We received this testimonial question from a loyal reader, who is wondering how to move from wealth management in a firm to independent management.
“For several years,” she writes, “I have been dealing with an investment consulting firm. My advisor directed me towards products corresponding to my investor profile and (as much as he could) to my values. All while applying fees of 1.25%, recently reduced to 1% at my request. Over the years, I have learned a lot about personal finance and the famous ETFs (exchange traded funds). My advisor’s performance does not outperform the market, once all fees are deducted. I find it more and more difficult to see his monthly fees taken from my account to pay for advice that I find more and more occasional and of less interest. In short, the added value of this service appears to me to be increasingly weak. Can you guide me on how to transfer [mes placements] towards independent management of my investments? »
In theory, a purely technical transfer
Our reader tells us that she owns Series F mutual funds, which are fee-based funds. She wonders how to transfer them to an online brokerage account, in order to limit the tax impacts and fees.
First of all, regarding fees, we must distinguish between redemption fees and administrative fees. Since she holds fee-based funds, there will be no redemption fees applicable to the transfer or withdrawal of her investments. Regarding administrative fees, these vary from one financial institution to another and depending on the type of account held (self-managed account or held in the client’s name).
The tax impacts will depend on the type of regime in question. Thus, our reader can transfer the balance of her registered accounts, such as the RRSP or the TFSA, but, be careful, only to the extent that the transfer forms prescribed by the Canada Revenue Agency are used! It is in fact imperative to use the famous T2033 or T2151. No question of selling the investments and then investing in a new online brokerage account!
If the investments are held in a non-registered account, unless the securities can be transferred into property, there will be a tax provision when they are sold, which will result in a capital gain or loss. Our reader will therefore need to check whether her current funds are available through the online brokerage platform she wishes to use.
Otherwise, he will have to consider the fact that the transition to autonomous management involves selling the portfolio and purchasing new securities. It will have to analyze different options between full or partial transfer, the impact of delays between the sale and new purchases in the context of current markets.
A breakup also includes a human dimension
In her testimony, our reader mentions that the added value of the services offered by her current advisor is increasingly low. If it is entirely possible, administratively speaking, to repurchase or transfer one’s investments without communicating with the latter, I consider, as a practitioner, that feedback would be preferred.
This communication could make it possible to reestablish certain facts. If the business relationship has been established for a long time, there may be tasks that the advisor performs for the client that have become, over time, taken for granted. Additionally, once raised, the discussion on return net of fees could open up opportunities for portfolio improvements. If it turns out that the work of the existing advisor does not live up to expectations, it will be possible for him to improve his practice, for the benefit of our reader or his other clients…
Things to think about before the big leap
Madame told us that she was more than ten years away from retirement. While it is true that an investor with a good risk tolerance and a growth-oriented profile could have fared relatively well during the 2010s, autonomous investment management in an inflationary context steeped in uncertainty economic is probably not the prerogative of everyone.
The selection of securities could make the difference in the next ten years and, the management of the fixed income portion being more strategic than ever, this option should be considered if you have a strong interest in personal finances and an agenda allowing you to do so. devote the required time. For example, the use of ETFs envisaged in our reader’s letter offers numerous advantages, with the particularity that systematic redemption programs are generally not offered. Brokerage fees may therefore be higher without a strategic disbursement plan. In early retirement, optimizing disbursements is often one of the key roles assumed by the wealth management firm.
Studies show that advice provides added value, increasing financial resilience and household net worth. Before moving on to independent management, I would therefore advise our reader to consider changing firms or advisors offering a global approach not limited to portfolio management.
It is also possible to reserve autonomous management for new investments, a formula which would allow you to test your real interests and capabilities. In her testimony, our reader says she is certain of being able to put aside her emotions in the face of market ups and downs. This is the biggest risk facing the independent investor. If, unlike her, you are not sure that you have the necessary emotional detachment, it would be better to gather your courage to have a frank conversation with your current advisor.