# Does my mother need a fee-only planner? (She likes low-MER funds but not DIY.)



## timmitchell (Apr 3, 2009)

My 68-year-old mother recognizes that low-MER ETFs would save her money, but she is not comfortable with DIY investing. 

Would the appropriate professional to call be a fee-only planner ( as seen on this list http://www.moneysense.ca/directory-of-fee-only-planners ) or are there other alternatives she might consider?

Currently she has all her investments handled by an Investor's Group advisor who has put the money in Investor's Group mutual funds with MERs over 2.25%. Her portfolio is worth around $1M.

Thanks for your advice.

Tim


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## Cal (Jun 17, 2009)

I would consider a fee only planner or a couch potato strategy implemented at TD with e funds as another low cost option.


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## timmitchell (Apr 3, 2009)

Following up on my own post, I see that Preet Banerjee's article "Find the perfect financial planner" clears up some of my confusion.

If I understand correctly, my mother has the following options:


Open self-directed accounts (RRSP, TFSA, and unregistered) and buy low-cost ETFs herself. She would have to navigate the shift from RRSP to RRIF on her own and make her own decisions about asset allocation and tax planning. She would need to be able to resist panic-selling and other unwise decisions.
Open self-directed accounts and buy low-cost ETFs herself, guided by a fee for service planner, who charges, for example, $250/hr. She would need to execute trades herself, but would get advice about RRIFs, asset allocation and tax planning.
Hire an asset-based financial planner, who would charge her, for example, 1% of the portfolio's value. The planner would set up accounts for her, execute trades, minimize taxes, help her shift from RRSP to RRIF, and would support using low-MER ETFs.
Continue with the financial planner at the mutual fund company, who is paid by trailing commissions for guiding her into high MER mutual funds. The planner executes trades, minimizes taxes, helps her shift from RRSP to RRIF, but does not support low-MER ETFs.

Does that sound right?

If her goal is a high level of service and hand-holding, but at the best value, it sounds like #3 is the right choice for her.


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## Synergy (Mar 18, 2013)

timmitchell said:


> If her goal is a high level of service and hand-holding, but at the best value, it sounds like #3 is the right choice for her.


I would have to agree. However, don't forget to factor in the costs associated with leaving The Investors Group - penalties, selling the funds, taxes, etc.


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## MRT (Apr 8, 2013)

She needs to decide how much hand-holding she needs.

IMHO, she could probably get plenty with #2, and save a fair amount of money. A fee-based, by-the-hour financial coach could still help her setup her accounts by helping her fill out forms/setup online, and help her execute trades to setup her desired allocation, while offering the same tax advice a %-based planner could provide.

Peace of mind is worth something though...so it does depend on her comfort level. I would at least explore #2 first. A fee-based coach should talk to her briefly for free, to explain what services they would offer to her and what ongoing support is available and at what cost.

You could be part of that meeting and/or discuss it in private with her afterwards, and then she can decide if that works for her or if she would be more comfortable with even more hands-on service. It costs you nothing to check out this lower-cost option.


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## GoldStone (Mar 6, 2011)

If she is not comfortable with the self-directed options, consider option #5:

Move to a low cost mutual fund company that also provides advice. The all-in cost might be a bit cheaper than option #3 (and obviously much cheaper than option #4). See this recent post by the president of Steadyhand:

The ETF Price Disadvantage

He has a point:

_"The combination of ETFs and advice generally costs more than a low cost mutual fund, which also comes with advice."_


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## MoneyGal (Apr 24, 2009)

MRT said:


> She needs to decide how much hand-holding she needs.
> 
> IMHO, she could probably get plenty with #2, and save a fair amount of money.* A fee-based, by-the-hour financial coach could still help her setup her accounts by helping her fill out forms/setup online, and help her execute trades to setup her desired allocation, while offering the same tax advice a %-based planner could provide*.
> 
> ...


As attractive as this option may sound, this service does not exist in Canada. The money in money management -- on the advisor side -- is in asset management, not advice. Every securities commission requires that a person providing ANY advice "in furtherance of a trade" is required to be registered with the relevant securities commission. If you are going to register with the commission and comply with the registration requirements (and purchase errors and omissions insurance), you aren't going to give up on the thing that makes money: asset management. 

That's why places like Investors' Group "give away" their advice "for free": they have the assets and are charging fees to manage them. There's no money in advice-only financial planning *if the subject of the advice is asset management.* 

You can purchase asset allocation advice as a stand-alone service. You can't purchase trade execution advice and "hand-holding" apart from asset management.


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## kcowan (Jul 1, 2010)

Synergy said:


> don't forget to factor in the costs associated with leaving The Investors Group - penalties, selling the funds, taxes, etc.


This is the major obstacle facing your mom. Not many people are up to it. Her best bet is to try and find a portfolio manager who is happy with 1% ($10,000/yr). They are around. My MIL used one until I convinced her to switch to me at TDW. The reason that was possible was:
1. She trusted me (after many years)
2. I kept her in a similar mix of investments
3. I did her taxes and produced an annual portfolio performance report
4. I showed her how much better off she was every year
5. I was retired and could spend the time needed (mainly moving the stuff, but with occasional rollovers).

I found some tax advantages that were slipping through the cracks because her portfolio manager did not know taxation. Doing her taxes took less than a day with Ufile.


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## MoneyGal (Apr 24, 2009)

It is important to note that (1) not only would your mother's costs go down under the scenario kcowan is proposing, (2) they'd actually go down more than might immediately appear apparent as the fees on a non-reg portfolio are tax-deductible (this assumes that some of your mom's money is in non-reg accounts).


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## timmitchell (Apr 3, 2009)

I really appreciate all the advice.

Although I am a DIY investor myself, I'd hesitate to take on the responsibility for my mother's portfolio -- I can live with my own screw-ups/learning opportunities, but wouldn't want to affect her. Plus, I haven't thought much about retirement-age planning. So it sounds like a financial planner who takes a fee based on the size of the portfolio (option 3) is the best bet for us, so long as the fees for leaving Investor's Group aren't burdensome.

I also hadn't thought about the tax-deductibility of the nonreg fees either, so thank you for that tip, MoneyGal!

Tim


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## AltaRed (Jun 8, 2009)

I agree that procuring the services of a AUM based financial advisor is likely the best choice. The challenge may be whether there are many options 'locally' to where your mother lives. It will be necessary to ferret out who is available, interviewing them, understanding their fee schedule, investing styles, and asking them to produce some aggregated data on performance data (portfolios against the relevant benchmarks). Unless you are in a large urban area, it may be difficult to find someone to handle a $1M portfoliio for 1% overall. 

Finding someone who IS keen on low cost couch potato investing, asset allocation and annual re-balancing and having retirement planning tools are the most important components of financial planning. The actual selection of 'low cost' products, i.e. the ETFs, index funds, bonds, GICs should fall out as a matter of course.


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## fatcat (Nov 11, 2009)

what about the couch potatos service ?
where he holds your hand and helps you set up your own low-cost etf portfolio ?


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## Synergy (Mar 18, 2013)

fatcat said:


> what about the couch potatos service ?
> where he holds your hand and helps you set up your own low-cost etf portfolio ?


According to the Couch Potato's Website:



> Our DIY service is available to investors across Canada, but it isn’t appropriate for everyone. The ideal client:
> 
> -is engaged in the investing process and willing to spend time learning to manage their portfolio online. This includes owning a current version of Microsoft Excel and being comfortable using spreadsheets
> -has no more than $500,000 in investable assets. Investors with larger accounts should consider using one of PWL Capital’s full-service advisors


I guess some people aren't well suited for hand held DIY portfolio's either.


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## timmitchell (Apr 3, 2009)

AltaRed said:


> Unless you are in a large urban area, it may be difficult to find someone to handle a $1M portfoliio for 1% overall.


She's in the Toronto area, so we have that going for us anyway.



fatcat said:


> what about the couch potatos service ?


As I recall, the service aims to serve people who are in the asset accumulation stage. Although my mom still adds to her RRSP, she'll need to start drawing it down soon.


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## MRT (Apr 8, 2013)

MoneyGal said:


> As attractive as this option may sound, this service does not exist in Canada. The money in money management -- on the advisor side -- is in asset management, not advice. Every securities commission requires that a person providing ANY advice "in furtherance of a trade" is required to be registered with the relevant securities commission. If you are going to register with the commission and comply with the registration requirements (and purchase errors and omissions insurance), you aren't going to give up on the thing that makes money: asset management.
> 
> That's why places like Investors' Group "give away" their advice "for free": they have the assets and are charging fees to manage them. There's no money in advice-only financial planning *if the subject of the advice is asset management.*
> 
> You can purchase asset allocation advice as a stand-alone service. You can't purchase trade execution advice and "hand-holding" apart from asset management.


would a financial coach not provide the necessary asset allocation and tax planning advice, then mom could execute the trades herself over the phone with her brokerage?

Assuming the goal is low-MER index funds, there is no reason to pay someone 1% to 'manage' a portfolio that requires virtually no management. There is nothing to 'screw up' if the goal is to invest the funds and setup an income stream. She could return annually to get advice on rebalancing, if anything, for a lot less than 1%.

maybe I'm grasping at straws here, but I hate to see people pay a % if it can be avoided...so I defer to the experts


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## Synergy (Mar 18, 2013)

MRT said:


> There is nothing to 'screw up' if the goal is to invest the funds and setup an income stream.)


Some people simply want nothing to do with investing and are happy to hand over everything to an "expert". It doesn't have to be about whether or not the individual is competent enough to handle some or all of their own investments, accounts, etc. Some people have absolutely no interest whatsoever. For these types of people, a good accountant, financial advisor / planner, and lawyer are a great asset - saves you money! Not everyone can be a DIY'er, some people "want" help while other "need" help.


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## humble_pie (Jun 7, 2009)

MRT said:


> would a financial coach not provide the necessary asset allocation and tax planning advice, then mom could execute the trades herself over the phone with her brokerage?



MRT i'm so glad moneyGal keeps on patiently explaining to the forum why low-cost, hand-holding, fairy-godmother fee-only financial planners do not exist.

some day, hopefully, folks will understand that this is true. There's no magic lamp.

most fee-only planners don't want to be bothered with a client's etf purchases while the client phones these orders in to a discount broker. Nearly all "fee-only" planners want to be, either directly or indirectly by way of a referral fee, on board that product sales pipeline themselves. Bref, they are salesmen, too. 

as far as i can make out, there are a few - very few - "fee-only" planners who offer bespoke services with no hidden sales strings attached. Their fees are around $3500 & up for a retirement plan. I believe that moneyGal herself knows a few of these parties in Toronto.

one of the parties is a toronto actuary. I believe he's recently retired; worked all his life for giant insurance companies; now enjoys helping individual folks & couples plan their retirement, optimize their decumulation strategies, choose among their pension options when possible, achieve their estate legacy goals.

i visited the actuary's low-key website & i was impressed. Because i look for understatement & restraint in finance, never for flash or glitz. Also i read between the lines, carefully. For clients approaching $1M & up, i thought the actuary was a good bet. This being said, i have no idea what his fees might be.




> She could return annually to get advice on rebalancing, if anything, for a lot less than 1%


it's true, if one assumes a 1% fee on $1M or $10k per annum, that an investor could find an actuary in private practice (already quite rare, i imagine) or a highly-qualified fee-only planner who could also be consulted during the course of a year; & the aggregate fees could be less than 10k per annum.

i'm not sure, though, whether an actuary would undertake such a responsibility.


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## humble_pie (Jun 7, 2009)

Tim, your mother appears to have an ace in the hand, which is a responsible & thoughtful son who is obviously putting her needs & wishes first.

i agree with those who thought your mother would do best with ongoing financial service, albeit at a reasonable cost. 

i hope you won't rule out what is described upthread as option #5, quoted here:



GoldStone said:


> If she is not comfortable with the self-directed options, consider option #5:
> 
> Move to a low cost mutual fund company that also provides advice. The all-in cost might be a bit cheaper than option #3 (and obviously much cheaper than option #4). See this recent post by the president of Steadyhand:
> 
> ...




a balanced fund or a portfolio combining a few funds from such a firm would not stray far in its underlying holdings from a properly-chosen 100% ETF portfolio that would also combine etfs for a balanced whole.

some time ago a similar cmf thread put together a small list of professional investment management firms in canada that are thought to offer sound investment advice, at the above-mentioned hard-to-find reasonable cost.

i'd define "reasonable" as something like 1% of AUM including all costs such as portfolio trading fees (the TERs) plus custodial fees. These latter - custodial fees - can run as high as .50% per annum. Many private wealth management services will recite a 1% management fee, but often this does not include the all-important separate custody of the securities themselves, which then bumps the fee to north of 1.50%.

as i recall, there were only 4 nominations on the tiny cmf forum list. One was, i believe (hope someone will check this out) Philips Hager & North. Another one would be Steadyhand. These are vancouver-based firms but with toronto offices, i believe.

the name i proffered was Jarislowsky Fraser, also with a toronto office. Their fees seem to be the lowest of all - typically from .50-.60% of a portfolio, although for private wealth management i believe the threshold is $2M.

handily, jarislowsky offers 3 low-cost mutual funds, with MERs (including custody of securities) ranging from .65-.75%, ie not much more than your average ETF. In the middle range, they offer wrap fee services.

i recall that about 18 months ago, the jarislowsky equity fund was not much different from XIU with one important exception: J & F had just sold *all* of their barrick. What a brilliant foresight that turned out to be.

i once asked a jarislowsky representative why their fees were so low, apart from the frugal influence which legendary founder Stephen Jarislowsky - who was always severely scottish with his purse - would have had upon the operation. The partner's answer? the high volume of overall client assets under management opens the door to lower per-unit costs, he said.

here's their website. I see they have at least 11 CFAs in the toronto office alone; justin trudeau is a client of theirs; i better stop going on here or else people will start to think i'm being paid.

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


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## AltaRed (Jun 8, 2009)

A low cost mutual fund firm with advice is a good alternative to a financial advisor AUM approach. That said, it also depends on how much face time the OP's mother wants..... so that she can feel confident she is remaining on track with her plan to age 95. 

When one is in retirement (withdrawal) mode, making significant mistakes can be non-recoverable AND there is also an element of peace of mind. The last thing a retiree should be doing is fretting about their financial plan, i.e. financial security. While costs matter, they are not the end all for someone winding down their assets over a finite period of time. I caution about being pennywise and pound foolish.


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## GoldStone (Mar 6, 2011)

humble_pie said:


> some time ago a similar cmf thread put together a small list of professional investment management firms in canada that are thought to offer sound investment advice, at the above-mentioned hard-to-find reasonable cost.
> 
> i'd define "reasonable" as something like 1% of AUM including all costs such as portfolio trading fees (the TERs) plus custodial fees. These latter - custodial fees - can run as high as .50% per annum. Many private wealth management services will recite a 1% management fee, but often this does not include the all-important separate custody of the securities themselves, which then bumps the fee to north of 1.50%.
> 
> as i recall, there were only 4 nominations on the tiny cmf forum list. One was, i believe (hope someone will check this out) Philips Hager & North. Another one would be Steadyhand. These are vancouver-based firms but with toronto offices, i believe.


Tim Bradley named 5 companies in the above linked post:

Steadyhand (his own firm), Mawer, Leith Wheeler, Pembroke and RBC/PHN

Off the names on this list, I'm partial to Mawer. Their balanced fund costs 0.98%. The long term performance record is excellent. 0.98% buys you some basic investment advice... not sure how much though. This is something the OP would have to investigate.


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## GoldStone (Mar 6, 2011)

AltaRed said:


> When one is in retirement (withdrawal) mode, making significant mistakes can be non-recoverable AND there is also an element of peace of mind. The last thing a retiree should be doing is fretting about their financial plan, i.e. financial security. While costs matter, they are not the end all for someone winding down their assets over a finite period of time. I caution about being pennywise and pound foolish.


Very good point. 

Here's one example where a low cost mutual fund company is not adequate. I doubt they would ever recommend an annuity. It's just not their business.


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## AltaRed (Jun 8, 2009)

There are some professional folks that would say the Mawer Balanced Fund may be all that a retiree needs for an investment portfolio. Probably not quite true as one may want to up the FI component over time, but it could be the bulk of the portfolio.


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## MoreMiles (Apr 20, 2011)

GoldStone said:


> Tim Bradley named 5 companies in the above linked post:
> 
> Steadyhand (his own firm), Mawer, Leith Wheeler, Pembroke and RBC/PHN
> 
> Off the names on this list, I'm partial to Mawer. Their balanced fund costs 0.98%. The long term performance record is excellent. 0.98% buys you some basic investment advice... not sure how much though. This is something the OP would have to investigate.


With $1 million, you can get Series-O at many places, which is even better than Series-F funds. For example, Franklin Templeton has Series-O for 0.8% The limit for Mawer Series-O is $2 million.


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## MRT (Apr 8, 2013)

Synergy said:


> Some people simply want nothing to do with investing and are happy to hand over everything to an "expert". It doesn't have to be about whether or not the individual is competent enough to handle some or all of their own investments, accounts, etc. Some people have absolutely no interest whatsoever. For these types of people, a good accountant, financial advisor / planner, and lawyer are a great asset - saves you money! Not everyone can be a DIY'er, some people "want" help while other "need" help.


that is a very good point.


and thanks for your comments, humble_pie (and MoneyGal, prior).

it is discouraging to hear that such services do not exist, or are near-impossible to find if they do.


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## GoldStone (Mar 6, 2011)

Justin Bender of PWL Capital responds to Tom Bradley's post that I linked upthread.

ETF Price Disadvantage?



> Bradley’s comment that direct-sold mutual funds “also come with advice” implies that Steadyhand’s services are equivalent to what you would receive from an independent advisor. I can’t speak for all advisors who use ETFs, but I am happy to explain how our service goes far beyond what a client would receive from a mutual fund provider.


PWL Capital is the firm that Dan Bortolotti (Canadian Couch Potato) partnered with.


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## Greyhound86 (Feb 21, 2010)

Don't like to hijack the thread but the discussion is interesting and timely for me.

Thinking of moving to a fee-only advisor. The total investments we are thinking of transferring are over $1million and non-registered.

Nesbitt Burns offered a fee of 1.25% which includes all transaction costs and fees. You can even make your own trades online if you want. 

I have known the advisor for a number of years and I would be comfortable working with him. We feel our best strategy is to hold a diverse portfolio of Canadian and USA stocks rather than ETF's or mutual funds in such an account.


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## timmitchell (Apr 3, 2009)

Thanks Greyhound86. It's interesting to hear what fees and services other folks are encountering.

I e-mailed PWL Capital in Toronto about a week ago to see if they'd be interested in my mother's business, and they have yet to write back. So I'm still looking.


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## andrewf (Mar 1, 2010)

Try contacting dan over at Canadian Couch Potato. He works with PWL and maybe he can help you get connected.


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## Greyhound86 (Feb 21, 2010)

Other points to give some thought to are:
1. Do they charge the fee on cash? No per NesbittBurns advisor
2. Do they charge the fee on bonds? .60% 
3. Do they charge the fee on mutual funds? no


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## MoneyGal (Apr 24, 2009)

I'm a little confused here. 

AUM pricing is typically all-in - whether you are holding cash, fixed income, mutual funds or individual stocks. 

The fee is charged *in lieu* of commissions but includes MER on mutual funds (i.e., they are not charged separately). 

I'm not aware of any fee-based brokerage that separates out the MER and the fee - and none that "charge no fee on mutual funds" per the above comment.


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## MoneyGal (Apr 24, 2009)

Although PIC (private investment counsel) services may separate out fees and MER for tax efficiency in non-reg accounts. Not the same as "don't charge a fee" on them.


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## AltaRed (Jun 8, 2009)

MoneyGal said:


> I'm a little confused here.
> 
> AUM pricing is typically all-in - whether you are holding cash, fixed income, mutual funds or individual stocks.
> 
> ...


I found the description a bit confusing as well. I would have thought the AUM is on the total portfolio, including mutual funds, but that any mutual funds would be F class (no trailer fee), but still an MER associated with the Money Management firm, e.g. Fidelity, etc. 

OR perhaps the AUM fee is not charged at all on mutual funds, but the mutual funds stay as A class (trailer fee going to the advisor), in which case that would be a better deal since trailer fees would be in the range of 0.5% (difference between A and F).


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## Greyhound86 (Feb 21, 2010)

Sorry for the confusion. Mutual funds would stay as "A" class as long as it was the least expensive option. not planning on any mutuals anyway.


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## MoneyGal (Apr 24, 2009)

No problem! Practically speaking it doesn't make much cost difference - if any.


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