# Opinions on Fee Based Investment Advisor at TDW



## Jets99 (Aug 26, 2011)

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.


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## the-royal-mail (Dec 11, 2009)

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.


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## 44545 (Feb 14, 2012)

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.



Jets99 said:


> ...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/Investment_Policy_Statement


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## MoneyGal (Apr 24, 2009)

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.


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## kcowan (Jul 1, 2010)

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.


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## Jets99 (Aug 26, 2011)

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!


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## MoneyGal (Apr 24, 2009)

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). ???


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## CanadianCapitalist (Mar 31, 2009)

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?


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## Jets99 (Aug 26, 2011)

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.


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## MoneyGal (Apr 24, 2009)

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.


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## Jets99 (Aug 26, 2011)

CanadianCapitalist said:


> 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?


Good point. Why doesn't everyone simply buy an index fund? Not sarcasm, you are making me think here. Part of my answer would be that when I look at index funds, I don't like all of the holdings I see. I like the ability to pick stocks I like. Not saying I can do better than an index fund but I can live with any failings here. I like control and I want to take more active control of my portfolio and I think if I buy mostly funds, I'll likely tend to let it sit. 

Having said this, I will likely buy some index funds too. Any you would recommend?


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## CanadianCapitalist (Mar 31, 2009)

Jets99 said:


> Why doesn't everyone simply buy an index fund? Not sarcasm, you are making me think here.


Mind you, I wasn't trying to be sarcastic. A strategy of buying blue-chip dividend payers sounds reasonable to me as far as portfolio construction is concerned since you are retiring fairly soon and likely would like to spend income from your portfolio. I was simply pointing out that your plan is very different from your implementation. 

I agree with MoneyGal. Your needs are quite different from someone who is simply building a portfolio. You either have to DIY (MoneyGal's Pensionize Your Nest Egg is a good starting point) or hire someone with expertise in retirement planning. It looks like you may also want to get help with building and managing a portfolio (and yes, I fully realize that "help" will cost money). Buying products or stocks to implement your plan is the last step in the process.


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## Sampson (Apr 3, 2009)

I would ask you what you are hoping to get out of the adviser?

If it is a 'plan' then this is not the way to go. I know people who have used these types of advisers and while they certainly are not your average MF salesman, they often don't add a whole lot of value - e.g. they advise you to buy portfolio matching your 'risk tolerance', then usually select the most widely held investments (SU, for example), mix in with some different asset class holdings (bond funds or something), and check in on you, or buy what you ask them to, and offer recommendations a few times of the year.

To me, if you are inclined, you might as well either learn on your own, or follow CC's advice of passive indexing.

That said, I do see value in some types of advisers - ones that help you pick micro-cap companies, ones that are good at timing, and ones that help you find and develop a plan. These types are rarer, and certainly not ones you would find at TDW.


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## Four Pillars (Apr 5, 2009)

Lots of good comments so far.

You might also consider doing both passive investing and some stock picking. If you want non-North America international exposure then buying ETFs is the easiest way to get it. You can still pick some Cdn & US stocks.


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## Jets99 (Aug 26, 2011)

Whether I go DIY or not, I'm going to get the book today. Thanks for the tip.

I'm not sure I understand your comment that "your plan is very different from your implementation". Suncor, Goldcorp and more AAPL are only a few I am considering but is it that they don't meet your criteria for blue-chip dividend payers ? I know AAPL doesn't but I'll bend the dividend rule for this one.

I also own Telus, GWO, COS, MFC, GE, RY, MSFT, AT&T, AAPL.


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## Jets99 (Aug 26, 2011)

Sampson said:


> I would ask you what you are hoping to get out of the adviser?
> 
> If it is a 'plan' then this is not the way to go. I know people who have used these types of advisers and while they certainly are not your average MF salesman, they often don't add a whole lot of value - e.g. they advise you to buy portfolio matching your 'risk tolerance', then usually select the most widely held investments (SU, for example), mix in with some different asset class holdings (bond funds or something), and check in on you, or buy what you ask them to, and offer recommendations a few times of the year.
> 
> ...


Good post. This sounds alot like the guy I have now at NesBurns except for the "check in on you" part 

And I agree if I could find a guy who was good at picking micro-cap companies and good at timing and who would keep a close eye on my portfoilo I think he'd be worth paying for. But how do you know unless you actually take the plunge and go with him.


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## kcowan (Jul 1, 2010)

Jets
You don't seem to understand your need for a plan. It has nothing to do with building a portfolio. You will not get this from any of the guys you are dealing with. Without a plan, how will you know when you get there?


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## Charlie (May 20, 2011)

I'll concur with MG that 1.25% is a good price for a managed portfolio. Especially at $300K. This is a DIY board, so many of us question the value -- but that's about as good as you'll get for someone else to manage your stuff. As to the service -- it really depends on the adviser, and on you. 

For someone with few trades (which should be most long term investors) I can't help but think you should be able to hire an adviser who charges hourly to review your stuff and your plan every 2 to 3 yrs at much less than the $12K in fees you'd pay at 1.25% on $300K over 3 yrs. But that's because I'm a DIYer and like this stuff. Maybe it's a penny wise and pound foolish thing? And sometimes the full service advisers have access to certain bond or pref share issues that the retail investor doesn't.

But to your original question -- 1.25% is a good price.


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## Jets99 (Aug 26, 2011)

kcowan said:


> Jets
> You don't seem to understand your need for a plan. It has nothing to do with building a portfolio. You will not get this from any of the guys you are dealing with. Without a plan, how will you know when you get there?


Maybe you're right but I actually think I have a very detailed plan on how I will get to my retirement goal. Too much detail to share and probably not of interest to anyone but me (even my wife is tired of hearing about it  ). 

In a nutshell I know what my goal numbers look like that will allow me to retire and I also know what funds I need to come up with and allocate to various investment vehicles annually to reach my goal but one of the biggest factors impacting my plan is expected rate of return on my investments. Hence my decision on DIY vs Advisor. Another advantage of the Advisor would be to validate my plan and apply his retirement planning tools. 

But is it worth paying for? I still need to work that out. All of the opinions offered here have been excellent and I think my main question has been answered by MoneyGal and Charlie and others. So the 1.25% is not expensive and my original opinion on that was wrong. But sheesh I'm still having trouble coming to grips giving someone $3,750 a year to manage my money. Question is, would pinching pennies here come back to haunt me...


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## MoneyGal (Apr 24, 2009)

Jets99 said:


> In a nutshell I know what my goal numbers look like that will allow me to retire and I also know what funds I need to come up with and allocate to various investment vehicles annually to reach my goal but *one of the biggest factors impacting my plan is expected rate of return on my investments*. Hence my decision on DIY vs Advisor. Another advantage of the Advisor would be to validate my plan and *apply his retirement planning tools*.


At the risk of beating a dead horse, you are not going to get what you are looking for from the advisor you are proposing to use. First, there is no guarantee that using an advisor will give you higher rates of return and in fact, you could argue the opposite - the fees you'd be paying impose an additional hurdle the advisor has to overcome to give you the required rate, compared to implementing the same plan on your own. 

Also: he isn't going to have any but the most basic, generic retirement planning tools - at least at the price you are paying. He won't be validating your plan. He won't even really be interested in your plan beyond what it takes to get the Know Your Client form completed. 



Jets99 said:


> But is it worth paying for? I still need to work that out. All of the opinions offered here have been excellent and I think my main question has been answered by MoneyGal and Charlie and others. So the 1.25% is not expensive and my original opinion on that was wrong. But sheesh I'm still having trouble coming to grips giving someone $3,750 a year to manage my money. Question is, would pinching pennies here come back to haunt me...


This is the wrong question. If "pinching pennies" means you go it alone in order to save on the "expensive fees," it does not hold true the other way that paying the pennies (instead of pinching them) provides a better outcome.


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## Jets99 (Aug 26, 2011)

MoneyGal - thanks for the feedback. I've never met a dead horse that I didn't at least kick once more. I'll be dithering myself into retirement I think.

Your statement, "He won't be validating your plan" seems a little strong. The service I'd be paying for is a step above the guy just pushing mutual funds. I can't see him not offering an analysis of my plan and if he didn't I'd be walking. Hell, at least I have a plan. His work is mostly done. Just has to pick the right investments for/with me. 

Ok I'll stop now. So what stocks should I buy after I read your Pensionize Your Nest Egg book?


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## Sampson (Apr 3, 2009)

Trust the opinions on this thread. I've met many people working with these advisers and they offer NO PLAN.

They pitch that they can secure higher returns, that's all. There is not detailed analysis on what you need to meet objectives, and whether the risk profile is warranted to get there. Maybe you don't need to invest in equities at all, could be the case if your savings rate is high enough, but these types won't look into this for you.


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## kcowan (Jul 1, 2010)

and remember that the $3750 is just the first year. Once he has you on autopilot, those fees just come rolling in every year for sharing with you what their stock analysts are recommending every week.


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## 44545 (Feb 14, 2012)

Sampson said:


> ...{bank-based advisors} pitch that they can secure higher returns, that's all. ...


Lock-step with that point: index fund investing beats 85% of "active" portfolio management. (don't take my word - I'm paraphrasing John Bogle, Larry Swedroe, Rick Ferry... Warren Buffett - who all suggest the average investor index instead of actively managing)

Would you rather bet that the random advisor you found is going to be in the 15% that _may_ do better but will likely do significantly worse than the market? I'll bet on the index.



kcowan said:


> and remember that the $3750 is just the first year. Once he has you on autopilot, those fees just come rolling in every year for sharing with you what their stock analysts are recommending every week.


^^^ This.

Why not use a "fee-only" advisor instead? By that I mean a non-percentage based advisor who will instead charge you an hourly rate or a flat fee for a service, such as designing a plan.

A good one won't won't try to sell you on "beating the market." Their goal is to help you meet your financial goals. 

If you're on this forum, you probably already have the interest and discipline to manage your own portfolio, once you have a plan in place. Consult a flat-fee advisor to help develop your plan and then do the work yourself.


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## jet powder (May 29, 2012)

Hey Jet, You have done an amazing job so for dont blow by not having confidence in your own ability. (trust in your eyes)

your best off to invest on your own & maybe use a credit union instead of a bank for making sure your not making any basic mistakes i.e., with taxes with RRSPs, maxing out TFSA etc.

Credit unions are owned by the members & unlike banks try to help thier members.

The majority lose money in the stock market & those that make money are almost always independent thinkers, that do thier own research & develope a method that gives them an edge, fits thier personality & have the disapline to follow the method. Most people should invest in the safest vechile possible & only risk 1-3% of thier portfolio in the stock market. 

There is no way I would ever pay someone that works for money for advice on how to make money work for me in the market. I bet your doing better financially then the adviser your thinking of paying.

I have made more money in the stock market then I have ever made working for money & I will tell you it was not easy & there is no way I would ever risk more then 3% of my total portfolio in the market. If you have not done your own research to develope a method to play the market that gives you an edge dont play the market untill you do. Put your money in the safest vechile i.e., GIC with MAXA financial

Buying high dividend stocks is a myth right now. @ important lows the average PE is single digit & below the dividend yield which will be double digit. & the PE ratio of late is based on creative acounting 

wish you the best in your investments & I think you can do better then paying someone high fees that will do a worse job then you can do.


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