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Canada's Future? Look To Kelowna
Financial Post, Thursday, February 21, 2008
William Hanley

Ken Hawkins is a good man to talk to during RRSP season. He is semi-retired, lives in Retirementville, Canada (aka, Kelowna, B.C.), is a Boomer at 57 and the work he still does concerns checking over the suitability of people's portfolios.

As vice-president of research and development for Second Opinion Investor Services Inc., and in his former life as a senior equities portfolio manager, Hawkins has seen just about every kind of mistake that people make in building their RRSPs and preparing for retirement.

"People look at their RRSPs as another kind of investing account," he says over the phone from Kelowna. "They don't think about it as their personal pension plan, which it is, particularly for all those people who don't have a pension plan at work."
Hawkins says if you think of it as your own personal pension plan, you think the same way that the head of a big pension plan thinks. "How they manage is the same as you should manage -- just on a smaller scale. In essence, you have to be the chief investment officer of your RRSP."

Second Opinion (www.secondopinion.ca) was founded in Toronto by Warren MacKenzie in 2003. For a fee, MacKenzie and his staff examine the suitability of portfolios, giving unbiased opinions. They sell no investment products. I met MacKenzie over lunch when he was just launching what's turned out to be a successful business that's filled a niche in the investment industry. Hawkins and I exchanged e-mails following an About Retirement column containing some comments with which he disagreed.

He moved out to Kelowna in 2003 after being "restructured" out of his equity portfolio management position at the Ontario Teachers' Pension Plan. He had links to British Columbia and, instead of continuing his career in Toronto, reckoned it was the right move at the right time while taking early semi-retirement.

Kelowna, he says, is what Canada will look like in 15 or 20 years when all the Boomers are in their 60s and beyond. For cities with populations of 100,000 and over, it has a greater percentage of people over 65. Meantime, the number of those under 25 has been dropping. "It's on the leading edge of where a lot of places in Canada are going to be."

Noting that there are "tons" of real estate agents, brokers, accountants and lawyers in the city, Hawkins, ever the observer, says Kelowna may be in danger of becoming a grey ghetto with an economy that is far from dynamic.

"Kelowna has a lot of wealth, but not a lot of income. People have million-dollar homes but are not spending money. People spend their income. They don't spend their wealth. Someone in their 40s and earning $200,000 spends a lot more than the retired person with $2-million or $3-million in the bank."
Hawkins says that Kelowna is a resort town and notes that people like to retire where they would like to vacation. That said, it takes some wealth and some income to retire to Kelowna, which returns us neatly to RRSPs.

He says you do need to save wisely and consistently to make sure you can have the basics of a good life after work.

"In the end, what you need is consistency of performance in your portfolio. You're not going to shoot the lights out for 50 or 60 years. Just plod ahead and make your returns. And it doesn't end when you retire."

Hawkins also stresses that the few years either side of retirement are very crucial from an investment perspective. "You make a mistake in those two or three years and that could make the difference between a good retirement or a bad retirement financially."

He gives the example of the person who retires with a $500,000 nest egg and an expectation of making an average 8% over the long term. But if this person retires at the top of a bull market and enters retirement just when a bear market unfolds, it could be disastrous. Not only might the retiree spend that notional 8% in the first year of retirement, the bear market might cut the value of his portfolio by 20%. The result: In short order, that half a million is down to $360,000 and retirement doesn't look as sweet and secure.

"In the end, the most important thing is asset allocation," Hawkins says. "You need a balance between fixed income, equities and cash."

He himself has a balance of ETFs based in Canadian, U.S. and international markets and T-bills, keeping it simple along the lines of his life in semi-retirement. The income from his work for Second Opinion helps, he says, "to cover daily expenses."

Meantime, he enjoys walking his dogs, plays a little golf and does some hiking in the beautiful country around Retirementville, Canada.

mailto:whanley@nationalpost.com

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