In this case, I felt the return on the client’s portfolio had been pretty
good when taking into account a number of related factors. First, the
portfolio was allocated 30% to 40% to fixed income to protect the client in
down markets. Second, the portfolio is the client’s retirement fund, and
not something I would expose to increased risk or gamble with.
While returns and are important, they are not the whole story, and there
are many other (sometimes more important) factors to consider when thinking
about changing advisors based only on those narrow parameters.
* Is your planner/advisor independent?
A bank is not, and chances are very good that you will end up with a large
allocation to that bank’s investments. Try going into a TD branch and
asking for an RBC dividend fund. You will be told that TD has many dividend
funds that are just as good if not better than the RBC offering. TD
employees push TD product, and RBC employee’s push RBC product.They don’t work for their clients, they work for the bank . That is a very important point to remember.
* Do you have a long-term relationship with your advisor?
If you are making a change, do it in your 20s through to your 50s. Don’t do
it when you are close to retirement. Let’s say for example you switch
advisors at age 65 after dealing with a person you trusted for 20 years
because you though you’d get a bit more return. You make the change, and
then five years later let’s say you develop early onset Alzheimer’s or lose
some mental capacity. Will the new advisor simply let your portfolio sink
into a state of benign neglect, or worse? After all, they don’t know you
very well, they may not want to deal with the complications of family
members with powers of attorney, and they may prefer more active clients
who generate larger fees for the bank.
We don’t ever think this kind of situation will happen to us, but it does
happen to some people. Stick with a trusted advisor and work with him/her
rather than moving to someone new.
* What is the advisor’s level of service?
Many advisors help elderly clients with bill payments and I recently
dropped off some books for an elderly client in a retirement home. Will a
bank employee do that? Almost certainly not. But this type of personal
connection is all a part of some advisors’ practices. Do I get paid for
this type of activity? No. It is part of a service to thank clients who
have been with me and stuck with me through good and bad markets.
* Do you get the institutional brush-off?
I often meet with clients for 90 minutes chatting about my kids, their
kids/grandchildren, or recent trips. Some independent advisors are not “on
the clock.” But try having a 90-120 minute meeting with a banker. He or she
must get down to business, because they have another client scheduled in 30
or 60 minutes. They must keep production figures up, or their boss
will call them in for a “meeting” about flagging production numbers.
* What other services are offered?
Some planners look after tax planning, estate planning, and make sure
powers of attorneys and wills are in place. Will a bank do this? Maybe if
your asset level is high enough. Maybe not, but those are very important
My point is that while returns and MERs are important, there are other
factors that have greater significance, especially as you age. Making a
change for the potential of making bit more money is a risky endeavour. How
long will it take to build the same level of trust you already have? There
are stories every day about financial advisors taking advantage of clients
and ongoing legal actions across the country due to these issues. Is that
the kind of stress you want when you are retiring and looking to reduce
stress? Financial stress and stress in general can be a killer.
Think about what other services your planner/advisor offers, and then
decide whether it truly is worth making such a big change. If you have
worked hard and saved a decent sum, the stakes are high. Don’t become
another case on a securities commission docket, trying to recover thousands
of dollars in losses because you wanted a few more dollars of return,
without considering the risks that might entail.
Bruce Loeppky is based in Surrey, B.C. and is registered with
Portfolio Strategies Corporation as a mutual funds person. He is a regular contributor to the Fund
Library. He can be reached at email@example.com.
Notes and Disclaimers
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