Newly in a relationship with the crazy desire for it to last forever? One of the financial dilemmas that, sooner or later, will arise is likely to be the following: is it possible to each have their own financial planner? This is the question Mariette asks us this week.
“We are two pre-retirees aged 65 with good incomes and our union is rather recent (one year), writes Mariette. We plan to retire in a year or two. Even though I have lived in Montreal for two years, my financial advisor is in Outaouais. We have an interesting financial record and decisions to make for our retirement, but our portfolios are not managed in the same institution. My partner, Michel, is very insistent that I transfer my assets to his bank, where his financial planner works. I am hesitant, because although very dissatisfied with the work of my financial advisor, I have confidence in the institution where she works. I pay a management fee of 1%, but my partner pays less to his bank, and this is part of his arguments for me to move. My question is simple: would it benefit me (and both of us) if the same person did our financial planning? What makes me hesitant is that I would have the impression of “putting all our eggs in one basket”. It makes me nervous that one person makes all the decisions. »
Even though financial planning services and investments are generally integrated services and offered by the same professional in the financial services industry, it is important to remember that they are two absolutely distinct mandates. As part of an integrated financial planning mandate or a partial retirement planning mandate, the professional acts as a financial planner only.
Its analysis, findings and recommendations would allow Mariette and her spouse to have, for example, a retirement disbursement plan and advice on estate planning in the context of transferring assets from their previous unions.
When the discussion moves to the products themselves and more specific advice regarding the securities and funds that make up the portfolio, that’s a whole different professional mandate. In the particular case of our reader, it is not impossible to think that she and her new spouse could jointly carry out retirement planning without necessarily entrusting the management of their assets to the same institution.
Although it may be advantageous for the person who coordinates the financial plan to also manage the portfolio, the same objectives can be achieved if there is good communication with the other professional. It remains to be seen, in the situation of Michel and Mariette, which of the two professionals is the most seasoned in the functions of financial planner.
Furthermore, if Mariette decided to transfer her portfolio to her partner’s bank, the consideration should not be limited to the lower fees paid by the latter. On the one hand, because we must, remember, always analyze the net return after costs. Did our young couple do this exercise? On the other hand, because the choice of a professional should be based more on skills, experience and affinities.
The relationship at the heart of financial advice is nonetheless an intimate one; you must want to work as a team with the advisor and see each other regularly. However, we understand, upon reading the letter submitted, that the level of satisfaction with the current advisor is rather low. Let us therefore focus on the other fears raised by our reader regarding the centralization of decisions.
Diversifying a portfolio is not necessarily “spreading thin” as I frequently repeat. You could have all your investments in several institutions and still have fairly poor diversification. For example, you might have three balanced portfolios with relatively similar composition at three different banks or investment companies. On the other hand, you could have a single broker supporting you in your investments, with an excellent balanced portfolio with different funds and stock market securities to complement it.
Generally, using two financial institutions mainly leads to more demanding investment monitoring and accidental overexposure to certain securities, certain sectors of activity or certain geographic regions.
Our reader’s concerns about “putting all [leurs] eggs in one basket” are probably unfounded. However, the first step for Mariette will be to meet the professional who manages her new spouse’s portfolio in order to validate certain human criteria. The exercise could also allow him to compare the latter’s way of working, training and level of knowledge with those of his current advisor.
Before transferring her portfolio, our reader should also analyze its composition in relation to that offered by the bank and ensure diversification of asset classes (cash, bonds, shares, alternative investments), sectors of activity and geography, management style (if recourse to funds), which are the real keys to diversification. Although it may be possible to benefit from lower management fees and fees by consolidating the accounts of the same family, she should compare the net return (after fees) of her current portfolio with that offered by the institution of his spouse.