One of the main questions I get from new clients about buying precious metals is "Why should I hire you to help me with my gold & silver buying decisions rather than just buying online after watching a few YouTube videos?"
Well, the answer to that is multi-faceted and varied, but essentially the answer boils down to experience and consultation.
Below you will see an actual recent real-life example of a client of mine who experienced the benefits of hiring a knowledgeable consultant first-hand. In summary, it was a $28,000 net benefit in just 5 short months.
Before I go into details, let's discuss the various options available to any precious metals buyer.
1) Buy from a local retail coin shop, bank, or post office.
While tempting and convenient, this is usually the most expensive way to purchase precious metals. The reason is that the physical retail location must not only make a reasonable profit margin selling you the product, but they must also be able to cover the expensive rent, utilities, insurance, and taxes needed to provide you with the store front where you can see the product under a glass case. This cost is obviously passed on to you, the consumer.
They often require onerous pieces of ID for relatively small purchases. This invasiveness can be a deterrent to some who want personal privacy and security. Not only do they have lower limits for financial reporting requirements, they run the risk of data breaches that could expose your physical address that opens you up to home invasion robbery from insiders who collude with outsiders, since they now know where you live.
Retail locations run the risk of buying back a fraudulent product from sellers, and that product could be resold to you by an unscrupulous supplier.
Banks and post offices are typically the most expensive of all resellers of precious metals. In March 2022, for example, Scotia Bank was selling a 1-oz Royal Canadian Mint silver coin for $55 whereas we were selling the EXACT same coin for $47.
Banks and post offices typically don't buy back your metals when you want to sell.
Employees at these locations are not typically qualified or authorized to give you advice regarding the allocation split, the product selection, the buy/sell price points, taxation effects, tax shelters, disposition timing, and other financial tips that an experienced advisor typically provides.
2) Buy online from an internet-based supplier.
While also tempting and convenient, this is usually the most risky way to purchase precious metals. The reason is that you never really know who you are dealing with at the other end of the line or mouse click. Overall, online retailers have lower costs and smaller margins, and those savings are reflected in the price - and sometimes the quality of the product.
They have fewer ID requirements; if any; they can ship anywhere (for an extra fee) and still make money.
As before, they will have lower limits for financial reporting requirements, if any. Yet, they too run the risk of data breaches that could expose your physical address that opens you up to home invasion robbery from insiders who collude with outsiders, since they now know where you live.
Most online sellers typically don't buy back your metals when you want to sell.
Most are NOT A+ rated with the Better Business Bureau.
Telephone customer service is usually not available with many of these resellers.
3) Buy from an online social media, auction, or classified ads site.
Online portals like Facebook Marketplace, Kijiji, E-bay, Amazon, and others may be great for selling secondary used items or reselling new products from other suppliers, but they are the absolute worst place to buy precious metals! Fraudulent products, deceptive marketing practices, fly-by-night operators, and phishing sites that steal and resell your identity are just a few of the problems with this option. Avoid then like the plague. Buyers Beware! Enough said...
4) Buy from an experienced advisor.
Independent consultants like me are carefully vetted by our suppliers to ensure integrity, knowledge, and good sales practices prior to being accepted as a referral agent or representative.
We have our reputations to maintain and have a vested interest in providing you with great and honest service since we rely heavily on personal referrals to grow our business.
Depending on the advisor, some of us have a strong educational and practical background in finance and economics, politics, financial planning, taxation, legal and business structures, and regulatory environments that can literally save you thousands or millions of dollars by helping you avoid transactional mistakes, foreign currency conversion fees, and trading pitfalls, just to name a few.
An advisor like me who studies historical trends and patterns can more often than not help you to decide when to buy and sell your previous metals, and in what denominations and from which accounts to best maximise your returns, net of any tax requirements.
Advisors may offer quantity and loyalty discounts based on your overall portfolio size and transaction history. I have created a loyalty rewards program called the Academy Rewards™ which returns a percentage of each purchase back to you in spendable cash that can be used for hourly consultations or online registrations in the many courses being created on The Wealth Academy. It is essentially a formula-derived refund of my sales commissions that you turn around and spend on other services with me or on tuition in the academy. These points never expire and may even be given away as gifts. To my knowledge, NO OTHER ADVISOR DOES THIS! The inherent value can be worth many times the small markup on your original purchase.
So, now that I have hopefully given you all the reason to buy through a qualified advisor like me, it's time to share a real world experience with you and how I managed to save one client a small fortune on an RRSP investment transfer into precious metals.
The $28,000 RRSP Account Savings Case.
The story I am about to relay is true in all aspects and I do have the permission of the client to write this case study while maintain my client's anonymity.
First off, to protect my client from possible circumstantial identification by people who may think they know who I am writing about, I will not specify the true gender of the client even though I will use the proper written and traditional pronoun He or Him while giving this narrative. I do not use the pronoun They when discussing a singular person as that would be poor English, so I chose to use He in this case. It was a 50/50 choice of pronoun and that's what I picked without intending to exclude anyone else.
I have known my client for nearly 2 years and have developed much trust between us since first meeting. My client, whom I will call Sam, came to me with a desire to invest both open non-registered funds and some RRSP money into precious metals. As with all clients, I provided him with my due diligence materials, client disclosure forms, and some education about precious metals investing. He even attended one of my seminars on Sunday, March 6, 2022, a date which becomes very relevant to this story because of the days that followed.
The following Tuesday, March 8, proved to be the local peak in the price run-ups of gold and silver that resulted after Canadian Prime Minister Justin Trudeau announced on February 12th his unprecedented and unconstitutional invocation of the Emergency Powers Act that granted the authority to police and financial institutions to seize the banks accounts of the Freedom Convoy Truckers and the organizers of the anti-lockdown protest, and to also freeze the $8+million dollars in donations that were made to GoFundMe and GiveSendGo, as well as the 93,000 ordinary bank accounts of people who even just made a donation to the cause!
The resulting panic among investors world-wide was to pull over $30 billion dollars from the Canadian banks and other investment capital in the country in just 7 days, causing a near collapse of the banking system in Canada. Meanwhile, seeing the tyrannical warning signs of trouble ahead, investors had begun piling into the real safe havens of physical gold and silver over the preceding 4 weeks, thereby creating supply shortages of coins and bars, driving the prices up dramatically.
By March 8, Gold had spiked $247.70/oz CAD since the February announcement rising 10.5% from $2367.20 on February 11 to $2614.90.
Likewise, silver jumped dramatically from $30.02 to $34.11, an 13.6% increase or $4.09/oz.
See these 6 month charts leading up to those days.
Chart 1: 2021/10/01 - 2022/03/08
Chart 2: 2021/10/01 - 2022/03/08
At my seminar on March 6, we discussed the recent huge run-up in these prices and many people contacted me in the days and weeks that followed asking me to invest in precious metals at these prices. I counselled them about the increased importance of owning precious metals given what Trudeau had just done, setting the terrible precedent that your fiat bank currency can be frozen or seized on a whim and by a push of a button, without due process. However, I also suggested caution and to dollar-cost-average into the metals by making progressive purchases spread over weeks or months given the inherent volatility of the current Trudeau fear trade.
One of those people whom I counselled was my new client Sam. He explained that he had both open funds (non-registered cash) to invest as well as a sizeable portfolio in his RRSP's. He insisted on doing the transfers right away which, in hindsight, turned out to be the very height of the market. Fortunately for him, he took my advice and did only a small initial cash purchase on March 21 as prices were coming down from their highs of just 2 weeks earlier.
By then, Gold had dropped $198.31/oz or 7.5% to $2436.49 giving back most of its fear-induced gains.
Silver faired a little better but still dropped $2.34/oz or 6.9% in just 10 days.
Here are the year-to-date charts as of July 30, 2022. You can clearly see the price spike on March 8 and the subsequent melt-down of prices that have occurred since.
Chart 3: 2021/12/31 - 2022/07/29
Chart 4: 2021/12/31 - 2022/07/29
As you can see, by his investment date of March 21, the fear trade effect had pretty much run its course as prices were nearly back to their February 11 numbers. At that time, we therefore felt that it was a good enough entry point to get in as we were back to the pre-Trudeau announcement prices. The general tend was still upwards and Sam wanted to get in now while the prices were on sale again. Also, with dollar cost averaging, we knew we could see both lower and higher prices over the coming weeks and months. By doing a small amount now and increasing the purchases over time, we hoped to spread out the buys to capture as many downsides as possible. This is the mentality of a shrewd investor with a proper medium to long-term focus.
The Big Buy.
You may recall at the beginning of this story that Sam had a large RRSP account to invest in precious metals as well. His account was currently at a large financial institution invested in cash and other paper assets. To invest in gold and silver within an RRSP or other tax sheltered investment, there are several steps to go through in order to be able to buy metals within such accounts. For full details, see the course called Why Gold & Silver? for the steps required to be able to invest in tax-sheltered precious metals.
Ultimately, the funds must be transferred to a matching type of account at the only custodian in Canada that handles such arrangements, Questrade. before the purchase of precious metals can be made.
Again, fortunately for Sam, fate intervened along the way because he needed four attempts to set up the correct type of account for his funds to be transferred into. Finally, after nearly 3 months of messing around with incorrect fund types and my constant advice to be patient as prices were still trending down anyway, on July 28 we FINALLY got his money invested in gold and silver in his federally-regulated locked-in spousal RRSP account, not the regular unlocked RRSP account he started to open back in March.
So, due to the delays, my help with getting the correct account set up, my connections to the foreign currency desk at Questrade, AND my advice to hold off until prices dropped to a bottom, actually saved my client about $28,000 compared to what he would have paid in March if he had done it all on his own. Here is how the numbers were calculated:
February 12, 2022: Gold $2367.20 CAD; Silver $30.02 CAD
Sam calls me to invest $50,000 of open funds, the day after Trudeau seizes/freezes the bank accounts.
over the coming 12-28 days, Sam reviews my due diligence materials, submits the client disclosure form, we discuss investing the first $10,000 only since he was likely to need the balance for a pending real estate transaction, and I prepare a quote on March 12.
March 21, 2022: Gold $2436.49 CAD; Silver $31.77 CAD
He finally makes the purchase of 1oz of gold and 185oz of silver on March 21 after I advised him to wait for the fear trade to subside. This decision to wait temporarily saved him $198.31 on the gold purchase and $432.90 on the silver buy.
(note: the markets have since fallen below what he paid on this first order).
July 28, 2022: Gold $2247.69 CAD; Silver $25.55 CAD
He finally made the BIG RRSP purchase of 30oz of gold and 1528oz of silver, for a total savings since the March 11 peak of $387.11/oz of gold and $8.56/oz on silver. Thus, compared to those who panicked at the peak of the market, I managed to help Sam save $11,613.30 on the gold order and $13,079.68 on the silver purchase for a total savings of $24,692.98.
But, there is one last piece to the story.
One of the peculiarities of precious metals investing within tax-sheltered structures like RRSP's is that the funds must first be converted to USD within the tax shelter. This typically involves the client requesting the currency conversion through the Questrade web interface or sending the money to a Forex dealer to make the conversion. If left to do it on his own, Sam would have paid the standard 3% conversion fee and not even realized he overpaid for this conversion. However, going through me as the advisor, I was able to negotiate a 0.75% rate on his nearly $132,000 CAD Forex transaction. I therefore saved him a whopping 2.25% or $2970 on the conversion that had to be done anyway. As a frequent independent rep, I am able to get my clients much better rates then they can on their own. It is true that it is often who you now that counts.
When you add it all up...
I calculate that I saved my client $28,294.19 over 5 months.
Hopefully this actual example convinces you that the value you pay for professional advice can often times far exceed the price you paid for the service. In Sam's case, I would get paid no matter when he made the purchase. However, because I knew it was the right advice to give, I delayed pushing the order through early and saved him a small fortune in losses even though it meant I would delay getting paid myself for nearly 5 months. When I told him of these numbers he was eternally grateful that I urged caution all along the way.
I did advise him that the markets could still drop further as the Federal Reserve raises interest rates to combat inflation but at least we are both much more comfortable with the timing of this purchase than we would have been had we rushed into it in March or April. I trust that he will refer more people to me in the future and to this article for them to read about this true historical account.
My small competitive markup I make on the product for giving the benefit of my experience and advice is small compared to the long-term value you receive from my advice. And don't forget, I give you money back on your precious metals purchases with the Academy Rewards™ program. With Sam, I gave him 5151 points which he can now spend on consultations with me or on free enrollment in my online courses up to the limit of his rewards points.
I like what one of the industry gurus once said...
I look forward to assisting you some day with your precious metals needs.
Sincerley,
Coach James