toronto

Never been better

You’re looking for financial advice.  There’s something about your money that you’re not quite sure about and figure it’s probably time to speak to a human about it.  Whether you get a recommendation from a family member or friend, the experience continues to be pretty consistent. The advisor will sit you down,  talk personal finances, possibly offer you a new line of credit or travel rewards card and before you know it, the glossy pamphlets are on the loose with a clear pitch; invest with us, your money will only go up in value, you’ll be on the path to riches, sign here.

It all sounds like it makes sense, but in reality it's a lot of information and understanding what your money is invested in is difficult.  Most people have no idea how to assess their investment performance, both return and risk, or how much you’re paying every year in fees or commissions.  But that travel rewards card means you get access to the swanky lounge, so that’s a thing, right?

We put way too much trust in financial institutions and it’s perfectly clear, why.  They went all in on calling their mutual fund sales pitch, “advice” and not providing much, if any, actual advice or planning.

Even with the proliferation of Robo-advisors, exchange traded funds (ETF’s) and low-cost (D-series) mutual funds, the majority of the financial world seems stuck in 1994, pushing nothing other than high-priced mutual funds when so many alternatives are available. It sorta feels like, if HMV still existed today and was trying to convince you that buying a $16 CD was the only way to listen to music.

But it’s 2018 and it’s never been better for regular people to invest their savings into a globally diversified portfolio at a significantly lower cost than high-priced mutual funds (these are usually the A series funds that have an embedded fee over 2.5%, which, yes, is a lot!).

For starters, there are D-series mutual funds, which are identical to their higher priced A-series siblings.  The D-series are half the cost to own (1.25% compared to 2.5% on average for the A-series varieties) and only available through your bank’s online brokerage.  Because you can only invest in D-series funds online, you lose access to the financial advisor, which, may not be a bad thing since you’re tired of sales pitches, right?  Hiring an independent financial planner who will really walk you through your budget and how to reach your financial goals is an effective combination that I highly recommend.

Then, there’s the new kid on the block, Robo-advisors, which in many ways are similar to a mutual fund in that, both monitor and rebalance a portfolio of investments for you and charge a fee for doing so, usually, less than 0.75%.  While some Robo-advisors offer basic financial planning, it’s far more accurate to think of Robo-advisors, as Robo-Investment Managers. They’ll manage your investments, but are generally a bit light on providing detailed financial advice. That’s probably ok if you’re single, in your 20’s and only have you to worry about but in more complex situations like family planning, caring for a parent or considering a career switch, you may be looking for more detail and dialogue about what to do. Again, hiring a fee-based financial planner who will walk you through your budget and how to reach your financial goals is an effective solution that has become increasingly popular as the number of independent financial planners increases.

Finally, while not for everyone, managing your own portfolio of low-fee ETF’s is an option.  Yes, there’s an ETF for just about everything these days from marijuana to electric vehicles, which can lead people to feel like choosing the right combination of ETF’s is an impossible task. Fortunately, Vanguard has simplified that task by creating three new, asset-allocation ETF’s which do the work for you and are based on your risk level:

  • Growth (80% equities)

  • Balanced (60% equities)

  • Conservative (40% equities)

(In case you’re wondering, I’m not affiliated with Vanguard in any way.  Their new ETFs are the only all-in-one ETF solution, which, in my opinion is one of the best financial products to come out in years along with Robo-Advisors)

Access to cheaper investment products is only half of the ongoing disruption in the financial services industry, the other half is the growing army of independent financial planners and money coaches who don’t sell products and provide truly unbiased financial advice.  Most people go to an advisor because they’re feeling unsure about their finances and are just trying to feel better about their money. With investment fees on the decline and access to people who you can have real money talks with, its never been better to find a financial solution that works for you.