What the Heck is a Wal-01(k)? Does it really grow 3-5X faster than traditional 401(k)s?

Solving the latest teaser pitch from The Wealth Advisory

By Travis Johnson, Stock Gumshoe, November 30, 2015

Today, as the Black Friday crowds have died down and we’ve all grown tired of watching people fight over “doorbuster” items in the “what has the world come to” video clips that are all-too-popular nowadays… we can talk about a different kind of ridiculous promotion. No, not towels for $1.60 or Xboxes for $99, but a fantastic retirement for just $30!

That’s what’s implied by the ad for The Wealth Advisory, they call this “retirement plan” the Wal-01(k), which really rolls off the tongue, and say that it pays out monthly, is legally required to pay you every month, and will grow your money 3-5X faster than a “traditional” 401(k).

True? Well, as always with these ads the answer is “kinda”… but the reality is not nearly as enticing as the hype. Here’s how the ad gets us started:


“Funded by Wal-Mart, this automated savings plan is legally required to pay you a cash distribution every single month…

“You don’t have to work for Wal-Mart to participate in the plan…

“And it grows your money 3-5 TIMES faster than traditional 401k(s)”

Sound enticing? Even if you don’t much like shopping at Wal-Mart, just about everyone wants a way to grow their retirement savings more quickly. So how do we find out what this is?

Well, it sounds a bit familiar… but let’s check out the clues to make sure…

“You won’t find this retirement program advertised on Wal-Mart’s website…

“But you don’t have to work for Wal-Mart to take advantage of it, either….

“48-year-old Ray Kerr from Arizona got payments of $5,969 a month last year.

“Jerry Stevens from Ontario, Canada received a payout of $1,638 just last month.

“66-year-old Frank Pettit has had a Wal-01(k) plan for years, and these days, he’s getting remarkable payouts — as large as $23,220 a month….

“This has nothing to do with buying shares of Wal-Mart.

“It doesn’t have anything to do with dividend reinvestment plans.

“It doesn’t have to do with anything complicated like options or ETFs.

“And there is zero day trading involved.

“In fact, all you need to get started is just $30….

“Recently, Vancouver’s main newspaper, The Globe and Mail, reported on just how great being a Wal-01(k) participant can be:

“… a dollar invested [with this savings plan] in 2001 is now worth $18.”

Vancouver’s primary newspaper is the Vancouver Sun, not the Globe and Mail — which fancies itself the national “newspaper of record” for Canada but is published in Toronto. But that does help us, at least, to clarify that yes, this is similar to the pitch that Angel Publishing made a couple years ago about “Wal-Lord” and the way to get rich by becoming Walmart’s landlord.

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So, it turns out, Briton Ryle must be teasing the same stock as was pitched by The Wealth Advisory starting in 2012 — though he wasn’t running the newsletter back then, and the company has changed some and has a new name and ticker now… this is now a pitch for the “secret” Canadian REIT SmartREIT, officially called Smart Real Estate Investment Trust (SRU in Toronto, CWYUF OTC in the US). Until this past summer, when they bought out their longtime partner SmartCentres, the name was Calloway REIT.

And it is, indeed a way to earn a higher yield that’s based largely on Wal-Mart — though it has nothing to do with Wal-Mart other than the fact that the two companies are corporate partners to some degree, and Wal-Mart pays rent to SmartREIT.

Here’s some wording that bugs me from the ad:

“Why are these Wal-01(k) plans so rock-solid?

“Well, it’s because Wal-Mart must put money into the plan’s fund every month before it can even pay itself.

“As I told you earlier, Wal-Mart is MANDATED by law to do this. There’s simply no getting around it.

“And according to law, money in the plan’s fund must be disbursed to investors on a monthly basis.

“Wal-Mart has hired a company to administer the fund.

“And it automatically makes these disbursements to investors every single month.”

Wal-Mart is not forced to pay you “every single month” like the ad implies, though the REIT does currently have (and has had for many years) a monthly dividend, and Wal-Mart presumably pays their rent to SmartREIT every month and is obligated to continue doing so until their leases expire (most of the leases have at least 5-7 years left, with lots of long-term extensions possible). Yes, they “have to” pay their rent before they can “pay themselves” — “pay themself” presumably means “make a profit” and, like for anyone else, profit is what is left after they pay expenses (like rent)… but that doesn’t make these folks any different than any other landlord.

And REITs “have to” pay out their profits in the form of dividends or lose their tax-free status, but, of course, they can always cut the dividend if business weakens (this particular REIT hasn’t had to, though foreign exchange rates have effectively cut the payout for US investors in recent years)… and if they stop making profits, as has been known to happen from time to time, they don’t “have to” pay out anything.

Walmart has a lot of landlords, though SmartREIT is their dominant one in Canada thanks to a relationship with the founder of SmartCentres and Calloway REIT that had them basically being Walmart’s real estate developer as they expanded into the virgin, understored territory north of the border. And no, Wal-Mart has not “hired” this company to “administer the fund” — it has signed leases with this company to use their real estate, and it pays them for that use. Then, since they’re a real estate investment trust, they send essentially all that profit through to shareholders so they don’t have to pay corporate tax on it (Canada’s REITs are similar to US REITs, for those who are familiar with these income-focused investments).

How has that worked out as an investment? Well, OK. Not fantastic, not terrible. Walmart is still doing pretty well in Canada, and they’ve probably been helped by the fact that Target botched their northern expansion and pulled back out of Canada, but it’s not going to suddenly start paying dramatically higher rents — the improvements at SmartREIT are iterative, despite their talk about transformational deals like this one for SmartCentres (which will boost their square footage about 10%, though it does also provide more valuable development potential). The goal, I expect, is to get a little better each year, bump rents up 1% a year above inflation, get occupancy up slightly higher (it’s already very high compared to most REITs), and develop and buy new properties to gradually improve per-share cash flow.

If you look at the past five years, you see the huge impact that the falling Canadian dollar has had on the value of Canadian REITs for US investors — SmartREIT has a total return over the last five years of about 15%, dividends included, a little better than the 9% return of larger retail-heavy REIT Riocan and much better than the 12% loss for the more diversified Canadian REIT H&R Real Estate, but the average US REIT over that time (going by the Vanguard REIT Index ETF VNQ) is up 75%. And Walmart itself, despite the well-publicized collapse in their shares this year as growth has disappeared, is still up 22% over the past five years.

So SmartREIT looks like a solid operator, and it may be that they can “unlock” some more value thanks to the additional properties and development projects brought on by the SmartCentres acquisition, particularly in the Toronto area… but it’s not going to give you an easy retirement on $30. Nor, indeed, would it have done you much good to buy these shares when this same newsletter started pitching them as “Wal-lord” back in the Spring of 2012 — had you bought then, dividends included, your shares today would be worth almost exactly what you paid for them. Not terrible, and that means you would have beaten the broader Canadian index (which is down 8% during that time period), but that’s a far cry from the 60% gain you could have had in the US market (that’s the increase in the S&P 500 since then) or the 46% gain in the US REIT index.

The investment would have worked out much better, of course, for those who do your thinking and spending in Canadian do