Wealth Management: What Are You Paying For And What Are You Getting In Return?

(artwork by Grahame Arnould)

With an assist to Stan Buell and the Small Investors Protection Association (SIPA) for re-tweeting a blog from a year and a half or so ago that contained the following quote in regards to CRM2 (which came into effect on July 15, 2016), whereby "Investment firms are to provide an annual report that shows, in dollars, the charges and other compensation paid to the firm and your advisor for products and services provided":

"This all sounds beneficial, but if you own any mutual funds you're only going to get a fraction of the total picture. The disclosed fees that are paid to your firm and your advisor will not include the management fees charged by the mutual fund managers."

"This to me is one of the, if not, the biggest con jobs ever pulled off by the investment industry on the Canadian investing public".

"Where else in your life would you agree to have someone provide them with a service and allow them to take money out of your account without telling you how much they take - every month?"

So friends, about three years ago, Paul Tepsich and I came up with an idea: let's get in front of this CRM2 thing and create a completely transparent money and wealth management offering for individuals and families.

All in 1.15% management fee (plus or minus .05% for ETF MER's, depending on your portfolio structure): If you have $500,000 under management with us you pay $419.17 per month. 

In a non-registered account that is tax deductible. Effectively, you are paying a fraction of the management fee after tax considerations.

The MER taken by the mutual fund company or ETF manager is not tax deductible.

It literally staggers me when I talk to prospective clients who have a "great" relationship with the advisor / salesperson at their banking / financial institution who is prepared to pay an MER (in many cases of 2% or more) for any reason. Even ETF MER's which are considerably more reasonable are not tax deductible, so you would want to minimize those as best as is possible.

More importantly what do you get for your fees?

At High Rock Private Client, we begin with a Wealth Forecast (prepared by our Certified Financial Planning, CFP, professional) which is very specific to your personal situation. This allows us how to assess your goals, objectives and desire for risk and prepare a tailored investment strategy for you.

Some might think that every advisory offering does that. Do they? How well do they do it? If you find yourself in a "basket" of mutual funds and / or ETF's then you are not getting a personally tailored portfolio. 

Robo advice offers a selection of "baskets". And so they should perhaps from a business operation perspective: it makes sense to bundle their offerings to minimize the cost of management and limit their face to face time with clients. But that is not how we operate. We are in the business of looking after people: personal service.

A Wealth Forecast is not worth the paper it is printed on unless it is constantly monitored, regularly updated and adjusted for the inevitable changes that occur in a dynamic life.

We sit down with our clients to review every client portfolio every six months or so to determine where we are in the plan relative to where we want to be and if necessary, make changes to the strategy to stay current with whatever changes are happening in our client's lives.

When I see bank advisors selling GIC's to clients who have mortgages or lines of credit (instead of telling them to pay down the mortgage or line of credit), I shake my head.

You will likely not get long-term (averaged over many years) double digit returns, but our attention to risk will also not likely put you in harms way, which ultimately means less potential volatility and a better sleep at night. That is our fiduciary responsibility to our clients. You will not get that from your advisor at your bank / financial institution, because they do not have to provide it for you.

Low fees, better wealth and portfolio management, personal service, fiduciary duty. 

And all the same safety and security of a bank: Canadian Investor Protection Fund (CIPF), Ontario (B.C., Alberta, Saskatchewan) Securities Commission licensed.

Simply a better alternative.