What Should A Good Financial Advisor Charge To Manage My Investment Portfolio? [Secret Sauce Ep9]

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Are you struggling to navigate the complex world of corporate tax strategies and maximize your business’s retained earnings?

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You’ll learn: 

• Gain a clear understanding of how permanent life insurance policies can be used to solve retained earnings tax issues.
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• Discover the specific design elements that make a permanent life insurance policy most effective for your unique financial situation.

Tune into this episode now to uncover the secrets to maximizing your retained earnings and minimizing taxes—your business’s financial future depends on it!

Resources:

•  The Psychology of Money [Book}
• Like this short, “Wealth Secret Sauce” Episode? Tell us in your rating and review on Apple Podcasts. 
• Dig into our Ultimate Investment Book List
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX.
• Looking for a new mortgage, renewal, refinance, or HELOC? Reach out to Jon to share some options.

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Discover how to reduce investment fees and optimize your portfolio with expert financial planning advice in our latest episode. Learn the differences between fee-based and commission-based financial planners, explore low-cost investment options like index funds and ETFs, and gain strategies for tax-efficient investing. Whether you’re new to investing or looking to improve your wealth management, this episode provides practical tips and insights to help you achieve your financial goals.

On the Canadian Wealth Secrets Podcast, we routinely discuss Canadian investment portfolios, rates of return, Canadian real estate, incorporated business owners, corporate wealth management, participating whole life insurance, infinite banking, bank on yourself and much more!

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Transcript:

Hey there, Canadian Wealth secret seekers.

It’s Kyle again and it’s Friday, which means it’s another secret sauce episode.

In today’s episode, I’m going to be answering an email through video as I do with much of the clients that reach out, ask questions, or have follow-up questions after we meet. But I figured this one would be a good one for the Canadian Wealth Seeker audience.

So here it is, and I’m going to share this for those who are on YouTube with me, so you can see where I’m going around the web as we address it. This one is from a client Steve. I recently met with Steve about a month ago. He says, “Hey, it’s been a busy month. Thanks again for a great chat. I gained lots and enjoyed chatting with you.” So thanks again. Always great to hear that.

Steve had a couple of follow-up questions, mostly trying to vet his next steps. He’s curious about what is reasonable to pay for investment fees and how to lower them. For example, what would a good financial planner reasonably charge? What is a reasonable MER or management fee? Should he go that route? And what is the best way to send portfolio statements? He’s interested in my thoughts on his present TFSA.

For this particular individual, I had mentioned if he wants me to take a look at the portfolio. This individual is currently single, has no dependents, and is doing some house hacking. He is renting a small place while he’s purchased some property that he hopes to potentially build on. Right now, he does a lot of camping at this waterfront property, which is super awesome. He has a great income, has a pension as well, but wants to push for more. Since he’s single, he gets to live the lifestyle that he wants to live, which is really awesome. Good for him.

Let’s dig into this one. This is a great question ’cause it’s asking about a few things. It’s talking about financial planners and MER fees. Now here’s the thing, when it comes to financial planners, the reality is that it really just depends on what the benefit is for you. There are some that are very affordable. I don’t think they do much assets under management when we’re talking about a fee-based financial planner. However, any financial planner that charges an asset under management fee usually charges around 1%, sometimes more. The larger the portfolio, the more they’re earning. If you have a million-dollar portfolio, then you’re paying about $10,000 a year for them to manage your portfolio. With that comes the advice, perspectives, meetings, all of those things. However, most people, when working with planners, don’t feel like they’re getting a ton of individualized support. So that’s something to consider.

If you go for fee-based, you have to decide what it is that you’re seeking from them. One benefit is that they’re not going to invest your money for you. They might help you with that process. This is the same thing that I provide for clients that reach out to us here at Canadian Wealth Secrets. We hop on a free discovery call. As you know, this particular individual knows from the call we just had, and we continue to work with you over time as we help you to get to the next place in the journey. Along the route, there are opportunities for us to earn income by offering some of the tools and the education to support those tools, such as permanent insurance for tax minimization strategies and asset accumulation strategies, or what we like to call optimizing your investments. However, we don’t charge you a fee for that. That is something that will give us a commission.

On our end, we believe commission is a good structure as long as you have the right individuals to support you and they’re willing to work with you regardless of whether they believe they are going to make a sale or not. For this particular individual, I had been pushing for them to spend more time investing in their TFSA. We won’t do any of the investing in the TFSA, we’ll just continue to support you, give you perspectives, and help you to try to figure out what’s best for you. At some point in the journey, if this person continues to accumulate assets and wealth, their tax-free or tax-advantaged buckets are going to fill up. They’re going to have assets and they’re going to want to solve some of the tax problems that are created when you accumulate assets. What happens then? They come back to us, they work with us, and we help them to put in a plan that’s going to help them manage their taxes efficiently. Specifically for those incorporated business owners who are trying not to spend all of the retained earnings on taxes when they take it out personally, we have strategies and structures to help with that.

It’s all about education. When I look at what a good fee is to pay for someone who’s a financial planner, if your goal is just to work with someone to help you wrap your brain around a general plan, and then you’re off to the races, rock and roll. Go ahead and head out to that financial planner that is going to charge you a fee. They might charge you per session, they might charge you per month, they might charge you per year. You can decide if you want to continue that program. It’s much like coaching and mentorship programs that are out there for real estate investors or for business coaches or anything like that. If that’s what you’re after, rock and roll. The value you put on that is going to be different depending on what it is that you’re looking for from them. Are you looking for a general roadmap? Are you looking for handholding? What is your asset size?

Knowing this particular individual, they have some assets but do have a pension. I might argue that getting started with a planner might make sense, but I don’t know how logical it would be for them to continue this process for too long unless they are continually running into roadblocks along the way or if they feel that accountability is really helpful to them.

When it comes to actual MER fees or planners that are charging with assets under management, you really have to understand or determine what is that worth to you. How involved do you want to be? How hands-off do you want to be? The more hands-off you want to be, the more it’s going to cost you, in my opinion. If it is 1% for them to manage your money, the reality is most wealth advisors aren’t going to be able to get you a better return consistently than the average return of whatever the index is that you’re investing in. However, that might be worth it to you if it reduces your stress. If you want to be hands-off, if you’re not interested in doing any of that extra work, if you are interested in doing some of that other work, then you might want to start exploring some resources to help you along. Reading books like “The Psychology of Money” and “Income Factor” is great for those intrigued by the idea of dividend returns.

For others who aren’t interested in doing all of that heavy lifting or to have that weight on their shoulders, maybe just going to the big bank might make sense for you. Some people might not like that suggestion, but I know BMO, for example, has very low MER fees on some of their index funds. If you don’t specifically request those, they might try to sell you something that is a higher MER. For me, if someone’s gonna do that to me, I don’t trust them and I don’t wanna work with them. However, it really depends on who you are and what you’re after.

Up on the screen right now, I’ve got a couple of articles about how much you should pay for investment fees. Some people are saying it’s gonna be one to 2% for those who have actively managed funds. Some are charging from one to 3%. Three is really crazy. There are accounts you can dive into like Wealthsimple, but you still have to make some choices. There’s robo-advisors where you can allow the AI to take your risk tolerance and put your money across different ETFs or index funds so that you don’t have to do any of the heavy lifting. For other people, you might want to go and just find the funds that you’re after. Here on Money Genius, you’ll see a list of supposedly really good funds. The problem is, are you investing in the markets that are right for you?

For me, I don’t think that going into a Canadian All Cap or a Canadian equity fund is right for most people because Canada doesn’t seem to ever be ahead of the US over a long period of time. You can go and find these funds. You’ll notice they’ve got Vanguard, which has lots of low MER ETF funds. They have a Canadian all cap index ETF. The MER is 0.05%. That’s virtually nothing. The one-year return is 14.44%. One year doesn’t mean a whole lot, but the returns since inception since 2013 is 8.48%. If you’re bullish on Canada, then maybe that makes sense for you to go into a fund like that. It costs virtually nothing. The ticker is VCN and you on average are getting a pretty good return.

You can see a big list of ETFs here. They even have conservative ETF portfolios. Vanguard’s conservative ETF portfolio has a 0.24% MER. Good return this last year, but on average since 2018, it is only 4%. When I see an average of 4% on an ETF, I’m thinking there’s downward risk. I know that a well-designed permanent whole life policy can get me around the same rate with no tax and the fact that I can leverage against it to buy other assets. It is the and asset. Just make sure that whatever your choice when you’re looking for different types and when you’re trying to figure out how you want to invest, decide who you are as an investor. Maybe start with having an advisor, maybe having someone like us here at Canadian Wealth Secrets to have a conversation to try to nudge you towards a strategy based on who you are and your risk tolerance so that you can go and buy the index funds that make sense for you.

If you’re not interested in doing that yourself, you can reach out to a local big bank and let them know, “Hey, I understand what an MER is. I don’t want to pay a huge fee. Show me your lowest cost ETF funds or index funds.” They exist with all of these different companies. Once again, if you are gonna be a lone ranger and go at it yourself, maybe head over to Vanguard, take a look at what they have or consider looking at Morningstar’s different ratings for different mutual funds and ETFs to decide where you want to put your money. If you’re looking at putting it in more balanced portfolios, then you might want to consider splitting up your investment portfolio a little so you take these low-risk dollars, put them in something more guaranteed, such as a permanent whole life insurance policy, and then the remainder going into some equity type funds, be it global, Canadian, US, or a mixture.

It’s a tough question that I’ve been asked here to answer from one of our wonderful Canadian Wealth Secret seekers about how much you should be paying or what is reasonable. At the end of the day, what is reasonable comes down to what is reasonable based on what role you want to take in this journey. If you need someone there for accountability, maybe it’s the big bank, getting yourself on a dollar cost averaging strategy. The most important thing, in my opinion, is not the MER, but the volume of money that you’re going to invest in whatever asset class you decide. That’s going to be the most important decision you ever make.

Once you start getting a significant portfolio, the MER fee starts to make sense. When you’re first starting out, getting started is the most important part. If your portfolio size is only a hundred thousand, let’s be honest, 1% of a hundred thousand is a thousand dollars. It’s not that significant. It’s not going to change the world for you. On a million dollars, sure, 10,000 starts to matter. You want to start paying more attention as you get to that place. On 10 million and beyond, you’re going to want to start focusing on those fees. While you’re in the growth stage, don’t allow this to be, as Alex Hormozi would call, a woman in the red dress, which is the shiny object, the MER. You need to get the lowest MER ever and not sleep at night until you do. That’s not your biggest concern right now. Your biggest concern is pushing as much of those chips into investments in a risk-matched way. Let’s worry about fees once they become a significant issue where it’s actually starting to hurt your overall return and your portfolio’s performance.

Friends, if you’ve enjoyed this episode or any other episode of the podcast, please do us a solid head over to Apple Podcasts. Leave us a rating and review and share the podcast in the same way that you found it. If it was social media, word of mouth, or through an email, send it on to somebody. It means the world to us.

If you would like to get on a discovery call with me or with Jon, head on over to Canadianwealthsecrets.com/discovery. This episode was a derivative of a discovery call, and I can’t wait to meet with this individual again in the very near future. And of course, I can’t wait to meet with you, my friends.

Until next time, keep on seeking.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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