# Questions to ask a Private Banker



## yyzvoyageur (Apr 10, 2009)

We'll be meeting with representatives of the private banking arm of one of the big five banks in a couple of weeks. It's basically a sales pitch on their part. I'd appreciate any advice you may have, specifically any questions I should ask or topics I should ensure they touch on.


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## Mensa (Oct 19, 2010)

I would suggest looking at the services they offer vs. what you'll actually use. Then ask what the advantage would be for you given the services that you feel you need.

If you're looking for lower fees on investing, or the bank to look after all your day to day matters, then there is definitely value to be had.

I'm with Harris and I do find that while I appreciate the ability to handle many things via phone/e-mail, which saves me a lot of time, there are many services that they offer that I don't use (though perhaps I will in the future). I'm a bit too much of a control freak to feel comfortable handing everything off to someone else to deal with. Plus, I do feel that no one is as interested in my affairs as I am, so I can't bring myself to take full advantage of the services. I do find value in it, but I'm not sure I'm finding as much value as I initially thought I would.

I'm interested to find out what your experience will be!


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## Brian Weatherdon CFP (Jan 18, 2011)

*Private Banker*

I too will be very interested if you decide to share the experience with this forum. I suspect most in the CMF have no use or interest in a private banker... This suggests your experience can raise the overall value of the forum to new readers, as well as to some existing readers.

I recommend you consider what value you would be seeking from a private banker. You may ask yourself.... What circumstances in life are you wanting to simplify? What are the various financial areas in your life that add complexity? In what respects are you concerned about taxation, business, properties, family structure, trusts, and matters beyond Canada? What aspects to you want to keep & control yourself? Will age, failing health, or a highly pressured lifestyle ultimately require that you commit ongoing responsibilities to someone else who is professionally competent for the task? 

Best wishes, and I hope you will share how this experience develops. 
Sincerely,
BW


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## yyzvoyageur (Apr 10, 2009)

I thought I'd post an update for anyone interested. We met with these folks on Thursday. Overall, I wasn't particularly impressed with what they were offering, but I still felt the value for money was there, for some people.

While they do seem to offer some estate planning and other services, those were glossed over and they focused almost entirely on discretionary investment management. In terms of estate planning, they briefly touched on the fact that we could access their team of estate lawyers to help plan (though not write) our wills. I could see some value in that, but I was also concerned that it may be little more than a chance to promote their trust services where trust services may not be needed.

The rest of our meeting focused on discretionary investment management. The fees for that service are as follows:

First $500 000 = 1.60%
Next $1 500 000 = 1.10%
Next $1 000 000 = 0.70%
Over $3 000 000 = 0.50%

The fees are blended, so the fee for a portfolio of $2.5 million works out to 1.12%. I think it is important to point out that these fees are tax deductible. In addition you pay brokerage commissions on trades. They mostly invest in individual stocks and bonds, but for parts of your portfolio they may invest in their private pooled portfolios, each of which have an MER ranging from 0.10% to 0.70%. These pooled funds are apparently mostly used for international exposure to keep trading costs down.

I do feel there is value in these private banking services for some people. For those with complex needs or a complete lack of interest or skill in investing or dealing with day-to-day money matters (they will even pay your credit card bills for you if you want) I think it is a great deal. If we had a business to worry about or a complicated family situation I think we would probably consider dealing with a private bank.

In the end we decided against paying for their services. Ours is not a complex situation and we have little need at this stage for any of the non-investment services they offer. In addition, I am largely an index investor and one who feels that the best caretaker of my money is me. The thought of having someone else buying and selling stocks with my money gives me the screaming abdabs. I am lucky that at this point I have the time to dedicate to investing. Mine is not a high-pressure, 15-hour workday and never will be.

At a later date (many, many years I hope) it is something I could see myself considering as our family expands. If that time comes, however, I would not simply jump on-board with the private banking arm of whatever bank I happen to be dealing with at the time. Some shopping around would certainly be in order.


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## humble_pie (Jun 7, 2009)

voyageur how kind of you to take the trouble to post all this & i do agree with your reaction of sticker shock. This is, or should be, very common. Particularly in the case of ageing or elderly clients, the portfolios are no-brainer conservative & one is at pains to comprehend how the advisory firms can get away with fees running up in the $10-30k range & beyond per annum.

you have alas left out a significantly large aspect of the fees. These are the custodian fees. They should have explained these to you.

the custodian should be a reputable firm that is wholly separate from the advisor, so that if the advisor were to go out of business for any reason whatsoever, the clients' securities would survive intact. Such an arrangement will prevent the madoff/norbourg/stanford scenario.

custodial fees generally run up to another .50% of money involved. In addition, the advisory fee of 1.10% you have been quoted is a tad on the high side; it should run around 1% (aside: mon dieu is there no limit to their greed) so that the total package including commissions comes to no more than 1.50%. 

in another thread close by in this forum entitled Your Explerience with Money Managers, several people have offered names of highly reputable advisors who are offering quality services at fees that are noticeably lower than the industry standard you have been quoted.

http://canadianmoneyforum.com/showthread.php?t=7877

the firms named have reputations & track records as good as, probably better than, whatever bank you were visiting. Yet their fees range down to as low as slightly more than half the standard investment counsel/private wealth management fees.

in that thread you will find the names of:

- philip hager & north, offered by several cmf forum members;

- jarislowsky fraser, offered by myself;

- mclean budden, offered by cmf member "charlie" (however necessary to doublecheck their fees as charlie does not specify);

- odlum brown (same message as for mclean budden.)

i personally think the charging of $15-30k per annum for prescribing one or 2 million in classic bonds & blue chip stocks is outrageous. It's parasitic. It's borderline obscene. I for one would like to see a movement start whereby boomers demand - and eventually obtain - identical quality services at the cut-rate prices already set by jarislowsky & fraser (roughly .70%).


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## MoneyGal (Apr 24, 2009)

Humble, let me say first of all I agree with you. I do. 

But here's my devil's advocate response: 

They aren't paying for bond allocations. They are paying to have someone else be responsible for their money. Someone else can make the choices. Someone else can ensure the monthly withdrawals land in their bank account. Someone else can monitor yields, reallocate as required, answer questions, contemplate tax allocations, research new products as required, handle the communications with the product manufacturers, issuers and regulators, etc. 

So is the fee for *that* set of services "too much?" Entirely in the eye of the beholder.


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## humble_pie (Jun 7, 2009)

i certainly do see & appreciate your devil's advocate point of view.

but what puzzles me are the small handful of firms that have managed to undercut standard fees substantially. I mentioned some of these upthread.

yet MG i know that you know that these firms are carrying out the responsibilities & duties which you outline as impeccably as the majority of firms that are charging twice as much.

so how are they doing it ? this is what interests me. It's a great j-story imho.

it's easy to see some of the places where jarislowsky fraser is trimming the fat. Communications, for example, are adequate, proper, lucid, intelligent ... and on the spartan side. I mean, there's no gilt advertising presented on vellum documents being pressed into indifferent client hands, only to get tossed into recycling or worse 24 hours later.

yet the JF custodian is td securities. They are the ones who will inventory the securities, collect the interests & dividends, render the payments that you mention, & so on. Countless private or investment counsel advisors - whatever you want to call them these days - are using td securities. It's a top-notch firm.

so with respect to the bare bones of the investment management business, i don't see jarislowsky cutting any vital corners. And if JF can do it, then why not a great big crowd of others.

(you probably are familiar with the story of stephen jarislowsky's famous frugality. It is a journo's delight. Many even protect him over this issue.)


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## MoneyGal (Apr 24, 2009)

Humble - I didn't mean to compare the fees between one approach and another, I only meant to suggest that "what is being paid for" is not (only) what you had set out. Your questions are completely valid and I don't have good, or even any, answers.


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## humble_pie (Jun 7, 2009)

but i never "set [anything] out!"

voyageur had listed quite a lot of services that his bank-owned private counsel could offer. To these i added custodial fees, which he hadn't mentioned, which should always be a separate additional fee.

at no time did i ever speak of inadequate or partial services, nor am i even thinking of inadquate or partial services. Please do not distort mes paroles.

what i did say, what i still say, is that a tiny handful of deeply-respected private wealth managers/investment counsel are offering a full & proper range of essential services whilst charging fees that are conspicuously less than average.

therefore the questions become How are they managing to do this. And How can we, as eventual consumers, encourage other reputable firms to do this.

one way is by not accepting the standard overblown fee-pricing structure. This is something we can do right here in this forum.


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## MoneyGal (Apr 24, 2009)

humble_pie said:


> i personally think the charging of $15-30k per annum for prescribing one or 2 million in classic bonds & blue chip stocks is outrageous. It's parasitic. It's borderline obscene. I for one would like to see a movement start whereby boomers demand - and eventually obtain - identical quality services at the cut-rate prices already set by jarislowsky & fraser (roughly .70%).


This is what I was responding to. I didn't mean to suggest or imply you were suggesting or implying anything else...sorry for any confusion! I wasn't trying to say you were saying anything other than the bit quoted above.


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## humble_pie (Jun 7, 2009)

ah yes i see what you mean.

so sorry too for the confusion.

i wasn't meaning to imply that all they do is crank out a prescription. This is what comes from hasty scribble text drafting ! This is what a good editor will always catch !

i thought i'd discussed enough, higher up in that same post, the complete range of private wealth managers' services (it was a long post). Thought i could abbreviate & use a metaphor in the final paragraph. Hélas apparently it was a poor metaphor.

well i will try to write better in the future. Even though polish is so hard for a raw oatmeal recipe that's thrown together from scratch ...


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## yyzvoyageur (Apr 10, 2009)

humble_pie said:


> you have alas left out a significantly large aspect of the fees. These are the custodian fees. They should have explained these to you.
> 
> the custodian should be a reputable firm that is wholly separate from the advisor, so that if the advisor were to go out of business for any reason whatsoever, the clients' securities would survive intact. Such an arrangement will prevent the madoff/norbourg/stanford scenario.
> 
> custodial fees generally run up to another .50% of money involved. In addition, the advisory fee of 1.10% you have been quoted is a tad on the high side; it should run around 1% (aside: mon dieu is there no limit to their greed) so that the total package including commissions comes to no more than 1.50%.


They didn't mention anything about custodian fees. Reading the literature I have in front of me, the paragraph directly below the fee schedule includes this (bolding mine):



> This investment management fee provides you with professional portfolio management in accordance with your defined investment objectives, a dedicated investment counsellor, annual portfolio consultations, additional portfolio consultations as required during the year, comprehensive customized financial reporting and *security custodial services*.


On the next page, it states that, "...the Custodian is a wholly owned subsidiary of the Bank of Montreal...." It was BMO Harris Private Banking we met with, so is it wrong of me to then assume that the custodial fees are included in the general investment management fee?



humble_pie said:


> in that thread you will find the names of:
> 
> - philip hager & north, offered by several cmf forum members;
> 
> ...


Were I interested at this point in having someone else manage our money, these boutique wealth managers are exactly where I'd be looking next.

On that topic, a gentleman from Edward Jones came knocking the other day. I forgot to ask him about fees. Does anyone deal with Edward Jones? Any idea of their fee schedule?


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## humble_pie (Jun 7, 2009)

voyageur thank you so much for taking the trouble to investigate & write about the custodian details offered by the firm you visited.

and yes, they are included, and it is their own bmo sister firm, which is why the total price of 1.10% becomes more reasonable ... for a large house. If you were seriously thinking of going with them, i do believe i might float one more brash idea, which would be to negotiate to have all the commissions included as well ...

re custody with a small private investment counsel, i'm sticking to my knitting & saying that it's crucial to have outside & separate custody.

but with a large firm like the bank-owned, i wonder if this would be necessary. The chief risks of having securities lodged with an actual advisor are: 1) bankruptcy or financial collapse of the advisor; and 2) theft of securities by the advisor. In the case of a large bank-owned, i don't suppose that either of these 2 calamities could happen. In the end, i suppose every client investor must decide for himself.

ps i'm not sure that jarislowsky could be called a boutique house. I haven't checked but it wouldn't surprise me if JF has more AUM than bmo nesbitt private wealth. JF is also a big pension fund manager.

possibly irrelevant factoid: jarislowsky fraser keeps all managed securities - no exceptions - at outside custodian td securities.

highly relevant factoid: the 10 and 20-year performance history of the portfolio advisor. This imho is more important than the fees, would you not say.


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## Square Root (Jan 30, 2010)

Interesting discussion. Obviously there is a market for these inclusive asset management fees. I'm with YYZ on this one though. Ie I like to manage my portfolios myself and feel qualified to do so. Also paying these fees just reduces the amount of dividends I can use to cover our spending. Do my own taxes too. Will need some estate planning help no doubt but will pay for this as an unbundled service.


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## MoreMiles (Apr 20, 2011)

Has anyone heard of this guy? I saw him talking on BNN a few times.

http://burgeonvestbick.com/johndegoey/compensation

However, it seems that he is doing "passive investment". It looks like he creates a portfolio of index ETF and fixed incomes, then simply hold them. He only rebalances it twice per year, with the bi-annual consultation visits.

Is it what the other investment counselors do usually?


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## MoreMiles (Apr 20, 2011)

humble_pie said:


> - philip hager & north, offered by several cmf forum members;
> 
> - jarislowsky fraser, offered by myself;
> 
> ...


For these non-bank investment companies, does CIPF cover ponzi fraud? I'm afraid that they send these statements that really hold no actual security in them. It would be rare. But if there is such situation, would CIPF coverage make any difference?

I guess paying someone else for custody of those equities would prevent such situation. But there is another 1% fee as you have mentioned.


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## humble_pie (Jun 7, 2009)

miles here is a link to the portfolio management association of canada. This was formerly the investment counsel association but is morphing its name. There's a bit of confusion over this, but forewarned is forearmed. These are indeed the folks who offer discretionary financial management to investors with at least $1M, sometimes more.

http://www.portfoliomanagement.org/index.php

it is generally thought that the smaller boutique firms offer better individualized services than the big bank-owned entities.

you can search by the province in which you live, and refine your list further by contacting, meeting with, reviewing the literature & proposals of, etc any of the firms.

i believe this website also provides a standardized list of the kinds of questions clients might ask prospective advisors.

about fees, i do not have specific information, but generally (very generally) the investment counsel portion is about 1% while the safekeeping/custodial portion is about .50%. The total should not exceed 1.5% per annum.

for myself, i would always require a separate custodian - save & except, perhaps, for the large banks - and i would look askance at any advisory firm that proposed to hold custody of my securities itself.

what has also been discussed here in this forum are reputable firms who are charging less than standard fees while delivering quality services. Some of these firms are not members of portfolio management dot org.

standard-bearer among these non-member firms would be the iillustrious jarislowsky fraser. I don't know why JF is underquoting the average fee so dramatically. Next time i'm in touch with them i will certainly ask !

the only reason i can think of is that company founder & ageing patriarch stephen jarislowsky is, himself, a famously frugal man with a strong sense of righteous corporate behaviour & a penchant for occasional maverick conduct, so it's not impossible that he has taken this low-fee step in his own firm as a way of cutting insane amounts of fat out of the industry. (he also opposes multi-million-dollar salaries for CEOs.)

so far, this forum has accumulated the names of philip, hager & north; jarislowsky fraser; mclean budden; & odlum brown. This list has something of a BC slant. To these i might add steadyhand of vancouver, if you are also in BC. What steadyhand offers are a few core or basic funds with low MERs. These funds have outside fund managers. My guess would be that these managers, in turn, have private wealth management fees that are lower than the industry average.

miles i believe it will take some time for you to find the right advisor. Some time as in possibly months or half-a-year or more. There's a lot to think about. Won't you please take as much time as you comfortably need.


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