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Remember, fees are only one part of your advisor relationship. And you can get them lowered
READ: Should I fire my advisor?Keep in mind that the lower cost funds you read about don’t compensate advisors, so advisors charge a fee on top. Once the fee is applied there may not be too much difference in “total” fees. Fees have been getting a lot of attention in the media lately and it seems the message is “if you pay less money you will make more money”, which sounds logical, but an investment is not a loaf of bread. If I pay less for my bread one week, I know I’ve saved money and I’ll have the same experience with that loaf as I would with the more expensive loaf.
READ: Getting a second opinion on your investment portfolioInvestments are much harder to compare. Just because you have a lower-cost investment does not mean you’ll get a higher return. Yes, it is more probable you’ll get a higher return but it’s not a sure thing, especially in the short term. If you have mutual funds with deferred sales charges (DSC) and are thinking of paying the DSC to get out and switch to a fund with a lower fee, don’t do it. There’s no way that anyone can say for sure that over the next five to six years a lower-fee fund will outperform because the time period is just too short.
READ: Don’t get screwed by your advisorHere’s an article on a neat study you may like. In simple terms, the researchers modeled one talented investment manager against 20 untalented managers. They wanted to see how many years it would take before the talented manager’s returns would beat all of the untalented managers’ returns. Here are the results, after:
READ: The difference between fee-only and fee-based financial plannersMy view on this is to find an investment philosophy you believe in and will stick with, and then find the lower-cost funds that follow that philosophy. Focus on your lifestyle and tax planning because you have a greater ability to do something about those things than you do investment returns. In the end, the best way to decide if you should stick with your advisor or not may be to talk to another advisor that deals with low-cost funds and find out what your total cost will be to work with that advisor. Once you know that then you can decide if the price difference is worth leaving our current advisor or not. I hope this helps. Allan Norman, M.Sc., CFP, CIM, Atlantis Financial/IPC Investment Corp *This commentary is provided as a general source of information and is intended for Canadian residents only. The views and opinions expressed in this commentary may not necessarily reflect those of IPC Investment Corporation.
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