Opinions on Fee Based Investment Advisor at TDW

[Jets99]

I am considering consolidating all of my investments with a Fee Based Investment Advisor at TD Waterhouse. His fee is 1.25% annually with a minimum portfolio of $300K. I'll spare the detail on services he will provide but suffice to say he fits the bill for what I'm looking for but his fee seems steep to me. Opinions?

My alternative is to go it on my own with half of my portfolio in a TD WebBroker account with flat rate $10 trades and leave the other half with Nebit Burns and continue paying them $125 for trades but of course benefit from the guidance they provide. Overall I'd say performance and service from Nesbit Burns has been only fair hence my consideration of moving everything to the advisor at TD.

Or the third option is to do it all on my own but I'm 5-7 years from retirement so some "expert" advice and help with retirement planning is getting more important. But the Nesbit strategy seems to be pretty simple - buy more blue chip high dividend stocks and hold them until retirement, no trading and don't try to time the market. I think I can do this pretty well myself but maybe overestimating my abilities.

Maybe lacking detail here but any opinions/feedback is welcome and appreciated. Fire away.

[the-royal-mail]

Well, these folks are typically not "advisors". I prefer to think of them more like salesmen. Of course they give you guidance - to their own products.

I'm not sure someone so close to retirement should be taking too much equity risk at this point but the bottom line is nobody cares about your investments more than you do. It will be very difficult to find objective advice as most of these are effectively commission salesmen who prosper when you buy the products they "suggest". I realize there is a market for this type of service but I'm just not sure you're it.

Besides, I thought "fee based investment advisors" were the opposite of what you describe. We've discussed these before.

[CJOttawa]

Ditto what "the-royal-mail" said.

Accept my apologies in advance if any of what I'm about to write is redundant but I'd feel remiss in leaving it unwritten.

Read the book "The Naked Investor (Why Almost Everybody But You Gets Rich on Your RRSP)" before you chain yourself to anyone in the financial industry. The first print was published prior to TFSAs existing but the advice therein is still very relevant.

The terms "churn" and "discretionary trading" should not only be familiar but scare the heck out of any investor. We have far fewer protections here in Canada than do our US counterparts so avoiding those two drags on returns should be foremost in your mind when considering any fund or advisor.

For my money, I trust my own judgement and oversight more than a bank-based "advisor" with a clear conflict of interest.

For advice beyond what you can get online, I'll pay an independent, "fee-only" financial advisor. You can execute securities trades yourself.

If you haven't already read John Bogle's "The Little Book of Common Sense Investing," I recommend it.

...I'm 5-7 years from retirement so some "expert" advice and help with retirement planning is getting more important. But the Nesbit strategy seems to be pretty simple - buy more blue chip high dividend stocks and hold them until retirement...

Conspicuously absent from your post was an asset allocation strategy. What percentage of your portfolio is in bonds? Stocks? Domestic? International? Sector funds?

An asset allocation strategy should be the first thing you establish; everything else falls into place thereafter.

Some model portfolio & recommended fund links:
http://canadiancouchpotato.com/model-portfolios/
http://canadiancouchpotato.com/recommended-index-funds/
http://www.bogleheads.org/wiki/Lazy_Portfolios

If referring to US-based advice, their Roth IRA is similar to a TFSA, a US 401k is similar to our RRSP, and TIPS are the same as our RRBs.

An investment policy statement might benefit you too: http://www.bogleheads.org/wiki/Inves...licy_Statement

[MoneyGal]

Well, just commenting on the price quote: the rate you posted is standard (very standard) and it is on the "cheap" side on two counts: normally more assets are required before you can move into a fee-based portfolio (I've actually never heard of a bank providing fee-based on an asset base of only $300K), and in cases of an asset base of under $500K, 1.5% is more standard.

On the retirement planning advice part: you are unlikely (very unlikely) to get competent retirement planning advice for the all-in price you quoted. Not necessarily because the advisor you'd be working with is incompetent, but because the price you were quoted is too low to include anything but bare-bones portfolio construction and trade execution. tax planning, financial planning, estate planning and retirement income planning would not be provided except at a very cursory level. You are unlikely to be happy with *this part* of the engagement if you go with it.

[kcowan]

You need a fee-based financial planner to build your life into a spreadsheet. They will set an investment objective that you are happy with but it is your job to make those investments. After you have paid that fee and have your spreadsheet, come back here and get advice on what investments will generate the necessary returns. Pay attention to your living expenses in this exercise.

[Jets99]

Thanks for the replies. I have been reading (never posting) this forum for a long time now and expected some very good input. Lots of smart people here.

Maybe I wasn't clear on a few points. First thing I asked the TD guy was how do you get paid ? His 1.25% fee is all inclusive. There are no further fees for trading or account management, etc. I know MoneyGal said this is cheap but I find it expensive although this is the only flat fee guy I have spoken to so just basing that on my own frugal nature. If I start with $300K, I'll be paying him $3,750 a year for his service. Or to look at it another way, my entire portfolio is 1.5% down to begin each year.

But based on this flat fee approach I don't think he will be biased at all about steering me into investments that he gets commission on and I don't want any part of mutual funds and will be sticking mostly to blue chip stocks. So his bias is not a concern to me and in fact this is one of the major attractions for me using this guy.

As for my asset allocation, I would be bringing him $150K cash and $150K in various blue chip stocks and a few mutual funds to start. And adding another $150K in cash within two years. So this meets his minimum plus more. And at $500K his fee drops to 1.15%.

My investment style should be conservative and that's what I have instructed Nesbit but I really struggle with the returns now on fixed income that my Nesbit guy offers me. So I'm leaning more now towards loading up on blue chip stocks with decent dividends and even if this is more risk I'm willing to tolerate it. My retirement is flexable and if I do well, maybe a year or two earlier. If not, there's always freedom 65! Or 66 now. If I want security I'll put it all into the local credit union and collect my 2% and pay no fees to no-one (and that's what I tell them is my benchmark).

Now if I do decide to go it on my own, I will definately be posting alot more. Interestingly, my first stock pick in my TD Webroker account was going to be SU right now. When I talked to my Nesbit guy yesterday, the first stock he advised me to add with him was SU. This was to me another small validation that I could do this myself.

FWIW - These are the other stocks on my watch list that I will likely be buying in the next couple weeks on my own: CTL, TEF, BMO, and more AAPL. Maybe Freeport (FCX) on the advice of another advisor but not sure.

I also wanted to get some Goldcorp but looks like I missed the boat, up 7.62% today!

Sorry for the long post! Any further input is again welcomed and appreciated!

[MoneyGal]

I don't mean 1.5% is "cheap" -- it's just cheap relative to the same service from a competitor. It's still a lot of money. I wonder why you wouldn't just go it alone, given that you seem to have a plan pretty much worked out (blue chip dividend-payers). ???

[CanadianCapitalist]

I do have some comments. You seem to understand that switching from bonds to blue-chip dividend payers means taking on more risk and you have a plan B in working longer.

However, I find it hard to square your desire to assemble a "blue-chip high dividend stocks" with names like Suncor, Goldcorp and AAPL thrown in the mix. If you are going to assemble a portfolio that looks like the index, why bother when you can simply buy an index fund and be done with it?

[Jets99]

Thanks MoneyGal. You answered the main question I meant to ask. I wanted to confirm the 1.25% was not overpriced relative to others. My original post was going to be a one-liner with that question.

I am leaning to going it alone but I guess the main things I think an advisor will provide me are some expert insight on specific stock picks and some good retirement planning analysis. There's also the feeling that they will provide a "safety net" and keep me from making any serious investing mistakes but I plan on keeping it simple.

[MoneyGal]

As I said above, I do not believe you will actually get "good retirement planning analysis." Here's why: your advisor is going to make $3,750 *including trading costs* for the services he is providing to you. How many hours do you expect him to work? How many meetings do you expect to have? How much analysis do you expect to get for $3,750 per year?

If you went to a commission-based advisor, and moved your whole portfolio over, that advisor would be paid $300K * 5% in the first year = $15,000, and then he or she would be paid a 1% "trailing fee" ($3000) for every year you keep your funds invested.

(Please note that I am NOT suggesting that a commissioned advisor is going to do a "better" job or is the "right choice." My intention is only to discuss the mechanics of how people in the financial services industry are paid.)

The bottom line is that *relative to his peers in the industry, and the pay benchmarks that exist in the financial services industry,* you are not paying him enough to get additional advice beyond very basic account positioning and management. And given the quoted rate, he is either quite young or...I don't know why his rate is 1.25% and I'm very surprised it is all-in. You yourself are paying $125/trade at a competing institution.

These are just things to think about. My concern is that you are not going to get what you are expecting. Retirement income planning is QUITE different from portfolio construction as the issues in a decumulation portfolio are very different from (and not just "the opposite of") an accumulation portfolio and strategy. Trying to get both "cheap" investment services and retirement income planning is a risky strategy, in my view.