# Your Experience with Money Managers



## dubmac (Jan 9, 2011)

Hi all...

I just finished meeting with a money manager with whom we (my wife & I) are considering to manage 2 trust accounts -all in 450K in assets. He works for TD Waterhouse. He has suggested, given that our primary goal is capital preservation, a few options - one of which is to invest in a few low fee bond/income funds - each with their own MER at 2.0-2.2%. He has suggested that she can buy the funds at a lower MER of 1%, and also invest in some (20% of the amount invested) dividend stocks that he will manage. 

His fee is 1.0% withdrawn quarterly. He has suggested that this would earn in the neighborhood of 5-6% per yr. Essentially, he would earn $4,500.00 per yr to buy funds (that anyone could but using a discount broker), and buy some dividend-earning stocks.

My question(s) to the forum...(& I know that many of you are DIY investors, and view money managers carefully)

My wife & I wonder whether it's worth the fee. Certainly he has access to information that we do not. He has time and experience allocated to the task that we do not. Have you any experience with a situation like this one? Is the fee reasonable for the service? 

Thanks in advance.. so many of you folks offer good, reflective points and (free ) advice...

Regards


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## DanFo (Apr 9, 2011)

I am far from a professional in these things.. but saving 1% off an MER only to pay what you saved to the planner really offers no savings at all, but you do get the value of someone with more experience in asset managements.. and your assets are fairly decent... whether that experience is worth 4500 a year is up to you...I know in my td E series... the Can Bond MER is only 0.48%...and the equity funds range between .32-.53 MER's...With my rather small portfolio right now I am comfortable suffering some growing pains as I learn however if I had 450K to invest I'd prob seek advice. a fee based advisor might be cheaper.

Personally I take the advice of the bank people as only something to consider since they have a conflict of interest because of the money they're making off of your investments through them. I'm not saying their advise is bad, just be aware of their fees and where their primary interest lies. With assets your size I'd at least try a few other planners at other banks and see what they offer as well... it could save you a lot of money in the long run.


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## humble_pie (Jun 7, 2009)

how strange.

why did you change the gender of the advisor. It was a she originally.


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## Spidey (May 11, 2009)

With today's interest rates, 2% in fees will strangle the performance of fixed income funds. I would suggest checking out PHN, whose bond fund has an MER of 0.59%. 

https://www.phn.com/Default.aspx?tabid=112
https://www.phn.com/Default.aspx?tabid=188


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## dubmac (Jan 9, 2011)

Spidey said:


> With today's interest rates, 2% in fees will strangle the performance of fixed income funds. I would suggest checking out PHN, whose bond fund has an MER of 0.59%.
> 
> https://www.phn.com/Default.aspx?tabid=112
> https://www.phn.com/Default.aspx?tabid=188


I checked into this...I could buy this bond fund, but would need to change my discount broker as they apply a charge (0.5%) as well if I were to buy that fund.


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## Spidey (May 11, 2009)

dubmac said:


> I checked into this...I could buy this bond fund, but would need to change my discount broker as they apply a charge (0.5%) as well if I were to buy that fund.


Saving 1.5% from the MER amounts to $1500 annually on every $100,000. For me, that makes it worth having my accounts at more than one house. I have accounts with both PHN and TD Waterhouse. I like the fixed income products at PHN and I have most of my equities at TD.


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## larry81 (Nov 22, 2010)

As a friendly reminder:


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## Financial Cents (Jul 22, 2010)

larry81 said:


> As a friendly reminder:


Nasty chart, but so true.


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## Four Pillars (Apr 5, 2009)

I think those fees are crazy. If all he is doing is investment management, then 2% for mostly fixed income is way too much.

It sounds like they are planning to buy pricy bond/balanced fund mutual funds with a MER of around 2%. They'll get the "F" series which doesn't pay a trailer and saves 1%. As DanFo pointed out, then they will charge you that one percent separately. This is actually cheaper than paying a 2% mer, since you can write off the 1% annual (it is annual right?) fee paid to the broker.

If you really want someone to manage your money, then shop around. $450k isn't that much, but you should be able to do better than this guy.

You really should consider a fee-based advisor - they are absolutely perfect for your situation. It might cost you a few bucks up front, but they can direct you on the right path and will be way cheaper.


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## larry81 (Nov 22, 2010)

IMHO there only two viable alternative:

1. Doing it yourself with low-cost investment vehicles, such as index funds and/or ETF

2. Using a good fee based advisor to set you up (asset allocation, investment vehicles selection, tax planning, etc)

See the graph i posted regarding the _real_ impact of 2% MER on your return...


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## RetireYoung (Jun 29, 2011)

*I second that...*

I agree with Larry81. For a stable, low-risk, income producing portfolio, the complexity is not high AND fees are critical.

Option 1 -- Invest these funds yourself. Definitely do-able with very low fees. Not a big learning curve. Check out the Couch Potato income portfolio.

Option 2 -- Hire a fee-based advisor. For a $1500-$2000 one-time fee, you can get the professional advice and support you need to set this up. Then you may only need assistance periodically and infrequently (if something changes). This will be much less expensive over the long run than paying an advisor 2% annually.


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## dubmac (Jan 9, 2011)

kind thanks Larry 81 and 4 pillars...
That graph is indeed a damning testament to how to lose money...I'm pleased with the responses - I plan to use this graph in my arguments!


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## warp (Sep 4, 2010)

I am not a certified financial planner..but do yourself a big favour and look up "the Couch Potato" portfolio.....( I handle my, and all my family's accounts at a discount broker)

OR...read the book..."How a Second Grader Beats Wall Street"....a very easy read that will be informative for you.

Lastly...Read the book...."The Naked Investor".....an absolute eye opener on the Canadian Financial Services Industry...( as in fiancial planners)

Chop the fees...keep the money in your own pockets.

Good luck.


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## warp (Sep 4, 2010)

Sorry, I forget to add.if you want dividend stocks......you could just buy a few yourself....Fortis, the Banks, Sunlife, Greatwest Life, Transcanada , Bell, etc,

Or just buy one of the several low MER dividend ETF's in Canada.....

You do not need a planner to buy these for you.


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## andrewf (Mar 1, 2010)

In my opinion, you would be crazy to pay a MER of ~1% and an additional 1% to your asset manager for them to invest in fixed income. Buy GICs instead, or a bond ETF. It doesn't take a genius to invest in fixed income, and even the best managers in the world do not add 2% of value over the average return.


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## larry81 (Nov 22, 2010)

+1 for "The Naked Investor" recommandation


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## dubmac (Jan 9, 2011)

I'll look to get a copy of the Naked Investor at Chapters, maybe look for Pensionize your nextegg as well...thanks all.


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## Henry (Jul 12, 2009)

If 1% fee that financial adviser charges include trust administration fees and you want to invest mainly in equities, then it might be actually a good deal. A lot of financial advisers charge 1.5% for similar sized accounts with trust administration fees on top. Trust administration fees can add up if charged separately. With TD Waterhouse, do you get access to their estate lawyer and tax specialists? If you can use those services, 1% fee for equities may be very reasonable.

You might want to have two accounts with adviser: equity investment account with asset management fee of 1% and fixed income account with commission based schedule. For fixed income investments, a commission based account tend to have lower fees, because GICs pay a trailing commission of .25%, bonds have an upfront commission of 1% to 2%, money market funds/saving accounts pay of a trailing commission .25% or less, and bond funds pay .5% in trailing commissions. All those fees are lower than 1% asset management fee and all those built in fees reduce taxable interest income already.

I have researched quite a bit on full service brokerages and what I found is that if you can use all their services, then asset management fee is quite reasonable. For second opinions on estate planning, brokerage's lawyers can review estate documents without additional charges and tax specialist can handle a significant portion of tax planning without additional charges. If you want to consult with a lawyer or accountant, then you will be billed every time. If one's situation is complicated, then a full service brokerage may be able to handle most things within the brokerage. Again, you would research and learn more so that you can make a fully informed decision.


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## humble_pie (Jun 7, 2009)

henry are you possibly a spokesperson for the financial services industry.

i for one do not find a fee of 1.5% PLUS trust administration services on top of that to be reasonable in the least. I would never expect to pay more than a total of 1.5% for advisory & administrative & trustee fees combined.

as for access to the brokerage estate lawyers or tax specialists - presented as behind-the-scenes experts who will read documents & proffer advice, presumable channelled through the licensed financial advisor - how many times in a decade would any client need such services. Probably not more than once or twice. Yet in that same decade client would be paying out $45,000 for financial advice to the broker/dealer, plus another $45,000 to the fund managers themselves. It seems to me that it would be incredibly less expensive to set up an economical asset management plan with ultra-low fees, and then pay-as-you-go for specialized services only when client needs them.

it's worth mentioning here that the firm of jarislowsky & fraser has recently pioneered 3 basic managed funds with rock-bottom MERs that, at .65-.70%, are comparable to many index etfs. There is a bond fund, a balanced fund and an equity fund. The latter somewhat resembles XIU, but the difference is that it is actively managed. For example, jarislowsky sold all of its barrick holdings in the $50 range earlier this year, arguing that gold is unlikely to repeat its meteoric rise in the near future. In retrospect this looks like a brilliant move.

rather oddly, even for private investment counsel jarislowsy & fraser are still charging the same ultra-low .65-.70% (for this individualized service, client needs 2 million, though). I am not exactly sure how or why it is that this well-established, prestigious firm is charging about half the fees of any competitor, but there you have it. To me, it's an indicator that the inflated fees of the competitors should come under strict review by any prospective client.


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## andrewf (Mar 1, 2010)

How does Jarislowsky's Canadian large cap funds' performance compare with XIU over, say, the past ten years? They have slightly outperformed, maybe, _before fees_. Add in fees and they don't beat the index. Seems to me that buying actively managed funds is riskier as their out-performance is not guaranteed, but their fees surely are.


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## humble_pie (Jun 7, 2009)

the funds i was writing about are the new jarislowsky house funds, introduced only last october or november. No track record yet. I don't know what you are referring to when you speak of 10 years.

in the past jarislowsky has managed portfolios for fund companies, for example TD asset management. It is these fund companies that have imposed their MERS on such funds, not the firm of jarislowsky fraser.

as far as i know the new jarislowsky house funds are their first house funds.

folks with accounts in between the small fundholder & the $2 million client can avail themselves of a middle tier of management, with personal advice included, for the same kind of very low .65-.70% all-in annual fee. 

in bringing decent financial services to a complete range of clients - ie everybody from 10 thousand to 10 million dollars - at these ultra-low costs, jarislowsky has set the bar for the industry. I am not their client, but i am certainly pleased at this development. Stephen Jarislowsky himself is a legendary titan among investment counsel in canada. What he has done with his new funds will help to nudge fees downwards across the industry.


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## andrewf (Mar 1, 2010)

Lower fees are unquestionably a good thing. I'm just unconvinced that active management in a space like Canadian large caps can add much value over indexing. I was referring to the Canadian large cap fund they managed, inception Oct 2001. That fund returned about 1% more than XIU in that time, before fees on the MF. You'd be lucky to have matched XIU in that time, after fees.

He might be a very good investor, but it is very hard to beat the market by much over long periods, especially when managing 6.5 billion dollars.


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## MoneyGal (Apr 24, 2009)

Having worked in a couple of full-service brokerages I assure you we did not provide "free" (or even free) legal or tax reviews of client documents.


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## cannew (Jun 19, 2011)

The only good thing about "Fees", is I never have to pay any. Most of my dividend stocks have increased their dividends and I don't have to share any portion with an Advisor.


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## Henry (Jul 12, 2009)

humble_pie: I am not a spokesperson of the financial industry. I think 1.5% + trust administration fees is very high and that is why I said 1% all inclusive is reasonable for equities. I also mentioned ways to minimize costs on the fixed income side. Other than Scotia iTrade, every other discount brokerage charge full commissions on bond transactions. Discount brokerage offer the same GICs and receive the same trailing commissions. For bond funds, you can choose PHN bond funds and other low cost bond funds, which is cheaper if bought from some discount brokerages. For bond ETFs, it is cheaper to buy through a discount brokerages. If the investor want to go with a bond/GIC ladder, then it may make sense to go through a full service brokerage with a good adviser, where the fees are the same but there is advice provided.

I was researching for a NGO and I found some people can benefit from a full service brokerage. There are people who need advice or have complicated situations such as trusts. Full service brokerages charge different level of fees and asset management fee can be as high as 2%, which is quite ridiculous. I feel 1% or less for equities is quite reasonable. 

MoneyGal: Thank you for your information. I will tell people to interview their advisers carefully to make sure what services are provided.


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## HaroldCrump (Jun 10, 2009)

Henry said:


> Other than Scotia iTrade, every other discount brokerage charge full commissions on bond transactions.


Scotia iTrade charges a commission too - it's a minimum of $19.99 and a maximum of $29.99 I believe.
Since the bond market does not have the same level of transparency as the equity market, I can't say whether their quotes are 100% primary market quotes or still have some degree of spread built-in.


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## humble_pie (Jun 7, 2009)

_" Full service brokerages charge different level of fees and asset management fee can be as high as 2%, which is quite ridiculous. I feel 1% or less for equities is quite reasonable." _

henry if you look at the OP's original message you will see that he is indeed being charged 2%. One percent by the TD advisor. And another one percent by the funds themselves that the advisor has selected.

as the OP explains, he would have been charged 3% for the advisor-plus-fund combo, except that the advisor has selected funds for him that have a special discounted MER when they are sold by advisors.

in addition, this appears to be a straightforward account, not a complicated trust account.

the reason i mentioned one well-known & reputable financial house that is presently charging .65-.75% to investors of all sizes was to show where the bar has recently been placed. In time, other financial houses may migrate their fees downwards.


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## CanadianCapitalist (Mar 31, 2009)

humble_pie said:


> folks with accounts in between the small fundholder & the $2 million client can avail themselves of a middle tier of management, with personal advice included, for the same kind of very low .65-.70% all-in annual fee.


The 0.65% MER is only applicable to Series E funds that are sold direct through discount brokers. Those wanting advice pay a higher fee for Series A funds that are sold through the advisor channel.

Having said that, 0.65% is less than 1/2 the cost of a typical actively-managed fund even after stripping out the cost of advice (assuming DIYers can buy Series F funds directly, which we can't).

Low cost and low turnover (we don't have data yet but JF have been buy-and-hold types in the past) make these funds an excellent option for those wanting to go active.


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## Henry (Jul 12, 2009)

HaroldCrump: That is correct. However, Scotia iTrade's bond fees are less than other brokerages and that is what I wanted to get across.

humble_pie: Yes, I did read that. What I wanted to say is that if financial adviser can design and manage OP's portfolio directly, then the 1% fee maybe worth it, providing that there is access to other services from the brokerage. 

If one wants to get some advice but not full service, PHN is an interesting option. Through PHN direct investing, PHN and RBC D series funds have MER from .50% to 1.3%. PHN investment fund advisers can provide some investment advice through the phone or even in person at PHN offices with no additional charges. The fees are reasonable in my opinion and some advice is included.


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## humble_pie (Jun 7, 2009)

CC you are right i had forgotten about the discount broker angle being cheapest for the new jarislowsky funds. Plus i believe there are only 4 discount brokers that offer them, is that not the case.

by "middle tier of management" i meant their wrap fee service, which normally would be offered to investors with something like 250k-2M in assets. Their website doesn't state fees for this, and i have never inquired to verify.

however, since the jarislowsky fee for 2M & up starts at about .65-.70% & drops thereafter with increased account size; and since the mutual fund fees are explicitly set forth at .65, .70 &.75 respectively - albeit from discount brokers only as you mention - i am assuming that their middle tier fees are somewhere in line with these 2 extremes.

there is quite a difference between the XIU mer of .17 & the jarislowsy mer of .75 for its canadian stock fund, which resembles xiu in its conservative large cap holdings.

those supporting the higher mer for the jarislowsky fund would point to its ability to pick stocks, for example its ability to shed its entire barrick holding some time early this year. A formula top-60 index fund cannot do this. 

so we will have to watch & see, for a couple of years, how the new jarislowsky equity fund performs relative to XIU. Will it be worth its extra slightly-more-than-one-half percentage point in management fees.


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## humble_pie (Jun 7, 2009)

of course for a diehard optionista like myself there is only one choice. XIU plus options


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## dubmac (Jan 9, 2011)

CanadianCapitalist said:


> The 0.65% MER is only applicable to Series E funds that are sold direct through discount brokers. Those wanting advice pay a higher fee for Series A funds that are sold through the advisor channel.
> 
> Having said that, 0.65% is less than 1/2 the cost of a typical actively-managed fund even after stripping out the cost of advice (assuming DIYers can buy Series F funds directly, which we can't).
> 
> Low cost and low turnover (we don't have data yet but JF have been buy-and-hold types in the past) make these funds an excellent option for those wanting to go active.


I am learning quite a great deal here -- thanks for the points everyone.
A few things from me...one reason we are exploring a money manager is because, as mentioned, they are (expected) to have the time, expertise and resources at their behest to manage the funds. After some reflection, we may 
a) simply request a (much) lower fee..some suggest 1-1.5% is high, but perhaps for example, the if fees paid can be tax deductible in the income trusts, then it would be easier to absorb and "justify".
b) DIY..Do-it-yourself
c) fee-for-service advice (Can anyone suggest where I would find a good reputable person/organization?)
Do I understand correctly that some 1-2M accounts charge less than 1%. Some have said 0.65%. 
Thanks again...


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## Charlie (May 20, 2011)

Don't put too much weight in the tax deductibility of the fee. It will be effectively deductible regardless whether paid direct (and therefore directly deductible) or in a fund (and thus effectively deductible through a lesser allocation of income). So there's one variable off your plate .

At $450K of a fairly inactive (I'm assuming) portfolio, you're at a level where aren't restricted to 'storefront' financial advisors. Henry recommended Phillips Hager and North, and I'll second that. While I don't use them, I know others that do, and are very happy. Fees for their funds are much less then what you've been quoted (https://www.phn.com/tabid/89/Default.aspx) and include consultations and reviews with a designated investment manager (https://www.phn.com/Default.aspx?tabid=92). I know two individuals who work there and they're IMO outstanding. There are probably similar firms out there, so I'm not specifically shilling PHN (though it certainly reads asif I am). At $450K I think you're restricted to the funds they sell, rather then individual securities -- but possibly you don't want to get into picking stocks? Not sure what your TD guy is offering that's worth more then twice the price? 

Good luck.


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## Charlie (May 20, 2011)

...on rereading the thread (must be a slow night) I see you and spidey already had a PHN discussion. So I guess Henry was the seconder, and I'm a third? As I understand it, if your account is directly with PHN (the Advisory Service link) you don't pay any other discount broker fees. Your funds are not at a discount broker -- they're at PHN. And you get the advice, review and reporting. May be worth a call. As others have said -- a 2% overall fee for a bond/income portfolio seems high.


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## humble_pie (Jun 7, 2009)

bof i'm not shilling either. But i did notice that jarislowsy fraser has a vancouver office on west hastings. Two out of the 3 officers named hold CFAs. This is pretty good. It means the person managing the account will be far more than a salesman. JF should have a wrap fee something in the neighbourhood of .70-1%.

http://www.jfl.ca/Corp_Overview.html

any fee paid should be chargeable & paid in such a way that it can be deducted against income as a carrying charge.

i certainly do not agree that fees hidden inside mutual funds are "effectively deductible" in the form of slightly lowered income. This idea does not make sense to me. What the client/fee payor wants are fees that are reliably identified as carrying charges and can be written off, dollar for dollar, against investment income.

an advantage of a wrap fee structure is that investor/client will not be restricted to the house funds as with PH&N. Investor will be able to include a mix of individual common stocks & bonds. This could be helplful in OP's case, as the greatest dividend tax credits will be derived from owning div-paying stocks outright rather than through the mechanism of a fee-draining fund.


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## Charlie (May 20, 2011)

Hadn't heard of JF before this thread. They look good too. Others to consider might include McLean Budden (min $500K for advice -- but that's flexible and I expect they'd be pleased with $450), and Odlum Brown. These are all houses with significant presence in Vancouver -- there should be excellent groups elsewhere too.

My comment on mgmt fees was simply to not worry about the deductibility as they're always deductible in some form. I do agree that transparency of the fee is so important and often overlooked. And the preferential treatment of dividends also flows through whether stocks are owned directly or through a fund. (though HP is correct in that there's a slight disadvantage when fees are deducted against dividends (as they would be in a fund) rather then directly. I think that disadvantage is so slight that it's more then offset by lower mgmt fees for house funds (ala PHN, McL Bud, JF (If you can get advice included with the fund?, etc).

I think the point we're all trying to make here is that a 2% fee (including mgmt fee and MER) as proposed seems high for the type of portfolio dubmac's described. And that there are lots of alternatives out there.


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## cannew (Jun 19, 2011)

WHAT YOU PAY IN FEES 

Take the 450K and at 2% your annual fee is $9,000.

An ETF 450K investment at .07% is still $3,150.

Whether the investment grows or not you still pay the fees.


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## larry81 (Nov 22, 2010)

returns come and go, fees are FOREVER !


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