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Dale Jackson

Personal Finance Columnist, Payback Time


Financial uncertainty during the pandemic has been good business for the finance industry.

Many advisors are reporting a rise in new clients since the original lockdown over a year ago, backing up a recent survey commissioned by Manulife Investment Management showing 63 per cent of respondents plan to turn to an advisor for help compared with half in 2019.

It’s times like these when qualified investment advisors prove their worth; whether it’s tailoring a long-term portfolio to a client’s goals and risk tolerance, or just talking them out of making rash decisions. 

According to a 2015 study from the Montreal-based non-profit CIRANO Institute, investors who received professional advice were found to accumulate 3.9 times more assets after 15 years than comparable investors without advisors. That doesn’t take into account risk-management strategies that made generating returns less stressful.

Still, there are good advisors and bad advisors. If you think you have a bad advisor, here are five signs it might be time to tell them to take a hike. 

1. Returns don’t jive with broader markets

Major stock markets have topped pre-pandemic highs. A properly diversified investment portfolio spread out among sectors, geographic regions and risk levels should reflect that. If your portfolio is still making up for lost ground, there’s probably something wrong. Most diversified portfolios have a few duds but they should be far fewer than the winners.  

2. High fees are eating into returns

The reason your portfolio is underperforming the broader markets could also be the result of high fees, and the biggest culprits are usually mutual funds.

There’s an old saying in the investment industry: mutual fund are not bought, they are sold. For many retail investors, mutual funds are they only way to get professional management and diversification. For many advisors they are a way to get rich commissions from mutual fund providers who can charge up to three per cent on the amount invested each year.

Many mutual funds are worth their fees but good advisors should be directing you to lower-cost exchange-traded funds (ETFs) or stocks that trade directly on the stock market as your portfolio grows.

3. Your advisor is AWOL

Do you only hear from your advisor when RRSP season rolls along and they want your cash? Portfolio management is a year-long event and regular communication is essential - especially during periods of volatility like the present.

Your advisor should be in touch with you by phone or email, or at the very least a weekly or monthly newsletter to all their clients explaining the situation and assuring you that your investments are well positioned for what comes next.

If your calls and emails go unanswered send them a map of your local hiking trails.  

4. Your advisor isn’t listening

A good advisor should know your retirement goals, tolerance for risk and personal circumstances that impact your finances.

To properly formulate a plan, they should also know your big financial picture: debt levels, home equity, workplace pension plans and other major assets and liabilities.

They should also ask about more personal matters like your family health history to help determine life expectancy.

5. High taxes are eating into returns

Part of an advisor’s job is to ensure your savings are invested in a tax-efficient way. Lowering your tax bill is a risk-free way to boost returns.

If too much money is in a registered retirement savings plan, for example, investments could grow to a point where withdrawals will be fully taxed at a high marginal rate. Eventually, minimum withdrawals will be mandatory, putting government benefits like old age security (OAS) in jeopardy. 

Savings should be channeled into more tax-efficient vehicles before it gets to that point, such as a tax-free savings accounts (TFSA), income splitting strategies like spousal RRSPs, and even non-registered investment accounts.