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In this episode, the Rational Reminder team unpacks the mechanics and implications of mega IPOs like SpaceX, OpenAI, and Anthropic potentially entering public indices. They explore how index funds handle IPO inclusion, why newly public stocks tend to underperform, and how structural features of indexing can lead to systematically buying high and selling low. The conversation dives into academic research on IPO returns, the role of free float in index construction, and how evolving market dynamics are forcing index providers to reconsider long-standing rules. They also examine alternative approaches from firms like Dimensional and Avantis, and whether investors are truly missing out by not accessing private markets. This episode blends market structure, empirical evidence, and investor behaviour into a nuanced look at one of the most talked-about investing topics today.   Key Points From This Episode: (0:00:04) Introduction to the Rational Reminder Podcast and hosts. (0:00:19) PWL Capital expands to Vancouver through partnership with Macdonald Shymko & Company. (0:03:45) Main topic: "Mega IPOs" and concerns about index fund exposure. (0:05:00) Why large private companies going public matters for index investors. (0:06:55) Index funds aim to represent markets—not optimize returns. (0:08:41) Massive scale of index funds and implications for IPO demand. (0:10:19) Why IPOs tend to have low expected returns. (0:12:39) How index inclusion rules differ (S&P 500 vs total market indices). (0:15:53) Research on "fast-track" IPO inclusion and front-running effects. (0:18:59) Why mega IPOs may amplify existing inefficiencies. (0:20:39) Important reminder: indexing trade-offs are small and structural—not fatal. (0:21:29) Potential solutions like pre-allocating IPO shares to index funds. (0:23:24) The role of free float in determining index weight. (0:25:00) NASDAQ rule changes and implications for low-float mega IPOs. (0:27:40) Conflict of interest concerns in index rule changes. (0:32:43) Why index providers may need to evolve with changing markets. (0:35:27) Historical changes to index methodology (e.g., float adjustment). (0:37:21) Why IPOs are historically poor investments ("new issues puzzle"). (0:40:28) Evidence from Dimensional on IPO underperformance. (0:41:14) IPOs behave like "junk" stocks (small, unprofitable, high growth). (0:43:04) Low-float IPOs and extreme underperformance data. (0:46:00) High valuations (price-to-sales) linked to worse IPO outcomes. (0:48:00) Index rebalancing as systematic "bad market timing." (0:50:03) Dimensional vs Avantis approaches to IPO inclusion. (0:52:56) Trade-offs and tracking error across different strategies. (0:54:16) Importance of investor discipline amid changing narratives. (0:56:00) Are investors missing out on private markets? (0:58:00) Risks and costs of accessing private shares (SPVs, fees, fraud). (1:00:15) Indirect exposure to private companies through public equities. (1:02:52) Final takeaway: index investing already captures most opportunities. (1:03:25) Wrap-up: IPOs are a known cost—not a reason to abandon indexing.   Links: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore Ben Wilson on LinkedIn — https://ca.linkedin.com/in/ben-wilson   Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

What if the decades-long debate between active and passive investing wasn't really a debate—but a data problem? In this episode, Ben Felix and Cameron Passmore are joined by Tim Edwards, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices, for a deep dive into the SPIVA Scorecard—the industry's most enduring and data-driven comparison of active versus passive investing. Tim explains how SPIVA has evolved over 25 years, why survivorship bias matters more than most investors realize, and what the data consistently shows across markets: most active funds underperform their benchmarks—especially over longer time horizons. The conversation goes beyond the headline results, exploring persistence (or lack thereof) in manager performance, why bond funds don't escape the same fate, and whether combining active funds improves outcomes (spoiler: not really). They also tackle common critiques of indexing, including index rebalancing costs, IPO inclusion concerns, and the role of index funds in market concentration.     Key Points From This Episode: (0:00:17) Introduction to the SPIVA report and its long-standing role in the indexing vs. active debate (0:01:18) Overview of the episode: SPIVA, index behavior, IPOs, and market concentration (0:03:30) What SPIVA is and how it measures active fund performance versus benchmarks (0:04:14) Why SPIVA was created: to inform—not settle—the active vs. passive debate (0:05:20) How SPIVA has evolved across regions, asset classes, and research dimensions (0:06:59) Controlling for survivorship bias and why it materially affects results (0:08:57) Real-world survivorship rates: ~50–60% of funds survive over 10 years (0:10:12) Core finding: most active funds underperform, especially over longer horizons (0:10:57) Comparison of equity vs. bond funds: slightly better outcomes in bonds, but still mostly underperformance (0:13:44) Structural differences in equity vs. bond markets (e.g., skewness, dispersion) (0:15:06) Typical survivorship rates across markets and how crises affect fund closures (0:16:02) Persistence analysis: past winners rarely remain winners (0:18:16) Global variation: some markets (e.g., international small caps) show slightly better active results (0:20:41) "Better" doesn't mean good: even in stronger categories, most funds still underperform (0:21:31) Do active funds perform better in down markets? Not consistently (0:23:37) Multi-asset portfolios of active funds: 97% underperform over 10 years (0:25:10) Selecting top-quartile funds improves outcomes slightly—but not meaningfully (0:26:46) Surprising findings in SPIVA and how market dynamics shape results (0:27:45) Impact of SPIVA on industry behavior and investor education (0:29:03) Ben shares how SPIVA influenced his own career path toward indexing (0:30:08) The "index effect" and whether index rebalancing creates performance drag (0:31:30) Why the index effect has largely diminished due to market competition and liquidity (0:34:05) Research on IPO inclusion and whether index rules create systematic return drag (0:36:57) How S&P handles IPO inclusion (e.g., 12-month seasoning rule for S&P 500) (0:39:58) Whether index methodology could evolve due to larger modern IPOs (0:42:36) Addressing concerns about large IPOs entering index funds (0:43:52) Historical perspective on market concentration and today's top-heavy indices (0:45:29) What happened to past top-10 companies: many declined, but markets still thrived (0:47:10) Creative destruction: why markets can succeed even when leaders fail (0:49:15) Weak relationship between market concentration and future returns (0:50:55) None of today's top companies were top companies in the 1960s (0:52:16) Key takeaway: markets evolve, and cap-weighted indices adapt automatically (0:53:58) Concerns about index fund growth and its impact on market function (0:54:30) Benefits of indexing: lower fees and often better investor outcomes (0:56:15) Timing the market: why waiting for a bigger drop tends to hurt returns (0:58:52) "Time in the market" vs. "timing the market" (0:59:09) Tim's favorite index: the DSPX dispersion index (1:00:53) Defining success: why happiness is the ultimate metric     Links: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

What if the way we think about investing—and expected returns—was fundamentally incomplete? In this episode, Ben Felix and Dan Bortolotti take a deep dive into one of the most influential papers in financial economics: Fama and French (1993). With nearly 15,000 citations, this research reshaped how we understand asset pricing by showing that market beta alone isn't enough to explain returns. Instead, multiple factors—specifically size and value—play a critical role. Ben and Dan unpack how this paper challenged the dominance of CAPM, introduced the now-famous Three-Factor Model, and laid the foundation for decades of empirical asset pricing research. They explore how factor investing evolved, why anomalies may not be anomalies at all, and what this means for evaluating portfolios and active managers today. The conversation also connects theory to practice—highlighting how modern fund providers implement factor strategies and what it means for investors trying to improve expected returns without abandoning diversification.     Key Points From This Episode: (0:00:00)  Introduction to the episode and why this is a long-awaited deep dive into factor investing. (0:01:12) Overview of Fama and French (1993) and its massive impact on finance and portfolio management. (0:03:55) Origins of factor investing and how it connects to index investing and academic research. (0:04:46) Core premise: multiple factors drive expected returns and asset prices. (0:06:08) He explains why different assets can have different expected returns, and why that matters for investors. (0:07:24) Ben introduces the CAPM as the dominant model that linked expected return to market beta. (0:08:53) Dan reflects on how revolutionary CAPM and portfolio theory were when they were first introduced. (0:10:51) Ben describes today as a "golden age of investing," where theory and implementation tools are widely accessible. (0:11:17) He explains how anomalies emerged that CAPM could not explain. (0:12:10) Ben introduces the joint hypothesis problem: we cannot cleanly separate market efficiency from model accuracy. (0:13:47) He identifies the three big issues with CAPM: size, value, and the weak relationship between beta and returns. (0:15:29) Ben introduces the three-factor model: market, size (SMB), and value (HML). (0:17:37) He explains that these factors are built as long-short portfolios designed to capture systematic return variation. (0:18:02) Dan notes that the model did not really address the low-volatility anomaly. (0:18:36) Ben agrees and explains that later work, including the five-factor model, went further on that front. (0:19:03) Ben describes how Fama and French formed 25 portfolios sorted by size and book-to-market. (0:20:00) He explains their use of time-series regression to test how well the model explained portfolio returns. (0:21:12) Ben walks through factor loadings, alpha, and R-squared, and why those outputs matter. (0:23:31) He highlights the model's strong explanatory power, with average R-squared around 0.93 across test portfolios. (0:25:00) Dan clarifies that unexplained return could reflect skill, luck, or another missing factor. (0:25:27) Ben emphasizes how dramatic the jump was from CAPM's explanatory power to the three-factor model's. (0:26:11) He points to small-cap growth as the major area the model struggled to explain. (0:27:09) Ben explains how the model also absorbed dividend-to-price and earnings-to-price "anomalies." (0:28:01) Dan discusses why dividend strategies may simply act as rough value screens rather than offering something unique. (0:28:52) Ben expands on how later research, especially profitability, sharpened value investing implementation. (0:30:37) He notes the unresolved debate over whether factors are true risk exposures or persistent mispricing. (0:32:16) Ben explains how factor models changed the way investors evaluate active managers and fees. (0:33:16) Dan raises the possibility that some early active managers may have intuitively identified factor opportunities before the research formalized them. (0:34:09) Ben discusses whether factor premiums have shrunk after publication and why the evidence is still noisy. (0:34:59) He describes how the paper helped launch the boom in empirical asset pricing research. (0:35:35) Ben introduces the "factor zoo" problem and the explosion of published factors. (0:36:49) He explains the five-factor model and the addition of profitability and investment. (0:38:21) Dan asks about the intuition behind profitability and investment, especially why profitable firms might have higher expected returns. (0:39:38) Ben explains profitability through a multi-factor lens and inferred discount rates. (0:42:15) He argues that combining factors matters because single-factor portfolios can have offsetting exposures. (0:44:05) Dan points out that layering too many factors naively can just bring you back toward the market portfolio. (0:44:56) Ben discusses the tradeoff between diversified tilts and concentrated factor bets. (0:46:29) Dan describes factor tilting as a subtle adjustment around a diversified core portfolio. (0:46:47) Ben cites Fama's idea that investors need to "talk themselves out of the market portfolio." (0:47:16) He notes that there is still active debate over which factors and models truly make sense. (0:48:31) Dan explains why momentum is harder to implement in practice because of turnover, taxes, and trading costs. (0:49:23) Ben says even simple-sounding factors like value and profitability remain heavily debated in academia. (0:50:20) He brings the discussion back to practical relevance: how investors can access factor exposure through funds. (0:51:06) Ben explains Dimensional's roots in academic research and its long history of implementation. (0:52:48) He introduces Avantis as a newer competitor with similar academic foundations and newly launched Canadian ETFs. (0:53:42) Ben discloses that PWL uses Dimensional extensively, while noting they are not paid to mention Dimensional or Avantis. (0:54:09) He summarizes what factor investing means for investors seeking higher expected returns through systematic tilts. (0:55:47) Dan reflects on how early PWL's adoption of index and factor-based investing was in the Canadian market. (0:57:07) Ben invites listeners to learn more about how PWL applies this thinking in client portfolios. (0:57:41) The episode moves to the after show and review section. (0:58:21) Dan reads a listener review focused on evidence-based investing, planning, and disciplined saving. (1:00:23) Ben notes that they never actually named the paper during the main episode. (1:00:32) Dan closes with: the paper is Common Risk Factors in the Returns on Stocks and Bonds.     Links: Patrick Adams – MIT PhD Candidate: https://patrick-adams.com/  Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

What if your biggest investment risk isn't the stock market—but your own income? In this episode, we are joined by Patrick Adams, a PhD candidate at MIT, for a fascinating deep dive into how income risk, spending commitments, and liquidity constraints reshape what "optimal" investing actually looks like. Drawing on large-scale administrative tax data, Patrick challenges the conventional wisdom that young investors should be heavily—or even fully—invested in equities. We explore why stocks appear safe over long horizons but become risky when real-world constraints force investors to sell at the worst possible times. Patrick explains how high-income households behave during market downturns, why their income risk is closely tied to stock market performance, and how consumption commitments like mortgages and childcare create hidden financial leverage. The conversation also introduces a new life-cycle model that incorporates these frictions—leading to surprisingly conservative optimal equity allocations for working-age investors. This episode reframes asset allocation as a problem of liquidity and risk management, not just return maximization.     Key Points From This Episode: (0:00:00) Introduction to the podcast and overview of the episode's focus on asset allocation and new research. (0:01:18) Patrick Adams' background, MIT PhD research, and how the paper was discovered. (0:07:08) Why stocks are considered safe for long-term investors based on historical returns. (0:08:37) When the "stocks for the long run" logic breaks down—forced selling during downturns. (0:10:35) Evidence: High-income households sell stocks during crashes instead of buying. (0:12:24) Data source: Administrative U.S. tax return data and its advantages/limitations. (0:14:23) Investors shift into fixed income during crashes rather than staying invested. (0:16:52) Financial reality: High wealth, but low liquid assets relative to income. (0:18:00) Human capital: Income is risky and correlated with stock market downturns. (0:20:15) Typical allocation: About 25% of liquid wealth in stocks for working-age households. (0:22:36) Higher-income households have more volatile flows and greater exposure to stock risk. (0:23:42) Income shocks drive stock selling—not just panic or behavioral mistakes. (0:25:29) Why households draw down assets instead of cutting spending sharply. (0:27:26) Consumption commitments (mortgages, childcare) act like hidden leverage. (0:27:57) Key risk factors: Income volatility, low liquidity, and inflexible expenses. (0:31:31) Traditional models vs reality: People don't cut spending—they use savings. (0:35:25) New model incorporates income risk, market crashes, and spending frictions. (0:38:33) Core finding: Optimal equity allocation for working-age investors is only 10–40%. (0:40:55) Practical takeaway: Asset allocation is fundamentally about emergency funds. (0:42:35) Higher fixed expenses require larger safe asset buffers. (0:43:49) Counterintuitive result: Retirees may optimally hold more equities than workers. (0:46:56) Scenario analysis: Selling during downturns destroys long-term returns. (0:49:12) Key drivers of results: Income-stock correlation and spending rigidity. (0:51:11) Why this model differs from others suggesting 100% equity portfolios. (0:53:20) When 100% equity could make sense: low risk, high wealth, high risk tolerance. (0:56:28) Personal impact: Patrick rethinks his own savings, risk, and spending commitments. (0:57:34) Advice for listeners: Focus on liquidity, income risk, and fixed expenses. (0:59:58) Defining success: Impactful research, teaching, and meaningful personal relationships.     Links: Patrick Adams – MIT PhD Candidate: https://patrick-adams.com/  Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

In this episode, we unpack the growing tension in private markets—private equity, private credit, and private real estate—and examine whether their long-standing appeal holds up under scrutiny. With increasing pressure to bring these investments to retail investors, the discussion explores how illiquidity, valuation opacity, and complex fee structures may be masking risks rather than reducing them. We break down how private assets are marketed, why their "smooth" returns may be misleading, and what recent events—like gated funds and forced asset sales—reveal about their true risk profile.    Key Points From This Episode: (0:00:00) Introduction to the episode and overview of private markets as the main topic. (0:00:39) Clarifying PWL Capital's full-service wealth management approach beyond asset management. (0:03:24) Why private markets are under scrutiny and recent negative developments across asset classes. (0:06:36) The seductive sales pitch: higher returns, lower risk, and low correlation to public markets. (0:08:32) Private assets explained: what they are and why they appear less volatile. (0:10:06) "Volatility laundering" and the illusion of stability in private market valuations. (0:13:51) Retail investors entering private markets and the risk of adverse selection. (0:15:09) Liquidity challenges and the growing issue of gated funds. (0:18:33) Why illiquidity is especially problematic for retail investors with uncertain cash needs. (0:20:41) The debate over whether an illiquidity premium actually exists. (0:23:56) Trade-offs between liquidity and volatility in portfolio construction. (0:30:41) Evidence on private equity performance vs. public markets and the role of fees. (0:31:39) High dispersion in private equity returns and challenges of manager selection. (0:33:00) Continuation funds and evergreen structures raising valuation concerns. (0:36:00) Secondary market sales, NAV manipulation concerns, and "NAV squeezing." (0:40:00) Private credit risks, gating, and comparisons to publicly traded BDCs. (0:44:00) Insurance companies allocating to private credit and potential systemic risks. (0:45:02) Private real estate funds, liquidity issues, and IPO valuation shocks. (0:47:43) Public listings revealing large gaps between NAV and market prices. (0:49:34) Summary: private markets may be as risky as public ones, with added complexity. (0:49:44) Larry Swedroe's critique and the debate over private market outperformance. (0:52:00) Illiquidity premium vs. "smoothing as a service" debate. (0:54:00) Manager skill, persistence, and the challenge of accessing top-tier funds. (0:56:50) Final reflections on ongoing research and the importance of informed debate.   Links: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore   Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

What if factor investing in Canada became as simple—and affordable—as buying a single ETF? In this episode, we are joined by Eduardo Repetto, CIO of Avantis Investors, and Caitlin Ebanks, Director of ETF Strategy at CIBC, to unpack the long-awaited launch of Avantis ETFs in Canada. This conversation explores how a partnership built on client-first principles and fee discipline is bringing sophisticated, evidence-based investing strategies to Canadian investors in a dramatically more accessible way. We dive into the structure and philosophy behind the new ETF lineup, including how Avantis applies factor tilts, why implementation details like direct security ownership and low turnover matter, and how the new asset allocation ETF (CAGE) could simplify portfolio construction for DIY investors. Eduardo also shares insights into Avantis' research process, expected premiums, and the realities of tracking error, while Caitlin explains how CIBC is positioning these products within the Canadian ETF landscape. This episode is a deep dive into the evolution of factor investing—covering product design, pricing, portfolio construction, and the broader shift toward low-cost, transparent investment solutions.   Key Points From This Episode: (0:00:00) Introduction to the episode and the significance of Avantis launching ETFs in Canada. (0:00:42) Why this launch marks a major step forward in accessibility for Canadian factor investors. (0:02:52) Lower fees and simplified implementation remove key barriers to factor investing. (0:04:55) Background on Eduardo Repetto and Caitlin Ebanks. (0:08:12) Avantis surpasses $125B AUM and the drivers behind its rapid growth. (0:10:20) How the Avantis–CIBC partnership came together and aligned on client-first pricing. (0:13:04) CIBC's ETF strategy and rationale for partnering with Avantis. (0:14:49) Overview of the Avantis ETF lineup launching in Canada. (0:19:33) Fee structure, competitiveness, and expected MER approach. (0:21:25) Eliminating operational cost uncertainty from investor fees. (0:23:20) "Gas station sushi" and maintaining product quality. (0:25:08) Why ETFs were chosen over mutual funds as the primary vehicle. (0:28:29) Roles of Avantis and CIBC in managing and operating the ETFs. (0:29:32) Direct security ownership vs. ETF-of-ETF structures and tax implications. (0:31:23) Construction of the CAGE asset allocation ETF and its factor tilts. (0:33:46) Expected outperformance (1.5–2%) and tracking error (3–4%) ranges. (0:35:26) Transparency challenges and regulatory considerations in Canada. (0:37:26) How CACE differs from the TSX through profitability and valuation tilts. (0:40:13) Low turnover and tax efficiency considerations. (0:42:05) Long-term commitment to the ETF lineup and viability concerns. (0:43:44) Ongoing research and potential improvements to factor implementation. (0:46:07) Current research focus: improving profitability forecasting. (0:48:30) What excites Caitlin and Eduardo most about the launch. (0:50:41) Why CAGE could transform how Canadians implement factor investing.   Links: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore   Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

In this special 400th episode, the Rational Reminder hosts reflect on 50 years of index investing and the profound impact it has had on financial markets, investor behavior, and the cost of investing. The episode features a panel moderated by Ben Felix at the New York Stock Exchange—hosted by Vanguard and S&P Dow Jones Indices—bringing together leading voices in the indexing world to explore how passive investing evolved and what it means for the future of capital markets. Ben is joined on the panel by Tim Edwards (S&P Dow Jones Indices), Jim Rowley (Vanguard), and Shelly Antoniewicz (Investment Company Institute) to discuss the mechanics of indexing, the myths surrounding passive investing, and the evidence on how index funds affect markets. They unpack questions about market concentration, price discovery, and whether indexing is changing the structure of capital markets. Key Points From This Episode: (0:00:04) Introduction to the Rational Reminder podcast and the hosts from PWL Capital. (0:00:24) Celebrating the 400th episode and reflecting on nearly eight years of podcasting. (0:01:09) Dan Bortolotti discusses the early days of podcasting and the transition from the Couch Potato podcast. (0:02:11) The rise of podcasts and YouTube as major sources of financial education for investors. (0:02:49) How Rational Reminder grew after Dan ended his previous podcast and the demand for Canadian investing content. (0:03:47) The podcast reaches a record audience with over 384,000 views and downloads in January 2026. (0:04:19) Institutional investors—foundations, endowments, and unions—show increasing interest in PWL's low-cost index approach. (0:06:20) Why indexing can still be a difficult sell for institutional investment committees. (0:08:25) Peer effects in institutional investing: committees often hesitate to adopt strategies that seem unconventional. (0:09:11) 2026 marks 50 years since Vanguard launched the first retail index fund in 1976. (0:10:08) Ben moderates a panel at the New York Stock Exchange on the future of index investing. (0:11:55) Overview of the panel participants from Vanguard, S&P Dow Jones Indices, and the Investment Company Institute. (0:13:07) Discussion of research papers presented at the event examining index investing's market impact. (0:14:32) Historical context: the S&P 500 is currently as concentrated as it was in the mid-1960s. (0:15:36) The largest companies in 1965—AT&T, Kodak, GM, IBM—eventually faded from dominance. (0:17:43) A hidden advantage of cap-weighted indexing: investors automatically own future winners. (0:20:59) Debate about whether today's tech-heavy market concentration differs from past cycles. (0:23:30) The explosion of index funds and ETFs has created thousands of ways to implement passive strategies. (0:26:42) Technical improvements in ETF implementation, including lower tracking error and better hedging. (0:29:02) The "Vanguard Effect": index investing has driven massive reductions in investment fees. (0:29:38) Index funds account for about 23% of total U.S. market capitalization, not the commonly cited 50%. (0:32:48) Evidence suggesting index funds have not increased large-cap concentration in markets. (0:34:25) Passive funds represent only about 1–2% of daily trading activity. (0:36:16) Dispersion in stock returns remains high, meaning opportunities for active management still exist. (0:38:12) Panel begins: defining passive investing and why the term is more complex than it seems. (0:42:13) Who invests in index funds? Millions of households using them primarily for retirement savings. (0:45:22) How advisors and institutions use ETFs to build diversified long-term portfolios. (0:46:19) The surprising role of ETFs in trading and market liquidity. (0:48:30) The proliferation of niche ETFs raises questions about whether indexing has strayed from Bogle's vision. (0:49:49) Academic research offers conflicting views on indexing's effect on market efficiency. (0:52:27) Evidence suggests index fund growth has not increased market volatility. (0:54:25) Dispersion data shows indexing does not eliminate opportunities for stock picking. (0:57:15) Index funds own only about 30% of the U.S. stock market, leaving the majority in active hands. (0:59:42) Historical perspective: high market concentration has occurred before and eventually declined. (1:02:14) Research remains inconclusive about whether indexing harms markets. (1:05:25) Over 20 years, 94% of actively managed U.S. equity mutual funds underperformed the S&P 500. (1:06:20) Post-panel reflections and discussion with the Rational Reminder hosts. Links From Today's Episode: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore   Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

In this episode, we welcome back James Choi, Professor of Finance at the Yale School of Management, to unpack one of the most important—and misunderstood—questions in personal finance: How much of your portfolio should be in stocks? Drawing on his new paper, Practical Finance: An Approximate Solution to Lifecycle Portfolio Choice, James walks us through the classic portfolio choice problem first solved by Robert C. Merton, later extended by Francisco Gomes and co-authors, and now made dramatically more usable through a spreadsheet-based approximation. We explore how risk aversion, wealth, labor income risk, and expected returns shape optimal asset allocation, why simple rules like "100 minus your age" aren't terrible but still costly, and how James and his co-authors managed to approximate a complex dynamic optimization model with an error of less than 0.1% in lifetime welfare.   Key Points From This Episode: (0:04) Introduction and why this episode delivers on "mathy roots." (1:10) James Choi's new paper: Making lifecycle portfolio choice solvable in a spreadsheet. (5:15) The portfolio choice problem: How much should you allocate to stocks versus risk-free assets? (6:09) The classic Merton (1969, 1971) solution and the "Merton share." (8:00) The equity premium formula: Expected excess return ÷ (risk aversion × variance). (11:20) Extending the model to risky labor income (Cocco, Gomes, and Maenhout). (14:27) Why labor income behaves bond-like—even when it's risky. (16:33) How wealth, risk aversion, and labor income characteristics affect optimal equity allocation. (20:52) Transitory vs. permanent labor income risk—and why permanent risk matters more. (23:04) Solving thousands of parameter sets to approximate optimal lifecycle allocations. (27:09) How close is the approximation? ~3–4 percentage points on average, with (29:56) Comparing to rules of thumb: 100 minus age and 60/40. (32:08) Why 0% equities is often far worse than 100% equities. (33:33) What the optimal allocation typically looks like over the life cycle. (38:55) Walking through the publicly available Google Sheet to calculate your allocation. (44:39) Estimating your risk aversion using a coin-flip thought experiment. (46:08) Forecasting future labor income and using wage imputation. (48:05) Why housing is excluded—and why it's so hard to model. (50:35) How often you should update your assumptions (hint: not often). (53:06) Leverage, constant leverage ETFs, and why young investors might rationally use them. (58:55) Discussing lifecycle advice from Scott Cederburg and co-authors. (1:07:40) What practical finance problem James wants to tackle next (hint: the 4% rule and retirement spending). Links From Today's Episode: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

In this episode, we sit down with Tom Hardin, also known as "Tipper X," the former hedge fund analyst who became one of the most prolific informants in the largest insider trading crackdown in U.S. history. Tom walks us through his journey from rule-following soccer referee in Georgia to Ivy League graduate and rising Wall Street analyst—before crossing the line into insider trading at age 29. What makes this conversation so compelling is not just the crime, but how ordinary it felt at the time. Tom explains how small rationalizations, cultural pressures, ambition, and the normalization of questionable behavior gradually eroded his ethical boundaries. After being arrested and recruited by the FBI, he wore a wire 48 times and helped build over 20 cases in Operation Perfect Hedge, exposing widespread misconduct across the hedge fund industry. We explore the psychology of ethical failure, the "fraud triangle," moral licensing, and the difference between ethics in the classroom and ethics in the real world. Tom also reflects on redemption, forgiveness, mentorship, and how he now defines success after losing his finance career.   Key Points From This Episode: (0:04) Introduction to Tom Hardin, former hedge fund analyst turned FBI informant. (5:15) Tom's conviction: One count of securities fraud and one count of conspiracy after four illegal trades netting $46,000. (6:11) Early life as a rule-following soccer referee and how ambition shaped his identity. (8:07) The hedge fund world as a meritocracy—high pressure, high stakes, and performance-driven culture. (9:13) How insider trading networks operated openly in certain hedge fund circles. (12:21) The legal definition of insider trading: material non-public information and breach of fiduciary duty. (15:25) How difficult it is to consistently generate returns without some form of edge. (16:26) The first insider tip—and the rationalizations that followed. (19:03) The "fraud triangle": pressure, opportunity, and rationalization. (22:16) Placing the first illegal trade—and feeling almost nothing. (24:39) Peer validation and the normalization of wrongdoing. (28:38) The 6:30 a.m. arrest and being approached by the FBI. (31:43) Deciding to cooperate—and becoming "Tipper X." (36:24) Learning to wear a wire and extract incriminating statements over multiple meetings. (38:26) Inside Operation Perfect Hedge: 81 individuals charged, 32 cooperators. (39:28) The chilling effect on hedge funds and the possible decline of illicit "edge." (42:12) Being publicly unmasked as Tipper X and the personal cost to his family. (44:02) Why ethical failures are incremental—not sudden transformations. (45:11) The gap between academic ethics and real-world psychological pressure. (46:57) The role mentorship could have played—and how culture shapes behavior. (50:29) Tom's view on hedge funds for retail investors: high fees, limited liquidity, and questionable value. (52:04) Ethical drift, rationalization, and warning signs to watch for. (52:35) Redemption: Owning mistakes fully and learning to forgive yourself. (55:02) Redefining success—relationships, honesty, and meaningful contribution.   Links From Today's Episode: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Dan Bortolotti — https://pwlcapital.com/our-team/ Dan Bortolotti on LinkedIn — dan-bortolotti-8a482310  Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

In this episode, we welcome back return guest Hank Bessembinder for a deeply analytical conversation spanning leveraged ETFs, volatility, and the future of performance measurement. Hank walks us through his latest research on leveraged single-stock ETFs, clarifying the misunderstood concept of "volatility decay" and decomposing returns into rebalancing effects and frictions. The results are striking: meaningful underperformance relative to simple levered benchmarks, driven by both embedded costs and the mechanics of daily resets. In the second half, we shift gears to a more foundational question: What is a return, really? Hank challenges the dominance of arithmetic averages and even geometric means, arguing that neither truly captures the long-term investor experience. He introduces the concept of the sustainable return—a measure based on the cash flows an investment can support without depleting capital—and outlines how it could reshape academic finance and real-world financial planning. Key Points From This Episode:   (0:01:03) Welcome back to Hank Bessembinder and overview of his recent research. (0:06:16) What "volatility decay" really means—and why the term may be misleading. (0:09:16) Why volatility does not necessarily reduce mean returns in constant leverage ETFs. (0:10:11) Ex-ante decision-making and the wedge between mean and median outcomes. (0:11:26) Single-stock vs. index leveraged ETFs: Similar mechanics, different magnitudes. (0:12:52) Why past research has been so cautionary about long-term use of leveraged ETFs. (0:15:53) How rebalancing costs differ for long and short leveraged products. (0:16:57) The benchmark: Levered buy-and-hold versus constant daily rebalancing. (0:19:46) Empirical results: Long funds underperform by ~0.8% per month; short funds by ~1% per month. (0:21:10) Decomposing underperformance into rebalancing effects and frictions. (0:24:15) The real (though rare) possibility of returns below –100% in leveraged products. (0:27:04) Simulation results over 50 years: Skewness, negative medians, and rebalancing drag. (0:28:38) Why volatility tends to coincide with reversals—and why reversals drive rebalancing costs. (0:31:15) Practical guidance: Who, if anyone, should use leveraged single-stock ETFs. (0:34:58) The limitations of arithmetic means and single-period models. (0:36:55) Why aggregate investors are not buy-and-hold investors. (0:39:17) The shortcomings of arithmetic averages, alphas, and Sharpe ratios for long-horizon measurement. (0:42:38) Why log returns don't solve the core measurement problems. (0:44:56) The case for dollar-weighted returns and the limitations of IRRs. (0:48:18) Modified IRRs and their role in capturing aggregate investor outcomes. (0:50:14) Introducing the sustainable return: Measuring what can be withdrawn without depleting capital. (0:53:22) Expected sustainable return and its close relationship to the geometric mean. (0:56:09) Proportional sustainable return and withdrawal-based performance measurement. (1:00:00) Individual stock returns through the lens of sustainable returns. (1:00:53) Nudging academic finance beyond the "econometric streetlight." Links From Today's Episode: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/ Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

In this episode of the Rational Reminder Podcast, we are joined by Theresa Ebden, Vice President of the Investor Office at the Ontario Securities Commission, for a deep dive into how regulators are thinking about modern investor risks—from AI-powered scams to finfluencers and the gamification of investing apps. Theresa explains how the OSC works to protect investors through policy, education, behavioral research, and direct engagement with the public, and why investor education is one of the most powerful tools regulators have. Key Points From This Episode: (0:01:55) Overview of the OSC and why its investor research and education work matters. (5:42) What the Ontario Securities Commission does and its mandate to protect investors and capital markets. (6:25) Inside the OSC Investor Office: policy, education and outreach, and the investor contact centre. (9:28) How the Investor Office identifies priority issues using inquiry data, behavioral insights, and global collaboration. (12:11) The nature of investor inquiries: fraud, crypto confusion, complaints, and recovery room scams. (14:01) How contact-centre data feeds into education, outreach, and policy responses. (16:07) Overview of GetSmarterAboutMoney.ca and its role in investor education. (20:43) Major retail investor risks today: AI-enhanced scams, finfluencers, dark patterns, and gamification. (24:43) What to do if you're impersonated by AI in scam advertisements. (29:28) What a "finfluencer" is and the different categories they fall into. (31:01) Research findings on how strongly finfluencers influence investor decisions. (32:55) Why non-investors are especially vulnerable to finfluencer advice and social-media scams. (36:11) How investors can evaluate online financial advice and check credentials. (38:02) Regulatory challenges in overseeing finfluencers and online financial content. (41:04) How AI magnifies traditional scams and why AI-enhanced fraud is more effective. (43:42) Mitigation strategies: education, just-in-time warnings, and system-level tools. (47:25) Relationship investment scams and why they are especially damaging. (52:53) Research on gamification in investing apps and its effects on investor behavior. (55:25) The Get Smarter About Trading simulator and how it demonstrates gamification effects. (57:19) How gamification can be used positively to improve diversification and outcomes. (58:16) Theresa's perspective on success and her focus on improving the individual investor experience. Links From Today's Episode: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Dan Bortolotti — https://pwlcapital.com/our-team/ Dan Bortolotti on LinkedIn — https://ca.linkedin.com/in/dan-bortolotti-8a482310 Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

Ben Felix and Braden Warwick are joined by Dr. Charles Chaffin, a leading voice in financial psychology, to explore why investors so often act against their own best interests—and how better tools and frameworks can help bridge the gap between rational plans and real human behavior. The conversation blends behavioral finance, goal setting, and risk profiling, while also introducing a new evidence-based risk tolerance questionnaire now being made publicly available to listeners. The episode digs into why humans are wired for short-term survival rather than long-term optimization, how biases and environment shape financial decisions, and why coaching—not transactions—is becoming the advisor's most important role. Charles explains concepts like money scripts, financial flashpoints, identity-based goals, and financial self-efficacy, tying them directly to investing behavior and client outcomes. The discussion also goes deep on financial risk tolerance: what it really is, why people consistently misjudge it, and why psychometric tools outperform traditional questionnaires. Key Points From This Episode:   (0:00:00) Introduction to Episode 395 and guest Dr. Charles Chaffin (0:01:15) Charles' background in financial planning psychology and authorship (0:02:30) Why PWL wanted to move beyond the Grable–Lytton Risk Tolerance Scale (0:03:40) Introduction to the Money and Risk Inventory (MRI) and full disclosure (0:04:55) Announcement: Public access to a psychometric risk tolerance questionnaire (0:05:10) Risk tolerance vs. risk capacity—and how PWL combines both (0:06:43) Why firms must map risk scores to asset allocations themselves (0:08:35) The role of psychology in financial planning beyond technical advice (0:10:17) The Klontz–Chaffin model of financial psychology (0:12:05) Why humans are "bad with money": survival brains and emotions (0:13:30) How heuristics and biases derail long-term planning (0:15:42) Tools for overcoming bias: automation, pre-commitment, and friction (0:21:29) How environment and social context shape financial behavior (0:26:38) Financial flashpoints and their lasting impact on risk tolerance (0:29:35) Financial self-efficacy and why low confidence leads to avoidance (0:36:01) Money scripts: avoidant, worship, status, and vigilant (0:40:07) Why understanding your own money scripts matters (0:41:19) Common behaviors that lead to poor financial outcomes (0:42:59) Practical strategies for recognizing and mitigating bad behaviors (0:48:22) The role of identity in goal setting (0:50:07) Why goals matter for motivation and behavior alignment (0:52:56) Intrinsic vs. extrinsic goals and self-determination theory (0:58:26) When quitting a goal is the right decision (1:00:26) What financial risk tolerance really is (1:02:16) Why people consistently misjudge their own risk tolerance (1:03:31) How stable risk tolerance is over time—and what changes it (1:05:12) Why reassessing risk tolerance regularly improves outcomes (1:06:05) Handling couples with mismatched risk profiles (1:07:37) Psychometric vs. revealed-preference risk questionnaires (1:09:30) Evidence showing psychometric tools better explain real risk-taking (1:10:39) Where traditional risk tolerance questionnaires fall short Links From Today's Episode: PWL Risk Profile Tool — https://research-tools.pwlcapital.com/research/risk-profile Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

Equal-weighted index funds sound like an elegant solution to some of today's biggest investor anxieties: high market concentration, elevated valuations, and outsized influence from a handful of mega-cap stocks. In this episode of the Rational Reminder Podcast, Ben Felix, Dan Bortolotti, and Ben Wilson take a deep, evidence-based look at whether equal weighting actually improves portfolios—or simply introduces new risks under a different name. The discussion breaks down how equal-weighted indices differ fundamentally from traditional market-cap-weighted indexes, why equal weighting has historically outperformed in certain periods, and what's really driving those results beneath the surface. The team explains how equal weighting tilts portfolios toward smaller, cheaper, and more volatile stocks, while also systematically trading against momentum due to frequent rebalancing. Key Points From This Episode:   (0:01:10) Introduction to Episode 394 and discussion about declining enthusiasm over long podcast runs. (0:02:00) PWL Capital's growing work with institutional clients and why index-based approaches are rare in that space. (0:05:12) Episode topic introduced: equal-weighted index funds and why listeners keep asking about them. (0:06:00) Definition of market-cap-weighted vs. equal-weighted indexes using the S&P 500 as the main example. (0:07:14) Historical outperformance of equal-weighted S&P 500 indexes and why start dates matter. (0:09:00) Equal weight vs. cap weight performance over the last decade: meaningful recent underperformance. (0:10:21) Market concentration concerns and why equal weighting appears attractive during periods of high valuations. (0:12:00) Why market-cap-weighted indexes do not mechanically buy more overvalued stocks as prices rise. (0:16:14) Trading costs explained: explicit vs. implicit costs and why turnover matters more than TER. (0:19:16) Capital gains, tax efficiency, and reporting differences between Canadian and U.S. funds. (0:21:07) Market concentration historically shows little relationship with future returns. (0:24:58) Volatility comparison: equal-weighted indexes are meaningfully more volatile due to small-cap exposure. (0:25:12) Equal weighting increases exposure to small-cap, value, and high-volatility stocks. (0:28:58) Sector distortions created by equal weighting and why this represents uncompensated risk. (0:31:21) Unintended consequences: sector bets, security-level overweights, and forced rebalancing. (0:32:30) Turnover is roughly 10× higher in equal-weighted funds than cap-weighted equivalents. (0:33:15) Equal weighting behaves as a systematic anti-momentum strategy. (0:34:02) Multi-factor regression results: positive size and value exposure, negative momentum loading. (0:36:33) Rebalancing frequency trade-offs and how quarterly rebalancing amplifies momentum drag. (0:42:21) Comparison with alternative approaches that target similar factor exposures more efficiently. (0:44:47) Why backtests are seductive—and why live fund results matter more. (0:47:40) Investor behavior, uncertainty, and the constant search for strategies that "fix" the market. (0:48:41) Factor investing in disguise: most deviations from cap-weighting are just factor tilts. (0:53:06) Equal weighting as an acceptable strategy—if investors understand and accept the trade-offs. (0:57:18) Listener feedback, enthusiasm jokes, and discussion about Spotify video uploads and audio speed. Links From Today's Episode: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Dan Bortolotti — https://pwlcapital.com/our-team/ Dan Bortolotti on LinkedIn — https://ca.linkedin.com/in/dan-bortolotti-8a482310 Ben Wilson on LinkedIn — https://www.linkedin.com/in/ben-wilson/ Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

What if financial planning were approached the same way engineers design aircraft, medical treatments, or complex systems—with clearly defined objectives, constraints, and rigorous trade-off analysis? In this episode, Benjamin Felix is joined by Braden Warwick for a deep dive into what it means to engineer financial outcomes. Drawing on Braden's background as a PhD-trained mechanical engineer and his work building financial planning software at PWL Capital, the conversation reframes financial planning as a design problem rather than a speculative exercise. They explore the critical distinction between a financial plan and a financial projection, why uncertainty does not invalidate good planning, and how professional communication under uncertainty can build trust with clients—especially those from technical backgrounds. The discussion highlights the importance of goals-based planning, sensitivity analysis, and explicitly quantifying trade-offs when clients have multiple competing objectives. Key Points From This Episode: (0:00:04) Introduction to Episode 393 and the return of Braden Warwick (0:02:50) Braden's role at PWL and his experience deploying Conquest Planning software (0:05:46) The tension between low industry entry barriers and professional standards in financial planning (0:07:54) Braden's background in mechanical engineering and academia 0:09:33) Financial plans vs. financial projections: why uncertainty doesn't make a plan "wrong" (0:12:59) Lessons from medicine and engineering on communicating decisions under uncertainty (0:15:15) An engineering framework for financial planning: objectives first, then solutions (0:18:42) Why surface-level goals like "minimize tax" or "maximize returns" often miss what really matters (0:21:19) Evaluating plans against goals using projections, scenario analysis, and sensitivity analysis (0:24:28) Why sensitivity analysis helps planners focus on what actually drives outcomes (0:29:27) Handling multiple competing goals using trade-off analysis and Pareto frontiers (0:36:46) Practical ways planners can present trade-offs without complex math (0:39:25) Case study setup: professional financial planning with corporate clients (0:40:20) Salary vs. dividends for business owners when optimizing for legacy goals (0:44:26) Why financial planning software outputs can be misleading without context (0:48:23) The importance of understanding how planning software calculates key metrics (0:50:22) Using PWL's free retirement tool to analyze CPP and OAS timing decisions (0:53:44) Approximating Monte Carlo outcomes using standard error of the mean (0:56:16) Linking "bad" and "terrible" outcomes to plan success probabilities (0:58:44) How CPP and OAS deferral affects sustainable spending and downside protection (1:02:46) What makes PWL's CPP calculator different from typical break-even tools (1:05:15) Why wage inflation assumptions materially affect CPP deferral decisions (1:07:46) Closing framework: goals, constraints, sensitivity analysis, and quantified trade-offs (1:09:36) Financial planning as an emerging discipline rooted in engineering-style thinking Links From Today's Episode: Live Webinar: How Much Do You Need to Retire in Canada? | Feb 12 @ 12NN EST | Register here — https://pages.pwlcapital.com/webinar-how-much-do-you-need-to-retire-in-canada?utm_source=rational%20reminder&utm_medium=rr_ep393&utm_campaign=webinar_retirement Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

ETFs were once almost synonymous with low-cost, sensible investing. But that era is changing fast. In this episode, Ben Felix, Dan Bortolotti, and Ben Wilson introduce and unpack the concept of "ETF slop"—the explosion of complex, high-fee, behaviorally engineered ETFs that are designed to attract assets rather than improve investor outcomes. The trio traces how ETFs evolved from simple index-building tools into wrappers for increasingly speculative strategies. They discuss how the ETF "halo effect" can mislead investors into equating structure with quality, and why innovation in financial products often benefits manufacturers more than end investors. From thematic hype to downside "protection" that isn't what it seems, the episode offers a clear framework for thinking critically about modern ETF offerings. Key Points From This Episode: (0:00:04) Introduction to the Rational Reminder Podcast and the hosts. (0:00:39) Ben introduces the idea of "ETF slop" and why ETFs are no longer synonymous with sensible investing. (2:20) More actively managed ETFs now exist than index-tracking ETFs in the U.S. (3:30) ETFs increasingly engineered to attract assets rather than improve investor outcomes. (4:04) Record ETF launches in 2025: over 1,000 in the U.S. and 300+ in Canada. (6:43) Average management fees on newly launched ETFs rival traditional active mutual funds. (7:47) The ETF "halo effect" and why structure is mistaken for quality. (10:31) What an ETF actually is—and why it's just a wrapper for a strategy. (11:13) The first ETF was launched in Canada and still exists today. (14:40) ETFs as tools for speculation versus long-term investing. (17:08) Evidence that simpler allocation funds reduce harmful investor behavior. (20:35) Why too much product choice can make good investing harder. (21:40) Four categories of ETF slop introduced: thematic, buffer, covered call, and single-stock ETFs. (22:16) Why thematic ETFs appeal to optimism and extrapolation bias. (24:04) Evidence that most thematic ETFs underperform after launch. (26:25) Morningstar data: almost no thematic ETFs outperform over long horizons. (28:55) Why exciting narratives don't translate into superior returns. (31:25) Buffer ETFs explained: capped upside with partial downside protection. (34:31) Research showing high fees, high costs, and inconsistent protection. (38:16) Why simple stock/bond mixes dominate buffer ETFs even in drawdowns. (42:53) Covered calls: high income today, lower total returns tomorrow. (45:48) Why covered call ETFs systematically underperform their underlying assets. (47:38) Income needs can be met more efficiently without covered calls. (48:19) The cult-like following driven by double-digit yield marketing. (49:57) Single-stock ETFs as the "sloppiest" form of ETF slop. (53:44) Leveraged and inverse ETFs magnify volatility and complexity. (56:20) Research showing massive underperformance versus simple benchmarks. (58:56) Why these products resemble speculation more than investing. (1:03:35) Complexity in investment products is strongly linked to poor outcomes. (1:05:48) John Bogle's warning: beware of new and "hot" investment products. (1:06:48) Why ETFs are powerful tools—but only when used correctly. Links From Today's Episode: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/ Ben Wilson on LinkedIn — https://www.linkedin.com/in/ben-wilson/ Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)