Episode Transcript
[00:00:00] Speaker A: You are listening to the wealth without Bay street podcast, a canadian guide to building dependable wealth. Join your hosts, Richard Canfield and Jason Lowe as they unlock the secrets to creating financial peace of mind in an uncertain world. Discover the strategies and mindsets to a financial future that you can bank on.
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[00:00:35] Speaker C: That's Sevensteps ca.
How exactly do you go about becoming a goldbacked bank? Well, we don't really know, but we're going to find out and we're going to learn what some of the challenges are in making that happen. And we are joined together today here by the incredible Brett Oland who is the current CEO of Beau Valley Credit Union and for the last five years has been steering that ship at the helm. He's 20 years as a chartered professional accountant and man. He's been in banking for 20 years and we're going to learn a lot about banking. We talk about banking all the time on this program, but today we're going to go down a little bit of a different track and we're going to hear some of the challenges facing the banking industry that Brett has identified and we're going to share and learn quite a bit about what he's doing to change the game in that environment, at least when it comes to Alberta, Canada. Welcome, Brett. Thanks for being on the program today.
[00:01:28] Speaker D: Well, thanks for having me. I don't know about the incredible part, but we do what we can.
[00:01:34] Speaker E: Well, and we appreciate your advocacy on behalf of, of course, your stakeholders, your customers and Albertans and by proxy Canadians. I mean, the ripple effect in the economy from province of Alberta is remarkable. And there's a lot of, I think, unintended consequences as a result of some of the proposed legislation and things that are going on backstage that folks may just not be aware of, the constraints that that places on credit unions like yours and the fact that you want to keep capital moving because that's what keeps the economy thriving. It's the heartbeat and circulation of the economy is money that's in motion and you keep it in motion through the process of lending, being a deposit taking institution and creating opportunities for businesses to gain access to capital to scale quickly. And so my first question for you, Brett, is what inspired you to take on the role at the Beau Valley credit Union? What was that trigger for you?
[00:02:38] Speaker D: Well, I was happily semi retired in my previous role at a not for profit organization and I was looking at an ad and I saw that they were looking for board of director members.
And given my banking career I was interested in that and got onto the board and there was a bit of a shake up at the CEO level.
People kept on looking at me and I kept on looking at the ceiling and then keeping on looking at me and I kept on looking at the floor and finally agreed to do it. But yeah, I've been having a lot of fun in the role. It's institution where I think we can really make a difference, especially given our value set to our membership and really shake up the way banking has traditionally been done in the past.
[00:03:36] Speaker E: And what would that for our viewers and listeners benefit? What would the primary distinctions be between a credit union versus a traditional bank, if you will?
[00:03:48] Speaker D: Sure. There's about four key distinctions. Number one, we're membership owned, we're not shareholder owned. So anybody that does banking with our credit union is a member and you purchase common shares within our organization and we do pay dividends on those common shares. So you're vested into the organization and our wins are your wins at the end of the year, based on the way we're paying it out, that works out to be about a six and a half percent dividend on your money, which is not too bad in today's environment.
Secondly, we're regulated provincially. We're not regulated federally. So the federally regulated financial institutions are regulated by OSVI under Minister Christina Freeland.
We'll save our words for.
So that's your rbCs, your bmos, your canadian western banks, your tds, that type of thing are regulated. And there's a few larger credit unions that are regulated federally as well. We're regulated by the credit Deposit Guarantee Corporation, which is provincial and they're headquartered in Edmonton and they tend to generally have the better interest of Albertans in mind.
And so we have a great working relationship with our regulators and their regular people that want to help credit unions move forward.
Another key distinction, a third key distinction is we have 100% deposit guarantee within Alberta. So any deposit within our organization is 100% insured. Whether it's a dollar or 10 million, you're insured. Whereas with the schedule one banks under the CDIC insurance, if you don't structure it properly, you're only insured up to $100,000. Right?
So any dollar above that $100,000 limit is potentially at risk at other financial institutions. And then finally, big distinction number four is we make local decisions. So all of our staff are in Alberta. We have Alberta's best interest in mind.
What we typically see, especially in oil downturns and that type of thing, the bigger financial institutions will pull out of Alberta basically say, well, these guys are done for a number of years and we have a vested interest in seeing Alberta do well. So we want to be able to provide support, especially in the hard times, not just when it's good. So those are some pretty bigger distinctions within our organizations.
[00:06:41] Speaker C: I think those are really critical distinctions and a couple that I want to touch on or highlight for our listeners who are very familiar with, of course, what we teach people about, which is the infinite banking concept. The idea of a mutual insurance company where it is owned wholly by the participating policy owners is very similar in its general premise as the credit union, which is a member owned institution. And so I think that's important thing to identify. And you speaking specifically about the albertan aspect, I would venture to guess, and maybe you could just quantify this. Other provinces of Canada would have similar rules with credit unions in their respective province. They would be provincially regulated, as you said, and in general probably have the province's citizens as more of their primary, obviously, customer base and who they would put their attention on.
And so I would imagine that regardless what province you're in, there's going to be a lot of similarities to the baseline of how the credit unions operate. Is that a fair assessment?
[00:07:42] Speaker D: Yeah, you are correct with that. Although in some provinces don't have the 100% guarantee, sometimes it's only up to about a $250,000 deposit maximum. But for the most part, you are correct. They're provincially regulated institutions and operate pretty exclusively within the province that their jurisdiction is under.
[00:08:04] Speaker E: And brett, what are some of the things that are worrying and troublesome right now that you're seeing that you think it would be important for viewers and listeners to be aware of?
[00:08:15] Speaker C: I suspect a lot of this has to do with the most recent budget of 2023 and some of the federal things that are looking at being amended or changed, like the Bank act, the Insurance Companies act, et cetera.
[00:08:28] Speaker D: Sure. Yeah, I can touch on three different things.
Back during 2000, after 911, the federal government and a lot of western world governments implemented antiterrorism acts to stop the funding through financial institutions.
And I think the idea was safety and security in mind. But I think people need to remember as safety and security increases, your freedoms decrease.
And so they put in a bunch of rules around anti money laundering sort of thing. And we saw over the past, I think it was about 1819 months ago that they used this act of fintrack to basically freeze people's accounts that donated to the freedom convoy, the trucker convoy.
And I think some people were put in a very precarious position because they had their knees taken out, regardless of if they only donated $25 or something like that. So that's a fairly scary thing that came out. But as a result of that, they looked at this tool, and in the federal budget, they threw a whole bunch more money towards Fintrack, including sort of budgeted money for AI enhancements, criminal enhancements, better links between the government. And, you know, that didn't really sit particularly well with me, because I think anytime you're mixing too much government interference with basically economics, you're going to run into challenges. And so I think that's a bit of an issue right now that we're working to get past.
A couple of other things that are on the forefront is open banking. I'm not sure if you've heard of open banking.
Just in a nutshell, basically, the simplest example I can use is if you start up a new accounting software, a new budgeting software or something like that. One of the first things it wants to do, it wants to link to your bank account, and so you basically allow it access that third party provider access to your bank account. You type in the information and gets a picture of your financial transactions.
Right now, it uses a technology called screen scraping. It's not terribly effective. It just can grab dates and times and amounts and that type of thing.
The canadian government, about three years ago, launched a process to create an open banking framework within Canada. So it's basically legislated rules around open banking and how it regulates. And my biggest beef with it is they created this framework. So all the information is basically siphoned through a government agency. So when you allow it, not only will open banking go to that one bank account that you assigned it to with the budgeting software, it'll actually go everywhere and grab information from other financial institutions, insurance companies, the CRA.
And basically what it does is siphon all this information through this government agency and creates a complete financial picture of you. And so, again, you can probably tell where I'm leaning, but from a privacy standpoint, that doesn't sit very well with me.
So we're not opting into open banking. So we're not creating basically the pathway so anybody can get access to anything within our organization. We're legally allowed to do this, we're legally allowed to opt out of this. And I think that's something that people need to be aware of and need to consider, especially from a privacy standpoint when you're dealing with financial institutions.
[00:12:43] Speaker E: No kidding.
Even the fact that that progressed from conversation into any form of action is just mind boggling. Yeah, mind boggling.
[00:12:56] Speaker C: It's not like the government to do things in a very quick status usually. So the fact they were able to put that together in three years alone is pretty astonishing, let alone what it's up to.
[00:13:07] Speaker D: Well, you're absolutely right. And there's one final thing I'll talk about and sort of close this section with some concerns that maybe people have around it. But there's also a bill that's on the table and I think it's past the third remedy in the Senate called B 15, and it's the climate risk mitigation bill and it's a fairly benign document. It talks about greenhouse gas emissions and how we need to cut them down and do our part and worry about the climate and that type of thing. And it's not particularly damning, but it does link to another bill, S 243, which is directed towards the OSFE regulated financial institutions, and particularly they seem to have in their sights the oil and gas industry. So any oil and gas, oil and gas servicing, and I'm sure we'll get into this a little bit later, but capital is very important to financial institutions and they're increasing any lending that you need to do to oil and gas companies basically by 1250%. So if I needed a dollar of capital to lend to an oil and gas service company, I would currently only need about twelve and a half cents of capital to do that.
Going forward, after this bill is passed, it'll take a Dollar 56 in capital to lend to any dollar out to an oil and gas industry.
[00:14:44] Speaker C: That's astonishing.
[00:14:45] Speaker D: Yeah, and effectively, it's pretty clear that they're trying to take out the oil and gas industry at the knees by basically forcing the financial institutions not to lend to them.
[00:14:57] Speaker F: Become your own banker and take back control over your financial life. Hey, is this even possible? You may be asking, can I even do this? Well, you better believe it. In fact, it's easy to get going. So easy that we put together a free report. Seven simple steps to becoming your own banker. Download it right now. Go to Sevensteps ca. That's seven steps ca. Now let's get back to the episode.
[00:15:27] Speaker C: What's amazing is that your unique position to even read and going through these types of documents, learning what's going on in the industry, at the CEO level of a banking institution, you're uncovering something that virtually every canadian citizen wouldn't even know exists. Unless maybe they were in the oil business and they actually were looking once seeking that type of financing and they might have an advanced notice of this. But far and wide, I would venture to guess, there's very few people even who would listen to our program that might even know that level of overreach exists in stipulating the lending capacity of a particular industry to grow its entrepreneurial journey.
[00:16:08] Speaker D: Yeah. And it's particularly troublesome when you can read into the document and see it could potentially easily go beyond just the oil and gas industry. They talk about just basically greenhouse gas emitting enterprises. So agriculture comes to mind. Mining comes to mind.
If you're driving the wrong truck, perhaps that comes to mind if your house isn't insulated enough, it comes to mind. And just to put it in perspective, a 1250% increase in capital would move, say, a 5% mortgage today to a 30% mortgage. So effectively, when your mortgage comes up for renewal and all of a sudden it's 30% per annum, because it would.
[00:16:55] Speaker E: Need to be in order for the lender to make any profit.
That's the only way that the function of lending is profitable, which is the whole basis of what you're doing.
You can't operate as. Now again, I'm not as familiar with the guidelines around credit unions, but if we shift to a conventional bank for a moment, you can't function as a conventional bank if you don't keep capital moving.
If you're not literally in the banking sector, if you're not literally creating money where no money existed before, it's not going to be long before you're not existing anymore.
[00:17:38] Speaker D: Exactly.
Put on your tinfoil hats around that. But that's why it's especially important on what you gentlemen are doing is giving a heads up that there are alternatives. Because I think a lot of people will start streaming towards private lending as well as credit unions because we don't fall under ausfee regulation for this type of lending. Because frankly, you're absolutely right, it could potentially collapse industries in Alberta if it's mismanaged.
[00:18:15] Speaker E: Yeah. And I'm curious, just does the minister of finance office ever reach out to folks like yourself to say, hey, shocker, there's going to be some unintended consequences here? Do you mind helping us identify what they are?
[00:18:32] Speaker D: Funny you should say that. I actually did write a letter to Nate Horner here in Alberta, the minister of finance, and it largely fell on deaf ears.
Just basically explaining exactly what I just explained here.
And it fell on deaf ears, which is very discouraging. And I find I don't want to get too political, but politicians generally don't do anything unless they have to.
[00:19:03] Speaker C: Now, this is the same letter, I think, that had 46 pages of identified notes from the upcoming and proposed legislation with very specific identified components where as CEO, in relation to Beau Valley credit union, you had specific asks that you were recommending really for the benefit not just of your own institution, but actually of all credit unions in the province of Alberta, to be able to maybe suggest that the guidelines are modified uniquely for the credit unions. And there was a number of things that you identified in there, one of which actually, I think will transition us to another part of the conversation is how bullion assets are currently being looked at as far as capital requirements are concerned for institutions. There's many other requests that you have in there, so maybe there's a few that you'd like to speak to and highlight, but I definitely would like to zone in on that one as we go through our conversation here.
[00:20:01] Speaker D: Sure. Where do you want to start?
So the specific asks were around, basically the Fintrack reporting, not being allowed to basically close people's accounts for political donations.
The second ask was around this b 15. And basically, hey, pay attention. This is a potential real whirlwind coming towards you.
[00:20:26] Speaker E: Buy a calculator.
[00:20:29] Speaker D: Yeah. And potentially they didn't want to listen to me because even though we're considered a large credit union, we're not a very big player in the grand scheme of things.
[00:20:42] Speaker E: Yeah, the size of the lobby, it doesn't weigh enough.
[00:20:45] Speaker D: Right.
[00:20:45] Speaker E: For somebody to say, hold on a second, we got to pay attention because this is going to cost us a lot of votes if we don't.
[00:20:52] Speaker D: Correct. Yeah, that probably had some sway. And the third ask was around recognizing gold and silver as a currency rather than a commodity. Currently in the Alberta Credit act, the precious metals, gold and silver are considered commodities, rightly so. They probably could be.
And we disagreed with that fact. We thought that they should be valued as a currency at fair market value.
A number of reasons for that. New basel three laws came out that stated such.
It's traded daily, it's a very liquid asset, it's recognized worldwide. So there's a number of things that sort of pointed in the direction that it could be accommodated as currency.
The minister or the regulators disagreed with that, which is fine, but we are allowed to hold it as a true face value currency. So if anybody's ever looked at a gold coin, it has a $50 face value, if it's from the Royal canadian mint. And so we can carry it on our balance sheet at face value. But that's a significant markdown from the fair market value, which today is nudging up against $2,700 an ounce, which is an interesting story in itself, that at one point somebody thought a 1oz gold coin was worth $50. Today the market value is worth 2700. But that's sort of a different story.
[00:22:36] Speaker E: And is the balance sheet tallied up and segmented the same way? Like in terms of tier one capital, total capital, all of that from a reporting and accumulation requirement?
[00:22:54] Speaker D: I would love that if we were more on the standard of the Basel standards where we can count precious metals as a tier one equivalent to cash as capital. But unfortunately, no, they force us to write it down and so we carry it on our balance sheet at that $50 face value versus that $2,700. So in a way, our balance sheet is significantly stronger than it looks on paper because we do have precious metals within our control.
[00:23:26] Speaker C: Now, one of the reasons that's important and the push for that and the ask, of course, that you recommended basically to the Alberta government to be able to carry it at that fair market value is obviously just what it looks like on their balance sheet, of course, being one. But then the concept of the idea of going back to a much more traditional methodology of banking, where a dollar could be pegged to something of physical value, such as gold or silver, and that is kind of the general premise, I think, of what direction you were looking to go down. And now there may be some challenges in creating such a thing. So if any institution in Canada presently today wanted to go about doing that, what are some of the difficulties and challenges that they would face in trying to make that a reality?
[00:24:11] Speaker D: Well, part of it is the government would be working against you.
Their superpower, if you will, is the ability to create money out of thin air, create currency out of thin air. As soon as you peg it to something tangible, that superpower goes away. And I could go down and have much of the world's problems today, or as a result of the government being able to print currency, but we'll potentially save that for another time. But that's probably your biggest challenge, is you're going to have the government standing in your way to be able to do that.
Number two, as an organization, we can't back our deposits 100% with precious metals because as a financial institution, we need to be able to pay for our buildings and pay for staff and pay for it and that type of thing. And that's all paid in fiat currency. We need to be able to make a profit on what we're doing. So we can't just be strictly a bullion bank where you're basically taking fiat and buy gold with it, that type of thing. So that's probably the next biggest problem that you're going to run into.
That's probably enough to stop the whole process.
[00:25:39] Speaker E: Where do you see Bow Valley credit union in the next five to ten years? What's really exciting you around some of the developments that you've got in the business plan for the credit union?
[00:25:51] Speaker D: Yeah, well, we have some significant themes around precious metals.
We have a partnership with Silver, Gold Bull. They're a canadian wide dealer. They also deal in the US. They're the one of the biggest in Canada.
And through their partnership, we do retail sales of gold and silver, buying and selling silver as well as storage. They have a storage facility right within Calgary, which we like.
They're from Alberta, they grew up in Alberta, they're vested in Alberta. We like that as well.
Along those same lines, not only are we trying to help people get protected from inflation and devaluation of currency through physical precious metals, but we're in the late throes of developing a program where you can actually lend against your precious metals. So it almost works like a home equity line of credit where you basically have, say, $10,000 worth of gold value. You have it in storage. Oops, the furnace blew up. I need $5,000. You can borrow against your precious metals and actually use fiat currency and almost leverage your position to some degree, which generally people in the gold and silver precious metal space do not want to get rid of their precious metals. So this is a significant advantage for them.
In addition, about a quarter away from launching our gold backed deposits, where you can actually deposit fiat currency, and there's no downside to it because you're guaranteed on that and you get paid interest on your fiat currency, but you can also take advantage if the price of precious metals goes up. So it basically works as a fiat currency inflation hedge, if you will, for people that want to carry some fiat currency.
[00:28:00] Speaker E: Very interesting.
[00:28:01] Speaker D: Yeah, we think there's a particular big amount of interest around that, and that.
[00:28:06] Speaker C: Would increase your capital reserves as well, which is one of the things that you're looking to do if you can increase your deposits from that standpoint, correct?
[00:28:14] Speaker D: Yeah. And the bigger we get as an organization, the more capital we need, the more locations that we want, the more capital and it all goes towards that. And so it comes in mainly in two different ways. Either through profitability as mentioned just previously, or through common shares. People can actually purchase more common shares within our organization to allow us to expand. And that's been a big theme of ours lately is getting to more regions of Alberta because we just find a huge amount of Albertans wanting and needing our service and our value set around this. And to be able to do that, the capital to very very good.
[00:29:02] Speaker E: And again on your team. So what are you most proud of in terms know, community involvement, things that the Beau Valley credit union is really passionate about. And what bright light do you want to shine on your team?
[00:29:16] Speaker D: Sure, I think they're a fantastic team and they've worked exceptionally hard over the last, even just 18 months has been very impressive to see and I've been very happy with that.
And I think instilled within every member of our organization is a particular value set.
And that value set I'd like to say is very agnostic to just about anything. So politically agnostic, health agnostic, religious agnostic. And I think it's been very interesting, let's say over the past number of years where particular number of organizations virtue signal in spaces where they frankly don't belong. We're not here to do that. We're not health experts, so therefore we're not going to dictate to you what you should do as a health standard.
We're not political experts, so therefore we're not going to dictate to you what political advice we should give. We're here for a financial service, maybe a little economics, but that's about it.
[00:30:30] Speaker E: Spells free to freedom to me.
[00:30:32] Speaker C: Speaking of the economics and thinking about leverage with the institutions, at least in Canada. We talked about this a little bit before we hit the record button.
Other institutions in Canada have a certain degree of leverage that can be created based on deposits that exist. And there's a pretty distinctual difference you are identifying between the credit unions versus the traditional commercial banks, at least in Canada. Can you expand on that a little.
[00:31:02] Speaker D: Bit for our, you know, so as mentioned, capital is king. We need capital for everything we do. So you'll find that organizations that are over leveraged will definitely have a capital multiple much higher. So in traditional schedule one banks in Canada, they can go to a maximum about 23 times their capital.
And us as an organization typically like to keep it around 8%. So significantly less leveraged than other financial institutions. And just to give you a bit of a scope. Like Lenaman brothers, when they blew up in 2008, they were leveraged 100 to one. So that's sort of where you can get with your leverage.
It can cause significant problems if you are, as we likely all experienced in your.
[00:32:01] Speaker E: Yeah, especially if capital stops.
You know, again, the financial know, you had ceos of some of the largest corporations in America getting on the horn with the Federal Reserve and saying, unless you get credit and capital moving, I can't buy raw materials, I can't pay the bills. I can't really do anything other than turn the lights off in the business. And I don't think people really, truly had a really clear indication of just how close to the brink the financial system was to collapsing.
And there's a really great movie that we like to reference. It's titled too big to fail.
And there were conversations going on leading up to the precipice of that. And these folks in Washington were saying, like, the american public has no idea.
[00:33:02] Speaker D: What'S about to, well, you're bang on. It's not like bills weren't getting paid and things weren't happening. It's basically just that credit stopped. And so when that happens, then there's going to be a cascading waterfall effect.
[00:33:23] Speaker E: Definitely. This was a lot of fun. Rich, take us home.
[00:33:27] Speaker C: Well, Brett, we got to say I really appreciate you coming in to share a unique knowledge that you have, both about the banking industry and what currently is being faced by the canadian population, at least. And of course, for our american friends listening in, I'm sure they'll be curious to find out what's happening on their own home soil and with the challenges you've identified. And again, I got to see the letter that you sent to the minister of finance. You may not have been wearing a superhero cape when you wrote that letter and plans to send it to the government to let them know what changes you'd be recommending. But you are showing up to a canadian citizen, at least to Albertans, as a bit of a hero by taking a stance and finding ways to create more freedom in banking for them as citizenry. So we really appreciate that. And so our question for you, red, is who would you most like to be a hero?
[00:34:25] Speaker D: Know a big part of this? I don't get angry much in my life, but I was pretty angry throughout when my kids weren't able to go to hockey and things were taken away from their youth.
So a large part of what I'm trying to do is just make sure that the freedoms that we enjoy today are past, are continued going forward because I think we have a really slippery slope and go down a very dark path if we're not very careful.
[00:34:58] Speaker E: Agree 1000% Brett, it was just a real pleasure to have you. And thank you. Thank you for your advocacy again and work that you're doing there. To be a voice and to be a voice of logic, which is largely absent out there nowadays. And so thank you for doing that on behalf of Albertans and by proxy Canadians, because we're such a large contributor to the health of the canadian economy.
So we appreciate you. Thank you for being generous with your time and your knowledge, and we look forward to having you back. And we'll pick up the conversation on some of the things we were discussing before hitting the record button as well. And for all of our YouTube listeners and viewers, you just saw another video come up on the playlist thanks to our amazing editing team. The reason we do that is there's no such thing as having arrived in knowledge. There's always something new to learn. So we've recommended the next video that we would like for you to view and to continue your journey of learning. So gentlemen, this was a lot of fun. Make the rest of your week outstanding and thanks again.
[00:36:05] Speaker C: Thanks Brent.
[00:36:08] Speaker B: Thanks for listening to the wealth without Basery podcast where your wealth matters. Be sure to check out our social media channels for more great content. Hit subscribe on your favorite podcast player and be sure to rate the show. We definitely appreciate it. And don't forget to share this episode with someone you care about. Join us on the next episode where we continue to uncover the financial tools, strategies, and the mindset that maximize your wealth.
