I received a large severance from my employer that recently eliminated my job after 38 years. I plan to find an advisor, but because I have never had one before I am wondering what I should agree to pay for their services?
Ed
How to pick a good investment advisor
Ed, you are not the only one looking around for a new investment advisor. With the volatile stock market environment, many people have sent me comments and questions about how to move their portfolios to a new advisor. I would caution those investors on making any quick changes and selling stock at this time. Remember, the key is to maintain a well-diversified portfolio which includes bonds, cash, and high-quality stocks.
When you are looking for an investment “partner,” try to pick an advisor who really has your best interests at heart; something you will definitely need when weathering future market uncertainties. Please make sure to do your homework and find out what the firm and the new advisor’s value proposition is. It goes without saying that you should interview more than one and make sure you find a good fit with not only the advisor but the brokerage firm.
Now, let’s talk about fees. What should you pay? There are two types of fee structures – transactional or fee-based.
Many people use direct investing options these days to avoid high advisor’s fees and we are seeing an increased shift with millennials who simply don’t see the value in having an investment advisor. The young simply don’t want to pay the thousands of dollars just to sit down with an advisor and have a relationship with a banker. As more funds transfer into the hands of these new investors, advisors and brokerage firms may need to shift their thinking about their future fee structures.
Many bank financial planners typically are paid a base salary with a commission matrix based on how they grow their book of business and bring on new clients. Typically, fees are preset based on the mutual fund you choose for your portfolio ranging from one to 2.5 per cent.
Investment advisors are generally paid differently and on straight commission, making them highly motivated to ensure you make a profit, of which they, in turn, are compensated on. I have seen advisor fee-based services range from .75 per cent all the way up to three per cent. Some advisors act as personal bankers for ultra-rich clients, doing everything for them, hence I can see the higher fee structure. But, for most of us, we do not need someone to pay our bills and handle are budgets, so if you are paying more than 1.5 per cent for a fee-based portfolio, you may be paying too much. If you have different SMA products (Separately Managed Accounts), your advisor may increase their fee up to 1.8 per cent.
Bottom line, fees are all over the map and vary from one advisor to another and really should be based on your comfort zone. Do you feel that you are getting your money’s worth on your fee-based portfolio or would you prefer a transaction-based portfolio? Is your advisor a valued partner that you are willing to pay for, and most importantly, are you satisfied with their services?
It is always a good idea to periodically check out the competition, talk to your friends and see what they pay. Only you will know what feels comfortable to pay for investment advice.
Good luck and best wishes,
Money Lady
Written by Christine Ibbotson, Author of the best-selling book, How to Retire Debt Free & Wealthy, and a new book Don’t Panic – How to Manage your Finances and Financial Anxieties During and After the Coronavirus, available at all bookstores across Canada. If you have a money question, please email on website
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
