Jun 6, 2016
Personal Investor: 8 things to bring up with your advisor
By Dale Jackson
ANALYSIS: The carefree days of summer are just around the corner. That usually means we pay less attention to our longer-term financial goals.
It also makes now the ideal time to get reacquainted with our investment advisors to make sure those goals are on the right course.
Sitting down with your advisor can be an intimidating experience, but it doesn’t need to be. Here are eight topics you should remember to bring up and discuss with him or her:
1. Your personal situation: The know-your-client rule should be at the heart of the client/advisor relationship. An advisor needs to know your personal situation to tailor a proper financial plan.
Let your advisor know if there are any major changes in your personal life, such as a change in marital status or children. Also, you should mention big financial changes such as new debt, paying off your home, or receiving inheritance money.
2. Review your holdings: Look at everything in your portfolio – stocks, bonds, mutual funds and exchange-traded funds. Determine if they are performing the way they were intended when you bought them.
If a holding has risen dramatically in value, consider selling at a profit (Remember the rule of buy low, sell high?). If it has fallen in value, decide if it needs more time or if it should be cut loose.
3. Review asset allocation: Many advisors recommend investing a certain portion of a portfolio in fixed-income to hedge risk from equities. But equities have risen in value more than fixed income, so that weighting may have changed.
Also, as we age – and closer to the time when we need to withdraw our savings – the certainty of fixed income becomes more important. It could be time to boost your weighting in fixed-income.
4. Risk management: Risk should be lowered as we near retirement. Review just how much exposure your savings have to the broader market. Be sure proper hedges are set up in the event of a downturn, such as diversification strategies that offset sectors against each other.
5. Markets and economy: Discuss the broader markets and economy, and how they relate to your portfolio. They are more inter-related than most people realize.
Are events in other parts of the world opening your savings up to risk – or opportunity?
6. Know your goals: Based on events in the broader markets, determine how much you can expect your portfolio to grow in the coming years. In the past, advisors often budgeted for eight per cent growth expectations. Now, it’s more like five per cent.
On the other hand, advisors often expected five per cent inflation to eat away at those savings.
Now, inflation is below two per cent.
Also, discuss how future contributions will add to your overall portfolio. Establishing realistic targets can help provide the discipline needed to reach your goals.
7. Tax efficiency: The tax free savings account (TFSA) has added a new dimension beyond the registered retirement savings plan (RRSP) to saving for retirement. As a tax deferral plan the RRSP could grow too big in value and put the holder at risk of higher taxes in the future, or Old Age Security (OAS) claw-backs.
An advisor who understands taxes can save you a lot of money by properly allocating savings between an RRSP, a TFSA or neither.
8. Review fees: This summer the latest phase of an investment fee overhaul comes into effect, where fees will be disclosed as a dollar amount instead of a percentage. That gives investors a better idea of what they are paying their advisors.
Investment fees are still incredibly complicated, so be sure you know how your advisor is being compensated and how much you are paying.
Dale Jackson is BNN's Personal Investor. Follow him on Twitter @DaleJacksonPI
