10 Right at the end. And so I do think that we treat finance or financial matters differently. But I think it depends what you grew up in. Of course. And I think any generation could say that. But some of the big things that, you know, we have is technology at our fingertips. And having Google as a source of information can be good and can be bad. So what we're seeing a lot of when we have conversations around intergenerational wealth is parents now including their kids into the financial discussions. And because probably they're going to be inheriting quite a bit of money. And maybe that's the first time that they've ever dealt with that. And so instead of waiting till they're not there and the parent can't help them manage those funds, they're starting to include them. And I think the other thing is our generation is a lot of people are socially responsible and care about ESG, which is environmental, social and governance of companies that they want to invest in. So they're using their dollars, their vote a little bit more.

Madison 00:07:24 Their parents often don't understand because they made all their money in oil and gas or, you know, if it's including the children in decision making before they pass. Sometimes it's important to say, what do you want to invest in? And how do we put your voice into maybe part of your parents portfolio if they want to include you? Or how do your parents actually start to understand what you believe in and want to invest in compared to them.

Nicole 00:07:54 So what do you think some of the biggest financial challenges are that young people face?

Madison 00:07:59 Well, everything is getting more expensive. And specifically, we're doing this podcast here in Vancouver. And real estate is very expensive and it can almost feel disappointing or really difficult to even conceptualize how to come up with 1.5 or $2 million and be mortgage free at 65. A lot of people are going to get support from parents, and people talk about the bank of mom and dad, and that definitely helps. But essentially big challenges are that they're maybe not getting the right advice at a young age.

Madison 00:08:37 And most people don't have a pension anymore and they have to pay themselves first.

Nicole 00:08:44 So that's a real challenge. So we've got high cost of living and people don't have, you know, built in retirement accounts and affording housing. So how what are some strategies that these people are looking at to try to overcome those challenges.

Madison 00:09:00 Good question. So some of the strategies are engaging with their parents advisor or an advisor that will have enough experience and knowledge or expertise to actually give them good advice. So often that's their parent's advisor to have an initial conversation on how to start planning. Planning, planning planning. How do we start having them save into a first home savings account. How do we have them understand about contributing to an RSP and the homebuyers plan. You know what is a TFSA. Should they be using it. Which account should they be contributing to first. So creating a plan and looking at their monthly ins and outs. Our world is one of subscriptions, and probably people have too many of those going on in their banking.

Madison 00:09:50 So every January, going through what is actually coming out of your visa card every month and making sure that you're allocating funds towards those accounts so you're paying yourself first is probably the biggest thing, and then getting that financial plan in place. I know if people are 30 or 30 5 or 40, you know, 65 feels like a long way away. But the biggest, most powerful tool in finance is compound growth. So putting a little bit away every month is such a powerful tool.

Greg 00:10:24 So before you get to the planning, I guess the other question would be is how important is financial literacy for youth? So of course, when you're starting to do the planning, they have to understand what you're talking about and what's the best ways to improve the literacy level.

Madison 00:10:39 So it's very strange that in our education system kids aren't taught about taxes or the different accounts we have in Canada. Or compound growth. But that's where parents often step in and they can help their kids. I think it can't be a forced exercise of parents forcing their kids into having conversations they don't want to have, or maybe aren't interested in, but at a certain point, they're not going to be there and they're not going to be able to support them.

Madison 00:11:09 So it is important that either professionals get involved to have those conversations with their kids or they're having them. My volunteer at JABC, which is Junior Achievers British Columbia, and so I go into classrooms, you know, a few times a year, and we do a money simulation in the market. So these kids read up about different stocks, and some are really risk oriented, and other ones go, oh, I like this dividend that I'm going to be paid every quarter. And then they get to see how their portfolio does with fake money. And so it's wonderful that we have these charities that are helping. But I do think these conversations are important to have. But even more important than starting them at a young age is maybe when you have young adults, including them in some bigger conversations so that they actually know about what they're going to be inheriting, what their potential if they are in a family business, why is their T4 high? Why are they making income? They don't know and they're just left out of these conversations, but it should probably be included at a certain point.

Nicole 00:12:18 So if you're talking to a young person, what are some strategies you would recommend to them to start their wealth building journey?

Madison 00:12:26 So I obviously have lots of friends that are starting to build significant wealth and have really great jobs and are working really hard, and they now are saying, oh, I have lots of money in my bank account. What should I be doing? And my first comment back is just to say, sit down and have a planning meeting with yourself and potentially your partner, and then go to a professional and talk to them and see if maybe you should be having an accountant instead of doing it yourself so that you can be tax sheltering, whatever growth that you do have in the registered vehicles that we have today in Canada to support growth. And then the other piece is that I deal with a lot now is, you know, people in their mid 30s inheriting quite a bit of money from parents, unfortunately, that have passed away, maybe a bit too young, and most of them are actually quite professional and understand that this money is for their retirement and with a bit of planning, they're able to actually understand the scope of what that dollar could be in ten, 15, 20 years if it's invested in the right way.

Greg 00:13:36 Well, how are the young people navigating the rising costs of living, particularly housing, because of course we talked about taxes earlier. We don't teach them about taxes, but inflation is perhaps even worse.

Madison 00:13:50 So the money sitting in a bank account earning 0 to 1% interest is probably not a good way to start building wealth. So we do have the first home savings account, which is a new vehicle that everyone should be using. And it's kind of like a middle ground of an RSP and a TFSA, and a lot of younger individuals that are saving for a home should be using that. And they can also use the home buyers plan within their registered retirement savings plan. So it's using vehicles like that. And then if they are going to be getting assistance from their parents, it's making sure that structured in a proper way. So advising the parent or the person that's going to be gifting the money to speak with their lawyer first to make sure if there was ever a marital breakdown or something unfortunate happened in that child's life that they're getting the proper advice and the money staying within the family.

Madison 00:14:44 Or has the gifter would like the funds to be received?

Nicole 00:14:47 So can you tell our listeners a little bit more about that new homebuyers account.

Madison 00:14:52 So, you can contribute $8,000 a year. It's kind of like a TFSA in that regards, where you get told what you can contribute, but this is probably not going to be increasing and that amount can be deducted like an RRSP contribution. And you can add to this account. And let's say you opened it up this year and you didn't want to contribute, but next year you did. You could add the full $16,000, but the account has to be open to start accumulating the contribution room. And then it's like a TFSA where any growth in the investments which are in that for a vehicle are not going to be taxed. So depending on a person's timeline, They could potentially look at some more growth focused investments if they weren't going to be purchasing in the next 3 to 5 years. And there's a maximum amount that can go into the account, of course, because otherwise every parent would say, put it all in there and let it grow tax free.

Madison 00:15:54 But it's a great tool and a nice assistant for these younger people that are trying to save or or older people that are trying to save for that first home, because it's really an incredible investment vehicle because of the principal residence. No tax when sold.

Greg 00:16:11 So for eligibility purposes, and Nicole and I both have 16 year olds. Could you create the account to get the annual eligibility starting without actually contributing?

Madison 00:16:23 Yeah, they have to be a specific age. But yes. Yes. And in BC with contractual law at 19, that's when they could open the account. But the account I believe can be open at 18. So they'd have the contribution room right in BC. Once the account is open. And if they're signing, that's 19.

Greg 00:16:43 Right. So just in the event they got some form of taxable windfall that they would have already created the room. Yes. In advance.

Madison 00:16:50 Exactly. So if they didn't have the capacity to contribute to the account yet and they opened it when they were 19, but had, you know, let's say they got a big raise and had enough funds to contribute to that account when they were 20, they could add the full $16,000 contribution.

Nicole 00:17:08 And how does it work with RRSPs? I believe you can take it out tax free, but you have to top it up again, is that right?

Madison 00:17:15 Yes. You have to re-contribute the money. So essentially it's called the homebuyers plan. And people often get confused because they feel like they have to use one or the other. But you can actually use both the first home savings account and the home buyers plan. And they just increased the homebuyers plan by quite a significant amount. And, yes, you have a certain period of time to return the money back to that RRSP account, because the idea of that account is supposed to be for retirement, but they're trying to say, here's a tax saving vehicle. You may use this to also help purchase your first home.

Greg 00:17:54 The difference being with the first home savings account, you don't have to replenish those funds. Exactly, yeah. Has technology and social media impacted the way young people manage their finances and build wealth?

Madison 00:18:06 Technology and social media has impacted the way that people manage their wealth.

Madison 00:18:14 Essentially, social media has a lot of false news, as we all know, and a lot of people sharing information. And some of it's good and some of it's bad, but maybe it prompts someone to start thinking about something and then they say, hey, mom or dad or hey, asking your friends, have you heard about this account or this stock? And sometimes people get it wrong that they're going to buy Apple stock or Nvidia, and it's going to grow an exponential amount. So sometimes it can make people not understand the power of diversification. And it can be really bad. People often don't talk about their losses, whether it be in the real estate market or investment market. But diversification is a really powerful tool, and a lot of young individuals have the ability to invest in electronic traded funds. So ETFs, an example would be like an S&P 500, where you're investing in 500 companies in the broad based American market, and a lot of people have made significant wealth off that and have diversification.

Madison 00:19:28 So it is a good tool for people, and it's often talked about on the social media platforms Instagram and Facebook.

Greg 00:19:36 So are you seeing in, say, clients? That would be probably 25 to 45. It's off book assets like Bitcoin right. So it's because a broker can't hold Bitcoin. You can hold the ETF versions. And my wife and I know various people that have significant amounts that were in early, but they never diversify out of it. They never take some off the table. And you know, maybe now that there is something available like an ETF, they could bring it in from wherever their wallet is and diversify to something else broader to make sure they keep their gain.

Madison 00:20:11 Yeah. I mean, no matter the product, how you win in the market is by selling when it's high and buying when it's low. Right. And if you are emotionally attached to an investment, you're probably not going to sell it when it goes up. So you need to either have the personal discipline or you need to work with a professional who has an investment policy statement and says, we can't hold any position or we shouldn't hold any position.

Madison 00:20:36 That's over 5% weighting in your portfolio. so when we go back to the broader question of technology and access to information, you just have to make sure that it's the correct information. And just don't believe what Google says all the time because a lot of the influencers are also American. And we have very different system here in Canada just to take that advice. learn from it. I think information is a very powerful tool, but what we always say is we're here to help our clients make more informed decisions. And information is power. So I never say, don't follow those people. Follow them. Learn from them. See if we can incorporate some things that you're interested into your portfolio, but don't take it and run with it. Seek a little bit more advice surrounding what you're reading online.

Nicole 00:21:29 So speaking of online, like how prevalent are those Reddit forums and there is that GameStop fiasco? Like, do you feel that you have peers that are impacted by some of that misinformation or are tell me your experience.

Madison 00:21:47 so most of my clients are 10 to 15 years to retired to retired. but the beauty of me joining my parent's firm is that it makes all of our clients think, oh, I should probably include my kids in some of these conversations, or they're 30 or 35. I wonder what they're doing. Let's see if I can either do some live gifting, or let's see if I can do some strategies with a team that I've trusted for 35, 37 years to give that continued advice to my kids. So I don't see a majority of my clients dealing with some of the Reddit threads or being avid day traders. But I do see some portfolios be transferred in because they can transfer in in kind. So meaning if I give a second opinion to a client, they say, I would like to work with you Madison. I just say, great, I'll open up accounts and I'll move everything in as is. And I will see some very interesting positions sometimes, and some that you can tell were influenced by technology or social media or peers.

Madison 00:23:00 And sometimes they've made lots of money and need to be trimmed back. And that affects taxes, which is difficult. But it's all about the long term gain or long term focus. But also sometimes they've done really poorly. So I think we do see clients asking about having some crypto exposure. And it's just using a vehicle that is appropriate and we feel comfortable having on our books, but also that we'll give them a little bit of that exposure to say, this is your portfolio and we want it to reflect what you believe is going to be important in the future, but also they work with us to hopefully delegate and also trust in the expertise and experience that comes with the Mailey Rogers group.

Greg 00:23:44 Right. Do you find it's difficult to have clients take losses because the loss is just a mark on the day, and for tax purposes, you should take it because you can be back in it in 30 days. If you love the stock. And you know we have some family members that just want to wait till the sun shines again.

Greg 00:24:04 And I said, well, but you may as well take advantage.

Madison 00:24:07 I think it really depends on the client. We talk and our team believes in education for our clients, and obviously you do too. That's why you're doing a podcast for your clients. But every month we do lunch and learns and we teach them on various different topics. We also do in-depth annual reviews. We don't just show them what they got sent in the mail and say, oh, this is how your accounts have done. We teach them about here's your performance, here's why that is your performance. This is what's happened to the market. This is how you're allocated from an asset allocation perspective. Why is your money invested in there. Which means what's that dollars job description. It should have won grow income. Speculative. And how risky is it. And so we show them, hey, if you're going to be an equity investor, this is what a bear market is. Here are the last seven bear markets. This is why they happened.

Madison 00:25:06 Here you are. As you said, a technical definition of a bear market is when it goes down from a previous peak, 20%. Here you are. A year after that bear market has happened. So, as you said, you haven't actually lost that money until you've sold it. And that's why we're often there to hold a client's hand, or tell them to put on the horse blinders to not look at their portfolio if times are tough, but at the same time, depending on their tax situation, realizing loss is a practice that we do all the time and we call it tax loss harvesting.

Greg 00:25:42 Because I think especially last year, people that might have had giant gains and things were going to get cut off with the government's change on capital gains. And if you have a bunch of losses you've previously taken, that would have helped a number of people.

Madison 00:25:57 Oh, definitely. And we had very little tax loss selling this year. It was very hard. And if we were trimming anything it was triggering little losses.

Madison 00:26:05 But in previous years, in 2022, it was a not a technically a bear market in Canada, but it was not easy year in the markets. And we did trigger lots of losses. And so essentially, if you sell out of a position but you still like the whole thing. If you sell out of it for 30 days, it's a realized loss in Kira's eyes, and you can repurchase that security. Or you could move it into a different investment, but you can use those losses to offset gains in the last three years or carry them forward indefinitely. So it is a powerful tool, and it's something that most management teams will be looking at consistently throughout the year. But it doesn't mean that clients aren't sad or scared if their portfolio is showing losses.

Nicole 00:26:52 So speaking of capital gains, there's a lot of ambiguity around what's going to happen with the change in government. How are people approaching that?

Madison 00:27:01 I think there's been a lot of noise around what's happening in the United States with Donald Trump, and then what's happening with Canada and Trudeau and the Liberal Party and the conservatives potentially coming in.

Madison 00:27:18 and people were really nervous about this capital gains inclusion rate change. And people are always scared about the principal residence tax exemption too. But nothing around that has changed so far with the inclusion rate change. I think there was a lot of misinformation where most people thought that all capital gains had increased from the 50% inclusion rate to 66.66%, and that's not true. So we'll wait and see exactly what happens. But a lot of people made some pretty big knee jerk reactions. And that's also where we step in with our planning team. We have lots of CPAs that work within Scotia Wealth Management and lots of incredible planners that are very educated. And they're able to look at the big picture of the family's wealth and able to see what we should do. And often clients find it best to kind of find a middle ground. So if that person is old and they potentially die in a time where that inclusion rate is higher. They might have triggered half of their gains or done something, but it's an in-depth planning process to make sure you're doing the right thing.

Madison 00:28:30 But I don't think if it you know, if it does change, if you trigger over $250,000 of capital gains, then you're pushed up to this 66.66% capital gains inclusion rate. I don't really see that affecting our world as much because unless you're passing away or selling real estate, you're not really hopefully going to be triggering that amount of capital gains in your portfolio for the size of clients we're dealing with. So as long as you actually just read the fine print, you know that you're probably not too affected by it.

Nicole 00:29:06 We saw a few clients that were planning to gift properties to adult children. If it was going to be their residence or a cottage, they were They're going to do it anyway. So they thought, well, we might as well do it now before this prospective change comes in. But I think there is a lot of ambiguity about what the series position is going to be. So I think we'll have to see.

Greg 00:29:29 I think the lesson is always the planning has got to be, you know, able to change because we don't know the future governments in the future plans of taxation.

Greg 00:29:41 Right. It's at a point in time.

Madison 00:29:42 And that's the beauty of technology too, is that you have that base plan, that base blueprint of where you see your life until age 95, and then life happens. Governments change. You have grandchildren. Lots of things change in people's lives. And this plan just gets updated every year. And then it allows people to sleep easy at night thinking, okay, I actually don't need to stress about this, or hey, actually, I should really incorporate this into my planning.

Nicole 00:30:13 So do you have any final tips for our listeners and particularly younger people? If there are Millennials or Gen Z's, what they should be thinking about?

Madison 00:30:21 I would say ask a lot of questions. Start learning. Start asking your parents what they're doing and talk to professionals that actually can give you the advice that makes sense for your situation. So I know that a lot of people like to use the discount brokerage services to purchase securities they like, if they're maybe under the age of 30, maybe that's what they prefer to do with their wealth.

Madison 00:30:49 But at the end of the day, there's no advice in those systems. And that's why you are just paying per trade and looking at the big picture. Getting a financial plan in place, asking questions. And don't be afraid to ask a question that may seem stupid because it's not if it's going to impact you and hopefully help you. One thing that's been nice is sometimes I'm a bit more approachable for my clients’ kids than my dad or my mom was just because of age. And you know, I say, why didn't you ask this question 4 or 5 years ago? It could have really impacted your planning. Just don't wait. Ask the questions, get the advice, and make sure you're starting to save. Even if you're young, just a little bit makes a huge difference.

Greg 00:31:37 Madison how can our listeners find you?

Madison 00:31:40 So I work in West Vancouver at the Scotia McLeod office, and my team is called the Mailey Rogers Group. We have monthly luncheon learns, which we're happy to welcome any listeners to come for some free advice and hopefully get to know our team a little bit.

Madison 00:31:58 And you can always call me or email me, but our team is a team of five, and there's someone on the team that might fit your personality type or what services you need. And if not, we work for an incredible institution called Scotia McLeod, and we'd be happy to help her answer any questions that a listener might have.

Nicole 00:32:16 Thank you so much. Madison, thanks very much.

Speaker 4 00:32:17 Appreciate it. Good. Perfect.

Nicole 00:32:20 This podcast is for informational purposes only and should not be considered individual, legal, financial, or tax advice. Make sure to consult the advisor of your choice to advise you on your own circumstances. Thank you for joining us for this episode of Your Estate Matters. If you like this podcast, make sure to follow it on your podcast platform of choice.

Greg 00:32:42 Whether you are planning your own estate or you're acting as executor for somebody else's. Heritage Trust can help partner with heritage trusts to protect your family, your assets, and your legacy.

Nicole 00:32:53 If you would like more information about Heritage Trust, please visit our website at Heritage Trust Company.

Greg 00:33:06 This podcast is produced by Podfather Creative.