Canadian Money Forum banner
1 - 19 of 19 Posts

·
Registered
Joined
·
9 Posts
Discussion Starter · #1 ·
Hi, I’m new here. I tried ”search“ but no luck

I am with a financial advisor. They charge me 1.75%.

On my fixed income side, I have an etf “Mub”. (Just an example)

If it historically returns 3%, does my financial advisor take 1.75% off that 3%?

I see that etf’s have a management fee but it is nowhere near 1.75%

If the advisor takes 1.75% off 3%, why would I not invest in GIC’s for up to 5%?

Thanks for any Replies
 

·
Registered
Joined
·
9 Posts
Discussion Starter · #4 ·
I may be out to lunch but it just seems like an off the shelf etf that I might buy direct without my advisor, doesnt give me a discount because there are no advisor fees.
 

·
Administrator
Joined
·
5,292 Posts
He said his fees come out of the etf. I cant possibly see how that works if the management fee of an etf is around .5%
It should be simple for them to show you "return - fees" for a specific ETF on paper. Are they are charging you this 1.75% on your entire portfolio value?

I may be out to lunch but it just seems like an off the shelf etf that I might buy direct without my advisor, doesnt give me a discount because there are no advisor fees.
If you have a simple portfolio (one ETF?) then buying it yourself seems like a good idea to bypass any additional fees. There are sometimes fees to buy/sell ETFs so be aware of that.
 

·
Registered
Joined
·
13,266 Posts
The published performance of the ETF as advertised online is before your advisor takes his fees. You are likely in a "% of AUM" relationship with your advisor where the firm takes 1.75% of your account value every year.
 

·
Registered
Joined
·
9 Posts
Discussion Starter · #7 ·
The published performance of the ETF as advertised online is before your advisor takes his fees. You are likely in a "% of AUM" relationship with your advisor where the firm takes 1.75% of your account value every year.
Yes I am charged a % of AUM. I am using mub as an example etf from my portfolio (mackenzie unconstrained bond). It’s dividend appears to be about 3%. I cant seem to find the actual yield. I think its about 2% over 10 years but I really dont know where to find that.
If it only pays 3% and he gets 1.75%, the math seems pretty easy that I should just ladder gic’s from 4.30 to 5%. My advisor advises that that is a bad idea.
 

·
Registered
Joined
·
9 Posts
Discussion Starter · #8 ·
It should be simple for them to show you "return - fees" for a specific ETF on paper. Are they are charging you this 1.75% on your entire portfolio value?


If you have a simple portfolio (one ETF?) then buying it yourself seems like a good idea to bypass any additional fees. There are sometimes fees to buy/sell ETFs so be aware of that.
Yes they charage on the total portfolio value. I agree i could just buy a simple all in one etf (vbal) for example. It is a consideration
Basically, im considering just buying a conservative equity only fund and then using GIC’s as my fixed income portion I’m 66 and retired.
Thanks for replying
 

·
Registered
Joined
·
13,266 Posts
Yes I am charged a % of AUM. I am using mub as an example etf from my portfolio (mackenzie unconstrained bond). It’s dividend appears to be about 3%. I cant seem to find the actual yield. I think its about 2% over 10 years but I really dont know where to find that.
If it only pays 3% and he gets 1.75%, the math seems pretty easy that I should just ladder gic’s from 4.30 to 5%. My advisor advises that that is a bad idea.
He advises that is a bad idea from maybe 2 perspectives. #1 You could lose out on a large capital gain from the bond ETF over the next year or two. Returns from bond ETFs are not just the yield (e.g. bond interest). Bond ETFs experience changes in market value of the units, either as capital losses or capital gains depending on bond market sentiment. The past year, bond ETFs have suffered capital losses due to rising interest rates. Selling that bond ETF now locks in capital losses. You'd be much better to recover some losses over the next year or two than to sell low and buy higher yielding GICs.
#2 He may be afraid of losing those funds from the account IF you were to move those funds out.

FWIW, every ETF will publish fund facts. You can find the information on the Mackenzie website.... or you can google it from Morningstar Canada which carries performance data for your ETF (combination of both capital gain/loss and yield data).
 

·
Administrator
Joined
·
5,292 Posts
Yes they charage on the total portfolio value. I agree i could just buy a simple all in one etf (vbal) for example. It is a consideration
Basically, im considering just buying a conservative equity only fund and then using GIC’s as my fixed income portion I’m 66 and retired.
Thanks for replying
If you can manage your investments yourself then by all means, do it. Right out of the gate you gain most the 1.75% back you're losing to the advisor!

Yes, vbal is an easy option or split it with an equity ETF / fixed income (GIC) yourself. Maybe vgro and GIC would work for you ... simple equity/bonds/gic combo.
 

·
Registered
Joined
·
1,415 Posts
Yes I am charged a % of AUM. I am using mub as an example etf from my portfolio (mackenzie unconstrained bond). It’s dividend appears to be about 3%. I cant seem to find the actual yield. I think its about 2% over 10 years but I really dont know where to find that.
If it only pays 3% and he gets 1.75%, the math seems pretty easy that I should just ladder gic’s from 4.30 to 5%. My advisor advises that that is a bad idea.
It's definitely a terrible idea that will negatively impact your advisor's income. lol!

I'm troubled that you don't have statements that clearly show annual returns and account growth. There is a legal obligation to provide statements so you must have them. Perhaps statements are available through your online portal?

To your question regarding a GIC ladder, they are easily operated and probably less work than interacting with an advisor (misspelled with an "o" so they can avoid fiduciary responsibility).
 
  • Like
Reactions: Mjdy2k

·
Registered
Joined
·
4,091 Posts
Yes, vbal is an easy option or split it with an equity ETF / fixed income (GIC) yourself.
Yeah, both of these are fairly simple and basic DIY solutions for someone who takes an interest in their portfolio. The OP appears to be one of those people.

I am always amazed at the number of investors who are completely capable of taking care of this themselves with minimal effort, as opposed to funding their advisor's retirement to the tune of 1.75% of everything they have saved.

ltr
 

·
Registered
Joined
·
13,266 Posts
It is easy to say for those of us who made the transition long ago. It is less easy to make the leap...much like flying solo the first time. There is no question though that with today's range of simple core ETFs, the transition has never been easier.
 

·
Registered
Joined
·
1,415 Posts
It is easy to say for those of us who made the transition long ago. It is less easy to make the leap...much like flying solo the first time. There is no question though that with today's range of simple core ETFs, the transition has never been easier.
For sure but all it takes is a bit of courage and CMF folks will help with everything else down to minute details. (y)
 

·
Registered
Joined
·
9 Posts
Discussion Starter · #15 ·
Thanks for the replies. I had everything in GIC’s for years. I had never bought a stock until march 13 2020. Then I sat down and started buying and selling In a frenzy. It was easy picking then and everything made me money. However, I was all into individual stocks and as things stabailized it got to be too much research and the margin for error was higher.
I took everything to a financial advisor last year and the market tanked. Since then, I wonder what my advisor has done for me. I could have lost all that money on my own, He has set me up in a 65/25/cash porffolio and I compare the performance of that to an off the shelf all-in-one solution and the losses were identical. So why am I paying him?
So yes, I am now looking to just move to an all in one Etf while taking advantage of high gic rates.
 

·
Administrator
Joined
·
5,292 Posts
So yes, I am now looking to just move to an all in one Etf while taking advantage of high gic rates.
Just have a plan going forward with realistic return expectations. Also remember, some years will be good while others not so much but the average return over many years is what matters.
 

·
Registered
Joined
·
83 Posts
Yes I am charged a % of AUM. I am using mub as an example etf from my portfolio (mackenzie unconstrained bond). It’s dividend appears to be about 3%. I cant seem to find the actual yield. I think its about 2% over 10 years but I really dont know where to find that.
If it only pays 3% and he gets 1.75%, the math seems pretty easy that I should just ladder gic’s from 4.30 to 5%. My advisor advises that that is a bad idea.
I think your first question has been answered but I can tell you that when I did use an advisor my entire portfolio (fixed, equities and anything else) was charged his fee which was 1% back then.

What I did was to keep most of my fixed income away from him and bought GIC ladders on my own to avoid having to pay him a fee just to hold them. He once wanted to buy a GIC for me at 2.5% with the net return being 1.5% after his fee. I declined. But it creates asset allocation issues as he wants/needs to know your entire holdings to build the appropriate risk into your portfolio. I ended going on my own for many other reasons.

This past year I have had portfolio reviews from a couple of advisors who all operate the same way. They manage it all and charge their fee across the board. Fees were between 1% and 1.75%. I decided to remain on my own.

The amount of money you are paying them is large but not everyone can self manage so I'm not suggesting they don't have a place. That said, if you can't get a clear picture on fees, regular updates on performance of your portfolio, regular discussion and performance history, then I'd go elsewhere.

And I'd never pay to have someone hold GIC's for me. I feel somewhat the same about ETF's and mutual funds. I can buy those myself and they already have their own fees. For me the value of an advisor was stock picking (and his resources to do it) and his overall ability to manage my portfolio and build in risk avoidance. To do it right he does need the freedom to buy all of the above as he sees fit. And charge you for all of it.
 

·
Administrator
Joined
·
5,292 Posts
.... but not everyone can self manage so I'm not suggesting they don't have a place.
^^ And that is something people need to be honest with themselves on. I know some that would lose their shirts doing it alone jumping from one "get rich quick" method to another instead of using a good long term investment plan.
 

·
Registered
Joined
·
755 Posts
Yes I am charged a % of AUM. I am using mub as an example etf from my portfolio (mackenzie unconstrained bond). It’s dividend appears to be about 3%. I cant seem to find the actual yield. I think its about 2% over 10 years but I really dont know where to find that.
Its an active strategy (un constrained) so you would look at total annual return, less fees, each year, not yield. Part of the annual return is the income from the bonds owned by the ETF and the rest from the gain, loss in value of the bonds they owned. The link below gives historical performance for a fund (not sure if this is yours or not).


To evaluate whether it’s the right investment going forward, what you paid is irrelevant. Since it’s an active management strategy what is important for you to know is whether they have a strategy to beat your other alternatives going forward (GICs, a low cost passive strategy, or another active strategy). Your advisor should address this for you or it’s time to find a better advisor.
 
1 - 19 of 19 Posts
Top