# Investing: DIY or Wealth Management Service



## 273455 (Jan 12, 2014)

Hello guys, I'm looking to invest about 600k-1m over the next year or so - when I had about $300k, I did the DIY thing - mostly ETFs - I ended up making a little bit, but not a lot - mostly because I picked many broad-market ETFs, but also some specific sector ETFs - many of which didn't do well.

My question is for those in a similar boat - what would you recommend I do?

I have looked into PWL capital - ala Dan Bortolotti - they have a wealth management service - which works out to approx 1% of assets - they mainly invest in some ETFs and some passive mutual funds by Dimension funds.

The other thing they'll do for me is - besides investing my personal funds, they'll take care of all the paperwork involved in investing any funds inside a corp.

Can anyone suggest any other routes they would recommend. I have looked at Assante, TD financial planners wanted me to get their mutual funds, didn't even offer me their e-series funds (not sure why).

And during this period of indecision, my funds are sitting as cash - analysis paralysis is preventing me from doing much with them.

I should also mention that I'm a little confused about strong suggestions by my insurance broker to purchase insurance products as an investment. I can share the details of what has been suggested.
Thanks


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## gt_23 (Jan 18, 2014)

Not sure what your insurance broker is suggesting, but dividend-paying whole life has strong merit as part of an investment plan.

If you choose the DIY route, are devoting 100% of your time to this? or do you still have a FT job. Given the size of your investment capital, you might want to look at hedge funds or private wealth mgmt. I like these because their comp is tied to performance. If you go with fee-based advisors and mutual funds they make money regardless of performance. Moreover, if they were any good at consistently generating returns, they would likely be working at HF or PWM.

Regardless of what you choose, don't go with bank FPs. At the very least, you should be choosing a high-performing investment advisor (likely downtown in major cities).


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## Canadian (Sep 19, 2013)

If you're interested in having someone manage the investments, another alternative is going for the full financial package through Harris Private Banking or RBC Wealth Management, etc.


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## larry81 (Nov 22, 2010)

gt_23 said:


> Not sure what your insurance broker is suggesting, but dividend-paying whole life has strong merit as part of an investment plan.


No they are not, keep investing and insurance separated.



gt_23 said:


> If you choose the DIY route, are devoting 100% of your time to this? or do you still have a FT job.


DIY should require only a couple hours a month max. Some say 2-3 hours a year but this is unrealistic.



gt_23 said:


> Given the size of your investment capital, you might want to look at hedge funds or private wealth mgmt. I like these because their comp is tied to performance.


Avoid them like the plague, hedge funds charge a % of AUM _and_ a % of profit. They are for suckers.


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## GoldStone (Mar 6, 2011)

+1 to what larry81 said.

600K-1M portfolio doesn't have to be more complex than 300K portfolio. Anyone who says otherwise is trying to sell you something.

Keep things simple and cheap. 3-5 broad market ETFs will serve you well.


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## AltaRed (Jun 8, 2009)

I'd suggest the big wealth management firms are for accounts in the >$10 million range. Many DIY investors have accounts in the $1 million range (even in the $3-5 million range) but if you do not want to DIY, look for firms like PWL that will charge 1% or less at the $1 million level (note that is $10k per year in management fees in addition to any trading fees, ETF MERs, etc.). That is pretty expensive when one can manage a true Couch Potato porftolio for peanuts but not everyone wants to DIY.

I think the OP's original problem was not having multi-year patience with some broad market ETFs. Slicing and dicing with boutique ETFs is chasing performance aka what most investors end up doing with mutual funds. A couch potato portfolio should not have more than 3-5 ETFs. None the less, the OP may wish to spend more time doing financial planning research, perhaps spending some time at finiki

I agree with posters above to NOT mix insurance and investing. These integrated products come with horrendous fees and commissions.

Added: I see Goldstone had similar thoughts.


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## donald (Apr 18, 2011)

Why not get back on the horse and diy(investing 300k in principle is not any different than a million)
Reflect on your mistakes(maybe you just sold to soon on some of your sector etfs)
your armed with real life portf management(maybe your weightings were out of whack?to much crossover/fiddling etc)
As far as corp investing just get your regular acct to figure on that side of things.
why would you want to blow money on models that are easily replicated by pretty easy study.


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## larry81 (Nov 22, 2010)

bstern12 said:


> I should also mention that I'm a little confused about strong suggestions by my insurance broker to purchase insurance products as an investment. I can share the details of what has been suggested.
> Thanks


I would like to hear the detail of what your broker suggested.


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## larry81 (Nov 22, 2010)

donald said:


> As far as corp investing just get your regular acct to figure on that side of things.


For asset allocation, there nothing really "special" about investing inside a corporation. 

Just keep in mind that canadian corporation are not subject to US estate tax, so it would make sense to hold US ETF like VTI, VXUS. They have lower fee and are more tax efficient than "Wrapper" ETF like VUS.


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## 273455 (Jan 12, 2014)

larry81 said:


> I would like to hear the detail of what your broker suggested.


So, besides the usual - disability which I have, they have suggested the following:

1 - cancel my term life insurance that I had for business loan purposes
2 - purchase critical illness insurance
3 - corporately owned whole life insurance with a cash value and death benefit - this is being suggested as an investment/retirement strategy

This is some of the information I was sent by them - some of it might seem very basic, but I really don't know much about these products:

==============

Universal Life Insurance – Permanent coverage, which never expires. Initial premiums are higher than term coverage, as there is a guaranteed payout at end of life. Coverage is generally a fixed amount, e.g.: $1 million. Premiums become significantly lower than term insurance as you age. There are options to pay premiums for a limited time only, for example 20 years. You therefore pay premiums while you are working and your income in retirement only funds your lifestyle expenses.

Whole Life Insurance – Permanent coverage with increasing death benefits and cash values. Ideal insurance to be included in your retirement strategy, as you are able to access cash values on a tax free basis and use is as an income stream when needed. You are also able to pay premiums for a limited time while actively working in your career. The younger you are when purchasing this insurance, the greater the cash values and death benefit as you get older.


My recommendation would be to have a combination of both of term and permanent insurance as moving forward, you may purchase another home or business, have a family etc and your need for life insurance will increase, but at the same time you will be creating significant cash values which you can access.

Many people like yourself are using Whole Life as a strategy of creating wealth by using corporate dollars. You are able to use life insurance as a vehicle for wealth creation by providing permanent insurance as well as giving you access to lifetime income during retirement.

Owing to your age, you are able to benefit from the products’ significant projected growth of both the cash value and the death benefit. By design, Whole Life Insurance starts with a lower initial base coverage and cash value. The annual growth in death benefit and cash values becomes even more pronounced every additional year, thereby providing you with the potential to access tax free income .


===================
I did get some feedback from my accountant as well, which is as follows:

With regards to insurance question below, you can consider your corporation owning a Universal or Whole Life policy (note, corporation needs to be the policy owner and beneficiary of the policy), which allow the corp to pay the premiums directly. Please kindly refer the following advantages/disadvantages of having the UL policy in the name of the corp:

Advantages of transferring UL policy into corp:
1) The fair market value immediately prior to the transfer will be able to be paid by the corp to you on a tax-free basis.
2) Dollars which were taxed at a lower rate will be used to pay for the UL policy. However, although payment will be made by the corp, the premiums will not be tax deductible by the corp. Any income earned by the UL policy will be earned on a tax deferred basis.
3) The corp will be able to pay for the premiums without any personal tax impact to you.

Disadvantages of the corp owning the UL policy:
1) Prior to selling the shares of your corp, you will need to transfer the UL policy back into your personal name. This transfer will trigger a personal tax bill of approximately 32% x CSV of the policy at that time. Please note that the policy’s CSV when the practice is sold could be much higher than when the policy was first transferred into the corp.
2) When such transfer is made, the UL policy, because it is owned by the corp, could be attacked by creditors.
3) The sale of corp shares may not qualify for the capital gains exemption due to the UL policy.

We suggest clients look at whole life or UL once they have no personal debt (home mortgage, student loans, etc.). Whole life/UL is comprised of 2 components, one is a life insurance component and the other an investment component. The investment income accumulates tax free inside the policy, subject to the above.


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## larry81 (Nov 22, 2010)

I have been proposed a very similar strategy by my broker few years ago:

This is relevant to your interest: http://perry.kundert.ca/range/finance/ul-blows/


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## fatcat (Nov 11, 2009)

corporations ?
corporate tax returns ?
accountants ?
corporations owning life insurance ?
really ?

the last corporate tax return i paid for was ultra simple and cost $1500
not to mention you attract the attention of the cra

the fees are going to kill you, not to mention sleeping well at night

how about dollar cost averaging into 5 low cost etf's over then next 24 months and then starting to rebalance once a year after that
and you can do your own taxes to boot

you are trying to turn an ice cream cone into an ice cream factory

nevertheless, you might be in the running for client-of-the-year from the insurance brokers or more likely the canadian accounting association
good luck


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## james4beach (Nov 15, 2012)

I definitely recommend managing your own investments instead of going to a wealth management service. At best, a company like this will match a disciplined DIY approach such as investing in a few standard ETFs. That's if you're lucky. More likely, they will under-perfrom (and over complicate) what is actually a very straightforward process. At worst, you will be exposed to fraud, trickery with your money (through opaqueness) and horrible decisions.

Either way, these companies want fees and want to skim from your money. They will add complexity, and it's not in your best interest.



fatcat said:


> you are trying to turn an ice cream cone into an ice cream factory


I agree with fatcat. Don't bother with complex structures... keep it simple. Average into a few major ETFs. Do your own tracking and taxes... if you have this much money, I think you have an obligation (to yourself and your family) to understand the money and be on top of the taxes.


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## marina628 (Dec 14, 2010)

When we decided to start selling off some assets of the corp in 2012 my brain was swelling just listening to all the advise and shell games some professional investment brokers and accountant want you to do.My husband and I are fairly simple and we know no mater what we did we are in the top tax brackets so other than split the sell of assets over 2 tax years we just bit the bullet wrote off the big cheque to cra and no matter how we cut it the absolute lowest amount of income tax as still a big cheque.I gave the people at TD and CIBC a chance to give me a proposal but we decided nobody knows our needs and long term goals for the capital than my husband and me.I am sure you could do a basic DIY and get a conservative 6-8 % in these markets .I think all of us got double digits last year and most of us have done that already in 2014.This forum probably has the best advise and it is free


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## uptoolate (Oct 9, 2011)

larry81 said:


> No they are not, keep investing and insurance separated.
> 
> 
> 
> ...



+2 

This and all that follows from others.


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

My goodness. I am shaking my head at what I am reading here. Stop talking to these people! They're all trying to sell you useless "products" and solve problems you didn't even know you had.

IMO you would be far better off learning about how to invest in stocks. Don't talk to any companies like the ones you mention. You will be putting as much effort into learning their fine print and understanding their promises, as it would take to learn about investing and then you can make your money grow. No mutual funds and useless insurance!

In the meantime, you should put your money into some cashable GICs while you figure all of this out. 1-2% of the money you have is certainly worth it.

Remember, if someone in a tie is sitting across from you it's not because they're nice people, it's because they have their sights set on recurring fees from your money.

You have a lot of money. Take the time to learn to invest it well. Please do not take a passive approach and think that fancy folders, ties and front lobbies with a receptionist will work for you.


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## AltaRed (Jun 8, 2009)

The OP in the original post said


> Hello guys, I'm looking to invest about 600k-1m over the next year or so - when I had about $300k, I did the DIY thing - mostly ETFs - I ended up making a little bit, but not a lot - mostly because I picked many broad-market ETFs, but also some specific sector ETFs - many of which didn't do well.


I believe it is this experience that has the OP second guessing his/her ability to DIY. S/he did not say how long s/he was in DIY mode with the $300k in ETFs nor which period of time nor which sectors. As we all know, short time periods and bad timing are not a good test of investment capability. For example, the 2008-2011 time period would have been a brutal time to test one's DIY mettle. The trouble is, many of the professional money managers would not have done any better on average, and many would have done worse. 

I don't necessarily agree with the suggestions to becoming a stock jockey. Few are really cut out for that. There is nothing wrong with having a DIY Couch Potato portfolio of broad market ETFs and leaving them alone for 10-20 years. They will serve the average investor very well for a very long time.


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

^ there is _everything_ wrong with "DIY Couch Potato portfolio of broad market ETFs" -- the OP already did that and it did not work for him. Also, he does not have 10-20 years as he is on the cusp of retirement and cannot afford to lose principle due to risk and fees. Not to mention, he needs to EAT.

IMO this is not the time to take risks, but if the OP insists on taking risks due to not being happy with GICs, then he has very few options to make his money grow on a guaranteed basis.

Regardless, OP, please immediately stop talking to people who are trying to sell you that insurance and corporation BS. I think they are trying to liberate you from your money with the BSBB concept.


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## GoldStone (Mar 6, 2011)

I agree with AltaRed. TRM's suggestion to learn stock picking is bad idea. Most amateur DIY investors should stick to broad market ETFs.


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## uptoolate (Oct 9, 2011)

And he didn't really try a Couch Potato approach - going with a three-fund or four fund approach over the last 5 years would have done quite well. He says that, 'I picked many broad-market ETFs, but also some specific sector ETFs' - this is not Couch Potato. He says, 'that many of which did not do well'. This is an example of why Bogle and Buffet don't like ETFs - they can be used in the wrong way - just like jumping in and out of stocks and betting on sectors. I would think that short of just putting it all in GICs (which may not be that safe when inflation is considered), the safest thing one can do is pick a fairly conservative asset allocation and pick 3 or 4 (or whatever) broad ETFs and leave it aside from rebalancing periodically.


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## AltaRed (Jun 8, 2009)

the-royal-mail said:


> ^ there is _everything_ wrong with "DIY Couch Potato portfolio of broad market ETFs" -- the OP already did that and it did not work for him. Also, he does not have 10-20 years as he is on the cusp of retirement and cannot afford to lose principle due to risk and fees. Not to mention, he needs to EAT.


The point of mentioning 10-20 years was to reinforce 'set and forget'. I'd suggest ETFs are even more important for shorter holding times. You get the market (less a few basis points for MER). No one or two black swans to dent the portfolio badly as it would be in stocks. What can be more 'certain' of somewhat unpredictable outcomes than that? The further one goes into retirement and withdrawal of assets, the clearer the path should be. 

FWIW, I always recommend a 5 year GIC ladder for a significant portion of the portfolio during post-retirement withdrawal for precisely the reasons of certainty.


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## MoreMiles (Apr 20, 2011)

Next time these posters that want everyone to DIY... just remember, if your life depends on that person, like a surgeon or airline pilot, the last thing you want is that person trying to watch the stock markets or daydream about how to rebalance or cut the losses in the middle of their work... So for some people, the ability to fully concentrate at work is priceless... and their clients will definitely support that too. 

For the other, they have so much money that 1 hour extra with their children is worth $10,000 they save from DIY.

Also, everyone says they can ride the up-and-down like 40% without blinking their eyes... but really? Who does not get depressed when there is a $400,000 loss? That is possible with $1 m portfolio. Your wealth manager acts like a psychologist to calm you down. So just like you can DIY for mental health (ie, meditation, think positive, make friends, widen social circles, religious support, etc) some people do need professionals. So this is actually a very big reason why you need someone to be there for investment... not for the good times, but the rough times.

So it really depends on what you do and what you value.


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## donald (Apr 18, 2011)

MoreMiles wouldn't one be better off hiring a shrink yr round?(atleast you can talk about other problems also lol)
I am just guessing but I doubt the common wealth manger has a psyd or cpsych?
Unless your way outside benchmarks in a downturn(not likely anyhow using a wealth manger, because they cling to safe models imo for this exact reason so they are not overexposed in bad markets)what's it matter?vs flying solo?your still looking down a loaded gun in the carnage.
I doubt dan b over at CCp is going to come over to the op's house and have a coffee with him in a downturn and tell him 'there/there'(using that only as example not against ccp!)if anything your more likely to be meet with voicemail and unreturned phone calls from the 'common' wealth management firm in a 40% correction.that is a poor reason for using a wealth manger imo.


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## james4beach (Nov 15, 2012)

Hilarious! Yeah, the money manager is going to take away the burden of my money and "calm me down". I saved up $1 million, but I'm still a child and I need a high-fee advisor to skim away my money while he pats my head and reassures me everything is going to be ok! lol! I heard this before from Investors Group, who several years ago refused to let me withdraw my money from them. (They said they were looking out for me). You want to talk about stress and frustration? The money manager made me incredibly angry and I came close to suing them. I'm still comparing notes with a friend of mine (she had a similar experience) and we're still considering suing IG.

This is when I first awakened that you should not allow money managers to come between you and your money. They aren't there to help you. They are there to skim fees and clasp onto your money, treating it like their own.

The money manager _should_ be providing timely and accurate statements in any case. If I'm going to get freaked out by declines, those statements are still coming and are still going to freak me out. There is no hiding from market declines, and no hiding from potentially enormous declines of paper wealth. The money manager can't (and should not) be sheltering or hiding normal fluctuations. If you don't want those fluctuations, keep your money in cash, GICs and short-term bonds.

A DIY investor doesn't have to keep watching his money, or placing trades, or anything of the sort. I help manage family accounts of around 500k and we make barely 5 trades a year. Most of the activity is buying new GICs and sloshing cash in/out of high interest savings accounts. None of it is time sensitive, urgent, or requires a daily ticker. The discount brokerage automatically creates monthly statements. The time commitment is minimal.

You can make your investment portfolio as complicated and time consuming as you want.


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## SkyFall (Jun 19, 2012)

I won't name what bank, but I recently had a chat with one of the financial planner at my local bank (it was a friendly chat, he didn't know if I was a potential client or not), he was trying to sell me the motto that other had putted in his head that self-directing investment isn't worth it, he told me that I was better off with mutual funds than stock picking or buying ETFs... so why would I pay you to buy my OWN mutual funds when I can do it for myself 

my2cent


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## PuckiTwo (Oct 26, 2011)

MoreMiles said:


> Your wealth manager acts like a psychologist to calm you down.


Would you mind giving me the name of such a fantastic wealth manager? Because my experience with wealth management from four different major Canadian banks was that they lie to you, try to get as much money out of you as possible, belittle you, take control away from you,....and do whatever is in their best interest. It was the most stressful time in my early retirement phase.
This from someone who is in retirement, switched from wealth manager to wealth manager (all very reputable firms) and finally on the recommendation of several CMF members tried DIY. It still isn't easy - we don't have money to throw around and have to be cautious. This is a great community and I can only recommend the OP to stick around, look at what he owns at the present moment and gradually switch it himself. There are a lot of recommendations on sample portfolios (couch potato or individual stocks/bonds/bond funds, etc) - especially in the 2011-early 2013 threads which can help. 
And he can ask questions here, the forum acts as a better psychologist - at least an honest one with lots of criticism (lol).


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## MoreMiles (Apr 20, 2011)

http://bridgehousecanada.com/the-value-dialogue-with-nick-murray-e1/


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## PatInTheHat (May 7, 2012)

GoldStone said:


> I agree with AltaRed. TRM's suggestion to learn stock picking is bad idea. Most amateur DIY investors should stick to broad market ETFs.


Even though I don't take this advice myself.

Definitely this.


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## Squash500 (May 16, 2009)

james4beach said:


> Hilarious! Yeah, the money manager is going to take away the burden of my money and "calm me down". I saved up $1 million, but I'm still a child and I need a high-fee advisor to skim away my money while he pats my head and reassures me everything is going to be ok! lol! I heard this before from Investors Group, who several years ago refused to let me withdraw my money from them. (They said they were looking out for me). You want to talk about stress and frustration? The money manager made me incredibly angry and I came close to suing them. I'm still comparing notes with a friend of mine (she had a similar experience) and we're still considering suing IG.
> 
> This is when I first awakened that you should not allow money managers to come between you and your money. They aren't there to help you. They are there to skim fees and clasp onto your money, treating it like their own.
> 
> ...


 Excellent post James. Very well-written!!


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## Squash500 (May 16, 2009)

MoreMiles said:


> http://bridgehousecanada.com/the-value-dialogue-with-nick-murray-e1/


 Thanks for posting this MM. Nick Murray IMHO makes a lot of excellent comments.


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## larry81 (Nov 22, 2010)

james4beach said:


> More likely, they will under-perfrom (and over complicate) what is actually a very straightforward process.


The complexification issue is a very important one, here two quick examples:

1. *The use of DFA funds.* While theses funds are excellent (but a little expensive for my taste, average MER is >0.60%). They can only be purchased through "select advisor". If in a couple years you decide to end the business relationship with your advisor, the DFA funds you hold can be transferred to any account/firms which DFA Canada have an agreement with. They have agreements with most majors private wealth management firms but, surprise, they don't seem to have any with discount brokerages. So in the end, you will have to sell your DFA funds and potentially pay capital gain.

2. *Additional assets classes* Think something like CCC Über–Tuber portfolio with a sprinkle of Junk bonds, Utilities, Real return Bonds, International bonds, etc. Things can get complex, and very fast !


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## fraser (May 15, 2010)

We have been using Philips, Hager, and North. Very satisfied to date.


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## gt_23 (Jan 18, 2014)

larry81 said:


> No they are not, keep investing and insurance separated.


Why? I suppose you think saving and borrowing shouldn't be combined either. There are many benefits to combining these...



larry81 said:


> I assume you are talking about indexing? If not, how do I outperform the index with a couple hours a month research?





larry81 said:


> Avoid them like the plague, hedge funds charge a % of AUM _and_ a % of profit. They are for suckers.


So the HNW individuals, institutions, and families of the world are suckers?


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## larry81 (Nov 22, 2010)

MoreMiles said:


> http://bridgehousecanada.com/the-value-dialogue-with-nick-murray-e1/


This is a very good video. The _2.7x more assets_ argument is often cited by advisor lobbying groups, notably the IFIC (. The most recent canadian-centric data are a little different but this is well documented.

https://www.ific.ca/wp-content/uplo...e-of-Financial-Advice-November-2012.pdf/1653/



> The data show that an Advised household that has worked with a fi nancial advisor for four to six years accumulates 58% (1.58 times) more assets than a Passive Non-Advised household that is identical in all other respects. Similarly, a household with a financial advisor for seven to 14 years accumulates 99% (1.99 times) more assets than an otherwise identical Passive Non-Advised household. After 15 years or more with a financial advisor, the Advised household accumulates 173% (2.73 times) more assets than an otherwise identical Passive Non-Advised household.
> 
> Efficient market theorists would argue that return advantages derived from advice are not much greater than zero, if at all. On the other hand, empirical research documents investment returns, net of fees, on advised accounts that are as much as 3% higher than on non-advised accounts.19 While this debate continues, it might be reasonable to conclude that a financial advisor could produce a yield advantage for clients of between 0 and 3% annually relative to what clients could earn on their own.


In the whitepaper "_Quantifying Vanguard Advisor’s Alpha_", our good friends at Vanguard goes one step further and try to break down the "value-added":
https://pressroom.vanguard.com/nonindexed/Quantifying_Vanguard_Advisors_Alpha_3.10.2014.pdf


Suitable asset allocation using broadly diversified funds/ETFs *> 0 bps *
Cost-effective implementation (expense ratios) *45 bps*
Rebalancing *35 bps *
Behavioral coaching *150 bps *
Asset location *0 to 75 bps*
Spending strategy (withdrawal order) *0 to 70 bps *
Total-return versus income investing *> 0 bps *

Potential value added “About 3%”

IMHO, the real value added is "Behavioral coaching" and avoid the sell low/buy high trap.


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## larry81 (Nov 22, 2010)

gt_23 said:


> Why? I suppose you think saving and borrowing shouldn't be combined either. There are many benefits to combining these...


I am personally not a big fan of leveraged investing, each to his own i guess...



gt_23 said:


> So the HNW individuals, institutions, and families of the world are suckers?


Yes they are (also know as whales in the financial industry). Hedge funds underperformance is well documented. Dont make the mistake of thinking that HNW people are good investor and/or are well advised on financial matters. IMHO, hedge funds are designed for people suffering from "the country club syndrome", the mentality that they need something "special" or "exclusive" because they are HNW. They would be better in a plain old SP500 index...



> Hedge funds trailed the Standard & Poor’s 500 Index (SPX) for the fifth straight year as U.S. markets rallied to record levels.
> 
> Funds lagged behind the S&P 500 by 23 percentage points last year, the most since 2005, as the U.S. benchmark surged 30 percent for its best performance since 1997. Hedge funds fell short of investor expectations as clients targeted net returns of 9.2 percent from their investments in 2013, according to a Goldman Sachs Group Inc.


http://www.bloomberg.com/news/2014-...il-stocks-for-fifth-year-with-7-4-return.html
http://www.businessinsider.com/hedge-funds-and-sp-500-nearly-identical-2013-8

Forgetting last year dramatic under performance, here is a 20y graph of hedge funds performance vs. sp500 (1993-2012):


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## OhGreatGuru (May 24, 2009)

Too little information in many ways.

If OP's portfolio has done badly because he is a poor investor, then perhaps professional management is warranted. If it was just bad market timing, then he needs to understand short versus long term prospects. 

OP doesn't specify what his investment horizon is, or anything else about his investor profile.

TRM - I must have missed something, because I didn't see any mention of how near or far OP is from retirement.

Generally speaking, insurance is just insurance - it is not a good "investment" product. Agents will try to sell you on whole life because they make a whole lot more money on it than on term insurance.


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

Sorry OGG, you're right. I had this one mixed up with another thread where the OP was retiring shortly.


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## 273455 (Jan 12, 2014)

Wow, so many great responses. So my retirement is at least a good 20-30 years away - i.e. long term horizon. 

I've been reading some other threads as well - and it seems like many people - much closer to retirement than I am - are also moving away from financial planners to DIY investing.

Now, lets assume DIY is the way to go and to keep things simple - Vanguard funds are the way to go. I have a few questions:
1 - what's the difference between US listed and Canadian listed ETFs, and why does Vanguard offer the same fund in a CAD-hedged version?
2 - Is there a generally agreed upon method as to what to invest in inside TFSA vs RRSP vs Non-reg?
3 - I had considered going with PWL - the thing is - their model portfolios are already on their website - so really - what are providing? Rebalancing on a regular basis? Access to DFA funds?


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## bgc_fan (Apr 5, 2009)

larry81 said:


> https://www.ific.ca/wp-content/uplo...e-of-Financial-Advice-November-2012.pdf/1653/
> 
> In the whitepaper "_Quantifying Vanguard Advisor’s Alpha_", our good friends at Vanguard goes one step further and try to break down the "value-added":
> https://pressroom.vanguard.com/nonindexed/Quantifying_Vanguard_Advisors_Alpha_3.10.2014.pdf
> ...


As interesting as these papers are. They actually don't make the case that having a someone manage your portfolio is actually beneficial, i.e. that an active manager can outperform the index. 

In the first paper, it actually doesn't prove anything other than the fact that those who have financial advisors tend to save more than those who don't (2x the rate of the non-advisors, although at a lesser rate than active traders). Just the fact that they save at twice the rate would account for the difference in accumulated assets. Another issue is selection bias, those who are interested in saving for retirement will tend to look for financial advisors, while there exists a number of people who stated they don't plan on saving for retirement and hence don't look for a financial advisor.

As you've pointed out for the second one, behaviour coaching accounts for half of the 3% advantage, i.e. don't be emotional about investing. For the majority of the people on this board and DIYs, personal advisors aren't worth the money.

Basically, if you are disciplined and have a financial plan and can stick to it, a financial advisor adds no advantage. However, there are those who aren't and could benefit.


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## MoneyGal (Apr 24, 2009)

OhGreatGuru said:


> Generally speaking, insurance is just insurance - it is not a good "investment" product. Agents will try to sell you on whole life because they make a whole lot more money on it than on term insurance.


Agreed wholeheartedly but want to add the (important) caveat that the tax treatment of permanent insurance for incorporated individuals means that insurance can be sold not for its investment benefits or insurance benefits but for its tax treatment.


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## Longwinston (Oct 20, 2013)

bgc_fan said:


> As interesting as these papers are. They actually don't make the case that having a someone manage your portfolio is actually beneficial, i.e. that an active manager can outperform the index.
> 
> In the first paper, it actually doesn't prove anything other than the fact that those who have financial advisors tend to save more than those who don't (2x the rate of the non-advisors, although at a lesser rate than active traders). Just the fact that they save at twice the rate would account for the difference in accumulated assets. Another issue is selection bias, those who are interested in saving for retirement will tend to look for financial advisors, while there exists a number of people who stated they don't plan on saving for retirement and hence don't look for a financial advisor.
> 
> ...


Yes, well stated. The study shows correlation, not causation. People need to be better critical readers especially when you consider the agenda of said studies authors/publishers. Just because it says "study" doesn't make it beyond question.

I do think it highlights a good point however, the most important aspect to having a healthy portfolio is the act of saving enough money to get it, and keep it going.


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## amitdi (May 31, 2012)

I can give you some advice on the DIY side of your confusion
i was in a similar boat, with the analysis paralysis thing, not the funds (wish it was otherwise)...here is what I did and currently doing

I made an Excel sheet with all my strategies, expected return, risk, account that it is suitable for - RRSP, TFSA, etc. Once I had that sheet, it was like a snapshot of all my research. Then I sat down and rated the strategies taking into consideration - my comfort level, ease of implementation, etc...Then I chose the strategies that I would follow and so far I am following them rigorously....that sheet can also give you asset allocation, but have to use pivot tables for that I guess..

If I do more research I put it in Excel, but I wont follow them unless I compare them with my incumbent ones. Its like having 2 personalities within yourself - one that finds things and does analysis, and other who just sits and approves them and the common link is your Excel sheet.


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## larry81 (Nov 22, 2010)

I you invest in a passive way (couch potato) and have a relatively simple situation, there is not much "analysis" to do. Despite what the financial industry want you to believe, the process is pretty straightforward:

1. Determine your target asset allocation (bonds vs. equities)
2. Consider tax issues (which asset goes where)
3. Determine which product you want to use (ETF shopping, vanguard, ishares, etc.)
4. Deploy the money (lump sum or DCA over X months)

But if you think you can predict the future, you can try to time the market. Everyone has been guilty of market timing and people have been predicting a correction/crash/end of time since 2009 and here we are at S&P near 2000...!


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## richard (Jun 20, 2013)

bstern12, DIY does have a lot of advantages. Hedge funds are an exclusive, white-glove, luxury service to help you move your money into their accounts. Insurance can have some tax advantages in some cases, but it also comes with high fees. In the long run those fees can be very expensive but then taxes can too. Advisors typically come with high fees as well that may be $10-20,000/year on your account, all to save you a few hours of work. To the person who said it's worth $10,000 to have an extra hour with your children, you might consider cutting out other things first like one hour of your favorite TV show. Unless that's worth $15,000 to you 

But DIY is only worth it if you can do the right things. What led you to pick narrow, specialized ETFs in the past? Can you avoid that, and market timing? The average investor underperforms the funds they invest in by about 3% because of market timing. If you can't stick to the right decisions on your own then an advisor might help you. If you can then there is no reason to think that a simple couch-potato portfolio is too easy to work for you. If you have complicated needs like a pension fund or you want to re-enact the movie The Ultimate Gift (which was pretty good by the way) you might need more advanced strategies but as long as you are saving for your own retirement a simple mix of ETFs will work even with large amounts. I would also add that if you decide that an ETF portfolio is too complicated for you, I don't see how picking individual stocks would be any easier (without massively increasing your risk).

Going back to your questions:

- US listed ETFs often have lower fees, but you may have to pay an up-front cost to convert into USD before buying them. It can pay off if you hold them for 5-10 years. CAD-hedged funds are usually not a good idea. The only benefit is if you have a very short time horizon, and then you probably don't want stocks anyways. Their high costs quickly take away any advantage they might have.
- There is no perfect solution to choosing between the different account types. Most fixed income is very highly-taxed in non-registered accounts but new ETFs like HBB may help with this. If you receive dividends from a US-based ETF it's better to have them in an RRSP than a TFSA. Dividends from a Canadian index are pretty efficient in a non-registered account. Capital gains are best to have in a TFSA (just about everything work out best in a TFSA), then a non-registered account, then an RRSP (although you can technically contribute more to an RRSP since it's pre-tax, which then makes the capital gains treatment equal to a TFSA; this is just assuming the amount invested is exactly the same).
- I've never worked with an advisor so I can't speak to what they provide. We can tell you the right things to do but we can't force you to do them (and you may get the occasional oddball opinion).

larry81, let's hope the market keeps "crashing" for a few more years  At least until bond yields rise so we can take our profits and re-invest them at a good rate.


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