In this podcast, Som Seif, a prominent figure in the Canadian financial services industry, discusses his background and journey to success with Jason Boudreau. He shares his experience immigrating to Canada as a child, his initial aspirations to become an architect, and his path to discover his true passion.

 

 

About the Guest – Som Seif

CEO of Purpose Inc.
CEO of Purpose Unlimited
Som Seif is the Founder and Chief Executive Officer of Purpose, which he formed following the sale of Claymore Investments to BlackRock Inc. in March 2012 and the Co-Founder of WealthSimple Technologies Inc. Prior to Claymore Investments, Som was an investment banker with RBC Capital Markets. He has a strong commitment to community and is currently a member of the AGO Foundation Board, Next Canada Board, and UofT Pre-Campaign Committee and Mechanical and Industrial Engineering Advisory Committee.

About the Host – Jason Boudreau

Jason has built VELA Wealth into an established life and estate planning firm, guiding families as they make meaningful choices at the intersection of life and wealth. Jason’s areas of expertise include intergenerational wealth transfer and estate planning with a focus on advanced insurance-based solutions that incorporate philanthropy and legacy planning. Leveraging these specialties, Jason brings a fresh perspective and outside-the-box thinking to the strategic planning process. To read more, please visit the VELA team page.

 

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The Podcast Transcript

 

Jason Boudreau:

Welcome, everybody to the Polestar Podcast by VELA Wealth. We are honored and excited to have Som Seif – entrepreneur, extraordinaire and well-known guy in the financial services industry in Canada. Looking forward to having a great dialogue with him. Welcome Som, thank you for being here.

 

Som Seif:

Well, thanks for having me, Jason.

 

Jason Boudreau:

So normally these podcasts go as a nice open conversation, but one of the things I was hoping we could do today is get a bit of background on you. I want to understand where you came from, where your family came from and how you ended up in Canada.  I love sharing the entrepreneurial journey but also interested to know how someone’s family life originated in Canada. So, why don’t we start the story and then dial up from there and then we’ll move it ahead.

 

Som Seif:

Sure. I think that a large part of my actual background story is a large part of the character of who I am, as I’d say most people are.  My family immigrated to Canada when I was three from Iran, just around the time of the Iranian Revolution. As we fast forward to the world that we’re in today there are a lot of correlations to that time, of course, in a different way and I think it’s an interesting time to be reflective of the last 40-plus years in the world, in the Middle East and of course, in Iran. My family moved to Canada, and it’s an interesting story actually. I asked my parents about a decade ago what it was that made them come to Canada. And it’s an interesting story because my father was studying for his master’s degree in England. I was born in England. We moved back to Iran, and he originally wanted to stay in England and his professor told him, “it would be stupid for you to stay here. You’re a Middle Eastern man and we are in the 70s in the UK. This is not a progressive society for someone like yourself.  You should go to a country that is more welcoming–a country such as Canada” and so that led to him applying to do his PHD at York University and coming to Toronto, Canada. We immigrated a year after that, in 1980, and I’ll tell you, it was one of the greatest decisions my family ever made, but most importantly, one of the most important decisions in my life that I didn’t make because that single decision changed the probability of success for me and my family by 100-times.  I’m a big probability guy. I’m a math guy and I look at life based on very, very specific factors. If I think about where I’d be if we hadn’t made that move, if we lived in Iran versus where I am today, would be in the top quartile of opportunity in my life relative to anything else. It was really powerful to grow up in Toronto.

When I was growing up, I always wanted to be an architect. It was my dream, and you know the reason? I have a very creative mindset. I loved the idea of building and designing, and it was something that applied a lot. I mean basically, from the age of eight I had always had this focus and it was interesting because when I had to make a decision about where to apply to go to school, I went and spoke to a couple of well-known architects in the Toronto Area and they all said to me don’t do it. It’s not going to be the job that I think it is and they all said that I won’t make any money and I didn’t grow up with anything.

My family provided extremely well for me and I’m very proud of that, but I always had this great ambition of making lots of money. It was actually the thing that really drove me. At least that’s what I thought. So, that led me to question becoming an architect. So, instead I went into Engineering at the University of Toronto. Very shortly thereafter, I made the decision to pivot to more of a business path. I went to work at RBC Investment banking in 1999, just in time for the tech bubble. It was one of the most exciting, crazy nine months of my career. I did more in the first nine months of my career than I did for the next two years. Frankly, it was quite amazing, but it was an unbelievable experience for the next number of years. I worked at RBC for six years and really applied myself. Then, I just started to ask myself, whether this was what I wanted to do? I remember the big moment. I was 25 years old, and money was one of my priorities at that point. I was starting to make really good money for a young kid, and I remember coming home one night at two in the morning, which was the hours I was normally working…

 

Jason Boudreau:

Investment bankers hours, right?

 

Som Seif:

Right.  I sat on my bed, and I said to myself “I’m not happy”. It’s not that I wasn’t enjoying what I was doing. It was that I wasn’t happy because I had pursued all of this with the singular goal of making money. And now I was making some money and I was on the path to making lots of money and I didn’t feel like that was the right goal. I did a lot of soul searching. I had to step back and say “Ok, what is it that I really enjoy?”. I still enjoyed waking up Monday morning and jumping to work and doing the things I was doing and what I realized was the thing that really made me happy was the thing that made me most excited. It was seeing my ideas progress, seeing things that really materialize and being a part of progress in a really meaningful way. And if I actually go back to what I loved about being an architect, it was the idea of seeing your efforts result in something that you actually physically touch and see. This was appealing to me. So, I had to step back and think about what I really wanted. Then I needed to apply myself in a way that was going to allow me to see my ideas flourish. I realized I wanted to build something. So, I sort of decided I’m going to leave at some point. I decided that if I’m still in this seat at the age of 30, I’m going to walk in on my birthday and I’m going to resign. And that gave me a date and I had to solve this problem of what I was going to do next.

Anyways, before the age of 30, that day came. It came at the age of 28, when I decided to break off and start my first company. I started a company called Claymore. At the time I had no idea what I was doing, but I had a really strong mental model and vision about how to build a better asset management firm. I advised a number of firms over the last number of years and got into what was happening in the industry really deeply. So, I believed there was an opportunity, and I built Claymore over the next seven years to become one of the most important financial asset management firms in the Canadian marketplace. It really changed the way the industry looked at asset management, specifically about fees, transparency, quality of investment strategy, and all the rest of it. I think we did a really cool thing, but I had a partner and the partner wanted to exit, so we ended up selling the company to BlackRock in 2012 and that gave me another moment to step back. I was 35 years old, and I had to ask myself what I wanted to do next? So, I decided that I wanted to do it again, but I had a bigger vision for the industry including asset management, wealth management and around financial services and banking. I went back to do it again. I started Purpose a year later and I also co-founded a firm called Wealthsimple We’ve been effectively executing over the last nine years across multiple areas of financial services trying to really drive innovation on behalf of Canadians within the industry. I’m really proud of what we’ve been able to do over the last little while.

 

Jason Boudreau:

Som, thank you for sharing. I learned a lot about you! I thought I knew quite a bit about you, but I really appreciate that background on your story and I know a lot of Canadians share a similar story, where they immigrated here at some point and really made something of being a Canadian and then the next generation, like you have recognized that and taken it to a whole other level. It’s just always really neat to hear that. So, I appreciate you sharing it.

 

Som Seif:

It’s actually quite amazing. I think of myself as someone who’s comfortable taking risks as an entrepreneur, but I’ve really gone through this journey of thinking about those who, either by their own will or, of course, through being forced to go away from the world that they know, friends that they grew up or their family, and move to a brand-new country, often times not able to speak the language or don’t know the culture and don’t know anybody. And they have to integrate into that society, build a life – that to me is risk. And I’m so amazed by this journey that people go through, and what they do, and, of course, Canada is an amazing destination for immigration for people around the world. Well, I’m encouraged, and I’m always inspired by it. I hope that Canada continues to really drive to be the best place in the world, to drive immigration because on behalf of those individuals it’s about creating an environment that only helps our country in the long-term. It also helps those individuals really be a part of a society in a meaningful way.

 

Jason Boudreau:

Totally, it is so important for Canada’s future to have strong immigration. I remember listening to Darrell Bricker’s book last year called “Next” and he talks a lot about the fact that without immigration Canada has basically a net zero new job growth and we need people to come here to help Canada grow and continue to be competitive globally. So not only is there the opportunity, but there’s almost a necessity for us as a country to welcome immigrants and their skill sets.

 

Som Seif:

I agree with that, and I actually think that it’s not only the future that is critical, but actually we don’t have to look much further than what we’ve gone through in the last 23 years. One of my theses around this is that if you look at the US, the US has been winning economically by driving a really strong strategy around IP ownership. If you think about the history of productivity, it was always around, call it physical manufacturing, economic growth and over the last 20 years we’ve seen such great progress on intellectual property and intellectual capital growth and the US has been winning that game against the players around the world. I’ve tried to deeply understand how Canada has been able to maintain a level of growth given that we don’t have the same strategy on the IP side. In fact, we’ve actually had a lot of our IP taken by the US in many ways, but I would say I think immigration has been one of the key driving forces for us being able to keep up with the economic development and growth that the US has been able to achieve. So, I think this is one of our strengths and I think it’s critical for us unless we do have to get our IP strategies right. We also have to continue to drive immigration for demographic reasons obviously, and also just for economic development and growth.

 

Jason Boudreau:

No doubt. I totally agree with that. One of the questions that I wanted to ask you is about your journey with Claymore and then selling that and then obviously starting Purpose. You’ve sort of alluded to it a little bit when you said that Purpose is almost a second chance in the same industry, that you took what you learned from Claymore and take it to the next level where you’re at now. Would you do anything differently if you went back again? Let’s say on the Purpose side, would you do anything differently in the past than you’re doing right now?

 

Som Seif:

So, one of my fundamental beliefs is that we shouldn’t have regrets in life and I actually don’t. Especially when it comes to business. Every decision that I’ve made in history, right or wrong, has been for reasons that were in the moment, and I think it’s important to go back and reflect on the decisions and whether or not you made good decisions or poor decisions.

I do that as often as I can. So, that I can learn from that, but I don’t actually ever look back and say “Oh, I wish I’d done that”. I’ve done that and I think having regret in your life is having an anchor. So, I’ve always believed in that and when I look at it, I’m very proud of what we’ve been able to accomplish with Purpose, but I wouldn’t change a thing because I think where we are today is a really good place. I think where we’re going is really exciting and really, what I hope is that every decision that I’ve made that has been a poor decision over the years will help me make a better decision in the future. I think that’s really the way I try to apply that thinking, so I don’t think I’d do anything differently. I think the only thing that I actually regret, was missed opportunity with my interactions with my wife and kids rather than on the business side.

 

Jason Boudreau:

Yes. I hear you. Well, let’s pull on that family thread a little bit because I know you’ve got a big family. You have four, right?

 

Som Seif:

Yes, that’s right.

 

Jason Boudreau:

That’s crazy. I mean I’ve got three and that’s crazy as it is, although I know my wife would love to have another one. Tell me about the background of how you guys decided to build such a big family.

 

Som Seif:

Well, I grew up in a very loving home. I’ve thought a lot about my upbringing, my parents were wonderful individuals who showed me love every day, very highly demanding but a lot of support, which is a very important thing in life. I also had a wonderful brother and older brother and then we had the benefit of my cousin who was my brother’s age living with us and so we grew up in this really interesting dynamic. My mum’s twin sister lived with us, so I had like two moms, two siblings and my dad, so our house was full. It was always something that made me feel joy. So, when my wife and I, who I’ve been with since we were teenagers, were planning our lives, we didn’t really plan at all. We both really enjoy a full house, we enjoy a full life, and we love kids and frankly, to your point, I would love to have many more.

We have four and we’re really happy with that, but every single time I see a baby, I always think that it would be great to have another one and they’re wonderful. My life has changed with them. I used to work non-stop most of my career and then we had our first child and I’ll tell you – your personal perspective changes you. All of a sudden, you become accountable to somebody else, you have a different perspective on priorities and what’s important. It’s been amazing, but I will say that even with that, it took the pandemic to open my eyes up to the importance of being more present regularly. I think all of us have taken the pandemic to teach us really important tricks about life and business, but one of the things I think it taught us is the importance of being present and slowing down. I think that’s been the trick that I’ve been learning really, really, deeply and it’s been exciting to build my new life, structured around my family, around the business, around the way that I want to still work at a highly competitive level. I want to accomplish amazing things, but at the same time balancing much more of the presence and time that I want to be with my family and my kids.

 

Jason Boudreau:

Yes, that also resonates with me. Just recently, I was saying the same thing to somebody that I was at more family dinners in the last two to three years that I have been in the past 12 years. It’s like one of those things where your family is your priority. And then at the same time it’s the easiest to take for granted, and it’s one of those things where the pandemic just kind of hit you square in the face and showed you your priority, right? And I’m very grateful for that happening. To your point, I’ve been totally rebuilding the way I do life and business since then to make sure that presence is there in my life with my family as much as humanly possible.

 

Som Seif:

I think that’s great, and you said the word “grateful”. I think it’s an extremely important word in our lives that we all have to make sure to implement in our day-to-day routines – what we’re grateful for. What I think about life in general, the thing that drives me is that I want to get to a stage where I don’t want anything. I think we always get all these cycles where you want this, or I wish for that. I had that and I think one of the things I’ve been trying to learn a lot more about is being grateful for what I actually have and reflecting a lot on the life that surrounds you today. To me that is very deeply important to have happiness in life in the long run. So, I think this is a really important thing and to your point around dinner – I used to never be home during the week for dinners and in my first business with Claymore I never used to be around even on the weekends, frankly. When I started Purpose, I made a certain set of rules around being home on weekends. I didn’t work on weekends, I made that a set discipline, but I still was Monday to Friday pretty much never home, I’d be at the office until 7:30pm or 8pm or later and I would rush home to tuck the kids in and give them a kiss and that would be the night. And during the pandemic we spent every night together for dinner and I have made that now a rule that I want to be home four nights during the week as well as the weekends having dinner with my kids. And even if that means I’m going to do a call after dinner or whatever, it is that important thing of not being absent for what I think is the most relevant period of my kid’s life in just that family time of being around the table, debriefing on your day and just being there.

 

Jason Boudreau:

What are their age ranges?

 

Som Seif:

So, our youngest boy is just about to turn 7 and then we’ve got three girls that are 9, 12 and just about to turn 14. So, it’s a wonderful age. I’m sure it is the same with your kids, where the baby is not a baby anymore and is not yet a teenager in a meaningful crazy way and we’re just having such a blast with them. They’re the other personalities. They’re fun to be around and they’re funny, really funny.

 

Jason Boudreau:

Yes, totally. We have two boys and the youngest girl who is turning 7 on December 27th. She’s so confident and getting a little sassy, sort of chuckle. It’s fun to watch and just see their expressions and the neatest thing is we just got the report cards from school and all their teachers said how much they love having them in the class, how great they are, how much they participate and they’re so inclusive. So, all these values that we’re trying to instill in them are really starting to show up. I think that’s one of the coolest things for me as a parent, and for Carissa too. So, it’s neat to hear that’s happening for you as well as, especially with the older ones. And obviously, as they get older, it’s probably only going to show up more and more.

 

Som Seif:

I think that’s exactly the case. One of the key beliefs I have that I live my life is this idea that you are the average of the five people you spend the most time with. It’s one of my favorite principles in life and you can apply it in so many ways.

 

Jason Boudreau:

It’s totally.

 

Som Seif:

To your point being a parent specifically is a very stressful job, especially for people like you and I that attack our jobs, we attack our lives with discipline with focus, and when we don’t know something, we learn it and then you get sort of thrown into the deep end with having kids, which is sort of like… I’ve never done this before.

 

Jason Boudreau:

Figure it out, yeah?

 

Som Seif:

…and learning as we go. The only experience I have is watching myself growing up with my parents. You are constantly asking yourself if I’m good? Am I going to be a good parent? Am I going to do the right things? Are my kids going to be okay? Am I teaching them properly? Now people talk a lot about values and they teach their values. To me, this is a really important principle. Your values are being exposed to them every day, you are exposed to them every single day, and so if you’re a good person, if you’re the type of person who believes in the right things and acts in the right way, treats others people with respect, grateful for the things you have, then your kids are going to learn that because they’re seeing you every day, they’re watching you, so they’re learning from you. I believe that for the first 12 years of their lives it’s about you and your spouse. After that it becomes about their friends and who they spend the most time with, and those people are the people who help them grow up to the next level of maturity. So, there’s only so much we can do up to that stage. But I do think that presenting a set of values to them every day…  and it’s not about what you say to them, it’s what you do. I’d say it’s the same in your life with your team at work, it’s the same with your friends, it’s the same with everything that you expose yourself to and it’s so critical that you see that. It brings to the concept that if you want to be great, hang out with people that are great. If you want to learn how to play guitar go and join a guitar club, you want to do really smart things around math go join a math club. The people you hang out with are the people that are going to influence you to learn the skills and do the things you’re going to do and the characters that you want to ultimately develop.

 

Jason Boudreau:

Wise words! I just wanted to pull a little bit of this sort of gratitude and give back a little bit. One of the things I love talking with entrepreneurs about is their value set around being a contributor, giving back and it’s one thing obviously for us to build businesses and employ people. But then there’s this whole extension that goes beyond that – into the community. I’m just curious to get your thoughts or your philosophy around philanthropy. How do you weave that into what you’re up to as an entrepreneur, as a family man, as a person? Where do you stand on that thing today and then do you have a vision for it for the future?

 

Som Seif:

It is a really important thing in my life. Going back to my upbringing as being important, I’ve been involved both with my time and my energy and money in different organizations to help and give back to society for a long time. It’s something that I believed in, and I’ll give you a story there. I’ve thought a lot about this as my parents came to this country, I’m again very grateful for the opportunity that Canada has given me and so I feel this sense of duty to give back to this country, to my community, to help people around me be better off and to support them in every way possible. It’s just something that is ingrained in me because I feel a level of thankfulness and gratefulness to everything I’ve been given.  I’ve always kept a very busy life sharing and having a social life and a deep career and all the things that have been going on. I’ve always in my life made time for giving back to really important parts and things I’m passionate about. My first interaction with this was in my second year of university. It was a crazy time in engineering and all these things going on in my life, I constantly had no time, but I went out for pints with a couple of friends and one of my buddies who I went to high school with came late and I asked where he was and he said “Oh, I was out with my little brother”. And I said you don’t have a little brother, what you talking about? He said he is a volunteer with Big Brothers. I started asking about it and then I sort of went away that night and I asked myself “Am I doing enough?”. The next weekend I signed up for Big Brothers and became a Big Brother and that taught me so much. I balanced it in my life and people would ask me how I’m going to make that work and I just did it. It taught me so much about giving and getting as an individual. When you give, the importance of it and the joy of it – and from there on I just started to get involved. So, today I have a deep engagement in many important organizations that I’m very passionate about. I apply myself to them, but I will say that I will do that for the rest of my life. But I will say what I am aspiring to and I’m still building it – it is the most important project of my life – how I can make an impact. Today I know that I try to add value and all the rest of it, but I’m talking about really giving with impact. And I want to apply the same rigor and entrepreneurial spirit to the way I build businesses, and how I helped try to change the financial services industry, and improve that on behalf of Canadians, to how I can give and help causes that I believe not just in a short-term, with time and money, but actually for the long run to really innovate and help drive outcomes that are meaningful and change society in a meaningful way. So, I’m excited about that. That’s my next big project. My wife and I have spent a lot of time talking about how we will start to pivot our minds towards that as a core, and I haven’t sold it yet, I’ve got lots of ideas. I’m really energized by getting to it, I’m excited, but we haven’t solved it yet.

 

Jason Boudreau:

That’s great. It’s so neat to hear that you were a Big Brother. I joined Big Brothers in 2008 Carissa and I worked together at the time, but she was living in New York, and so we did a couple of years long distance. I found myself thinking the same things as you just saying. “Am I doing enough?” And then someone introduced me to Big Brothers. I had all this time because I wasn’t in the dating scene and I had my soon-to-be wife living in New York and I said, you know what? I’m going to be a Big Brother. I have two younger brothers, but this was obviously a really important thing for me outside of the family, and I ended up being matched with my little brother and we had a 5-year official match from 2008 to 2013 and they gave us this award for long standing match. We’ve kept in touch ever since. Even though we officially kind of left the Big Brothers program, we’ve kept in touch, and it’s been really neat to see his life grow and I got to know, obviously, his mom really well and it was just such an impactful organization. I think the work they do in the community is so phenomenal that it’s really amazing to hear that you were also a Big Brother.

Just to wrap up the dialogue here, I wanted to ask you about sort of giving back impact. If you’re talking to the next generation, let’s say you’re talking to your kids about this sort of subject. This is something that Carissa and I talk to our kids a lot about, because obviously we recognize that there’s certain privileges that they have in their life that we didn’t have and we want to give that to them, but at the same time recognizing that there’s a responsibility to give back to the community. Let’s say you’re talking to your kids or a younger generation. What would you share with them about the importance of giving back and how to go about it in their lives today.

 

Som Seif:

I think it’s about showing them the joy that comes with it. I go back to the statement I made earlier about your actions, the things that you do every day that they are watching. They see all the things that you do and how you feel about it and how it makes you happy or not, and the impact of it. I think that’s the best thing you can do with them is showing that. When I was growing up, I didn’t have lots of stuff. All I had was my dreams. In many cases I’ve taken away some of those things from my kids because they grow up in a different life setting and many things that they have in their lives or they’re very fortunate to have. We have to find different ways to inspire them to be something greater than what they are today in many ways. I talked earlier about wanting to learn how to be able to give with impact…I think the passion that goes into that is something that we’ll teach our kids because they’ll watch us, and I think it is the best way of learning through being in your own actions.

When I look at my kids, to me the most important thing is to always be developing and learning. I have this belief that life is you versus yourself 12 months ago. All other competitions are crap, it just doesn’t matter, right? So, this idea that people should be worrying about how they are relative to somebody else doesn’t matter. It’s about how you have progressed as an individual over the last 12 months or the last six months or whatever benchmark you want to judge yourself by. If you, as an individual, think that way, you’re just going to get stronger. You’re going to get better. You’re going to do more. You’re going to feel more accomplished. You’re going to attack your goals, and I think that’s the most important thing I want to teach my kids. I think it’s a really powerful way to think in life.

 

Jason Boudreau:

No doubt, that’s great. I just finished listening to Dan Sullivan’s latest book called “The Gap and The Gain”, and that’s exactly the message. The natural human instinct is to measure ourselves against others and against some horizon that we’re really never going to get to. It’s truly a horizon. However, if we look back and measure ourselves against how far we’ve come, that’s where we get fulfillment, that’s where the gratitude comes from, that’s where that energy and that desire to keep progressing comes from. It was just a really neat reminder about the importance of acknowledging growth from the past to today versus trying to just keep growing and growing and growing without knowing where you’ve developed from.

 

Som Seif:

That’s right, it’s a great way to think about it.

 

Jason Boudreau:

Well, why don’t we wrap it there? I mean, this has been such an awesome juicy conversation. I really appreciate you taking the time in and thanks for opening up and sharing about your journey and your family’s journey. And speaking of gratitude, I am really grateful for the relationships that we’ve built over the last 5-6 years, and certainly excited to see where things are heading.

 

Som Seif:

Well, thanks Jason and I feel the same way. It’s a real joy to watch you and the way you think, the way you act and the way you have built a great practice in supporting your customers. What makes me excited about what we do every day is supporting entrepreneurs like yourself. So, it’s a real joy to be a partner of yours?

Jason Boudreau:

Thanks everyone for tuning in to the Polestar Podcast by VELA Wealth and stay tuned for our next guest next month. Thanks everyone.

In this podcast, Keith Allan of Harness Investment Management and Rob Wallis discuss positioning for portfolios and investment markets over 2023. They go through the current themes in asset allocation in portfolios given the current economic backdrop and what may happen in the coming year. They also discuss the recent talk around interest rates and the effects on growth and returns in the coming twelve months.

 

 

About the Guest – Keith Allan

Keith Allan is a Portfolio Manager with Harness Investment Management. Harness has engaged in a strategic partnership with VELA Wealth and provides discretionary portfolio management for many of VELA’s clients. With more than 15 years of buy-side investment management experience, Keith brings a wealth of knowledge and experience to provide insight and guidance to clients regarding their investment portfolios. At Harness, Keith is responsible for developing and maintaining investment portfolios for VELA clients. Keith is dedicated to fostering long-term relationships with high-net-worth individuals and families by providing a clear and transparent vision to help them achieve their investment goals. To learn more, please visit Harness Investment Management team page.

About the Host – Rob Wallis

Rob Has provided senior financial planning and advice to VELA clients for over 15-years. He excels at working with entrepreneurial professionals and business owners to define their individual ecosystems and establish meaningful life and financial goals. He has specialized expertise in guiding healthcare professionals who are building multi-location, and specialist clinics. To learn more, please visit VELA team page.

 

 

The episode is also available on:

    

 

Disclaimer

The information expressed in the podcast is designed for general informational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

 

The Podcast Transcript

 

Rob Wallis:

Welcome to VELA Wealth Polestar podcast. It is a pleasure to be interviewing Keith Allan from Harness Investment Management. Today we’re going to be talking about positioning, not predictions, for portfolios and investment markets over 2023, and we are deliberately not seeking a prediction from Keith as we don’t want to hold him to it. That said, we’re aware that lots of predictions do not come to fruition, so hence the title of this podcast is “Positioning, not predictions.”

So, with that in mind, Welcome Keith! What themes are we currently seeing in asset allocation in portfolios given the economic backdrop? What may be happening this year?

 

Keith Allan:

Well Rob, thank you again for having me. I certainly enjoyed the last time you had me on and I feel fortunate to be back.

Yes, positioning, not predicting. It’s always tricky to predict what’s going to unfold and manifest in capital markets, so I think giving clients and folks out there a better idea of how we have positioned ourselves would be certainly appropriate. With respect to the asset allocation, fundamentally, our position hasn’t changed over the last 18 months. For us at Harness and for the work we do with VELA clients, I think you would agree that our position has always been the same–that diversification is a key. We are a big believer in positioning clients’ portfolios with a mix of equities, fixed income, cash, and alternatives, and that hasn’t changed.

How do we tilt those asset classes, have perhaps evolved over the last 18 months. I think given the current economic climate, we’ve been more aware of using alternatives and real asset classes to a higher percentage, certainly being aware of what’s going on in the fixed income environment and how those assets have certainly underperformed, and what types of equities we’re holding. But we still believe in those four main asset classes, and we still make up the bulk of our portfolio allocation.

 

Rob Wallis:

So, lots of talk recently has been around interest rates and it’s super interesting to see higher interest rates again. It’s been at least a decade since we’ve seen any meaningful returns in cash as an asset class. We’ve always believed cash is an important asset class to hold because it provides opportunities to people to seek returns for that. That said, obviously, we’ve got inflation that’s driving higher interest rates to an extent. Given that backdrop now that we can see some meaningful returns, for example through the cash product that Harness has, how do you see interest rates affecting growth and returns in the coming 12 months?

 

Keith Allan:

I think that’s a great point, Rob. We are actively marketing and saying that cash is asset class – a true asset class now because you can use cash to get a yield north of 4% – 4.5% in some cases, which is meaningful for clients, especially those that want to keep their cash available and keep that dry powder available for opportunities. So, we are using cash as an asset class. We highly encourage it for clients, and the purpose of high interest savings we use for our clients as a cash position is yielding north of 4.5% right now. So, it’s certainly appropriate for those that want to keep cash now. With the second part of your question – with respect to interest rates and fixed income assets – everyone knows that as interest rates rise, fixed income assets fall. It’s an inverse relationship. We can spend the whole podcast talking about how and why that works, but folks don’t want to hear that. But the reality is, that’s what happened. So, as we’ve seen, interest rates have risen over the last 18 months, the capital depreciation of fixed income assets has taken place, and we’ve seen fixed income assets, most notably bonds, decrease in value. So, the question is then how do we utilize fixed income as an asset class? I think people have to understand that we use fixed income as a hedge in our portfolio. So, fixed income is not built into the portfolios to attract meaningful gains and show tremendous amount of capital appreciation, because that’s not what it’s there for. It’s there to provide a hedge, and yes, the assets have decreased in value, but over the long-term fixed income will do its job by providing a hedge against equity volatility and other volatility with alternatives. It’s there to provide us Gettys distribution of income in the form of the coupon, the bonds pay, and in most clients’ portfolios, those ETFs that synthetically hold the bonds or capture the bonds and pay out the distributions. So, while the assets themselves have decreased because of the rising interest rate environment, we still see them as a significant part of our portfolios, and we’ll continue to be that hedge against equity volatility. I think there was the third part of the question was what about interest rates? Well, certainly seeing interest rates rise to unprecedented levels over the last year and a half. It appears now that those interest rate hikes are on the path to stability. I don’t think, and in my estimation, we’re going to see the 100-basis point or 75-basis point hikes that we saw in the middle of 2022. That being said, it’s looks like there’s going to be 1/4-point hike here in Canada over the next couple of weeks. I can’t say for certain if that will be the last one or if we might see another quarter point hike in March, but certainly I think the days of drastic hikes in interest rates are potentially behind us.

 

Rob Wallis:

So, has the Bank of Canada achieved its mandate to control inflation?

 

Keith Allan:

I would say absolutely. It’s on the path to achieving it. I don’t know if it’s actually achieved it yet. I read today that the inflation rate in Canada has fallen to 6.3%, which is significantly lower than the north of 8% it was in mid-2022 or in third quarter of 2022, so it’s down to a level of that while still high, I think more in line with the expectations the Bank of Canada would like to see. So, in that way, it’s working. I don’t think it has achieved it yet, which is why I still feel like we may be in line for a 1/4-point hike here at the end of January. It’s a lengthy process, it doesn’t happen overnight as people have seen in a very painful way. But it’s getting there, and I am of the belief that if we were to have this podcast 12 months from now, we would look back and say that it has gotten there, it’s just going to take some time.

 

Rob Wallis:

All right. So, in terms of interest rates and how long they’re going to stay where they are, what are your thoughts and how that’s priced into asset values?

 

Keith Allan:

Well, I think about what we’ve seen here since the calendar flips of 2023, so the first two and a half weeks of the year we’ve seen a nice little bump, a nice little rally in capital markets, and I think that’s indicative of the fact that people feel like the worst is behind us, that we are now in an environment where there might be a small rate hike. But there is a higher probability of interest rates staying Status-Quo for the rest of 2023, then there is a significant rate hike. So, when that sort of filters down or cascades down in the economy, people become bullish in the sense that if interest rates have plateaued or if at some point over the next 24 months they might start getting cut that provides an environment for growth and  the sectors we saw really sell off like technology that are highly interest rate dependent, those types of names or securities or equities will show the most growth. We’ve seen that here in the first two and a half weeks of the year when the market has rallied. I’m reluctant to call it a bear market rally, I’m reluctant to call it a new bull market. I don’t think there’s any term for it. I think it’s just a matter of sentiment amongst consumers and investors that think that the worst could be potentially behind us and there could be a climate for growth here in the next six to eight months.

 

Rob Wallis:

So where is the capital heading right now?

 

Keith Allan:

Do you mean what asset class, or do you mean just in general?

 

Rob Wallis:

What asset class?

 

Keith Allan:

Well, we’re starting to see money filtered back into equities, which over time, equities have empirically proven that they are the best performing asset class out there. Certainly, that hasn’t been the case over the last 18 months, but repeatedly people gravitate towards that asset class. So, I think we are seeing more liquidity in the market. We’re seeing more capital enter traditional equities, but I still feel like people want an alternative, they want the ability to diversify their portfolio via private equity, private debt, alternatives, real assets, infrastructure, commodities. So, I think we are, and we will continue, seeing the capital deployed in those areas as people want to find the way to generate alpha. I know you speak a lot to your clients about that the days of the sort of 70/30 portfolio is an antiquated way of thinking about investing. I see a lot of people feel that way too – you’re not going to gain meaningful returns by just simply saying 60/40, 60 equities, 40-somethings income – set it, forget it, it’s done. It is very difficult to achieve meaningful alpha in your portfolio by doing that. So, for our clients we’re looking to deploy their capital in other areas.

 

Rob Wallis:

Got it. So, what positioning are you taking in alternatives right now?

 

Keith Allan:

That’s a good question, and it’s a great segue into the new portfolio that Purpose Investments has launched. They’re calling it the Alternative Completion Portfolio, or in short form Liquid Alts. This is a portfolio that was launched right before Christmas, and one that we’re beginning to put clients into, where appropriate of course. It’s effectively a portfolio that allows clients to gain access to real assets, infrastructure, some hedge funds, commodities, and a little bit of crypto, in a very liquid fashion, in the sense that their money isn’t tied up, there’s no lock up, period – it’s a liquid portfolio. All of its products within the portfolio are mark to market daily and have daily liquidity, but it is allowing clients to gain access to non-traditional asset classes and we’re really bullish on this portfolio. We think it will be a great way for clients to hedge their position, allow them entry into asset classes that they otherwise wouldn’t get without their money managers or other investment professionals. So, that’s one way we’re allowing clients to gain access to alternatives.

 

Rob Wallis:

What about crypto as an asset class? It has been interesting few months there. I’m sure some people are pleased with the predictions that they made in the past about what’s happened. What are your thoughts on crypto as an investment, and if it’s appropriate, what type of allocation would you put somebody in, at all?

 

Keith Allan:

Well, I will go on record, Rob, saying that my position on crypto has changed and I think anybody that reads my quarterly articles, or my quarterly updates knows that I was dead set against it a year ago, maybe a year and a half ago. I wouldn’t say that I’m backtracking on that. I still don’t feel that it is an asset class that has substantial fundamental prospects where it can be something where you want to hold 10%, 15% or 20% of your portfolio. That being said, I do feel that there is a small place for it in a very small percentage in one’s portfolio. In this Alternative Completion Portfolio, for instance, it holds the 2,5% weight. So, I think I’m becoming a little more flexible in my thought process there. No doubt it’s sold off considerably, and we’ve seen volatility in that asset class that would make a lot of people nervous, but it is also showing over the last several years that there’s potential for some meaningful gains there. So, I think having it in a 1.5% to 3% weight in your overall portfolio would certainly be appropriate.

 

Rob Wallis:

As we look to the year ahead, what risks do you see out there that could affect economic growth and stability for Canada specifically?

 

Keith Allan:

Well, I think people are very worried about the recession, whether we’re entering a recession or not. When I look at what the climate is and the current conditions of the economy, I feel like we’re there already. And I suppose if interest rates continue to rise, which again, I’m not so sure they will, that could provide some serious headwinds, but overall, I’m bullish on what 2023 has in store. I think the first half might be touch and go, but I certainly feel there’s opportunity for growth in the second half.

 

Rob Wallis:

For Canada specifically, or overall, for the global economy?

 

Keith Allan:

For Canada specifically. Again, it’s such a commodity driven country, and whether you are for or against energy and crude and oil and all of that, the reality is, oil is such a big part of the Canadian landscape and we’re in a full market for oil. And yes, a lot of that has to do with the war unfolding in Ukraine. When we look at other resource commodities, it’s a good place to be right now – and those stocks are the ones that have been best performing. So, I think Canada is in a strong position and as I said, I’m bullish on what 2023 has in store. I don’t believe we’re in a bear market rally. I think this is the beginning of what could be a very promising year, but I think it’ll take time. It’s not going to happen in Q1, unlikely in Q2. I think we won’t see some meaningful gains until the latter half of the year.

 

Rob Wallis:

Well, that kind of sounded like a prediction case.

 

Keith Allan:

No, no predictions.

 

Rob Wallis:

Would it be fair to say that you’re positioning portfolios to take advantage of any growth that happens and you’re not overly defensive right now?

 

Keith Allan:

I think right now we’re still remaining a little bit defensive. Our cash position is high, we’re encouraging clients to keep dry powder available to keep that cash on hand. As we progress through Q1 here in Q2, our cash positions for clients will probably start to hold a lower weight in cash and start to employ some of that capital elsewhere. We haven’t made any huge fundamental changes to the portfolios post-Christmas. We made a few model changes prior to Christmas. But overall, we’ve kind of stayed the course here and our clients are starting to see some meaningful gains, especially over the last three months. So, I think overall we’ll always look at ways we can improve our clients’ portfolios, but I think our positioning is quite strong right now. As the year unfolds, we’ll look at what tactical decisions we can make to continue to achieve meaningful gains for our clients.

 

Rob Wallis:

Got it, Keith. So, final question, how positive are you that we will end the year in a positive space?

 

Keith Allan:

I’m very confident about it. I feel like the first half will be kind of touch and go similar to what we saw in the latter half of 2022, but I think as we enter the second half of 2023 we’ll be able to see some meaningful advancements in capital markets and as such in our clients.

 

Rob Wallis:

And you’re positioned to take advantage of all of these upsides, as well as protect from any down position.

 

Keith Allan:

Absolutely. You never want to be reactionary in our industry. We want you to be forward-looking; you want to anticipate and be able to act before the market does and I feel like we put ourselves in that position.

 

Rob Wallis:

Awesome. Keith, thank you for your time. It’s a pleasure to have you on the Polestar podcast and we look forward to welcoming you back at the end of the year and we’ll see what happens.

 

Keith Allan:

Thank you, Rob.

 

Disclaimer

The information provided in the podcast transcript is designed for general informational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

Join Jason interviewing Mehdi and Barry from Three Shore Development in our last episode of the Polestar Podcast by VELA Wealth. They’re talking about forming a win-win partnership, discipline and planning, entrepreneurship journey, and approaches to dealing with uncertainty.

 

 

About the Guest – Mehdi Shokri

Mehdi is inspired by the desire to create meaningful change through development and is driven by an overarching passion to make neighbourhoods better. He aims to align visually-inspiring environments with sustainable and profitable solutions. To read more, please visit the Three Shore website.

 

About the Guest – Barry Savage

Barry values precision and process. His goal is to take a focused, structured approach to development, and values the methodical process of any project. His passion is to carefully consider all details in order to execute a plan that works for all stakeholders. Inspired by the urban vibrancy of other big cities, Barry is interested in how land use can shape and create homes and communities. To read more, please visit the Three Shore website.

 

About the Host – Jason Boudreau

Jason has built VELA Wealth into an established life and estate planning firm, guiding families as they make meaningful choices at the intersection of life and wealth. Jason’s areas of expertise include intergenerational wealth transfer and estate planning with a focus on advanced insurance-based solutions that incorporate philanthropy and legacy planning. Leveraging these specialties, Jason brings a fresh perspective and outside-the-box thinking to the strategic planning process. To read more, please visit the VELA team page.

 

 

The episode is also available on:

    

The Podcast Transcript

 

Jason Boudreau:

Welcome everyone to the Polestar Podcast by VELA Wealth. Today we have two very special guests Mehdi Shokri and Barry Savage, Co-Founders of Three Shores. We’re going to be talking about their entrepreneurial journey and having them share about what led them to where they are today, and then also some look forward to the future. I’ve had the opportunity of getting to know both of them over many years and watching them grow into what is become a very cool company that we are excited to be aligned with. I’ll turn it over to them to give some background on how Three Shores started, evolved and then we’ll get into some details on the life and entrepreneurial journey.

Mehdi and Barry, maybe just one of you can jump in, or even both of you, and just share about the journey to Three Shores and how it became what it is today.

 

Mehdi Shokri:

Sounds good! Well, first of all, thanks for having us on your podcast, Jay. We’re excited to be part of this. So, just kind of jumping into your question on how we started Three Shores. So, roughly seven years ago Barry and I met. I believe in two instances we were meeting without realizing how connected we actually were, but I was looking for somebody to help me out at the time. I was in the capital market space at CBRE with my role being to facilitate finding development opportunities or investment opportunities on behalf of other clients in British Columbia. I just finished selling a high-rise property and a gentleman who had purchased it really needed the expertise to have someone take him through the entitlement process and basically all the way through to construction. Knowing that it was a pretty unique ask, generally, developers are the ones who going to do that in-house, I reached out to one of my contacts, a well-known individual in the industry who right away jumped and said “I got the perfect guy. You need to call him. He’s just left working for a large developer, so you want to connect with him soon because he’ll probably get really busy fast”. So, anyway, that’s how I got the first introduction to Barry. Coinciding with that, I was helping another client of mine sell a site, Barry was on the other side for a developer who wanted to acquire a property that I was selling. Personally, I am very good at finding opportunities, dealing with capital stock, structuring the deal essentially, and Barry was really the one who’s taken it through the process and got things done to see the development through. We both realized that we’re helping some people make a lot of money and we quickly decided we should be doing this together.

 

Barry Savage:

Well, I think that another thing that kind of made us a good fit to be a company is that we have a really complementary skillset. Going through working for other developers, one thing that I noticed is that you do need to have people who have specific skillsets that complement each other because in our industry you have to know the big picture, but you also have to know really detailed information. I think that’s one of the things that makes Mehdi and I a good pair – he’s let’s call it the big thinker and he can see an overall strategy where we want to go and look at it from say forty thousand feet in the air, and my skills are more on the day-to-day detailed stuff. He can come up with a big picture, but then we know we can execute it.

 

Mehdi Shokri:

And I’ll probably add to that. Speaking for myself, I started in the industry as a lone wolf. I quickly realized the importance of building a team and obviously to grow you’re going to need help. I wasn’t always the best at understanding how to ask for help or facilitate help in my early days. I wanted to take on everything myself. A bit of a control freak–still am, but definitely learned quickly that you have to find the right help. I think what made it also very unique for me, at that point in my career things were definitely on the trajectory to be getting really busy for me, but I still really had a tough time finding somebody that I trust and who would actually get things done. I know I’m pretty much a “gut” guy in a lot of instances, and in a minute, I saw how Barry operated to his point, how different he was in so many ways than myself. I think the key thing for us is that we immediately had a connection of trust in what we were both good at. So, I think that really skipped a lot of the questions frankly around how to find a partner and like go through the dating process, we kind of jumped right in there and started working together.

 

Barry Savage:

Well, the other thing is that we both came from well-established careers, both successful at what we do. So, I think we we’re both comfortable knowing what our strengths and weaknesses are, and that helps when you know what lane you’re supposed to be staying in and that you don’t vary from. That’s always the conflict that you have between partners – you have them varying between what the role is within the company. Without sitting and writing down on paper our roles we both just intuitively know what we’re good at and what the other person’s good at and we let them take the ball and run with it and we don’t try to interfere in each other’s business.

 

Jason Boudreau:

So, Three Shores is two years old now, right?

 

Barry Savage:

We’re 7 years old.

 

Mehdi Shokri:

Yes, we went further after that connection was made. We decided that given where we were, still in inner prior roles, we weren’t going to move slowly and steadily, right? I was very aware of the conflict of sort of wearing two hats – being representative of other developers and capital partners that this wasn’t supposed to be something of the gun where we were just going to start taking on the world. So, after a couple of projects, things started to escalate, and it became clear to both Barry and me that it was time to roll all our activities into Three Shores. So, about two years ago we officially enrolled all of our activities.

 

Jason Boudreau:

So, thinking about where you are at today and what you’ve accomplished over the last couple of years since you really went into this, what’s one thing that you are really proud of that stands out for you?

 

Mehdi Shokri:

I’ll jump in. First of all, I think what I’m proud of is that it’s always a tough decision to form a partnership and create a business and obviously put yourself out there as an entrepreneur, but I think what I am proud of is that we’re very thoughtful about why we did this. We’re not dissolute, we didn’t just say okay, we’re going to jump in and we’re going to be developers now on our own even though we could have our egos to go that route because we had very successful track records in what we did. We definitely wanted this to be done in the right way and we wanted to make sure if we were going to do this, ego aside, we weren’t to become the next big developer or we were copying and pasting all the same kind of formulas that are out there to do in the industry. So, I’m proud that we stuck to that. I mean we were quite principled from the beginning, and I think we continue to have that same intention with everybody we talk to. We want to be involved, we want to be the face of this company and we’re committed to frankly not doing deals over the right partnerships and the right projects that just don’t align with why we did this in the first place.

 

Barry Savage:

Well, I would say the thing for me that I’m the most proud of, and it seems a bit of an odd thing, is I’m actually more proud of the stuff that we walk away from than the stuff that we actually do. I think that goes back to both Medi and I, and our experience in dealing with new developers. They inevitably do projects that are way too big for them and they shouldn’t be doing. I think Mehdi and I have the discipline to know what type of project we should do first and what should we do second and how should we grow methodically with purpose. We weren’t ever trying to jump further than we probably could have if we really wanted to push it. I think that this shows all of our partners that we have the discipline to know when to walk away from something and I think that’s important in our industry. People get caught up in doing the biggest and the best thing that they can do and sometimes taking a step back and being a little bit more conservative is the best business plan that you could have.

 

Jason Boudreau:

Yes, that totally makes sense. From business books or articles you read, and podcasts you listen to, you hear about some of the most successful people in the world, whether it’s Elon Mask, Bill Gates or Warren Buffett, and constantly what I hear as a commonality between them is they’re defined by what they say NO to, versus what they say YES to.

 

Barry Savage:

Well, and I think based on my background I used to do big projects such as two hundred plus million dollars projects. We had the discipline to start off doing a thirty-five million dollars project, right? I think a lot of people in our industry would not go back and go on to a small project like that, they would think it’s too small and would be eager to do bigger.

 

Jason Boudreau:

Interesting. So, pulling on that thread a little bit – how would you define success? This can be an individual thing, it can be a joint thing. I’m curious to know as you both are entrepreneurs, you’re in a unique business in real estate development, and obviously have tons of experience. We’re talking about the fact that you’re proud of the fact that you say NO to things, you’re proud of the fact of the discipline you stick to. So, to carry on that, how would you define success then for yourselves?

 

Mehdi Shokri:

Coming back to the purpose of all this, the money was never really the driver, nor was the ego. It was actually about the impact. So, for me, the purpose of what I am living for and some of those bigger philosophical questions really started to come into my mind as I was trying to better understand why I was happy and why I wasn’t happy about the things I was doing in my prior role. When I was committed to moving to Three Shores, I thought I would always tell myself that success will be about the reputation and the acknowledgment from the people that I care most about. That we did things right, we were good stewards, we were good people and built good relationships, had some humility and sincerity and were not just greedy. Again, our reputation would speak for itself after we went down the road years away and reflected on our company. That to me was really what I thought hopefully a successful outcome would look like. And it still is.

 

Barry Savage:

I think I’m along the same lines. The other thing that I would say is that for us our partners are always really important whether it’s our business partners or our consultants who we treat as partners whether it’s the community and the neighborhood that we’re working in. I think for whatever project we’re doing to be successful, all of our partners have to participate and gain from whatever we’re doing. For example, we did not have to put a daycare into the project that we are doing on W 3rd Street, but we thought that was the best thing to do and if that enhances that neighborhood at all, then that is a success.

 

Mehdi Shokri:

It kind of triggered another point that I was thinking of when Barry mentioned partnership. I think in general we were really hopeful that we did not have to entertain whether it was a deal or a partnership that wasn’t completely aligned with the type of people we wanted to work with.  For us in the end, success will be defined by the people we work with. I don’t say from a place of being cheesy about it, I actually mean it. If we start doing things such as working on behalf of partners for the wrong reasons, then that won’t be something I will look back at and say we succeeded in our mission. If we continue to stick to what we said about being aligned, and that might mean we lose some really big opportunities, then I think we’ve succeeded in what we said we were going to do.

 

Jason Boudreau:

Speaking from our experience, obviously, we’ve got a project on the go together, and I really feel like it’s a true partnership with you. You’ve come to us, said that you’ve got this opportunity, and offered to reach out to our network and help bring in the capital, while you’ll take the development on. Then, you are providing these quarterly updates that we’re able to send to our investors. People read them and they feel really good about it. It’s very professional. A lot of what I’ve seen in the development industry and smaller developers in particular around the city or even the province is there isn’t necessarily that level of professionalism, but you seem to have really brought that to the forefront. That to me just instills greater confidence for us as partners, but of course most importantly, for our investors who are partners of ours, right? So, speaking firsthand from experience I can definitely attest to the fact that you have brought that mentality to the forefront.

Just to sort of flip it a little bit, I am curious to know what keeps you awake at night. Because one thing is to talk about all the amazingly positive things that are happening but as a fellow entrepreneur I know they’re things that don’t allow me to sleep every day and I’m curious to hear from you – what keeps you up?

 

Barry Savage:

I would say in the current economic climate it’s protecting our partner’s money that they’ve entrusted to us, right? I mean that’s obviously for every developer it always has to do with the bottom line and in our case, it’s at least for me, it’s no different. It’s trying to do whatever we can to protect not only the equity that we’ve put in projects but to protect the equity that all of our partners have put in.

 

Mehdi Shokri:

I would echo that. Obviously, we’re very mindful of our reputation lasting. What keeps us up at night is also the opportunity that I see in front of us because I think we’re clearly in an environment where those who execute and follow up on what they say are the ones who will see these times. They’ll find the greatest opportunities and how we grow from this. Speaking to Barry’s point about protecting our investor capital and staying true to what we promise in the first place – those are all very top-of-mind realities that we’re dealing with but it’s also things that you can’t control. Accepting that, right? It is hard enough for me personally because as I said before I’m a bit of a control freak still… you try to think of all the various things that can come at you even in whether it’s in the good times or in times there’s more chaos. But it’s definitely a lot of managing expectations that probably I’d say is what keeps me up at night and making sure that you’re doing it the right way.

 

Barry Savage:

Actually, early in my career, one piece of advice that I was given was “if you want to be able to sleep at night you have to let things go”. Sort of what Mehdi said, there are things in our industry that we have absolutely zero control over. Take interest rates, right? Yes, we have no control over that. So, I don’t let that bother me because there’s nothing I can do about it. But what you want to do is you want to be prepared for it and have a plan on how you’re going to react. Those are the things that keep you up at night. But that’s what you’re thinking if someone’s coming in saying you know there’s another 75 basis points coming next month, right? The thing that will keep me up is not those 75 basis points coming up, the thing that will keep me up is do I have a plan on how I’m going to address it?

 

Jason Boudreau:

Yes, yes, that totally makes sense. One of the things that I’m curious about from your perspective is…From my side as an entrepreneur, one thing I’m guilty of is always looking at the horizon and thinking about where do I want to go versus where I’ve come from right?

 

Mehdi Shokri:

Or where you are now…

 

Jason Boudreau:

Yes, right. In the present.

 

Barry Savage:

I’m laughing a bit because that’s Mehdi’s lane. I don’t have to worry about that, I’m just looking at the present and how do I get to tomorrow. How do I get the project to tomorrow and the next day and the next day. I’ll let Mehdi look at the horizon.

 

Jason Boudreau:

It’s interesting to hear you share that because I just came from our office. You know Rob, my business partner. We’ve been involved in strategic planning for next year over the last couple of months and a lot of these conversations come up and it’s a very similar dynamic where I’m out there, sort of being head in the clouds, visionary, seeing things progress in a certain way, and then Rob said to me “Okay, now how we can execute that?”. He can see the vision and all the execution points and so we’ve got this great complementary skill set which I’m obviously very grateful for and that gate that does keep me grounded, right? Because I can always sort of chase the horizon or look at the horizon and sort of not look back to see where we’ve come from or have that eye on the present. That said, I’m curious about you how do you feel relative to what you set out when you decided to really jump in headfirst a couple of years ago into this thing to where you’re at today? How do you feel in the progress that you’ve made thus far and then what are some things you’re looking to accomplish that you haven’t yet?

 

Mehdi Shokri:

I’d be the first to say that I always battle looking forward and how we’re going to grow and all that kind of stuff. Or even looking back and not wanting to repeat maybe mistakes or experiences that I fear happening again. I think our mentality has been really about how we manage what environment we’re in and the journey so far has been really about like Barry alluded to earlier being able to say No right now.

I personally grew up in a world where success was defined by how many deals you did and there is almost a habit that needs to sometimes be broken in my own psyche world. Let’s say the shiny new ball – you don’t want to start chasing it and especially in this environment because as crazy as it is we are now seeing more and more opportunities, more than ever, and fortunately we built a good reputation where we have brokers coming to us now, trusting us and our abilities, telling us about off-market deals and sharing sensitive information about how to kind of structure some of these deals that it’s getting to the point where it’s now time to be able to have the discipline to say No. So, I think right now being committed to understanding that you can’t do everything, and you’ve got to stay focused on how you’re going to get to Barry’s point the next day is really kind of everything for me right now.

 

Barry Savage:

I think all businesses and partners need to have discussions. Mehdi and I set out what our goals would be over the next year. And again, we go back to the discipline, to stick to what that plan was, right?

Forget about a lot of the noise that’s going on but try and stick to what we thought was the best course for us when we were planning ahead and to try and stick to that. So, if we, for instance, in our case if we decided we want to do one wood frame and two concrete projects for this year coming up – that’s what our goal is. What the discipline becomes is what are the two best concrete projects and what is the best wood frame project to stick to, right? I think that’s what we’re trying to do and that’s what we want to do.

 

Jason Boudreau:

That makes sense. In the last couple of years when you really decided to jump in headfirst and you look at where you’re at today. Do you feel like you’re where you want to be, are you ahead of schedule or behind? What do you feel you’re at? Has it evolved?  I’m sure it’s evolved.

 

Mehdi Shokri:

I mean I’m never satisfied. So, I do not know how to answer that question (laughing).

 

Barry Savage:

So, that being said, if we were to look today and go back two and a half years ago when we decided that we’re going to do this full time we’re probably almost exactly where we said we wanted it to be. I think the difference is that we have a lot more opportunities that come forward now we’re picking and choosing the right one. But in terms of the number of projects we set our goal out, we’re pretty close to being right on our original plan. Maybe some stuff shifts maybe by six months or so, but it’s pretty close.

 

Jason Boudreau:

I think that obviously speaks to that discipline mindset that you have brought in – sticking to that plan. That’s really good to hear.

When we talked earlier about how you define success. I know Mehdi you said you are never satisfied or how did you frame it? When you define success and what’s important in your life today and of course look forward, do you feel like you’re successful?

 

Barry Savage:

For me, I think it’s actually too early to define whether you’re successful or not. I think we need to get through the next year or two before you will truly be able to say whether we were successful or not. Because of the projects that we’re doing right now – we haven’t completed one yet, right? We’re getting close on two that are going to be completed early sometime next year. But until you get to that stage I don’t know if you can say you were successful or not.

 

Jason Boudreau:

What about you Mehdi?

 

Mehdi Shokri:

I probably look at it a little differently because again, I come back to the point of not being able to control everything. I try not to look at success so much by what the end result is because some of those things are completely out of your control as to how they end up being successful or not whether it’s for the good or on the opposite side of what success looks like from a financial metric. I think for me I would still say it’s too early only because when I really thought about moving into this space there were a lot of mental health discussions that I was having with some business coaches and counseling and a lot of things, especially through Covid that really opened up my eyes to what success and happiness look like. I think I’m still going through this journey. I think for me as a broker in the Capital Market Space I never really felt like I was completely understood and that was probably more to do with my own shortcomings–not leaning in, or opening up to people about what kind of person I really was with my closest friends and relationships. I defined success as being a top broker in the country, or in the office, and that’s all I needed to know to keep me in line with my job.

Now it’s more about making sure that the relationships I have, and people really get to know who I am and I truly feel like I’m also doing my part in allowing them to know who I am. So, again, relationships take time. That’s why I think it’s too early to say. I think until those relationships really mature in this new space that we’re operating in, I won’t fully feel like I’m successful.

 

Barry Savage:

Well, I think for both of us as we go through our careers success is different, right? You know when we’re both young and didn’t have families career would define your success, right? Now it’s somewhat secondary.

 

Jason Boudreau:

Let’s talk about that a little bit because obviously, I know you both are family men and I am as well, and our families know each other. How do you want your kids to see you down the road? For me, I’m always lead by example person, right? I look at my kids and I think they’re going to emulate what I do way more than what I say or tell them to do. So, I’m curious about that from your side. How do you look at that when it comes to your kids and how they look at you?

 

Mehdi Shokri:

That’s a heavy question.

I didn’t have a father growing up, so just going right to the core of it – I want to be available. My entire intention when I became a dad was that I was going to be there all the time. So, now to some extent I maybe overcompensate because I’m a head coach for both of my boys and they’re playing more soccer than I ever realized would ever happen. So, my part-time job is really coaching kids’ soccer.

I do it because what I’m hoping for is that not only that I’m available but to your point that you lead by example and you want them to see when you commit yourself to something you do what you say and you’re accountable and you’re reliable, and you’re not a flake. All those things are part of why I’m doing this and why stick to it and I don’t try to veer off and do a half-ass job at anything that I’m involved with them, but I think I also want them to feel safe. I feel like if I’m there I don’t necessarily need to tell them what to do, but I want them to know that at this age, in particular, my kids are so young, that the feeling of safety is everything which I don’t feel like I had that necessarily as a kid. So, again compensating a little bit for my own childhood trauma. I think for me, that’s what I’m really trying to do as a parent right now more than anything – is just to give them that feeling that no matter what there’s not only somebody there but they’re in a safe place–that they can be themselves, they can talk to me and they can do whatever they need really.

 

Jason Boudreau:

That’s awesome, thank you for sharing.

 

Barry Savage:

I think it’s kind of along the same lines as what Medhi said. It is to be there.  There is a neighbor of mine who is in our industry, and I would say he has been on the same journey as us, but he’s probably eight to nine years ahead of us in terms of how they set up. I remember one of the things that he said to me when he saw me walk the girls to school and he said, “Those are the things that you need to enjoy because you’ll be amazed at how fast it’ll be gone”. And so that sticks with you, you want to make sure that you’re there, that you’re around, that you can participate.

 

Jason Boudreau:

Yes, totally and that’s certainly one of the advantages that being an entrepreneur lends itself that you can build that flexibility into your life and at the same time it’s always that dangerous line. You commit to something too much and all of a sudden, you’re way on the other side.

 

Barry Savage:

I agree. When I made the move from working at a development company to doing stuff on my own, I definitely worked more on my own, but it also at the same time gave me more time to spend with the kids. So, those are the trade-offs you make, right? You at home, it’s nine o’clock at night and you’re working, but you don’t necessarily feel bad about it because then you’re able to take the kids to soccer, you’re able to go to their swimming lessons. Whereas if you’re at a development company you’re there for a specified period of time and you never have that flexibility.

 

Jason Boudreau:

Yes, totally!

We’re closing in on our time together. So, continuing the family conversation. The last question I love to ask entrepreneurs is if they are talking to the next generation or your kids and sharing about life aspirations, what are some of the things that you would share with them, or maybe you do share with them now about the future or about what they want to achieve in their life?

 

Barry Savage:

I think the main thing is that they have to be passionate about something that they love to do and when they start off whatever their job is at the beginning the amount that they’re getting paid should be irrelevant. The question should be do you love doing it? And if you do then you’re going to be able to make a career out of it. If you don’t love doing it, you shouldn’t be doing it. It doesn’t matter how much you’re getting paid for it because you’re never going to be satisfied and you’re never going to be happy.

 

Mehdi Shokri:

I hundred percent agree. I wish I had that kind of guidance because I was naturally a good academic student in high school and university but coming from a Persian background and having parents who generally want you to be a lawyer or a doctor. Basically, it was very much in my mind that those were called the defined successful jobs that you could have. I think I’ll go a bit further than what where Barry was going with. Maybe it’s too early now but to your point, we’re talking about them a bit older is to be true to themselves and be comfortable with who they are. I know how much harder it gets when you become a teenager and people start to judge you and start to question whether or not you’re weird or you’re cool or whatever it is. So, I think it’s just that again that feeling of just knowing that they’re safe like I said earlier and that they are a hundred percent good the way they are. I think when you get to that point when you’re passionate about something you can only have clarity in mind about what you’re passionate about and that you’re comfortable with who you are. So, I guess setting them up for that moment, right? As I said, I thought I knew what I wanted to do when I was younger, but I know now I was confused because I didn’t really know if I could be myself in a lot of ways.

 

Jason Boudreau:

Interesting.

 

Barry Savage:

It’s funny because when I was growing up one of the things I loved was maps, right? So, when I was going through my education, I actually wasn’t going to be a planner or to be doing development or doing real estate even. When I was going through university that wasn’t what my end goal was. I always thought that I was going to go with land use, but I was more going towards land use in terms of forestry and getting it to grow to master’s in forestry. It’s amazing how things changed after one Co-op semester. I was working in a planning department and that totally changed what I wanted to do and that’s what I was saying – I knew what my passion was maps and that type of planning, right? But you never know where it’s going to take you to.

 

Jason Boudreau:

That’s great. Thanks for sharing that. Well, I think we’ll end it there on a high note because I mean I love hearing about your entrepreneurial journey, and then I love for our listeners to learn about who are the people behind the businesses that we talk about on these podcasts. I’m really grateful that you took the time here and thank you for sharing and being so open. It’s been great having you.

 

Mehdi Shokri:

Thanks. It was great. I appreciate it.

 

Barry Savage:

Thank you.

 

Jason Boudreau:

Stay tuned for the next episode of the Polestar Podcast by VELA Wealth.

Our most recent episode of The Polestar Podcast by VELA Wealth features Kori Chilibeck and Matt Moreau, founders of the social enterprise The Earth Group.  The Earth Group exists entirely to provide school meals to children globally through a worldwide agreement with The United Nations World Food Programme (WFP).

Hosted by Rob Wallis, Kori and Matt will share the journey of the Earth Group, its social initiatives and business model, challenges they faced during the pandemic, difficulties they experience while building new relationships with well-known brands, and their successful stories on changing minds and lives.

 

 

About the Guest – Kori Chilibeck and Matt Moreau

Kori Chilibeck and Matt Moreau met in 2005 while working at Skiers Sportshop in Edmonton, Canada. Through extensive travel their eyes were opened to the dire circumstances in which a large percentage of the world lives. This instilled a sense of responsibility to do what they could to create positive change in the lives of people who need it most. In 2005 Matt and Kori started a social enterprise called Earth Water and donated 100% of their net profits to the United Nations World Food Programme. Please visit The Earth Group website to learn more.

About the Host – Rob Wallis

Rob Has provided senior financial planning and advice to VELA clients for over 15-years. He excels at working with entrepreneurial professionals and business owners to define their individual ecosystems and establish meaningful life and financial goals. He has specialized expertise in guiding healthcare professionals who are building multi-location, and specialist clinics. To read more, please visit the VELA team page.

 

The episode is also available on:

    

                                                                               

Live-drawn board performed during the Gravity 2019 event in Vancouver.

 

The Podcast Transcript

 

Rob Wallis:

Hi, welcome to The VELA Wealth Polestar Podcast. Today we have the pleasure of having Matt Moreau and Kori Chilibeck from the Earth Group. We will be talking about their business and what they’re up to in the world.

We have the pleasure of welcoming these guys to our Gravity event, when we did in-person events back in 2019. It is incredible as it was over three years ago and how much the world has changed and moved on in that time.

It’s pleasure to have you back, and welcome. Before we jump in, could you tell us a little bit about the Earth Group? And then we’ll get rolling from there.

 

Kori Chilibeck :

Sure! The Earth Group is a social enterprise that right now sells water, coffee and tea in various countries all over the world. We use our profits to provide food, water and education to some of the poorest children on the planet through our partner, the United Nations World Food Program.

 

Rob Wallis:

I’m just looking at the board that we had live-drawn when you were in Vancouver in 2019 and it says you guys had four million meals served. How many meals have you had to that now?

 

Matt Moreau:

By the end of this year, we’ll probably be sitting about the four and a half million mark. Can get into it, but COVID certainly put a damper on things for us. We had to switch our model the year that COVID hit in 2020 and did a program locally and funded 50,000 meals for people here in the City of Edmonton with the local food banks.

 

Rob Wallis:

Got it. So, let’s talk about Covid. How was that for the Earth Group?

 

Kori Chilibeck:

It was, uh… it was devastating and it happened quickly. I remember Matt and I were sitting at the office, looking at revenue for the month and I think it was one of the worst months we’ve ever had since we ran the company out of an old van. It was bad. It got back quickly too. What are your thoughts on that Matt? Sorry, I might be exaggerating.

 

Matt Moreau:

Not at all. 85 percent of the revenue disappeared overnight. We were very heavily invested in channels such as hotels, cafes and restaurants, catering companies and airlines. And all these things just basically disappeared overnight. So, it certainly put the fear of God in us for a little right there.

 

Kori Chilibeck:

Yes, we actually had a contract with Hilton Hotels in Japan going through the Olympics. Obviously, the Olympics got cancelled and pushed a year. Then, when it actually happened, all the hotels were empty because they didn’t allow anybody in the country. So instead of potentially the best year we had ever had on record, it ended up being one of the worst.

 

Rob Wallis:

And how were regular retail sales during that time?

 

Matt Moreau:

Most of that disappeared as well. If we’re talking about regular grocery stores, people that used to walk into a store, grab a sandwich and a bottle of water, and head back to their office just weren’t doing that anymore.

So, our product is never going to sell in a 24 pack. We’re not here to compete with Nestle. So, that was the only water product that was moving in these stores, and we saw a lot of single use stuff in the lunch out disappear as well.

 

Rob Wallis:

Crazy. How it is now?

 

Kori Chilibeck:

Well, things have changed a lot. Again, it just happened all of a sudden: really picked up and I would say we probably had our busiest six months that we’ve ever had as a company right now.

 

Matt Moreau:

Yes, we’ve picked up. Speaking for myself, a few months there was kind of feeling of sorrow and I was terrified of what was going to happen with the business and everything. Then we just sort of dusted ourselves off and started finding spots that were still open and knocking on doors that were still in business. Places such as cafes, party bakeries were one of those spots.

Fast forward to today, we’re just starting a nationwide launch with all the Cobs bakeries across the country. The film and television industry were still operating, and they were really looking for a product that had a story for social enterprises support. So, we picked up a lot of great new business there.

With these new distribution channels and then everything else coming back online as far as the catering companies in the hotels and so forth, as Kori says, things are going really well right now.

 

Kori Chilibeck:

I think during COVID we had a lot of time to plan and find other avenues that we hadn’t explored. We were thinking about anything and everything. So, I think after two years of working the phone, sending e-mails, sending samples, trying to grow business when the world turned back on again. We had all these leads out there that just all the sudden started coming together all at once. So, it was nice.

 

Rob Wallis:

Great. And were you able to maintain relationships with the bigger companies such as Hilton?

 

Kori Chilibeck:

Well, Hilton is tricky because there are a lot of factors. One, it was in Japan and the Canadian dollar increased over COVID by about 16-17% against the Yen. So, we just became more expensive over COVID by quite a bit. Then, with the shipping situation globally including huge increases in shipping, we just became a very expensive product outside of Canada. Even with inside of Canada shipping has been difficult. The prices are starting to come down now and we probably ended up landing almost 30% more in Tokyo than we were before COVID.

So, it really put a damper on sales in that part of the world right now. We’re hoping that’s going to come back now and that things are starting to normalize a little bit.

 

Rob Wallis:

So, in terms of the story, what is the story of the Earth Group? How did you come up with the concept and what was the journey from there to where you are now?

 

Kori Chilibeck:

Well, it started as a spoiled kid growing up in Edmonton, realizing that the world was not what I thought it was. I went to university at the U of A, played hockey, went on family ski trips, didn’t really realize that 90% of the world wasn’t living the same lifestyle I was.

I had taken a year off of school, I was on a Mount Everest basecamp expedition with my girlfriend, now wife, and we were going up towards basecamp dressed as your typical North American tourists, wearing big North Face down, puffy outfit on, and there’s a kid behind me carrying three people’s backpacks and heading up towards basecamp. And we passed this old man on the trail, who was going the same direction as us, and he had a big woven basket on his back. He was totally barefoot, no gloves, no hat, no jacket, just like some ripped pants and an old shirt, and we asked him what he was carrying. He says, “I get paid $0.25 US a day to carry this basket, I don’t really know what the items are and it’s not something I can afford”. When we looked inside the basket, it was just cans of Coca-Cola.

So, at that point I started to realize that either directly or maybe indirectly, some of the biggest companies in the planet were making money literally off the backs of the poorest people in the world.

So, came back to Edmonton and thought, well, why couldn’t you have a company that could compete against the biggest brands and biggest companies in the world? But at the end of the day, we would give back to people who really, really needed it. So, that was sort of the idea of the company in the very early days.

 

Rob Wallis:

Got it. I’m seeing you two drink bottles of the Earth Water right now, and it’s in aluminium or aluminum for our North American listeners. What was the impetus  for choosing aluminum as a material of choice for the water?

 

Matt Moreau:

Kori and I are probably the only owners of a bottled water company that encouraged people, not to drink bottled water. For the most part, we’re very lucky here in Canada to be able to go to a tap and fill up from there.

So, we’re aware that we’re creating an impact on the planet through our operations and that single use plastic is a major global issue. So, we were looking at things thinking, how can we lessen our impact on the planet’s a little bit? We found out that aluminum gets recycled at a much higher rate than plastic and takes less energy to recycle. So, we got these fully reusable and recyclable aluminum cans that can be rinsed out, resealed, and used over and over again.

And I think that’s been a big kind of boom to our success as well through COVID. We made that transition basically a couple months before COVID hit and then had the last couple years to tell that story to people about how we have this product that is lessening the impact on the planet and just has a little bit of usability to it.

 

Rob Wallis:

Can you please tell us why aluminum has a higher recycle rate than plastic?

 

Kori Chilibeck:

I think there’s a couple reasons. In Canada, a lot of things changed since the 50s, when they started putting beer in aluminum cans. The beer industry created a really good recycling programs with the deposit on it. There is a value to aluminum whereas plastic is a bit of a false value. We put a value on it through the deposit system whereas aluminum is a commodity that’s traded on the open market. I think that stat is 70% of all aluminum ever created since the beginning of time is still being used today. So, it’s an amazing product that way.

So, the actual facilities do recycle because there is an actual market for the recycled material. Whereas with plastic it’s difficult to utilize recycled plastic and even trying to make other plastic bottles out of recycled plastic bottles creates a lot of energy and a lot of waste doing that. Whereas aluminum is just that much better. It’s exponentially better.

 

Rob Wallis:

Got it. What is your first product?

 

Matt Moreau:

The Earth Water was the first product. Sort of a water for a water idea.

By buying Earth Water you could provide water relief for someone somewhere in the world whether that was digging distribution points or wells or so forth in refugee camps.

As we’ve grown into coffee and tea and a little bit of apparel, that message has expanded from just providing water relief to funding school meal programs as well.

 

Rob Wallis:

And the other products that you’ve launched are coffee and tea, have I missed one?

 

Matt Moreau:

We do a little bit of apparel. For example, we were just sponsoring the Edmonton Folk Music Festival last weekend and we have hats and T-shirts and things like that. So, a little bit of that on our online store as well.

We’re really hoping, I would say in early 2023, to have some sparkling water and flavored sparkling waters as well. Kori’s got some other product threat perhaps on the go here as well.

 

Kori Chilibeck:

Yeah, I was trying to diversify the product line a little bit.  We’re changing up our packaging over the next months, hopefully early in the New Year. We’re trying to get more sustainable and do different things. There’s always a way to make things better because we’re a small company, we’re able to switch to new packaging quickly. Whatever the next greatest thing that comes along that’s more sustainable, benefit environment and maybe caught more cost effective – we can look at that immediately because we don’t own $100 million production lines that we’re able to switch over to something better.

 

Rob Wallis:

So how do you use the Earth Group to help the planet?

 

Matt Moreau:

Our main focus is school meal program. So, kids are given a safe place to go during the day, free food, free water and then provided that all important free education. So, better educated kids grow up to have higher earning potential, they’ll have less kids on average and they’ll make it to university. Effects of these school meal programs are enormous.

 

Rob Wallis:

Right, and how do people that need your help find you?

 

Kori Chilibeck:

Well, we really work closely with our partner, the United Nations World Food Program. So, they’re the experts, not us. We work in Edmonton majority of the time and we’re just not out in the field doing that. We’re really honored to work with some of the most passionate people on the planet. Essentially, they come to us every year and give us sort of a list of three or four places in the world that have the greatest need in their eyes. We work with them and fund projects that we feel that we can make an impact on, and we do try to do a project every year somewhere else in the world. For example, Tajikistan, Bolivia and then the Philippines. It depends on what’s happening in the world.

Also, and we do try to focus on places that aren’t in the public eye a lot. We try to focus on places that are sort of the world’s bit forgotten, but still need a lot of help.

 

Rob Wallis:

Could you give us an example of that?

 

Kori Chilibeck:

Sure. We did a project in Bolivia which is the poorest country in the Latin America. There was very little aid going into the country. Their school meal projects were actually about to be shut down before we came in there. They were running out of funds and we thought this was a great place for us to go in and help. So, I think we funded 500,000 meals in Bolivia.

 

Rob Wallis:

Wow.

 

Kori Chilibeck:

Obviously, 500,000 school meals over a certain amount of time.

Then there were other projects happening such as solar panels, and some green-houses. So, the world programs got all these amazing projects that they sensibly pitched to us and we try to get involved as best we can with the funds that we have.

 

Rob Wallis:

And how did you get the relationship with the UN to create the partnership?

 

Matt Moreau:

Months upon months of phone calls and emails and sending out packages and concept ideas around what this company would stand for.

Thankfully, there’s a gentleman out in Ottawa who finally answered the call and showed some interest in what the concept of the company was and at the end of that first year, we were able to give a small $7,000 check. I think at that point it was ok. We’ve decided to see what we can do in the second year. In subsequent years we were just able to continue coming back with bigger and bigger checks.

The financial side of it is one thing, but the reality is we’re still really small company and the World Food Program works with partners like Vodafone, Pepsi and Kraft who are donating millions or tens of millions of dollars. So, we are able to help a little bit financially, but it’s also just the awareness around what we’re doing as well. We’re one of the only products in the world to bear United Nations logos. When someone walks in and buys a bottled water at IKEA, they turn the bottle over and they can start reading about the World Food Program. Samething happens in places such as Fairmont Hotels and The Four Seasons and really all across the country.

So, we’re able to do a big chunk of awareness for what they’re doing as well, which is equally important.

 

Rob Wallis:

So, do you have companies that seek to shop your products more now than five years ago, and how is the social enterprise landscape shifting demand and visibility of the Earth Group?

 

Kori Chilibeck:

I mean, when we started the Earth Group, the word “social enterprise” barely existed. That was just sort of very new to the landscape. In fact, we probably didn’t even call ourselves a social enterprise at the beginning, because I wasn’t even aware of what it was. Now, the world has changed quite a bit in this regard.

Well, I know the consumers are looking for companies that make a difference. As much as one really wants to pour Coke, Pepsi, Nestle, Unilever, they don’t really care about those companies. Giant, publicly traded companies that are just everywhere. So, there’s not really much of a choice.

When people walk into a Fairmont hotel or a Hilton Hotel and see the Earth Water and see this story – that differentiates that spot from what everybody else is doing. They realized that maybe that hotel cares about what’s happening on the planet and actually searched out a product that does something a bit better.

I think for a lot of years, we felt like we were a bit ahead of the wave. And now I feel like the world sort of catching up to what we’re doing and maybe understanding that people need to focus on products that are trying to do something good in the world because, to be honest, that’s really a way to make great changes. I’m hoping that we’re sort of hitting. We’re in the right place and at the right time where people are looking for these types of products.

 

Rob Wallis:

As individuals, how do you define success? Matt why’d you go first?

 

Matt Moreau:

I’ve got a young family of a 3-year-old and a 10-month-old. I hope that this company is around for 30 years from now and that we can do some incredible things as far as putting people into school, educating them, being very aware of our environmental footprints, finding ways to combat that and be able to do that. Hopefully, some of that kind of the kids can glean some things from that.

If I’m sitting here 30 years from now, looking back, I would hope that there’s some good successes there along the way. Kori and I are so lucky to have been able to speak at all sorts of events over the years, whether it’s Rotary clubs, churches, university groups or business associations and hearing from people…We just got a note into our website a week ago. Someone saying that the path that they’ve chosen to go into for both work and school was kind of heavily influenced by a talk that they heard from Kori and I gave about six years ago.

Making people aware that we as businesses have the power to change the world for the better and that we as consumers literally have the power in our pockets to change the destiny of someone’s life simply through everyday purchases, simply through something boring as a bottle of water – is pretty cool.

 

Kori Chilibeck:

I think Matt said a lot about the way I feel too.

If someone like Nestle ran the same way we do – we could solve world hunger in a matter of years.

So, maybe there’s the next big thing coming down the pipe that someone thinking about, heard us talk or saw our business model and said “hey, maybe I can work my company the same way” and next thing you know they turn that into a $10 billion company and we’re able to really make some huge changes.

From our own sort of success, from our company, it’s again just that number that we talked about at the beginning of the show. We want those meals to be up to 50 million meals, we want to have these crazy numbers out there that we’re really starting to move the needle and starting to help people.

It feels amazing to send 50,000 meals to someone, but it feels incredible when it starts getting to that million-meal range and start to really make some significant changes in people’s lives. That momentum is something hopefully we can capitalize on and maybe other companies seeing this will react as “they just did a million meals, let’s match that!” and will throw another million in there. Now we got 2,000,000 and sort of get the world a little bit galvanized around what people are trying to do. These small things make huge differences.

 

Rob Wallis:

Matt you’ve mentioned 30-year time horizon quite a few times in your answer. If we were sitting down in 30 years, what would you like the Earth Group to have achieved if we were looking back over those 30 years?

 

Matt Moreau:

Well, like Kori said, if we can get to the point where we call you and say we’re making a donation and it’s literally funding millions upon millions of meals for people. To have created legacy projects in certain countries around the world where we’ve been able to support them year after year. To have been able to do that with the support of certain companies. We worked with IKEA for six years now, let’s say we’re lucky enough to work with them for another 30 years, really trying to build some landmark programs for them where they know that every bottle of water that they sell is benefiting a certain project. Doing the same thing with the Fairmont’s and the Hilton’s being able to come to these companies with more than just a couple of products like we are today, whether that’s for the beverage products or food items, or who knows, tech ideas, apparel for sure. For example, every time we sell one of our hats, we can feed and educate a kid for a week.

It’s really about every product that we sell. We sell a case of water, we sell a bag of coffee – we have a certain dollar amount that goes to the World Food Program. Leading with that transparency that as a consumer or a corporation when you buy that from us versus the Coke, the Pepsi or the Nestle, here’s the change that we can create in the world.

 

Rob Wallis:

You mentioned somebody reached out to you after you spoke six years ago? When you talk to young people, what do you share with them and what do you think inspires them?

 

Kori Chilibeck:

We try to share as much as possible – just to do something you are passionate about. I know that’s bit cheesy, but the reality is if you love what you do, you’re probably going to be very good at it and you’re going to be happy. For most people, doing something they’re passionate about, probably something good, something that’s doing something positive in the world and doesn’t have to directly feeding children, but it can be all sorts of things that just make the world a little bit better place no matter what you’re doing. We try to convey that just go out there, be passionate, tenacious.

Matt and I’ve been told so many times, I can’t even count, that we should shut the company down, that it’s not a real company, it’s terrible idea, that we are going bankrupt, it’s awful, to get other jobs and move on.

And that’s happened a lot. Some very influential, successful people have told us that over the years and sometimes it shakes you a bit, but we’ve just been “Nope. This is what? This is the path. This is what we believe in, we have to go, we have to do it no matter what anybody says”.

And that’s another thing to tell young people. People are going to tell you not to do it or you can’t do it. That’s total BS. You can do anything you want.

If you believe in, and you are passionate about it – just honestly don’t give up until it’s over, and even then, it’s not over. We’ve been beyond over and still come back from the edge and build the company back again.

 

Rob Wallis:

You guys must have learned a lot of resilience over the years then.

 

Matt Moreau:

Resilience. Tenacity. We often would tell a story about how we approached IKEA for about four years. Anytime we’re in a major city, we go introduce ourselves at the store. We would send out handwritten notes, send out samples. And finally got a call back from someone said “Listen guys, please just leave me alone. We have a contract with Nestle..” but that two-minute call turned into 10 minutes and 10 minutes turned into 45 minutes. As we said earlier, now we’ve been working with them for multiple years and we’re talking about perhaps expanding to other countries outside of Canada.

As Kori said, “It’s never dead”. Even if it was a “no” on January 1^st doesn’t mean it might not be a “yes” on June 1^st. We just kept on calling and setting the reminders in the calendar and respectfully harassing people as much as possible.

 

Rob Wallis:

Totally. So, if you were to come do the journey again, would you have done anything differently?

 

Kori Chilibeck:

That’s a really good question.

Every time someone says, “oh, but maybe it wouldn’t be exactly where we are if we would have done things differently and learned the extremely tough lessons we learned along the way”, which are super important. Now when you look back and realize you’ve learned a lot. So, I don’t know if I would change anything. Maybe I would have got a better accountant and lawyer on the first day to give you a little bit better advice. But other than that…

 

Rob Wallis:

We’ve done a podcast on that recently too, by the way. Reference: Key Considerations to Make When Selling a Business.

 

Kori Chilibeck:

Yes, there’re two things to tell people when they’re starting a company: get some good accounting and legal advice. But beyond that, I can’t think of anything I’d want to change.

There have been some ups and downs, but most of the time it’s been up. What do you think Matt?

 

Matt Moreau:

I have to agree. It’s like you say, it all led us to where we are today and those horrible lessons, those bad, tough days where you don’t even want to get out of bed because you’re struggling that much. Like you said, Rob, it builds resiliency and brought us to where we are today.

I think that’s where, as Kori mentioned, you find something you’re passionate about. It makes it that much easier, when it’s just week after week of “no” or month after month of getting beaten down or whatever the latest incident is. If you’re incredibly passionate about it, there’s a way to drag yourself out and get back at it.

 

Rob Wallis:

Yes, absolutely. Does anything keep you guys up at night anymore, given what you’ve been through? Far from children.

 

Kori Chilibeck:

Far from family and kids… It seems like there’s always a fire burning somewhere that needs to be put out. It hits you on some random Tuesday afternoon that you weren’t expecting… Maybe don’t keep me up like they used to just because I know that Matt got my back, and we can and we’ve accomplished so much and going over some pretty terrible things. So, these things sometimes seem a little bit on the minor side when they come up and we… I’m optimistic all the time. At least on my end I still have some sleepless nights, but there maybe not as many as they used to be.

 

Rob Wallis:

So, in terms of wrapping up, could you explain to our listeners where they could find your products in Canada?

 

Matt Moreau:

You can find us in place like IKEA, Cobs, handful of Fairmont hotels, lots of hotels across the country. You guys are in Vancouver – the Vancouver Aquarium carries us.

We’ve been really lucky to start getting some phone calls from some major universities across the country lately, which five years ago never would have happened because they were completely locked up in Coke and Pepsi contracts. Places like Whole Foods. What am I missing?

 

Kori Chilibeck:

You are in Vancouver, so, Tacofino got it. Simon Fraser University has got some, especially in the student union building. I believe UBC started to put some in the SUB building now.

Lots of cafes and little restaurants are carrying our products. We are trying to focus on that type of stuff.

 

Matt Moreau:

And another thing is – if you head into a cool cafe, grocery store, whatever it is, and you don’t see our products it would mean a lot for a manager to hear from someone “Hey, did you know this product exists here?” We can make cold calls all day long, and generally speaking, people don’t want to talk to us because off the hop they just conceive or perceive us as a bottled water company, but we’re really not that. Bottled water happens to be one of the vehicles that we’re using to try to affect change. The coffee, the tea – are the same things. So, those warm introductions go a long, long way for us.

 

Rob Wallis:

Thank you, Matt. Thank you Kori. I really appreciate your time and your energy and your passion. Look forward to seeing you soon.

 

Kori Chilibeck:

Thanks for having us on.

 

Matt Moreau:

Thank you.

 

Welcome to another episode of The Polestar Podcast by VELA Wealth. Today, Rob Wallis speaks with Ryan Howe, a business lawyer from Alexander Holburn Beaudin Lang. Ryan acts as general counsel to various BC based businesses with national and international operations on a wide variety of corporate and commercial matters.

In this episode, Ryan and Rob provide insights about selling the business, different transaction types,  transaction uncertainties and potential risks. They also discuss share preparation, negotiation and closing recommendations.

 

 

About the Guest – Ryan Howe

Ryan Howe is a Partner in the Business Law Group at Alexander Holburn Beaudin + Lang LLP. Ryan acts as general counsel to various BC based businesses with national and international operations on a wide variety of corporate and commercial matters. Ryan also acts as chief coordinating counsel for multi-business entrepreneurs who require personal legal representation to protect their personal and family interests and to coordinate their various other legal professionals across their holdings. To read more, please visit the AHBL team page.

About the Host – Rob Wallis

Rob Has provided senior financial planning and advice to VELA clients for over 15-years. He excels at working with entrepreneurial professionals and business owners to define their individual ecosystems and establish meaningful life and financial goals. He has specialized expertise in guiding healthcare professionals who are building multi-location, and specialist clinics. To read more, please visit the VELA team page.

 

The episode is also available on:

    

 

Disclaimer

The information expressed in the podcast is designed for general informational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

 

The Podcast Transcript

 

Rob Wallis:

Welcome to VELA Wealth Polestar Podcast! Today, I’m very excited to have Ryan Howe from AHBL (Alexander Holburn Beaudin +Lang LLP). We will be talking about business transactions. What makes and breaks deals. Welcome, Ryan and please introduce yourself.

 

Ryan Howe:

Thank you very much for having me, Rob. My name is Ryan Howe. I’m a business lawyer with Alexander Holburn Beaudin Lang or AHBL for short. I’ve been practicing business law for the last twelve years here in Vancouver at the same firm that makes me a lifer. I focused on private clients and their myriad of business law problems and successes.

 

Rob Wallis:

Thank you, Ryan. We have a lot of business owners as clients and a lot of the time the trend of the conversation around about selling their business one day. Sometimes it can be confronting, or it can be a joy, or it can be somewhere in between depending on who you are and what stage you’re at your business. What we like to talk about with people in addition to what are they going to get for their business if it is indeed even salable, is how they actually get there. When it comes to that transaction happening – what can help that be successful or indeed even happen in the first place? We feel there are three steps in that: the prep, the negotiation, and then the closing of the deal. So, if someone was coming to us saying that they want to sell their business in three to five years, what would you be saying to them from the standpoint of being the legal counsel?

 

Ryan Howe:

Well, the first thing I would probably start with is asking them whether they are selling because they have to or they are selling because they want to? So, if they “have to” that’s a different assessment than if they want to. If they “want to” – the first thing I’d say is to reach out to their tax advisors and ensure that we’ve got this thing structured optimally to take advantage of tax treatment such as lifetime capital gains exemptions. At the same time, we’re going to optimize the structure. We’ll probably be able to start digging in a touch, to what we call presale diligence, where we’re looking at problems that we know a purchaser is going to identify when they run diligence on the business and trying to prevent it before we actually get to the negotiating table. This allows us to negotiate from a position of strength when we’re negotiating the terms of the transaction.

 

Rob Wallis:

Okay. So, out of a scale from 1 to 10 when someone comes to you and says they want to start selling in 3 to 5 years, typically, how ready are they?

 

Ryan Howe:

That’s a great question. I think it goes back to that “I want to sell in 3 to 5 years”. Is that “3 to 5 years sale” a part of the plan that’s been structured with their investment advisors, their tax advisors, and their significant others, or is that just a kind of a very loosey-goosey plan? Is this a deliberate person that follows steps and they’ve got a prescription and they’re following it or is this just a lot of wishful thinking?

If it’s wishful thinking they may not have the stick–to–itiveness required to really push this thing through the right way. They might have been in a sort of desperation sale later when health issues or financing issues hit. So, a lot of it is part of the plan. If is a part of the plan, such as they plan to retire at 65, the kids are graduated, they are moving to Mexico, whatever the thing is – THOSE are very high success rates versus the ones where it’s “well I’m just kind of tired of what I’m doing…” and they haven’t really thought nor done any deliberate action to move that agenda along. So, I would say 50% are on the right path ready to rock and we’ll have a successful sale.

 

Rob Wallis:

Interesting. A lot of the time we find people’s idea of the value of their business is somewhat different from the reality of the value of that business. Then an exploration into what is the market value of my business at relative to where am I now financially and what can I actually do if I do want to retire or maybe work optional, am I there yet? Tends to drive more in-depth looking at planning and figuring out what is actually realistic. Do you find that on the offside too?

 

Ryan Howe:

Yes, hundred percent. I think you and I talk before about the notion that sometimes clients set the purchase prices as the amount, they think they need to retire. So, if their advisor is telling them they need 2,5 million to retire they’re like “Well, guess what? The purchase price is 2,5 million”. What that does is – it just shows to purchasers that you’re unsophisticated and unreasonable. Instead of that, if you need to get to 2,5 million – a lot of business sales are based on EBITDA functions or Multiples and if you are close you got to roll up your sleeves and maybe you can get there within the two-year period required to get that tax planning in place. Most people are not structured properly to maximize tax planning on sales and that’s a two-year lookback window, right? So, if we know we’ve got two years, the same time you’re going to the accountants for the restructuring should be the same time you should be thinking “let’s pull up our bootstraps here, and let’s get this EBITDA maxed”. This way we can come and get exactly the number we want. If you’re way out to lunch and you can’t possibly get that number where you are, you need to change your expectations or explore. I would call this an “alternative transaction structure”. Those you sometimes see when you’re selling to management or you’re selling to the next generation in the family in which case we typically get the number we want, and we effectively delay the sale or partition it in like a 10-year period. So, instead of getting cash on closing, you get money over 10 years. There’s a risk, but you get more than you would otherwise get on the open market or at closing.

 

Rob Wallis:

Okay. So, what about other things in the business that need to be cleaned up apart from tax planning? What other things do you see?

 

Ryan Howe:

The most common I see, and this is because it creates such a massive liability, are employees. So, if your employees aren’t on contracts that reference the employment standards act and cap their severance at eight weeks, you could have a mass of severance obligations sitting there, which is going to hit you if you do an asset sale because the purchaser is going to force you to terminate everyone. So, that can be a massive liability. We had one recently where we sold an iconic company in the Lower Mainland, and it had 250 employees of which 200 were not on contract. So, you can imagine the liabilities associated with that and that’s a big shock to clients when they haven’t thought about it. So, getting them (employees) on contracts and making sure you got that severance and then protecting the company against other things such as making sure there’s a confidentiality term, non-solicitation agreement and etc. That leads a little bit to confidentiality to IP (Intellectual property), right?

Sometimes you have freelance contractors or employees that have prepared IP for the company. Maybe they did it before the company was incorporated and it’s unclear whether the company owns that IP. Do we have an assignment of intellectual property rights and a waiver of moral rights? Do we fully own the thing? You can be a hundred percent sure that a purchaser’s diligence is going to reveal that absolutely immediately and if intellectual property is a key component of the business assets being purchased, having gaps in that chain ownership is going to be a major problem ultimately may kill the sale.

 

Rob Wallis:

So, that sounds like that could take many-many months to clean up.

 

Ryan Howe:

Absolutely! But once again, we always think about a two-year warning. If we’re thinking about a two-year minimum seasoning period – we’re really talking three (years). For true planners, they would be thinking five (years). Humans are just in a certain way always tend to attack the whole number and half number. So, 60 is a big birthday, 65 is a big birthday, and 70 is a big birthday. So, it’s your 65 birthday and if you’re thinking 70 is the chart, start moving then.

 

Rob Wallis:

 

Right. So, in preparation for a sale, it pays to be uber prepared?

 

Ryan Howe:

Well, yes. It is hard to explain how that works unless I could show what it feels like trying to negotiate terms in a deal where we are absolutely pristine condition: all the sheets are pressed, they’re white, there are no stains, the bathroom’s been scrubbed clean versus walking into an Airbnb where you’re going to leave a negative review immediately and there’s a dog pissing in the corner. That’s the reality. So, when someone comes in and looks at what you’re selling and they’re like “Wow”. If you get a “Wow” experience, then they’re absolutely not going to have the leverage they think they can, and really the only things they can attack are sort of future financial performance-oriented things. So, that EBITDA Multiple might get eroded a touch but, once again, the nice thing with a vendor is if you got a really nice product, you could find other purchasers. That walkaway power is what allows you to really set a price and get those terms that you want. But you can’t get that if you’re living in an illegal sub- suite.

 

Rob Wallis:

So, around 90% of businesses are not saleable. What do you do if you don’t have a buyer or you can’t find a buyer? My business is worth X but there’s no market for it.

 

Ryan Howe:

Well, that’s where you kind of fall in. So, I think you start looking at different options there. The one of the three that immediately jumped out to me would be selling to staff, right? We sometimes call it management buyout (MBO). That typically involves leverage on the company and the seller. So, you’re effectively propping them up and giving them very nice financing terms and maybe even guaranteeing their own borrowing. Because you just want cash out, you want to step down, transfer the reins and you want a little bit of liquidity, and then probably you’re going to be structured in a payout over 5-10 years. The same thing works for the next generation, for kids, even nephews, nieces, and extended family. The nice thing with kids is there are some tax benefits to intergenerational wealth transfers. So, we’re seeing quite a bit of that where generation 1 is going to generation 2 or generation 2 to generation 3. Once again, those are pretty loose least structure purchases because ultimately that kid’s going to inherit the estate. So, if the parent is relatively old, they’re not going to go through all that money. And once again, you’re not looking at a huge purchase price you’re looking at pretty loose financing terms probably getting paid over 10 years, and if the company craters because of the change in management your host. Then the final one I would say is thinking about partitioned asset sale, where you’re looking at your competitors in the market. They would otherwise acquire you but for the fact they don’t want the liabilities with your employees, they don’t want your office space. All they really want is your contracts. So, you could turn around and wind up the business and strategically sell off assets. That’s not a great way to go because your workforce is going to hate you. I mean, that’s effectively liquidation downsizing, kind of stuff but I mean in some instances if your heart’s out of it, your health’s not there, you can’t find those other 2 options then that’s kind of the way it goes.

 

Rob Wallis:

Interesting. So, could you just give us a couple of soundbites on asset versus share sale to start? Super concise, please.

 

Ryan Howe:

Sure! Speaking from the vendor’s perspective, the vendor is always going to prefer a share sale wherever possible because of the capital gains exemptions and lifetime capital gains exemptions that can be triggered. Specifically in that two-year planning when we were talking about – that’s where you want to put in a family trust and then try to take advantage of as many capital gains exemptions as available for the beneficiaries. So, share sales are riskier to purchasers because they end up stepping in and absorbing effectively all the liability of the company by buying the shares. Asset sales are more preferred for purchasers because they can pick and choose what liabilities they assume. It’s not as favorable to vendors, because vendors don’t get that lifetime capital gains exemption. Then they do get capital gains treatment and if you structure the transaction in such a way that the majority of the purchase price is allocated to goodwill you can sometimes end up with a tax result that’s not that bad relative to a share sale. But once again, it really depends on what kind of share sale you’re looking at. Let’s say if you’re selling your business, Rob, and you got a family trust, you’ve got 2 kids and your wife – that’s 4 capital gains exemptions typically. So, that’s indexed at 900K, you’ve got almost 3.6 million in the shelter there for that exposure. Whereas in an asset sale, even if we crank the goodwill, we might not be able to get there. So, there’s an inherent tension in the way that you structure the transaction itself and depending upon this goes back to, you know, the housekeeping if you have dirty sheets, right? They’re not going to want to buy them. So they’re going to say “you can keep your sheets. We just want this nice little Bose. We want this tv …”. So, you don’t want to give them an out on the share sale. You want them to lean in and say, “yes I want to buy the shares”.

 

Rob Wallis:

Okay. Let’s move into negotiation. Let’s say that the sheets on that bed are crisp. They’ve been starched. It’s squeaky clean. It’s beautiful. We’re going in to start negotiating. How does it roll from that?

 

Ryan Howe:

So, I think in that instance, what it allows us to do is really set favorable terms in the term sheet or the Letter of Intent (LOI) and those two terms are used interchangeably, they mean the same thing. Effectively, it is an agreement to agree. We want these things to be largely non-binding. The only binding provisions are typical with respect to deposits if applicable and then exclusivity. The rest of it is effectively non-binding. So, it gives the parties a framework for how they would approach the transaction. Purchasers typically want to jam in the loosest one-page LOI on the planet that may talk to a possible price and then nothing else. And then they bury you in details on the definitive purchase agreement. The problem is that by the time everything shakes loose, vendors who have never been through this process before get overwhelmed very quickly because of all the documents and information and decision requests that are happening. They get something called transaction fatigue that affects them and they become very poor negotiators. They lose their spine, they give in across the board and they lose the tactical advantage. Our recommendation for when you have “crisp white sheets” is we negotiate the hell out of the LOI or the term sheet. And what we’re trying to do is modify risk allocation at the outset. So, the way we do that is we say “listen the purchase price is X and we want 95% of that on closing. This is not a structured payday”. We’re getting all of it and then there’s a 5% holdback for known indemnities or whatever the case may be.

You want to get as much cash as possible on closing and ideally nothing else unless it’s there’s no other deal on the planet. Then you would typically want to avoid holdbacks and earnouts because that affects the total purchase price and it’s unclear where that’s going to come from. Also, that can affect tax positions and then from there, we want to look at things like indemnification. What’s our indemnification obligation? Is there a cap? Are there deductibles? Are they baskets? Are they tipping baskets? What’s the survival period? Can they come back on us indefinitely or can they only come back on us two years after the deal closes? Are there conditions to closing associated with us signing employment agreements or are senior people signing employment agreements that we may not like? Do we have to do transition services? There’s a whole bunch of sort of ticking time bombs that you could diffuse very early on in the transaction at the LOI stage. The nice thing is that you’re not really exposed to professional fees at that level. Negotiating a term sheet typically is not very expensive relative to getting to the end of the line on these definitive purchase agreements of getting ready to close.

So, in my experience, the best time to negotiate and use your negotiating power is at the term sheet level with the pure understanding that it may not go, and they may walk away. You have to be prepared for that and you have to look in the face of them walking away and accept it. We’ll find someone else, and you just learn from that.

When he desperate clients that are terrified for approval of the purchaser – we end up with terrible purchase terms and they’re always unhappy. We just successfully negotiated 1 for 1 of our clients and it took us two months to negotiate the term sheet. We got everything we wanted! But it was a horrendous process. Now they’re set. So, we know when the definitive purchase agreement comes in – all these matters already done. So, we’re not going to have to fight about it when the client doesn’t have the energy to do it.

 

Rob Wallis:

So, if both parties agree to walk away or one wants to walk away. Is there a risk that valuable information could have been given away from the seller?

 

Ryan Howe:

Well, that’s an excellent point. Typically, we have phase disclosure of information. One of the things we like to do is before we even enter discussions with someone, we want to get a nondisclosure agreement. So, the nondisclosure agreement will protect us against any disclosure we give. Beyond that, the other way to protect us is to segment the disclosure of information into multiple tiers. So, tier one would be after the nondisclosure is signed, tier two might be after the letter of intent or term sheet is signed, and tier three would be after the definitive agreement is assigned. That makes parties more and more committed at each level and the likelihood of the transaction increases exponentially. So, the likelihood of them just kicking the tires to take sensitive information and run with it is very low.

Also, we wouldn’t give them sensitive information until the very end.  We would not disclose things such as IP trade secrets, employees’ names, material, customer names, material suppliers and etc. We would give them loose data on that, we might give them charts that say here are top customers or clients, but we would anonymize them. We’d give them the raw details, but we just would say customer A, B, C and etc.

Then you disclose that on the definitive. Sometimes if we really get stuck, we’ll do an escrow delivery of sensitive information to their lawyer. So, their lawyer gets to see it, but the client never sees it until the deal closes, and then we know it’s protected because the lawyer’s going to be bound by undertakings to me. That’s how we protect against that.

 

Rob Wallis:

Very interesting. So, been super clean in the prep, very selective in the negotiation about how you disclose information, strong on the LOI… What about when we got through all of that? Everybody’s happy. Well, let’s assume everybody’s happy. They should be if they’ve done everything properly. What about closing? How does that typically roll if everything’s all in order and stacked up?

 

Ryan Howe:

Well, one of the things that we’ve been noticing recently is that even though we recommend to our clients to start working on the disclosure schedules early they typically don’t do it. Disclosure schedules are qualifications for reps and warranties. So, when you’ve got a purchase agreement, a purchaser is going to say “Rob, I want you to say that your company has never done anything offside with respect to the income tax act” and you’ll say “I’m pretty sure we haven’t done that”. So, you might say “to my knowledge, I’ve never done that” or maybe you know you did do something you can say “to my knowledge and except as disclosed in schedule 1.1-2, I’ve never done anything offside the tax act”. So, that except as disclosed in schedule X is a disclosure schedule. So, disclosure schedules are often used for the vendor to qualify reps and warranties that they don’t want to give and then often used by the purchaser to force disclosure at a diligence level for certain things. So, for instance, schedule 1.1 sets out the authorized share capital of the vendor. So, now we’ve made a representational warranty with a schedule that says “…here’s the shares as issued”. Those disclosure schedules can sometimes run 200-300 pages long. What happens is when they’re due, and they are due pretty much 5-10 days before closing realistically, the clients are completely overwhelmed. They are so busy trying to do integration, close bank accounts, get client consent, make payroll, and pay the accountants to run the balance sheet… there’re probably 25 different material things that they are responsible for in those two weeks prior to closing, so they tend to not pay attention to this. And then what happens is they do bad disclosure. That bad disclosure comes back to haunt them. If it’s wrong or if it’s a materially misleading in which case, then they get hit for indemnity. So, I would say the major keys to success in closing would be getting those disclosure schedules done way in advance and making sure that you have someone dedicated to your team to run the information disclosure. That could be a transaction advisor who comes in and negotiates the deal for you, they run the data room and handle a lot of upper-level technical requests. Also, it can often be a controller within the company. The only issue with the controller is that he/she is probably busy running your business. So, giving them another full-time job on top can be very stressful. So, you might want to hire an assistant for the controller to let them do this because some of these diligence windows can be as long as six months. Although we generally prefer to get these things closed in 90 days.

I’d say have good help and remember to get moving on your obligations early. You will never have enough time. Always be proactive because it always ends up being a rush and then it’s terrible.

 

Rob Wallis:

Okay, and if I’m selling a business. How do I ascertain that the purchase has actually got the money to close?

 

Ryan Howe:

That’s a great question. One of the ways we can do that is we can put in the term sheet or the LOI that serves as a representation and warranty from them, that they have sufficient funds to close, and they don’t have to go get financing. A lot of purchasers are hesitant to do that because they like to rely on debt wherever possible. However, once again it depends on the nature of the transaction. If they come and approach you with an unsolicited offer from a strategic buyer – they better have cash. If it’s desperation and you’re going on the market and selling to anyone who’s got hope – you’ll take the financing condition. It is what it is. This goes back to your leverage on how saleable you are and whether you can pick and choose amongst different buyers.

 

Rob Wallis:

Totally. Then, what about the order of signing and closing?

 

Ryan Howe:

That’s an interesting one. I think you and I talked in the past about the difference between simultaneous sign and close agreements versus a sign and then close agreements, with our preference being for the latter. Sometimes with weird tax transactions or public companies they can’t sign the document until the closing date. That means you as a vendor are exposed that entire time because they’re just sitting back saying “we’re not going to sign until you do this”. “We’re not going to sign” versus assign and then close – let’s say you sign the purchase agreement today and then maybe thirty days to close. So, now you’ve got some certainty as a vendor. As long as nothing happens in the window in between we’re good to go. Whenever possible we want to avoid simultaneous sign and close because it gives an infinite amount of leverage to the purchaser. We always recommend for our vendors the traditional approach which is a sign and then close.

 

Rob Wallis:

Our point of view in the planning work is that we work with our clients’ proactivity: planning for the future, considering what you want your life to be now and what you want to do in the future, and how your asset position support whatever that is and if it’s a business transaction that’s required to deliver some capital into the family balance sheet to ensure that there are sufficient funds into the future, what is that and then how is it going to be allocated? So, to deliver income and capital needs into the future for a family, what do you see from your end? Are people showing up knowing that they’ve got a clear plan for funds when they get them, or they are “I’m going to go and blow this money” or “I’m going to put it in another business!”. Quite often we see business owners wanting to go into another business and we need to remind them “well, let’s think how hard you’ve worked so far on the journey to get where you’re at and this is what you’ve made. Do you have the capacity for loss, for money to go into a new venture or is it more sensible to use someone else’s money?” What do you see?

 

Ryan Howe:

That’s a great kind of starting point. To your point once again, it comes back to the delineative people. If they’ve got a plan with their advisor that they’ve worked out and this has been going on for 5-10 years – they’re following the plan.  So, when that money comes in (when that “twenty mills” comes in), we know exactly where it’s going. It’s part of the plan. It is to do A, B and C and that’s why it has to go to X, Y and Z to do A, B and C. Those people that get it without a plan… there’s almost this insecurity that comes with entrepreneurs and business owners. There are feeling naked without a business. “What I’m no longer a business owner? I’m just Rob?” and the answer is “Well, no, you are always just Rob”. Sometimes they get a little bit terrified, and they immediately jump into something else. Our recommendation typically is to think about why you left in the first place? What were you doing? What were you trying to achieve and is this the right decision for you?

A lot of our clients do end up back in some sort of commercial enterprise, but they tend to be very low risk, low Involvement, straight cash…we’re talking parking lots, storage locker or owning bare land, just holding land and then selling it, that sort of things are easy. It doesn’t take a huge amount of time or effort to make smart commercial plays there with the right advice. Often, they’re doing that as a hobby, to maximize that total asset pool for them on retirement and then ultimately for their kids. But the ones that immediately jump into a high involvement and high-risk business, unless they’re very young and very hungry, always make me terrified and worried they’re going to absolutely lose everything. But some people are serial entrepreneurs and they got to do it. So, I think that’s where you as the advisor can really show your worth in terms of making sure that they feel confident in the plan and that they stick to the plan.

 

Rob Wallis:

Yeah, well back to that family of 4 with the 3.6 million of capital gains exemption. That’s a one-time thing, right? So, that money got to work even harder for growth.

 

Ryan Howe:

That’s a one-time thing, yes. So, it’s indexed around 9, so all those kids have used it up. So, if they want to be an entrepreneur in the future, they can’t use that. I mean if they’ve used their entire exemption. With the idea being that capital created will ultimately end up in their hands when their parents pass. that’s… I think there’s a difference between enough and then enough to stop.

So, there are just different personality types there and you got to figure that out. But there are so many worthwhile efforts out there and so much need for capital in targeted areas that would be more fulfilling than a purely commercial enterprise, right?

Some people may dream about running a bar on a Commercial (Drive). Good luck. I can’t wait to see what will happen here. Versus people who wanted to focus on regrowth options in this part of BC and doing a little bit of side planting and supply. Well, that’s great.

But once again, who am I? I’m just the lawyer, right? I’m not the one that’s got the moral suasion here. I’m simply the guy who’s seen 250 deals and here’s the way it shook out for these people. So, you have quite a bit of perspective, but they don’t come to you for the perspective they come to you for protection and making sure they got paid and are not screwed over. It’s not about “I’ve done it. What should I do Ryan?”. That’s more your domain, right?

 

Rob Wallis:

Well, we’ve both got lots of stories, that’s for sure. Thanks, Ryan, it’s a really interesting conversation.

So, the key points are to be squeaky clean, negotiate very-very hard and very selectively, make sure your purchaser can close, have a plan for what you do with the money and don’t blow it or open a bar unless you can afford? Right?

 

Ryan Howe:

A hundred percent! That’s the key takeaway! Thanks, Rob.

 

Rob Wallis:

Appreciate your time. Thank you!

 

Ryan Howe:

Thank you.

In this episode, Jason Boudreau speaks with Dennis Serre, President and CEO of Serre Financial, a company providing expert advice to financial professionals, new and existing business owners, and executives to navigate and fully mine the complex benefits of the Canadian Income Tax Act.

Dennis shares his passion to help entrepreneurs and business owners through advantageous tax structures and talks about the change in clients’ priorities, the positive impact of using consulting services, individual pension plans, private health service plans, and much more.

 

 

About the Guest – Dennis Serre

Since 1990, Dennis Serre and his wife Lisa have built and curated a team of leading tax experts with one truth in mind — every client’s situation is unique. With the Income Tax Act as their playbook, Dennis and his knowledgeable team have provided expert advice to industry professionals and business owners alike, all to find value with a net benefit to the end client. Over the past decade, the Serre Financial team has grown to include many talented tax experts, each crafting superior solutions for each of the several thousand clients. To read more, please visit the Serre Financial website.

About the Host – Jason Boudreau

Jason has built VELA Wealth into an established life and estate planning firm, guiding families as they make meaningful choices at the intersection of life and wealth. Jason’s areas of expertise include intergenerational wealth transfer and estate planning with a focus on advanced insurance-based solutions that incorporate philanthropy and legacy planning. Leveraging these specialties, Jason brings a fresh perspective and outside-the-box thinking to the strategic planning process. To read more, please visit the VELA team page.

 

The episode is also available on:

    

Read the transcript of the Polestar Podcast here.

 

Disclaimer

The information expressed in the podcast is designed for general informational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

 

The Podcast Transcript

 

Jason Boudreau:

Welcome everybody back to another episode of the Polestar Podcast by VELA Wealth. Today I have the pleasure of spending a little bit of time with someone I’ve gotten to know fairly well in this industry over the last number of years – Mr. Dennis Serre. He is the Founder, President and CEO of Serre Financial.

Good morning, Dennis. How are you doing? It’s great to have you here. Thank you so much for spending the time with us and I’m looking forward to the conversation.

 

Dennis Serre:

Great. Thank you. Likewise.

 

Jason Boudreau:

You and I usually see each other at different industry events, and we always have interesting conversations and, of course, we do work together as well on the business side.  So, I’m looking forward to unpacking some of that here, hearing more about what you’ve been up to, what you’re up to for the future and informing our listeners on some of the neat stuff that you do over at Serre Financial.

So, for a start maybe you can give the listeners a bit of context about you, Dennis. How have you gotten into the financial services business? I know it’s very unique because your clients are firms like ours
(VELA Wealth) and you are helping us serve our clients. Can you tell us a little bit about that sort of evolution of Serre Financial and then tie that into your vision for the future of the business?

 

Dennis Serre:

Certainly. Serre Financial has been created over two decades ago. We are working with people like yourself, as you mentioned a financial advisor platform.  How did we get into it? My background is from Revenue Canada Pension and trust services. Over time working with people like yourself and asking many questions at some point we were asked to provide more services. So, many years ago we started a firm and started to work directly with clients and realized that it was not the right approach. We wanted to work with the people who had a relationship with the client. We changed the model within three months. We need to work with financial advisors to really grow the business and understand how we can become part of the team versus competing with the financial advisors. So, becoming a component of the team as a further resource is critical.

We have grown from just myself to the 15 staff members that we have right now. Over the years, through legislative change, industry changes, and the advisors’ evolution, we have focused on certain areas of tax planning and tax solutions for business owners, the entrepreneurs, and professionals. We always focus on working with the financial advisor who truly has a relationship with these clients.

 

Jason Boudreau:

Right. Just sort of pulling on that a little bit Dennis. What are some of the challenges that you see that advisors and their clients experience? In today’s environment, what are some of the things that are coming up that you and your team are seeing?

 

Dennis Serre:

Well, there are two fronts to these.  Let’s talk over the last decade about what has happened in the industry and the tax changes that had happened. We all know that we had advisors who either were mutual fund advisors or insurance advisors and over the last decade, a lot of them became cross-licensed, cross-providing services to become a one-stop shop for their clients. However, most advisors are totally independent and have relatively small-businesses themselves (one to three industry people). The challenge they’ve been facing is having the resources to address concerns of their clients, understanding what the true challenges of the client are and becoming a partner with their clients versus just managing money or selling insurance. So that has been a big challenge.

One of the things that we have realized over the last 20 to 24-months of Covid is that client priorities have changed over that time. There is a realization that they need to look at their business affairs and personal family affairs differently. They see that they are intertwined. Clients are no longer content to forecast over seven to ten years like we used to see a few years ago. Now they want to forecast over 02, three, five year periods. Timelines have shortened so much as people have re-evaluated their priorities.

 

Jason Boudreau:

Interesting. That’s true. That’s a really good point. I’ve definitely seen that with our clients where we deal so much in long-term planning. The smaller, more incremental bite-size chunks of that long-term planning have certainly become front and center for people over the last couple of years as to your point they’ve indeed reprioritized. It’s good to hear it from you as we also have had the same experience with clients regarding the integration of life and business. They’re inexplicably interconnected, right? Even something as simple as working from home. Now, all of a sudden people are working from home and their business and their personal lives are basically integrated and that definitely had people not necessarily shift priorities but bring their true priorities into real focus.

Being an entrepreneur and obviously, you work with entrepreneurs, how do you define success in your life and in your business?

 

Dennis Serre:

Well, in the beginning, success was badly defined by how much money you’re making and how successful you are becoming which I think is a common thing that’d occurring among young entrepreneurs. However, as you mature and become better at what you do over the years you define success in a whole different way. When you look at the company you will see individuals trying to get to the top as fast as they can and that’s how they’ll measure success. As you grow up and your family members are getting older and eventually move on from the home you define success by interacting with people and providing the right solution for them. That’s where the pleasure of helping people has become a way to measure success. Yes, we all get paid for a service and everything that we do. However, that said, for me success is more about making a difference every day versus setting targets, accomplishing them, and reflecting back on them and saying “well, we’ve met our quota but where do we go from here?” Those are things of the past to me.

 

Jason Boudreau:

Yes, definitely. It feels like it’s a more personally meaningful measurement of success for you, isn’t it?

 

Dennis Serre:

Yes, for me and for the company. That’s why we want to make sure that every email that reached our company is acknowledged within 12 hours, within business hours obviously. Also, we don’t have an interacted phone system. We have a live voice, and we want to make sure that people can get to someone and get the answer they’re looking for instantly. If not, it will be researched, and somebody will get back to them as quickly as possible with those answers. To me, that is the touch. That is important.

 

Jason Boudreau:

Yes. No doubt. We have a very similar approach here. High touch, people talking to people. In this world of everything evolving to technology we have looked at it through the lens of “We are a human-first business supported by a great technology. We are not a technology-led business that has some people scattered in the background somewhere”. We’re in an advice-based business and humans giving the advice is definitely what we’re geared for.

I want to dive in a little bit into some of these solutions that Serre provides. Obviously, over the years that we’ve worked together, we’ve gotten to know each other, and we have an understanding of all of that. Can you share with our listeners some of those key services that you provide that ultimately have a positive impact on the lives of the business owners that they all are going to be implemented in the end?

 

Dennis Serre:

Well, why don’t we talk about an area of business which has been very busy the last few years—consulting? As the pandemic grew, it changed many people’s priorities as we mentioned earlier. One priority that has really grown in prominence has been really understanding the current situation. The current situation is more about the business: understanding the business structure and getting into what we call analysis of the roadmap. We all know the word “roadmap” has become more of a buzzword in the industry in the last three to five years. That said, today it’s becoming more “show me the goods”. Let me explain. We have recurring revenue as well as we have clients that are recurring. We have the income coming in… but what about the tax minimization? Where should I be putting my money? What does that mean when I retire? Talking about retirement -what do I do with my business? There are a lot of tax implications if I’m not prepared.

So, you manage my money, you help me with my insurance, my risk management… but what about all the rest?

We’ve been working very closely with financial advisors and end clients (business owners and professionals) and really peeling back the layers to really understand the client’s situation and help them understand what it means. From time to time you may have clients saying that they have the perfect structure with a family trust and a holding company and we ask them how this works for them? Often clients simply defer to their consultants.

You may understand what you do for your business, but if you don’t know why you have a certain structure in place and the benefits of having it – do you understand the overall picture of your business? Not really.

That’s what it is. That’s what we call a roadmap. It’s defining the right roadmap for each client.

 

Jason Boudreau:

Right. How that structure can serve you, what your goals are today, what they are in the future, and why it was all set up. I could also see that not just with Covid and people getting really doing a check-in or a gut check or maybe an accelerated a future-based plan. If we put Covid aside and just think about demographically where we’re at as a country. We are an aged population as a country and I’m sure that a lot of what your company is seeing in the consulting side of the business probably also has to do with the life stage that a lot of these entrepreneurs are at, right?

 

Dennis Serre:

Definitely. That is a valid point. We have a lot of entrepreneurs that are getting older and that want to have more time for retirement. Then it comes down to a successor, family member, or is it time to start looking at selling the business. It’s like having a large home without children; now it’s just my wife and me. Do we need to downsize and take some chips off the table? That’s where a lot of the people are saying “I don’t know. Jason, help me. Do you have a tool to help me?”. That is what we have found in the few years that it has become very important that people want to better understand.

 

Jason Boudreau:

Right? Of course! One of the strategies that I’m hoping you can share a little bit about just at a high level that I know is relevant to business owners and we certainly take advantage of for clients within our firm is the individual pension plan. That’s something that obviously has been around for a number of years but it’s not something that every entrepreneur out there is aware of, and I know that it’s something that you specialize in designing and help manage and there’s some sort of creative things beyond that I know you get involved with as well. So, just sort of pulling a little bit on that thread about the more aged population and business owners in that stage of life. Can you share a little bit about that type of structure and why it’s beneficial? Also, why it’s beneficial towards the end of selling a business? For example, when it comes to things such as terminal funding.

 

Dennis Serre:

Definitely. Those are great questions. So, the individual pension plan (IPP) you’re referring to is a defined benefit. The defined benefit has a much higher limit contribution than a regular RSP which is under the money purchase provision. When we look at the IPP for entrepreneurs that have been in business for several years, getting older and the cash flow now is not becoming as much of a concern, an accumulation of assets is becoming more forefront thinking and tax minimization oriented. For a lot of people, that’s where the vehicle of an individual pension plan makes a lot of sense because they can put more away using business dollars and they can benefit from having a pension. Just like someone is working for an institution such as a government having a pension for life. So, you can have a similar pension for yourself with your own business that you control, and you can have the contribution being so much higher than a regular RSPs.

There’s also an additional provision that you’ve mentioned – selling your business and different type of planning that you can do around it. The individual pension plan has also a few fronts that you can deduct your management fees that are being paid by bank, institution, or fee-for-service based on the type of application that’s been utilized. What happened if there is a shift in the market? Suddenly you can do a catchup contribution and you can get a tax deduction. Yes, you’ll tell me while you know the market will readjust but should it be in a downward where the person has extra cash and can take the tax deduction in the company? It may make a great strategy for them.

Also, if proper planning has been done with their holding company and with their family members it’s a way to do terminal funding upon selling the company – meaning that you will extrapolate the number all the way to age 71 which is a maximum age you can have a pension plan before starting to convert it to some sort of a payment schedule. You can make a very large payment into it depending on when you sell the company, obviously. You will have it within your own control, within your own family control which can eventually be converted to what we call an FPP (Family Pension Plan) which can be utilized to be used to fund the retirement.

In the event that the parents pass the pension plan can continue on a tax basis with the next generation which is significant as we know.

 

Jason Boudreau:

Right? Yes, totally. So, it may become a way where a family who has a significant amount or even just a good amount of wealth is locked up in a corporate environment and they want to provide certain income streams to their kids or their grandkids.

 

Dennis Serre:

Definitely.

 

Jason Boudreau:

They can set up a tax-advantageous structure to do so. Thank you for sharing about that.

Dennis, one of the things that we talked about before this podcast was you sharing a little bit about your experience. What are some of the things or even the most important thing in your mind that business owners can do today to help enhance their financial performance? I know that you’re coming at it more from the lens of tax minimization strategies which we love because that’s a guaranteed return on a dollar for a business owner without putting it at risk in the markets or any other kind of investment. So, from your perspective, what is the most important thing business owners can do to enhance their financial performance?

 

 

Dennis Serre:

Well. First of all, they should reach out for help, right? They’re good at what they do for a living, but we all know we have a certain array of expertise, the rest we should really reach out for help. This is a part where people like yourself and firms like VELA Wealth has the capability of helping clients beyond just managing money. It’s really understanding their situation and helping them to get to the next level and to achieve the goal that they’re trying to accomplish.

One of the key parts is to really understand not only how they are managing the risk but their business. How they’re running their business? Who do they believe will be taking on their business down the road or who’s looking after their business affairs while they’re away? Understanding all these key things but at the same token managing the risk.

A lot of people are getting to an age now when they want to slow down. Covid made them appreciate the priority of life and family and made them want to take a bit more time off.  The question is – who would be behind the scenes running the show and what have they put in place to make sure these people and businesses are protected so it can still move forward. It’s like a business plan and a lot of people are afraid to discuss their business plan. However, interactions and relationships the client has with a financial advisor help them to look at the business from a different angle, not necessarily just from a tax standpoint, but really from a day-to-day perspective or from where they see themselves in a number of years from now, to discuss what do they have in place to make sure they can get there or to have a plan in the event something happened. Those all are important to me.

 

Jason Boudreau:

Yes, I hear you there. That’s a really neat perspective as a lot of us think about what can we do to increase our margins or increase our revenue or get more market share. But very few people are probably thinking about what if something goes wrong. Well, I’m in that growth mode. What you’re sharing are important things to consider allowing the enhancement of that financial performance to be sustainable and solid, to have some kind of continuity plan in place should something happen.

 

Dennis Serre:

Definitely. I’m going to share a little bit of my own situation. So, three years ago before the pandemic, I was thinking who does really understand my business. I work with a lot of financial advisors across the country, but who can I have as second-in-command should something disrupt my business or me or whatever the situation is. What are the key things I need to do? After looking at different angles, I realized that the best person who understood my business was my corporate banker. UltimatelyI was able to hire my corporate banker to come and work for me.

 

Jason Boudreau:

No way!

 

Dennis Serre:

Yes! It really made a change to have someone from the outside look at your business not just from a banking standpoint but really understand the business. Well, she had an understanding of our business because she helped us a lot from a banking standpoint and not just from the lending aspect as we process a lot of pension and benefit payments. You have to have the right platform to pay and to move all these things and we’re not a large insurance company that has a multilayer platform that way.  That person was able to come in and look at it from a different angle and bring processes that really make… I don’t want to say our stress level, but our operations so much smoother because as you do it on a daily basis you may not realize the key things that you’re missing. That was a great insight for me to see how I could dramatically enhance my business.

 

Jason Boudreau:

I love that. Wow, I didn’t know that. That’s really fantastic that you were able to approach somebody who is a team member from the outside and bring them in and they accepted that offer and that challenge.

Most of our listeners are entrepreneurs and incorporated professionals. I was hoping that you can share with them some insights about the private health services plan (PHSP) because as abundant as it is it still blows me away how little people actually know about it and its benefit.

 

Dennis Serre:

Okay. Well, I am aware that unfortunately a lot of entrepreneurs believe that they only have the option of using a large insurance company while they have other flexibilities. The same belief is that the business owner could only use the bank for managing their money, but we all know that there are so many other options such as your firm to provide those services.

A private health service plan is a vehicle that allows eligible medical expenses (no different from a medical expense being submitted to an insurance company) to be submitted to their own administrator for the private health service plan and that is a service that Serre Financial provides. We call it a third-party administrator, TPA for a short name, for adjudicating the medical expenses.

What the client needs to understand is that if a medical expense is qualified for an expense on the personal tax return it will qualify for the private health service plan deduction for their corporation or their businesses if they’re not incorporated or partnership.

For employees, it’s a vehicle to turn medical expenses that they paid for into reimbursement from the employer without getting a taxable benefit or without having to pay a significant premium that they may use or may not use. That’s one of the differences that Serre Financial provides is that we take on the liability of what we adjudicate to make sure it’s a qualified medical expense.

 

Jason Boudreau:

Right, I know that from experience with Serre Financial.

 

Dennis Serre:

You have to make sure that it is a properly qualified medical expense. We charge an administration fee, and we make the process as easy as possible for both the entrepreneur as well as their employee. The retention for employees is to provide various vehicles such as benefits. One of the key things for employees is to make sure that they receive their money back into their personal bank account as soon as possible without being a taxable benefit.

 

Jason Boudreau:

Right.  Yes, it’s a wonderful structure and something we’ve been a big fan of for many years. The thing I love about it is that it’s so flexible for the business owner. They can decide what they’re going to give to every employee, one or two thousand dollars a year, whatever that number is. And employees will be able to utilize that money towards any qualified expense, whereas it is an insured plan there’s an allocation of a certain dollar amount and once you’ve used all that up you don’t have any more left. So, for example, my health priority is I need to get physio every month. Let’s say I’ve got an ailment and it requires ongoing treatment. I might get $500 from my insured plan but I could use that full thousand or two thousand dollar for physio if I needed to through the private health services plan. So, it’s the flexibility of it, cost control, and the predictability for the business owner and then, of course, the benefit to the employee including the owner. Getting that money as a non-taxable amount and full utilization of that dollar. We love it. We utilize it as a firm and individually as well. Thank you for sharing about that and I hope the listeners who are out there will want to learn more about the private health services plan.

We’re nearing the end of our time together Dennis. There’s one question that I have for you to just round out our conversation. It’s about your hope for your clients. You have a purpose behind your business, and I really want to know from you as the visionary and the leader of that business – what is your hope for your clients?

 

Dennis Serre:

Well, the hope for the client is really to get the best structure they can have to make it seamless for them to do business. To have an understanding. And when they sell their company or unfortunately when they pass on to make sure that they minimize tax liability. What people don’t realize is that in Canada we have a book called the income tax act. It’s the playbook telling you what you are eligible to utilize as a tax deduction. Unfortunately, maybe less than 1% of the population understands that they have those options, and a lot of people always think they have to pay their share of taxes.

Well, if you can keep your wealth within your own family and your loved ones, you should be able to operate at a level that you want to operate. I always say to my staff and anybody else that I provide the service just like I’d like you to provide service to me and treat others the way you’d want to be treated. That’s very important. That’s a piece of mind for the business owners. It’s a peace of mind for yourself as a relationship manager and for us as the provider of the solution. So, it’s a win-win-win situation. The clients are happy and have what they need, you (Jason) have the solution provided to your clients and keep the relationship with them, and we are providing the solution to you and being in a great relationship and at the same token earn a living from it.

 

Jason Boudreau:

Yes, for sure. Thank you. The last thing I want to just sort of end on is your vision for Serre. It was great to hear you brought in your banker as a key number Two or next in charge. What is your vision for the future of Serre and where it’s going to be in maybe three to five years from now?

 

Dennis Serre:

Well, as you know I have moved up north to a resort area which I do enjoy. There are various types of activities from skiing to golfing, cycling to hiking. I wanted access to these types of activity but I also realized that for me it was important to use my brain every day too!

I am in very good physical health, so I hope I will be able to be around helping people like yourself for many years to come. I enjoy what I do and earning a living helping others is the enjoyment is amazing. So, I hope I will be still working at reduced hours maybe twenty to twenty-five hours a week but be around another 3 to 10 years minimum. I’m young, I’m fifty-five years old and I don’t see myself fully retiring. Finding the right balance will enable me to do what I do for years to come.

 

Jason Boudreau:

Right! Well, it’s certain that Serre Financial is great at helping people and we’re grateful for our relationship with you Dennis, and your company. Thank you for your time today and for being with me on the Polestar Podcast here. It’s been a pleasure getting to know you better. I really enjoyed the conversation and learned some new things from you today that I didn’t know before. Thank you for joining me.

 

Dennis Serre:

You’re very welcome.

 

Disclaimer

The information expressed in the podcast is designed for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

VELA Wealth is excited to share another Polestar Podcast episode with Jayesh Parmar, the founder of Picatic [Exit/Eventbrite] and a Co-Founder and Co-CEO of Gunkii, the contemporary tongue scraper. In this episode Jayesh talks about his entrepreneurial journey, Gunkii and its shared values, his success in business and life, and his relationship with failure and uncertainty.

 

 

About the Guest – Jayesh Parmar
Born in Saskatoon, Canada, San Francisco incubated, alumni of Toronto’s Extreme Startups, New York’s Canadian Technology Accelerator and Vancouver’s Hyper Growth Program; Jayesh now calls Vancouver, British Columbia home. He was the former CEO/Co-Founder of Picatic.com which was acquired by Eventbrite in 2018. Jayesh is an active investor, a lifelong student, and has jumped back into being a Co-CEO /Co-founder of Gunkii, the world’s sexiest tongue scraper. Please visit Jayesh’s LinkedIn and Gunkii website for more information.

 

About the Host – Jason Boudreau
Jason has built VELA Wealth into an established life and estate planning firm, guiding families as they make meaningful choices at the intersection of life and wealth. Jason’s areas of expertise include intergenerational wealth transfer and estate planning with a focus on advanced insurance-based solutions that incorporate philanthropy and legacy planning. Leveraging these specialties, Jason brings a fresh perspective and outside-the-box thinking to the strategic planning process. To read more, please visit the VELA team page.

 

The episode is also available on:

    

The Podcast Transcript

 

Jason Boudreau:

Welcome back to another episode of the Polestar Podcast by VELA Wealth. Today we are honored to have my good friend and Co-Founder and CEO at Gunkii – Jay Parmar (full name Jayesh Parmar). How are you doing, Jay?

 

Jay Parmar:

Hey Jason! How are you doing? Good morning.

 

Jason Boudreau:

Good morning! It’s not often that we do these in the morning but it’s nice to start the day out with this kind of conversation. You and I have known each other a little while now, it’s going back not quite 10 years but feels pretty much close. I’ve had the fortunate opportunity to have a bit of a front-row seat to the stuff you’ve done over the last number of years–first in the tech space and now in a completely different consumer goods space and I’m looking forward to hearing all about it.

What I thought we would do to sort of kick things off a little bit is get you to share a bit about your journey – from where you started, even back as far as your first business, leading up into where you’re at today with Gunkii and why you’re doing what you’re doing.

 

Jay Parmar:

Sure! I’m not sure how far back will go. Effectively, I was born in southern Saskatchewan, I had these big ambitions and dreams to go out there and build a tech company that could penetrate the world. That was pretty audacious at the time if I could shed a bit of modesty because number one, I didn’t know what I was doing and had no real clue. There wasn’t a network for that. So, that was in 2008 and the idea at that time was an online ticketing event. I would put on a bunch of events and the problem that I wanted to solve at that time was how do I go up there and sell tickets without having to go to record stores and drop the tickets there. People didn’t know exactly how it worked back then. That was “pre-ecom-internet days” where it was extremely prevalent to come to a local record store and purchase concert tickets there. So, it was really tough to understand exactly how many tickets were sold, how many people were coming, and our cash flow.

The idea was to sell online tickets. At the time E-tickets was a novel, even a little bit crazy idea. At that time people often thought I was scamming them. I was like “Wait a second… Where’s the printed ticket?” – “Well, actually you print your own ticket” and it moved with the fact that you’d have to put on your credit card online which was a little bit gnarly at the time.

So fast forward, we moved, and we were relentless through all that uncertainty and we pushed forward. We were doing a ton of sales and the company at that time was called Picatic. It was quite evident that I plateaued in terms of the knowledge, and I need to go out there and raise capital and really grow.

Again, those are things I did not know how to do. So, I packed my bags, with my wife we got married and four days later we drove to San Francisco–right into the middle of the mecca. That was again, another really uncomfortable and gnarly situation. Fast forward a little bit later we raised money, grew a ticketing company that penetrated the world and then led it to acquisition in 2018 from a company called Eventbrite.

 

Jason Boudreau:

I remember that.

 

Jay Parmar:

So, I was able to go out there and start a company through a problem that I had and then go all the way through to an exit. Upon exit I was at home, and… it collided with Covid. So, like everybody else in the world, we’re sitting in our living room, and it gave me a refreshing opportunity. I think one benefit of Covid is that a lot of people got an opportunity to be introspective and really think.

 

Jason Boudreau:

Yes, totally.

 

Jay Parmar:

For me it was really introspective because this has been a life changer for me – I exited a company that I had spent a decade doing and invested a lot of blood, sweat and tears. But what happened was – I’m sitting there in my living room and we have it’s called Friday Movie Popcorn Night…

 

Jason Boudreau:

Yes, yes, you’ve told me about this.

 

Jay Parmar:

Yes, I know how much you love your children, and you are a family man. For me, I realized that Friday Movie Popcorn Night was the highlight of my life. It was absolutely thrilling. We would make some popcorn, get a couple of pies, and just sit there. The second sobering realization around that was that I realized I’d probably missed 90% of them and that was a gut-wrenching feeling. I decided that I never want to put myself in a position where I’m away from my family that much anymore if I could help it.

The second thing was that I got an opportunity to really see and witness my wife’s success in the big business that she built. She has a performance marketing company and was recognized with the “Top 40 under 40” award. I shed modesty here, I married up in a big way–like absolutely big way, she has three master’s degrees, and she was  working on a doctorate at the time we got pregnant. So, the realization came that I want to work closely with her.

It sounds kind of a little funny and weird to say that I love tongue scraping. Growing up, my friends and I would talk about it all the time which is a little weird. The background around it is a very Indian thing as I am an Indo-Canadian. My parents have introduced me to these tongue scrappers. They’d been doing it for 50 years and now I’ve been doing it for 30 years.

There is a layer of this gunk on your tongue and when you scape it off, it’s disgusting and most people don’t know about it. So, I pitched my wife–“Hey, why don’t we go out there and build the world’s sexiest tongue scrapper?” and so, that’s what we have now. We’ve built the world’s sexiest tongue scraper that has been sold in over 50 countries around the world…and we’re having a blast doing it.

 

Jason Boudreau:

Wow, right on! I can tell you my friend as a frequent user of the Gunkii tongue scraper it’s become now for me such a ritual. I was up in Whistler on the weekend, and I forgot my Gunkii. I brushed my teeth on Thursday night, and I was like “What am I forgetting to do? I’m forgetting to do something…” and then, of course, I look in the drawer and realized that I didn’t bring my Gunkii.

 

Jay Parmar:

Yes.

 

Jason Boudreau:

It’s been amazing. An amazing tool. One of those little things – “if you know you know” and you don’t know what you don’t know until you try it.

 

Jay Parmar:

Yes, that’s exactly it! Most people don’t know about it and think that this is a gimmick. It’s been around for centuries with Ayurveda medicine so it’s not something that we invented.

I associated it with brushing. If you didn’t know what brushing was and all of a sudden somebody was trying to explain to you the hair on your teeth and you got a buzz on your teeth that you can feel and you know that is the difference between tongue scraping and not time scraping for me.

 

Jason Boudreau:

Yes (laughing).

 

Jay Parmar:

And many people like there’s this gunk on your tongue. So, once you know – you know.

 

Jason Boudreau:

Yes. So, one of the questions I have for you Jay is to share your journey and to tell us how you got to where you are. I’m wondering how you define success and maybe one little caveat might be pre-Covid and now. Would you look at success differently? So, sort of two-part question there. How do you define success, and would you look at it differently in this sort of post covid world as you did previous to it?

 

Jay Parmar:

That’s a really good question. The way I look at success right now is by living life on my terms. I mean if for example, I could have five “Lambos” (Lamborghinis) but if I have to drive to work and work 18 hours a day just so that I can take my “Lambo” there and back – I don’t necessarily think that’s a success. So, to do things on my terms and, on my schedule is how I defined success and that’s kind of where I work.

 

Moreover, it is being around my family in creating the memories that I want to create and that to me is extremely successful. So, in the past, there is no doubt that I had a lot of notoriety building up a tech company and there was a lot of business success around that piece that has allowed me to go wealth there and live my peace and have the true success that I’ve really driven towards. I don’t necessarily think that I would really have more awakeness around that unless Covid happened which is a unique situation and a blessing in disguise. So, if there’s anything beneficial to Covid it is the enforcement for you to slow down. That’s what it has done for me. So that’s how I define success on “my terms”.

 

Jason Boudreau:

It’s interesting to hear you share that because it’s very similar to me. For example, the Friday Movie Popcorn Nights – I remember sharing with my wife or my mom that the blessings of Covid have been that I have not missed a family dinner in close to two years. It’s been a little bit more sporadic lately just given kids’ activity, starting up a little bit of business travel here and there, but still at home lots. Previous to Covid, I could probably count on one hand the number of family dinners I can remember being at since our eldest Ben was born. He’s 11 now. So, I hear you there, Jay. That’s truly been a blessing in disguise.

 

Jay Parmar:

Yes. I just think of going through life and looking back and thinking about not having those moments and how much I would have cheated myself and by that time I think it would have been too little too late.

 

Jason Boudreau:

Yes, yes, totally hear you there. What about the things that really drive you such as what gets you out of bed in the morning? What makes you feel like this is a day I’m ready to take on?

 

Jay Parmar:

That is again a great question. I lived in an attitude of gratitude, Jason. I’m extremely grateful. So, what drives me is that I’m so grateful to be alive and grateful for my situation.

So, there’s nothing that really drives me – I’m just happy to be here.

What drives me as a human and to continue to go on is that I do have a fear. I would say fear of plateauing. I continually want to learn, and I continually want to be uncomfortable. What I’ve learned through the journey is that putting myself in an uncomfortable situation is my new comfort zone.

 

Jason Boudreau:

I love that.

 

Jay Parmar:

It takes work to get there and embrace that uncertainty and be comfortable with uncertainty around that place. So, what drives me is to really try and discover the stuff that I don’t know.

Again, the most important thing is my family. I’m up early, I’m in a morning guy. I get the kids and just see my family. I think my wife probably wants to shoot me some mornings because I’m just so ready to go.

So, those are things that drive me. The search for learning and also my family.

 

Jason Boudreau:

Right on, that’s awesome! I hear you. Maybe this is a trait of the entrepreneur. I just feel the same way. I have this insatiable thirst for knowledge. I feel like I’ve never had that.

For me, the learning that I love the most is learning about myself. I love discovering more and more about who I am and how I relate to humanity. Therefore, how do I like humanity, how does humanity like me?  This is a kind of existentialist kind of thinking that helps me learn and grow as a human, of course, and as an entrepreneur. When we’re in business – we’re in business with people and learning about people is something for sure that I love doing. Thank you for sharing. That’s really great.

 

Jay Parmar:

Also, Jason, that’s something that you’re very good at. It’s definitely something to admire about you.

 

Jason Boudreau:

Thank you, appreciate the plug.

So, just sort of to flip that a little on its head. We’re talking about successes and things that drive us and what about the things that keep you awake at night. When you’re lying there are you thinking about whether it’s the business or the family or the world? What are the things that are keeping you up?

 

Jay Parmar:

Yes, absolutely, there are things that keep me out at night. I mean it’s just my human nature. I’m extremely impatient. I continually want to get there faster. I just can’t get there faster. Can’t roll fast enough.  I can’t learn fast enough. And this is something I have to work on – the cross-section of reality versus my expectation.

I love thinking big. I have these absolutely grandiose visions. Getting after big things is just the way I want to be.  As a Prairie kid that thought he could build a tech company and penetrate the world.

 

Jason Boudreau:

Which you did by the way.

 

Jay Parmar:

Yes, we did it!

I think about Arnold Schwarzenegger in terms of this kid from Eastern Europe that wanted to go out there and be a big movie star. It was just a thing in his mind. It was the clip that was going on. My clips that are going on are big. I want to go there and do all these magnificent, wonderful things. Often, they are not moving as fast as I want them to go.

But when I look back there’ve been a lot of accomplishments. So, I struggle sometimes with patience and those are things that keep me awake. That’s one of the things that I am working on. The relationship between expectations and reality. Would I change it? Probably not, because it’s made me who I am.

 

Jason Boudreau:

Yes, it’s just more about your awareness around it and how it might impact decisions you make or how you react to certain situations or things. It’s a motivator. It’s an internal driver. It’s a catalyst for your success and having that awareness around it and not saying “this is something I want to change, it’s just something that is part of me and therefore I’m going to make certain decisions about it that maybe I didn’t make before because I have an awareness now that I didn’t have previously”. I think is the key there.

 

Jay Parmar:

Yes, as well as focus and in the cross-relationship with the delta of relentlessness. I think that is what it does.

Meditation has really brought this in as I’ve got older it’s given me an opportunity to really understand that I have to really calm my thoughts to understand exactly what is going to move the needle, where do I want to focus, you know the Jackhammer around that, and use the tools that I have and be extremely relentless because my emotions around it are just my emotions.

So, yoga and as well as meditation have really helped me as a tool to go out there and help me get to sleep when I have those moments.

 

Jason Boudreau:

Good for you. I think that’s one thing that as a fellow entrepreneur I’ve really tried to implement into my life as some kind of mental stillness. Whether it’s meditating which I don’t do a lot, but I started practicing qigong not too long ago. It’s a bit of moving meditation. But even just things like going for walks and paying attention to my breathing even if I’m exercising. Little things like that just help to calm the mind. It is something that has been a welcome skill to develop even though I haven’t been obviously on top of it as much as I should be. That’s the whole entrepreneurial expectation thing, right? It is something that I should be doing more and the joke is to try not to shoot all over yourself, right? It’s just one of those things that is a bit of a human thing.

So, we’ve talked a lot about things you have accomplished. One of the things I want to know is what are some things inside that brain of yours that you haven’t accomplished yet that you want to.

 

Jay Parmar:

Well, there are two things. I’ll bring this down to family and business. In terms of family, I have a son and he’s eight years old. I look at that child as a 20-year experiment in terms of how well we did as parents in 20 years.  Do we get them moral values and ethics? Are they going to be happy within their own skin or are they able to go out there and live with joy and add value to the world and etc.

The thing I want to accomplish first and foremost without a doubt is to make sure that I help grow the best human that I possibly can.

So, that is definitely it. Then in my own personal life, I want to make sure that I’m becoming the best version of myself and that is the first and foremost actually. So, I can be a better dad, a better husband, and better anything else to everyone that is within my sphere. So, those are things I want to accomplish. I don’t necessarily and I hope I never accomplish that because I always continually want to be chasing the best version of myself and never plateau.

From a business standpoint, I do have that big ambition that Gunkii is the world’s sexiest tongue scrapper…

 

Jason Boudreau:

It really is by the way. The design thinking and the prototyping and all that you’ve shared with me, how can it not be? I look and think “I don’t know what all the other tongue scrapers out there look like, but this has got to be the world’s sexiest one!”. It’s a happy place in my drawer. That’s for sure.

 

Jay Parmar:

Well, I appreciate that. There’s a great team that spent countless hours making sure that it comes to life. So, I’m sure that they’re going to be happy to hear that.

The thing that I want to do from a business standpoint is to make Gunkii a household name. It’s to really penetrate the world. It will become a household thing. It will be something that people understand and know.

Saying that my wife and I started it as a for-profit enterprise with a shared value. Partial proceeds of every Gunkii that is sold go to help children with cleft lip and cleft palate. So, we want to create a sustainable but for-profit business that goes and continually helps people and makes a net positive to the world. That’s really important. We haven’t quite hit that goal yet in terms of penetrating the world and becoming a household brand name. But it’s something that we are working every day on accomplishing and that goes back to being impatient.

 

Jason Boudreau:

No doubt! Thanks for sharing about the contributions that the business is making to help children with these cleft lip and cleft palate because I was going to ask you about that. I’ll just pull on that thread a little bit. Business with a purpose, right? Back to your point earlier about Picatic – there was a problem with event ticketing and you use technology to solve it. This is a little bit different. The problem you are solving is getting rid of the gunk on the tongue. And the business is contributing part of its revenue towards a cause that’s meaningful to you guys. Can you just share a little bit about that because I love this integration of shared values. Can you just share a little bit about how you guys came to that decision, which I’m sure was a natural one. Why you choose the cleft lip and cleft palate children as that focus cause for the business.

 

Jay Parmar:

Sure. In the past life, I spent some time in the Harvard Business Executive program.  One of the learnings was a shared values paper in HPR. It’s absolutely a genius piece of writing and there are a lot of studies and cases around that piece. Effectively it’s been the foundation in terms of how I think about business, and we did this with Picatic.

Picatic is to bring people together and create memories, create experiences, maybe meet the love of your life, meet your business partner or enjoy this experience with a best friend. That’s what events do – they connect people and create experiences.

Having this in mind we test pilot with Picatic. How do we go out there and help non-profits changemakers and… we were able to go there in with the software. It helped raise about $10,000,000 for a non-profit cheerful organization while still running a sustainable business. In fact, it actually helped us generate more profit.

That was the first test. And we saw it worked. We were able to create change, purpose, and value for society and also make profits. It actually can help you make a profit and how great is it to create a sustainable business that does that where effectively the customer gets to vote with their dollar.

So, with Gunkii it was the number one foundational striving force. What were we going to do next with our business?  We need to make sure that there are shared values that we were going to help society in some way.

My wife and I both have a teaching background. We love children. As indicated that this is the Ayurveda system of medicine. So, rather than appropriating the culture even though it is my heritage we wanted to make sure that we’re paying homage to it. So, a full circle is bringing in this great education in the system of business which is the Western practice of business that created sustainability and mixed with the fact that we love children. The fact that we are pushing back funds to developing areas or unserved areas where they can use funds. So, that’s where the idea came from and how we’ve been penetrating it and why we do what we do. It is called Project Smile. If you take a look at the logo and if you throw it upside down the logo makes a smile.

 

Jason Boudreau:

Project Smile! Okay, right! Totally, I see the connection now. For all the listeners out there, check that out.

 

Jay Parmar:

Yes, I encourage everybody to get a read about it. It’s a very fast read.

 

Jason Boudreau:

Yes, I love that one. It’s it was a very impactful paper. When I read it back in 2012 or 2013 and it made so much sense. It’s just you know when you bring the right design thinking around it, and you really contemplate on how this business is going to impact stakeholders, not just the shareholders. Come at it from that broader lens and then put your mind to how you’re going to deliver that shared value. It’s one of those things where you can feel really good about what you’re up to in the business because you know you’re doing well.

As a business and you’re contributing to the planet at the same time. It’s interwoven into the fabric of what you do. It’s not like when we make some money, we’ll make some donations or something like that. It’s just built into that DNA.

We’ve got a couple more questions for you. When people are looking at the outside in at you and saying “Wow, Jay built this incredible company, had this exit to Eventbrite. He’s been all kinds of stages talking about tech and exits, his expertise and now he and Nic are out there building this incredible consumer goods company”. They’re looking on the outside in and probably saying “this guy is so successful; I want to be like him or I strive to be like him”. But I always love to hear from the entrepreneur themselves. Do you feel like you’re successful?

 

Jay Parmar:

I absolutely feel extremely successful. I feel accomplished in business in terms of being able to build a company, scale it, penetrate it, create employment and etc., all these aspects feel good, Success for me now, especially now, in today’s age, is being able to spend time with my family. I get to do drop-offs, I get to do pickups, and I get to work with my wife. I’m not enamored by the fancy things or the shiny things.

I am enamored by the opportunity and the experiences. Yesterday my wife and I drove our son to lacrosse and we both got to sit there in the stands. To me, there is nothing more successful than that. To me, the defined success is being able to be in those moments and share that with my family. So, I absolutely do feel successful. I feel that I have my health, I feel that I have my family, I feel that I have nothing, but opportunity, and I feel I have an opportunity to go out there and create goodwill for other people. Those are things that put a real big smile on my face giving me a lot of internal gratitude for success.

 

Jason Boudreau:

Right on. That’s fantastic. Thank you for sharing that. I appreciate you putting that context to success. First of all, of course, your definition of success is fulfillment. It sounds like you’re really fulfilled in your life and obviously, there’s a business success there. But the underpinning of it is the family side, right? Being connected to what you believe is truly important in your life and I appreciate you sharing that because I think that there’s even for myself. I think a lot about it when I first started building VELA and watching its evolution over time and it’s like part of the family, right? The business is part of the family. It’s like another child that requires nurturing, focus and attention. I think that a lot of entrepreneurs out there look at their business and say that this is taking up so much of my time, focus, and energy, and I really want to spend more time with my kids and my family. Then you look at the last couple of years… I know we keep going back to Covid being this silver lining and a hidden blessing. It just really forced a lot of people including myself to think differently about the way we approach business in our lives and having the business facilitate a life versus being our lives. It is great to hear that you’ve taken that thinking into building this next company and, of course, acknowledging that family remains at the center of it through.

 

Jay Parmar:

Yes, yes, I appreciate that, Jason.

 

Jason Boudreau:

The last question that I have for you, and I love getting this insight because we’re at this interesting life stage. We’re around the same age, we’re not young anymore but we’re not old. We’re in this mid-stage whether it’s mid-career or mid-life. We’ve got kids. We’ve got businesses and there’s this generation coming up, our kids, for example, but even the older ones. And I’d like for you to share some words of wisdom or things to think about. Some pieces or some tidbits or things that people could take away that you believe would help them as they’re on their journey in life and business.

 

Jay Parmar:

Sure. What I’ll do is I’ll phrase it as if I was speaking to my own son.  His name is Jai. The one thing that I would encourage him is to redevelop his relationship with failure and understand that failure is just a data point.

 

Jason Boudreau:

Failure is a data point. I love that.

 

Jay Parmar:

It is an absolute data point and it’s a pathway to success. Well, I don’t want us to celebrate it. I want us to fail fast. I want us to fail cheaply. But we have to suck at something first in order to be good or great at something. Along that pathway, it’s going to be laid with bricks of failure and that’s something that for me, especially coming from a small handshake community was really difficult because failure was highlighted when we moved to the valley and really got to understand what failure was and how people wore their failure with a badge of honor in the sense that they went out there and they swung.

One thing that I’m proud of is that I can go to my son, and I will tell him that he can do anything that he wants to do. But will I model that? I have modeled, I think I have. That’s a very proud thing as a dad to stand up and I went out there and I swung, and I kept on swinging, and guess what I strike out and hit the ball. I got up enough to the plateau that one time I actually hit a home run. So that relationship with failure is something that I would definitely work on and then embrace uncertainty in this world. As I mentioned it early it took me a while for me to understand how to be comfortable with “uncomfortability” and moving from a small town to San Francisco. When I jumped into that pool there it was absolutely gut-wrenching. I had panic attacks. I was extremely uncertain. I definitely was out of my depth.

 

Jason Boudreau:

Wow.

 

Jay Parmar:

When I look back at it that’s where I did my most significant learning. It’s a condition. It’s a muscle that needs to be really flexed on. When we come into this educational system and being a past teachers going through this program, we see that there are not a lot of opportunities to go there input yourself in positions to go and be uncertain. It’s often easy not to go out there and dive in. I think the muscle that really needs to go up there in order to embrace failure and understand it, understand your relationship with that, and embrace uncertainty, is to understand relentlessness. It’s the recipe to really get out and absolutely be relentless at what you’re going after. I always think back to the young kids. When I was first starting Picatic people thought I was crazy. Often ideas generally are a little bit nuts when they sound out there.

I think about the first person who talked to their friends and said why don’t we sell our spare bedroom and let strangers live in it. Airbnb derived from that. We’re always taught not to pick up strangers. Obviously, Uber came out of that. Imagine explaining to their friends “…we will use our car and we will pick up strangers that we don’t know and we’ll give them right to go to wherever they want to go even if it’s in a back alley”

And there is uncertainty and failure around all that. The one thing that they had is being extremely relentless in order to go through that process. So, those are some things that I encourage people to think about. Those are the recipes or the things within the recipes that have given me my success in life.

So, for whatever that’s worth, those are the things that I would mention to generations coming out and definitely things that I am teaching my son.

 

Jason Boudreau:

That’s amazing! Thank you. Well, I think we’ll end it on this high note, Jay. This interview’s been a long time coming and I certainly appreciate you and our friendship and the time you’ve taken today. It’s a privilege and a pleasure to be connected to you, my friend.

 

Jay Parmar:

My pleasure. Thanks for having me.

 

In this episode of the Polestar Podcast, Rob Wallis talks with Keith Allan from Harness Investment Management about the impact of inflation on economic growth, the interrelation of the US and Canada and well performing stocks that benefit client’s portfolio in 2022.

 

 

About the Guest – Keith Allan

Keith Allan, CFA, is a Portfolio Manager at Harness Investment Management, with over 10 years of buy-side investment management experience. He is responsible for developing and maintaining investment portfolios by fostering long-term relationships with high-net-worth individuals and families and providing a clear and transparent vision to help them achieve their investment goals. Please visit Harness website for more information.

 

About the Host – Rob Wallis

Rob Has provided senior financial planning and advice to VELA clients for over 15-years. He excels at working with entrepreneurial professionals and business owners to define their individual ecosystems and establish meaningful life and financial goals. He has specialized expertise in guiding healthcare professionals who are building multi-location, and specialist clinics. To read more, please visit the VELA team page.

 

The episode is also available on:

    

 

Disclaimer

The information expressed in the podcast is designed for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

 

VELA Wealth is excited to share the first Polestar Podcast episode with Stephen Fern, the founder of The Ark2030 Foundation. In this episode, Stephen talks about Ark2030 and its mission, new forms of environmentally-driven economics, and why we should be concerned about whales!

 

 

About the Guest – Stephen Fern

Following Law School Stephen qualified as a chartered accountant with Arthur Andersen before establishing a financial education business which he sold in 1999. He established the G9 in 2003, working with global business families to drive private capital into Impact, and developing a plan to end the climate crisis. Launched in 2019, Ark2030 has developed the roadmap to restore the world’s greatest ecosystems across every continent and every ocean; working to create a unique global collaboration of science, academia, landowners, NGOs and ‘on the ground’ implementation partners. Please visit Ark2030 website for more information.

 

About the Host – Jason Boudreau

Jason has built VELA Wealth into an established life and estate planning firm, guiding families as they make meaningful choices at the intersection of life and wealth. Jason’s areas of expertise include intergenerational wealth transfer and estate planning with a focus on advanced insurance-based solutions that incorporate philanthropy and legacy planning. Leveraging these specialties, Jason brings a fresh perspective and outside-the-box thinking to the financial planning process. To read more, please visit the VELA team page.

 

The episode is also available on:

    

The Podcast Transcript

 

Jason Boudreau:

Welcome everyone to our inaugural Polestar Podcast by VELA Wealth. Honored today to have our first guest – Stephen Fern, all the way from Jersey in the Channel Islands in the UK. Stephen is the founder of Ark2030 an organization that’s on a mission to reverse the climate crisis and end the destruction of Planet Earth. He and his group are looking to achieve this through two main initiatives. One is the restoration of five hundred million hectares of Planet Earth destroyed by mankind since the beginning of the industrial revolution and the other is investing in companies and organizations that will turn back the dial on the climate crisis. So, I’m going to turn over to Stephen. He’ll do a little introduction of himself and then we’ll get into some thought-provoking conversation. Stephen, hello my friend!

 

Stephen Fern:

Jason, it’s a pleasure to be your first guest on this podcast.

 

Jason Boudreau:

Thank you for joining us and I know it’s late over there for you. So, I appreciate you staying up past your bedtime.

 

Stephen Fern:

(Laughing)… Yes, I’ve almost given up on bedtimes as you know 8 children – probably haven’t slept properly in 28 years, so, it’s a dream to one day actually go to bed at a reasonable hour and wake up at a reasonable hour.

 

Jason Boudreau:

Right on. So why don’t we start by you just sharing a little bit about yourself and maybe just give us some insight into how Ark2030 came to be.

 

Stephen Fern:

Yes, absolutely. I started my life actually as a lawyer specialized in tax. I worked with Arthur Anderson’s in London and qualified as a chartered accountant in the heady 1980s. Towards the end of that decade, I realized I was more of a natural entrepreneur than an advisor and decided to set up my own business and actually combine both my professional background with the desire to be an entrepreneur and set up a wealth and financial education business. Over the decade through the 90s we became a global operation and worked with law firms, financial institutions, trust companies and predominantly private client advisors, taking people through professional examinations, professional conferences and continuing professional development. So, deeply embedded in the private wealth space. I’ve sold that business at the end of the 90s. My specialist area really was dealing with families of exceptional wealth.

So, in 2003 I’ve decided to set up a not-for-profit think tank for families of exceptional wealth, and essentially the objective behind that was to align mission and values with the wealth. It was really all about taking the sort of concept that a lot of families don’t ask themselves the question “what is money for?” and when you start to accumulate huge amounts of wealth it becomes a really important question because there’s only so much commodity you can buy and people start to really question what does it mean, what is the purpose of this and so it was really about finding that the answer to that question. In many respects our vision of what became the G9was that if you can align your skillset and your capital for something you feel deeply passionate about – you start to feel fulfillment. We spent 20 years resolving some of the biggest challenges facing mankind. Then three years ago when the UN came out and said that we have 12 years to resolve the climate crisis before we go off the edge of a cliff in terms of global biodiversity. That really hit me, and I realized that we need to focus our energy, our time and our efforts on resolving the mess we’ve created in the relationship between humanity and Planet Earth.

 

Jason Boudreau:

So, you’re three years into that now. Just give a sense of where you guys are at and what you’re up to today, and what the next year or so looks like for the organization?

 

Stephen Fern:

I think quite unnaturally for me I’ve had to instill a little bit of patience into what we’re actually doing here. The scale of the task was pretty simple really. I wasn’t setting out to create an organization or create a movement that contributed to making Earth a healthier place. It was really about saying “what is the answer?”. The Paris Accord for me didn’t go far enough. Just slowing down the problem to one and a half degrees given our propensity to miss targets like this was just a non-starter. I was really wanting to see what it means to get it right. Certainly, that is split between the sort of the idea of what we call nature-based solutions which is Ark2030 and the idea of climate crisis capital which is essentially stopping us from destroying Planet Earth in the future. So, the balance there is about 40-60 in terms of the task if we go and restore all of the nature, we’ve destroyed over the last two hundred years. Then that deals with about 40% of the challenge to get us in balance or get us back to balance. The other 60% is changing the way we do business. There are five big areas that we have to look at. There have been food systems, water, energy transition, real estate, and the circular economy. What we spend much of the last three years doing is mapping out what both of those tasks actually are, what they actually mean. So, this was very much more than just pointing at the moon saying you know, let’s go to the moon and not actually having a plan to do it. This was A – setting that mission where we want to end the climate crisis and the future destruction of the planet and B – what are we going to do? Where are we going to do it? How are we going to do it?

 

Jason Boudreau:

Yes.

 

Stephen Fern:

We’ve had to map that out in a system against the background of a system that’s not fit for purpose. Because we’ve spent fifty years knowing that things are going wrong, and many millions of dollars thrown out to climate crisis and biodiversity nature solutions. And we haven’t really even scratched the surface of addressing the challenge. So, we really had to throw out all of the thinking that’s got us to where we are today and almost restructure and reengineer how we go about the task of restoring Planet Earth at scale. That’s pretty much what we’ve been doing for three years.

2022 will see the first elements of that being enacted. The scale at which we are operating will essentially be eye-watching for most people as we unveil the projects that are going to start this year in 2022.

 

Jason Boudreau:

Thanks for sharing that. It’s certainly a bold task and a bold initiative and you know we certainly are excited to be connected with you and aligned with the group and look forward to being a part of that as it unfolds. Going to pull it back a little bit to sort of Stephen the Man, the Entrepreneur and then we’ll get back on the Ark2030 conversation. So, just curious, when you look back on your life is there one thing defining moment or just something in your life where you feel most proud of, and you brought up your eight children earlier – I’m sure that’s probably at the pinnacle. So, share with me what are your thoughts on that one thing in your life that you’re most proud of.

 

Stephen Fern:

I think in terms of pride, I think whatever you do – your family life ultimately is the most important and I think that’s the epiphany that we have as part of the G9. It’s understanding that whatever you achieve from a business or a financial perspective pale into insignificance in terms of your own sense of being. That personal fulfillment for me has always been my primary goal.

So, I’ve never really looked at things around me and thought that I have to achieve material success. I’ve always been conscious of that. So, probably the decision that I’m most proud of is as a 25-year-old working in the city in London in an almost obscenely well-paid job actually saying, “no. I’m going to turn my back on that because I want a different life where I have time for me and my family and my personal drive to be fulfilled”.. Looking back, it was a pretty brave step. I spent two or three years after that literally earning nothing. Having spent six or seven years having relatively spectacular lifestyle in London, flying around the world with work and… so, probably the most the biggest decision I made was that one.

 

Jason Boudreau:

So, when you think about the average day for you. The wake up in the morning, thinking about what you are going to tackle today. What do you feel brings you the most joy on that day? What do you really enjoy in your life?

 

Stephen Fern:

I think the amazing thing about what we’ve been working on with Ark2030. The reason I felt it possible was that I’d been very fortunate to spend the last twenty years working with 4,500 nearly 5,000 of the world’s wealthiest business families. The political and business influence that has opened the doors to me made me feel that I was in a position to actually do something about this. My typical day starts very early in the day, this is a global program, so, I’m talking to sort of Australia at 6 am in the morning and I’m talking to people like you on the West Coast of Canada or America at nearly midnight…

 

Jason Boudreau:

Right, before bed.

 

Stephen Fern:

… but what I do is I work in little gaps through the day and make sure I’m available for my family when they’re around and home from school and so on. So, I’m very fortunate in that. I’m not actually pinned down to a particular diary. Although it sounds like it’s a crazy number of hours – it’s not really, it’s just that they’re spread out so throughout the time.

The most exciting thing about it – is on a daily basis I have maybe three or four phone calls which if you had one of those calls in your entire business life you would be running down the street waving your arms and screaming “wow I just spoke to X and this is going to happen!”.

This is such an enormous project and it’s getting such amazing support from around the world, from individuals and organizations who range from small organizations with incredible passion, insight and ambition right up to global giants who are really questioning and challenging. This relationship between business and shareholder value and their responsibility to treat the Planet and people well – these are amazing conversations. So, my day is incredibly diverse. When people say no day is the same – my day is incomprehensive, no hour is the same… and that is both incredibly challenging, but incredibly rewarding and very exciting.

 

Jason Boudreau:

I really get that. Thanks for sharing. That’s very cool. So, it’s true that when you and I speak it’s usually towards the end of the day even much like it is right now and if we were to sort of end this call and, you know, you’re lying in bed and you can’t sleep. What’s keeping you awake at night these days?

 

Stephen Fern:

Ah, the things that are keeping me awake at night are actually all positive things. I think that to be an entrepreneur and you know this yourself, you will tend to have an optimistic personality.

I don’t think you can be an entrepreneur if you focus on the negative, it just would be too crushing on a daily basis because the challenge of being an entrepreneur is so crazy. I probably survived on about 4 hours of sleep, and the second I wake up my brain buzzes and I get out of bed. So, what keeps me up – not a lot, because literally as soon as I do wake up, I do get out of bed and just jump on calls and speak to people. I think the things that worry me… are actually not the scale of the challenge because I actually do believe that it is doable. I do believe the mindset of enough people is sufficiently positive that we can actually tackle the climate crisis.

The difficulties are just to try to step around. Ultimately, you can look at big business… and Canada is a great place where the challenges of saying that we have to ditch the carbon economy can be huge for countries like Canada and Australia; but my view on that is that we shouldn’t be wasting time trying to persuade those companies to stop doing what they do, because for soever long we are putting petrol and diesel into our cars and coal into our power stations they will keep producing it.

What we’ve got to do is do the bit that we Can change which is stop putting petrol and diesel in our cars – stop using coal and carbon.

It’s simple, simple economics and it’s about understanding what we can change rather than stressing about what we can’t.

 

Jason Boudreau:

Yes.

 

Stephen Fern:

And I wrote about it today actually, in response to a fairly well-known city figure. Basically, absolutely slaughtering. Unilever for the focus on purpose. And he said they’ve lost the plot. It’s about money. It’s not about having a purpose. I basically said, “look it’s very simple. Unilever is doing the right thing. That will mean less, or it may mean less profit. But if you believe that we can have an economy into the future which is driven simply by purpose irrespective of the cost – I can’t change your opinion. I don’t want to change your opinion. I don’t need to change your opinion. But what I will tell you is there are enough people on the planet who will shift their custom to the companies that do care”.

Those companies that don’t care might make more profit by a margin on every item they sell. But if they have zero turnover – they’re going to be out of business, and I think that’s the key for me. It’s not trying to persuade people to change their minds. It’s to get those people, the billions of people around the world who want to do good. Guide them to act in a way that says to those who don’t want to change their mind – okay, keep your opinions, but it’s not going to stop us doing what we want to do, and what we want to do is support a new form of economics that actually understands the value that people bring to business, that communities bring to business, that the Planet brings to business and to value those properly.

 

Jason Boudreau:

Right.

 

Stephen Fern:

That is why, perhaps, I don’t stress and get angry and upset about the challenges we face. It’s not a case of facing those challenges head-on. It’s just taking a different tack to address them. And it’s always about not stressing about things you’re out of control of. And that was something I learned when I was at Anderson’s in the mid-1980s. Almost the first thing that they really taught us was if you stress about your workload, you will never sleep. You will want to be in the office 24 hours a day. So, control the things you can control. Of course, stress if something is in your control and you need to do something about it. But don’t stress about the things that are out of your control.

 

Jason Boudreau:

Totally. Well, and it’s interesting you bring up your sort of response to this Unilever CEOs conversation around purpose because, of course, Larry Fink came out with his annual letter this year addressing stakeholder capitalism as he calls it – which I think is such a fantastic term because he’s talking about the fact that it’s not about not making a profit, it’s not about companies being successful. Financially it’s about where you’re creating value. His comment about the next thousand unicorns not being in tech or software but it’s really about transforming the future of this Planet – those are the next thousand unicorns.

 

Stephen Fern:

And these are certainly on the climate crisis capital side of our mission. He’s absolutely right. This is where the excitement is and where the pace of change will rapidly exceed humanity’s current expectations of the trajectory that we are on. The reality is that those organizations that develop the ideas that will change the trajectory will become global.

They will become incredibly popular and successful. They will be huge and of course, those opportunities are enormous in the sky, in scale, in number, in the different channels that this can be developed in. There’s a phrase that you’ve heard me say before which I absolutely love “The stone age didn’t end because we ran out of stone. The stone age ended because we found new tools and new ideas and the carbon age won’t end because we run out of gas or coal or oil. It will end because innovations and technology and things will replace it and it’s going to happen way faster than anybody anticipated”.

 

Jason Boudreau:

Right. Right.

 

Stephen Fern:

Yesterday, in Europe they announced that for the first-time electric car sales outnumbered diesel car sales across the whole of Europe. If you’d have asked me that twelve months ago – electric car sales were a fraction of petrol and diesel car sales.

 

Jason Boudreau:

Yes, that’s incredible.

 

Stephen Fern:

In twelve months! Twelve months and that transition has happened. And when governments are saying “we won’t allow car sales of petrol or diesel beyond 2035…” that is the most pointless piece of political legislation you could imagine because people will stop buying petrol cars by 2025 not because of any law, but simply because it will just be nonsensical to spend forty, fifty, sixty thousand dollars on a car that people will see as a dinosaur that’s in your front yard and you won’t be able to sell it second hand. So, people are not dumb in terms of the speed at which these things happen.

So, as soon as the infrastructure… People say “well the infrastructure isn’t there”. Wow, do you think people are not sitting here thinking that we need electric charging points literally on every street and what are the innovations that will allow that to happen. Yes, every lamppost will have a charging point in it because people all over the world are thinking of ways in which we can charge these cars and then use the batteries in cars almost as overnight storage to basically power things in and around the home.

The ideas and innovation are just enormous and even in battery technology. I think last week a company in America replaced a standard Tesla with a battery technology they’ve been working on. So, it’s a retrofit of a battery and the Tesla did 750 miles without stopping. So, even that battery technology is going to go through the roof – all of these things, things are going to happen way faster than we imagine.

If I had one prediction, and I think it blows most people away in terms of like “that’s not going to happen Stephen”, is that the decarbonization of our global economy will be pretty much at its end by 2030.

 

Jason Boudreau:

Wow.

 

Stephen Fern:

I really don’t think we’re going to be pushing 2050. I really do think that the vast majority of these solutions will be in play in eight years. Eight years is plenty of time to totally re-engineer how things work.

 

Jason Boudreau:

And when you say “in play”. It’s not necessarily that the reversal has happened. It’s that the pieces that are needed to make that happen are fully in play and now we’re on the trajectory we really should be on for a sustainable future.

 

Stephen Fern:

Yes, I’m not just talking about sort of like “we’ll know what the solutions are, and they will have started” but that it will be happening on an epic scale. Now that it doesn’t mean that every coal-fired power station will be put out of business by 2030, but I do believe that the vast majority of transport heating fuel energy will be renewable by 2030. And that will then decarbonize globally the economy.

God help those organizations that are stuck with those stranded assets because there are trillions of dollars that have been invested in stuff that there will be no buyer for.

 

Jason Boudreau:

I guess there lies another opportunity for innovation -how do you take sort of legacy assets and retrofit them or allow them to survive into the future in this new way of living, being and working and all of that. We see companies definitely doing that in real-time even today. Hydrogen is a good one. I know there’s a lot of companies out there, a few of whom I know locally here in the Vancouver area where they’re retrofitting internal combustion engines to be able to run on hydrogen and it’s not reinventing the wheel. It’s just retrofitting what already exists.

 

Stephen Fern:

Yes, I think that happens in almost any transition. But I think when Fink talks about these thousand unicorns of the future – I think they will come from people who literally tear up the old rulebook and just start a fresh.

I was with the head of Aston Martin design about two years ago and he was telling me that they were ready to produce effectively a four-seat Aston Martin that didn’t have a steering wheel, had two people on each side of the car facing each other. He said, “we’re ready for this”. He said the public isn’t ready to not point in the direction you’re heading, to not have a steering wheel. He said “that’s a mindset issue. It’s not a technology issue” and I think that’s really what’s going to be fascinating over the next few years -just to see how fast we’re willing to accommodate and accept some of the amazing changes that are going to happen to us.

 

Jason Boudreau:

Yes. One of the neat things that I didn’t have any real knowledge about myself, and you introduced me to over the last number of months, is this idea that if we find a way to transform our oceans. The impact that can have on transforming the climate issues we’re having as a planet is exponentially greater than trying to do anything on land. Can you share a little bit more about that?

 

Stephen Fern:

Jason, it was probably one of the most exciting moments of the last three years when I first looked at oceans and thought about what we are able to do here. It was exciting because when we first started the Ark mission we looked at breaking down this sort of five hundred million hectares into something that seemed to be manageable. One of the ways of doing that was saying “well, it’s a hundred million hectares of rainforest, a hundred million hectares of forestry, a hundred million hectares of degraded farmland, a hundred million hectares of Savanna Grassland type areas… and oceans. Oceans was the fifth and I was able to actually identify globally very clear and logical strategies for regenerating all of the landscapes. What do we need to do? Where? How? What are the techniques from rewilding to protecting a mosaic of options and I looked at oceans, I thought what do we do with oceans?”.

I was looking at ocean protection thinking that it is really not a case of us going and doing work, that is more political, lobbying governments to create Great Big Marine Protection Areas. So, that didn’t quite work. We looked at near Shore reforestation which is a huge thing, kelp and seagrass and things like this. There’s an amazing opportunity both economically and from a carbon perspective there. But nothing about the oceans themselves.

Then I had the most amazing conversation with a guy called Ralph Chami, IMF, who has spent 10 years building analysis for the ocean economy and in the most simplistic of ways he just transformed my mindset in minutes and it was the most fascinating conversation. And he basically described to me the answer to global warming lies with our oceans. It lies with the restoration of the global whale populations – every time a whale does its poop it creates this huge nutrient bloom in the water. That creates a phytoplankton bloom, and the huge scale of that phytoplankton absorbs huge amounts of carbon dioxide out of the air and kicks oxygen into the ocean. This then stimulates the growth of other bigger creatures which are then fed on by the smaller fish and then it opens up in the pyramid. So, there is this colossal biodiversity impact and massive carbon sequestration. Following in the wake of every whale.

One of the issues is our global whale populations have gone down from probably something like five or six million back in the early 1800s to a million and a half now. And in a way that has created massive dead zones around the world’s oceans. What he worked out was that the impact from a purely carbon perspective of the whales themselves restoring those whale populations is the equivalent of planting a hundred billion trees. And you think of the logistics of planting a hundred billion trees – it’s enormous

 

Jason Boudreau:

No doubt. The right type, in the right area to all of that.

 

Stephen Fern:

How do you restore whale populations? It’s not like you can do it like with a captive breeding program in a zoo. Then he went on to explain to me about the work that they’d done and essentially it is government-driven programs.

If ever you’ve been out and looked out across the ocean off the coast of Vancouver and watched the whale’s migratory patterns. Not only is it a life-affirming experience as anybody who’s seen it and I have in Australia, but it is also a life-affirming experience to actually see these creatures leap out of the water in front of your very eyes. Wow, it’s just breathtaking!

But in essence, the whales are moving around in a world that is like us spending a night next to a pneumatic drill. The noise from the shipping and the disruption from humanity basically prevents them from breeding, it prevents them….

 

Jason Boudreau:

… they are stressed.

 

Stephen Fern:

Yes, it’s the stress. So, people say “well, hasn’t whale hunting stopped?”. It nearly has, yes, but this isn’t a whale hunting issue so much as all that we need to do is understand and …

 

Jason Boudreau:

…the shipping lines, the cruise lines…

 

Stephen Fern:

…yes. At key times of the year. So, it’s not even a year-round issue. It’s just when the moat whales moving here. Steer clear. Also, a huge number of whales every year are killed accidentally by the propellers and things of the ships and the boats. So, it is about the understanding of the economics: if we can say that a whale generates thirty-three thousand tons of carbon in its life and we are valuing carbon at $20 a ton, then the whale is worth like a million dollars or two million dollars.

 

Jason Boudreau:

Right.

 

Stephen Fern:

So, maybe if you say to the shipowner “if you kill that whale in our territorial waters you have got to pay us a million dollars”. Then the ship owners might think “well, maybe I will steer clear of these whales” and that is really what Ralph’s work was about. It’s understanding the economic relationship between nature and economics.

It was really fascinating listening to this concept. If you think about it – we pay for food, we pay for water, we pay for our energy to keep us warm, but we don’t pay for the oxygen that we breathe. We pay for our rubbish to be taken away, but we don’t pay for our carbon dioxide to be taken away. So, maybe nature provides a service. He and I talked about this, and I said “well, I’ve heard of SaaS software as a service, maybe we could create something called “nature as a service” where we actually say how much these whales are worth to humanity and let’s start valuing them and when we start valuing them, we can create economics”. If we create economics, we can create a foundation where we act as custodians of that economics on behalf of the oceans and the wealth that those whales create because they are one of the world’s biggest carbon sinks. The wealth that they create we use then to deploy into more ocean protection work. There’s the answer. So, it becomes self-sustaining in a way that planting trees never can. It’s not that we’re not doing the tree planting but it’s just a complementary strategy.

That’s absolutely fascinating and your support on that as the earliest supporter of the program has been fantastic and has been incredibly important to getting us to this stage of actually going public with the campaign in the next four to six weeks.

 

Jason Boudreau:

It’s certainly been our pleasure to be a part of that and to support that. To your point about us being on the coast here, having grown up my entire life here, I had a chance to see whales in the wild, up close, a number of times. To your point, it’s breathtaking and life-affirming.

When you brought this idea to me about a way that we could begin that engagement in supporting the mission of Ark2030 was an absolute no-brainer and we’re super excited just to see where that’s going to go over the next bit. And, again, be a part of that, out here on the West Coast of Canada, certainly on the western side of the world where we want to make a big impact globally from.

Stephen, it’s been an absolute pleasure and I want to have you back for a repeat session soon so we can continue the dialogue. One of the things that I’m hoping to hear from you is – all the work that you’re doing is very future-focused and future-looking. And so, I’m curious. You’ve got 8 children of your own – there’s your next generation. When you’re talking to them or to others that are either in that next generation or about the next generation that’s coming, what do you share with them? What are you saying to them that is beyond when you’re here, things that are you feel are going to make an impact in their lives for them to be thinking about and be aware of?

 

Stephen Fern:

I think the most positive thing that comes out of what I’ve been working on for the last three years has been able to say to my children – there is Hope. We CAN do something about this. It is going to need your engagement. It is going to need your effort. It is going to need your energy. Please don’t think this is hopeless. And in part, three years ago everything I heard was doom and despondency, and we were going to miss the targets and so everything was very negative.

I don’t think that’s good for anybody’s mental health. With the Covid pandemic and everything else, there’s enough for the children of our world to be worried about and stressed about. I think just that sense of waking up in the morning thinking “A – this can be done and B – people around the world are uniting behind a mission to make it happen. I think that’s a really positive thing”.

 

Jason Boudreau:

That’s awesome. Well, we are going to end on that positive note. Thank you so much for your time and what you are up to with Ark2030 and like I said we are not only excited to be a part of it but deeply passionate about it and not only want to continue to support but expand that relationship. Excited to see what that looks like in the future. Thanks again to you and for your time today. Definitely look forward to picking up this dialogue again in the near future.

 

Stephen Fern:

Thank you so much.

 

Jason Boudreau:

All right, be well my friend.