A Money Coach in Canada

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Mom’s in town so gotta be brief, but here’s a jaw-dropper for you that I found thanks to Growth in Value‘s blog:

The Employment Insurance Fund has a $54 BILLION surplus.

Uh, shouldn’t one of two things be happening:

1. Our premiums plummet
or

2. Programs designed to help people find work or figure out a good career for themselves get reinstated?

READERS: why do you think we put up with this? Why aren’t we kickin’ up a fuss?

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I’ve been enjoying a lot of FREE stuff for the past several months.

Google, of course. (pardon my little joke if you click the link).

And if I need good info on a person, org, or idea, I go to wikipedia.

Recently I’ve also signed up with Skype, and now a lot of my overseas (as well as local) calls are Free.

My banking is free.

My entertainment is free.

My inspiration is free.

My cutting-edge information is free.

Notable exception: Alas, our public transportation is Not Free (boo!) although I’m hopeful that eventually this guy will get through to the right person and get that changed for us.

Ever really thought about the fact that all this is free?

We’re all about to think about it a whole lot more.

According to Chris Anderson, editor of Wired, our economy is changing to FREE.

That’s a pretty freaky gobsmacking thought.

Here’s his argument.

1. We’re used to “free” stuff, which is in fact subsidized by some kind of cross-sell. Think: cel phones for free, if we buy the 3-yr plan (my least favourite thing, fyi). We’re also used to “free” being in fact at the cost of being subjected to adverts.

2. Technology has plummeted in cost. There’s plenty enough to go around and we’ve found ways to make it for almost nothing.

3. This is introducing a new economic model. We can now subsidize the vast majority of services by charging money only for the top tier of service. “You can have a Flickr account, but if you want all the bells and whistles, pay us this small charge”.

So far we’ve seen this only in the online/technology domain. I wonder how long it will take to translate into the ‘real’ world: free computers (but if you want the xtra RAM…), free clothing (but if you want the soy-based kind…), free food (but if you want organic…).

Of course, it’s predicated on the basic kind being inexpensive enough to produce that the premium version will cover the costs and profit. But still. I wonder.

Photo Credit Rache.

Update: for a completely different opinion on FREE (in fact, a robust argument that it’s for the birds) visit the inimitable Squawkfox.

Some micro economics today:

Warner Brothers is going online!

As in, being a television network, but online only. We’ll be able to view shows like Smallville plus a lot of original made-for-online content. The premier sponsor of this online network is Johnson & Johnson. It, like traditional tv, will be supplemented with adverts (no idea if these will be banner ads, or please, no! interupt-the-show ads). Perhaps this should be macro economics not micro, as it really marks the new world of web 2.0. If they’re smart enough to let us watch on our computers, I hope they also know to let us watch it at a time that works for us, plus, include online forums to respond to the shows. Time will tell.

And in other news, Wrigley’s gum is going private again. Mars, Goldman Sachs and Warren Buffett are all going to own the chewing gum company. In typical, wry humour (or not) Buffett commented that he understood the gum business better than he could understand bank balance sheets. Wrigley stock surged by over 20% when the announcement was made.

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Readers:  what’s your guess?  Will WarnerBrothers do it right?  (I’m thinking they will).  Will you be watching online?  I sure will.

I’m watching the Vancity AGM by webcast and will liveblog. (Can one ‘liveblog’ when watching a live webcast?)

Note: these are in no way to be construed as official minutes. I am giving this a shot! Sorta citizen journalism. I may or may not manage to accurately blog as I watch. [update: note I often used the word ‘we’ in the blog. I don’t mean to imply I’m part of the ‘we’, it was simply blogging using the word used by the speaker]

Chair of the board, Patrice, is going through the formalities – rules about how the business of the meeting will be conducted (eg. say your name and branch; if it’s personal, this isn’t the place etc.)

Commenting on the BikeShare program – take a bike, ride it a couple weeks, then pass it on. This is a symbol of how Vancity helps its employees and the community make positive change.

Year in review: saying goodbye to Dave Mowat, CEO, and welcoming Tamara Vrooman. A year of incredible market disruption. Achieving carbon neutral – Vancity started thinking about how to reduce its impact on the environment (energy use in building, how our employees commute, and eliminating use of paper). [ed note: I can testify to this – they really do encourage us to commute, including negotiating discounted yearly transit passes for us, and our garbage bins are teeny-tiny]. Dockside Green is another example of leadership – affordable housing development in Victoria shooting for Platinum LEED status.

Another leadership initiative: helping the ‘unbanked’ start banking. Inspired by Dr. Yunnus, Vancity has advanced its own micro credit program. Vancity offers a match-saving program – for every $1 a person saves, Vancity will match up to $3 – resulting in 9 people being able to purchase a home, in partnership with the Futures Foundation {?}.

Vancity is always, at heart, a financial institution. Patrice is reviewing the mergers and growth of Vancity over the past year.

Because it’s a cooperative, $5.2 million of the profits went right back to the members.

Now introducing CEO Tamara Vrooman [I heart her. She’s delightful, straight-shooting, competent]. She was deputy finance minister when the board found her. One of her first priorities was to meet with members to find out What’s working? What’s not? and swiftly discovered how to support our members and communities. She tells it like it is, whether good news or bad. [applause].

Ms. Vrooman informing the crowd of the Cdn essential: hockey scores up to the moment.

One of the things that interested her in Vancity was the opportunity to listen and talk face-to-face with members. This was not something she could do as deputy minister (her former job). Now she will tell us about the results.

Good news: VC fundamentals strong – assets under mgt grew by 15% – nearly a historical year. $17 billion, including assets at Credential. 14,000 new members through mergers; 19,000 new members through organic growth. Equity remains strong. Broke the $500million mark. Capital Adequacy Ratio had robust 12% (only 8% is required).

Community Leadership funds also strong.

Underperformance coming up now.

Profits fell by 32%. Particularly steep. 3 reasons: ABCP, general narrowing of margins in industry, increases in cost base.

Note: Subprime is new word chosen by the American Dialectic Society. America grew overzealous in its mortages; bundling mortgages to fund businesses. Vancity grew its assets by selling 2billion of packaged mortgages. But in the states, investors funding the bundles, discovered that some of the (non Vancity) bundles were subprime mtgs. Vancity could no longer securitize (ie. sell the bundles) even though Vancity’s mortgages were not subprime. We took a write down of 20%. About 30 of our members had invested in some of our […. ACK…. streaming crashed …] Vancity paid out those members (?), well ahead of Canaccord doing something similar for its investors. Ms. Vrooman is very proud of this.

Other tough news: both our employee engagement and our service performance scores have declined in 2007. What are we going to do about it?

Areas of concern – feedback from members she received –

1. Transactions take longer than they used to.

2. We could do more community initiatives.

3. It doesn’t seem like we’re equipping our staff.

4. We’re not first to market these days.

Staff agreed with these assessments.

So, in November, she restructured the leadership team to be more streamlined. Key Focuses:

1. Retail and branch review (including fees to atms, line-ups)

2. Wealth management (many members who don’t have large sized investments want quality advice)

3. Improved technology. Staff are nimble, do workarounds, but major look at new technology.

4. Innovation. We’ve been the first on so many things historically – ethical investing, enviro visas (1990), internet banking. Good ideas come from front line staff. Will start talking more to them.

5. Social Finance – recognizing we have a capacity to do business in a way that’s sustainable in terms of our communities and the environment.

6. Commitment to staff – we will do fewer things, do it with their direct input.

Tamara is inviting members to contact her directly. Her e-mail: [email protected]

Closing with a reminder of our values – integrity, innovation, responsibility.

________________________

Q&A time

Q: why is our efficiency ratio higher than banks? 87%

A: because we give more service. But 87% is still too high to be sustainable.

Q: What steps will be taken to avoid similar difficulties in the future, such as ABCP? eg. getting caught up in US-led problems.

A: VC is looking hard at this. $77million VC had in ABCP represents less than 1/2 of 1% of VC total assets. But still, we didn’t understand fully enough what we were investing in, and took others’ words for it. It was not transparent, it was intricate, but still, we didn’t look hard enough at it.

Q: When I was at the branch one day, someone was complaining in line. Staff said “we are short on employees”. Is there a problem with wages? What is the poverty line, and what is the minimum wage VC pays its employees?

A: Our wages are very competitive in the market. FSR starts at $35K plus strong benefits and supports – pension plan, creative benefits plan based on the person’s needs. Training opportunities. But there are still more jobs than people in this market. This is why employee engagement is so important.

Q: – sound cut out –

A: people who bought ABCP [ARGH – lost connection again]

Q:

A: ING has low efficiency ratio – in low 50%’s. Credit union is not going to go that low, as we want to serve our members. We do need to get the trend going back down, in a way that’s consistent with credit union values.

Q: Thanks staff, has had no complaints. Staff bend over backwards. [Thanks!] Do we have an ombudsperson? Why not?

A: No, we don’t. Members concerns can go through the CEO or the Board. Ombudsmen are required in some environments. Ms. Vrooman’s belief is that each employee has the opportunity to bring up concerns, and her obligation is to address those in a transparent way. She hopes we don’t get to the place where we need one – it’s an admission of failure. (applause). Patrice comments she also receives letters, as do her colleagues on the board.

[missed about 10 min, connection broken]

Comment to Board from audience: Olympics coming to Vancouver. Potentially, a widespread shame. Can VanCity work on the homelessness issue? Similarly, a potential food crisis is coming. Last, focus on the arts, bridges our diversity. Congrats to new board.

Q: Daily interest on chequing is extremely low. Margin between this interest and how much loans charge is to big. Answer that funds can be kept in savings is not satisfactory – people forget to transfer funds into savings. Just because banks aren’t giving good interest isn’t a good enough answer.

A: Vancity does indeed offer higher interest options. Members want more option on savings options. VanCity is looking at options. However, the differential is not as great as they have been. VanCity will continue to look at best value.

Q: 10 pages in a brochure. It could have been on one page – conspicuous consumption. You guys have got to smarten up. Do some housecleaning like the average consumer does. This is ridiculous.

A: We heard you, John. Thanks for your comments.

Comment: A board of directors member from 1954 “I’ve survived all that”. Agrees we should emphasize homelessness. Answer is not policemen. Addictions need to be treated as an illness. We must let our governments know that illness is not a crime, it creates crime.

Q: Flaherty says regulators screwed up. Is that true?

A: In terms of the credit union regulators – they are appointed by the provincial gov’t, public servants. The Financial Institutions Commission has been cautious and prudent ensuring the members’ interests are preserved. Other provinces have different schemes. We have a good relationship with our regulator.

Comment: Please consider continue sponsorship of a program and actioning some recommendations [I didn’t understand- program at Balogna?]

Q: No qualm re: ombudsman. But wishes the problem had been explained first.

___________________________

Minutes are available by signing at the table. [errrrr — maybe email and ask?]

Door prizes being offered. Meeting adjourned.

That was way more fun and interesting than I expected. Next time I may be tempted to be there in person.

Again, this is the personal perspective, not official in any way, on the agm. If you want the real thing, ask for the official minutes, or maybe the video will be archived.

2259265239_0587c19e8e_m.jpgYou can just imagine the conversation. The approaching-retirement couple are assured by the financial planner/banker that, even if the worst case scenario occured – the mortgages (surely one of the most secure investments) went into default – the investment was still backed by the property. So yes, it is a conservative investment.

It sounds good to the couple (it would sound good to me!) so they hand over most of their nest egg and the funds are then lent out ultimately to people who don’t have the best credit, but want to buy a home.

Everyone wins. The people who need a mortage but don’t qualify through the usual lenders get a home. The investors make a reasonable rate of return, with the property to back it up. It’s all good.

Except the worst case scenario indeed happens. Over and over again. And next thing you know you’ve lost a massive part of your life savings.

Now what? Who pays?

According to the globe and mail, Canadian banks have agreed to lend billions of dollars in a plan to staunch the blood, in exchange for a legal bill that disallows any lawsuits against them.

Last week, Canaccord Capital made an offer to its investors to buy back their investments at par, to prevent a lawsuit. Watch for a similar offer from Credential Securities this week.

Readers: what is your opinion? At the end of the day, is this an investment risk like any other? Should the investors bear the brunt, and the responsibility, of this debacle? Or should they be allowed to sue the banks and institutions that sold them the product?

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