The company I work for, offered group RRSP, where if you invest 6% of your salary to this group RRSP, the company adds 3% more. The catch is that you have to open RRSP via financial advisor, though I can choose any mutual fund I wish. I want to invest to one of Mawer mutual funds, however I pretty sure that financial advisor for that group RRSP will anyway add some fees to Mawer mutual funds. Any advice about how to deal with that financial advisor to minimize fee would be greatly appreciated. Thanks in advance.
How to minimize financial advisor fee?
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Open a discount brokerage Account.
are they directing you to a particular bank?
when I was with TD, we offered Group RSPs to small businesses for their employees. From what I recall, you had to invest in TD funds. Not sure if you’re setup is similar.
are they directing you to a particular bank?
when I was with TD, we offered Group RSPs to small businesses for their employees. From what I recall, you had to invest in TD funds. Not sure if you’re setup is similar.
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.. not sure why you would think the fees are greater (presumably on the mutual funds) under the group RRSP versus the retail price (individual). I think it should be the other way around ... cheaper fees in group than individual. And I would not expect the financial advisor to "charge" you anything for a 15 minutes participation consultation (aka a questionnaire to determine which funds fit you).
I have one of those plans.
Some vest immediately so you can transfer the money out promptly.
But even if they don't, due to the match, the return is amazing.
$100 invested becomes $150, that boost in principle pays for a lot of fees.
lets say you get a 2% return (before fees) and it's eaten up by the 2% MER, after one year, you're still up 50%!
Lets say you get a 4% return, that's $6, or $156-$3 MER = $153, which again is more than 50% up
at 6% return, that's $9 -$2 = $157, or a 7% return on your initial $100 investment.
If you really care, transfer it out, but matching RRSPS are great, the extra principle quickly makes up for the higher fees, particularly in the short term before you figure out exactly how you want to handle it.
Some vest immediately so you can transfer the money out promptly.
But even if they don't, due to the match, the return is amazing.
$100 invested becomes $150, that boost in principle pays for a lot of fees.
lets say you get a 2% return (before fees) and it's eaten up by the 2% MER, after one year, you're still up 50%!
Lets say you get a 4% return, that's $6, or $156-$3 MER = $153, which again is more than 50% up
at 6% return, that's $9 -$2 = $157, or a 7% return on your initial $100 investment.
If you really care, transfer it out, but matching RRSPS are great, the extra principle quickly makes up for the higher fees, particularly in the short term before you figure out exactly how you want to handle it.
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I would think the fees should be stated in the Group RRSP plan pamphlets. If it is not in there I doubt you will see a fee.
Keep in mind that regulatory rules require a pamphlet of all fees MUST be given before any investment accounts are open. I doubt group RRSPs would supersede that rule. Also any fees upon purchase of an investment MUST also be disclosed before the investment is made. This would include any deferred sales charges if they were applicable.
In any case, it is kind of difficult to advise someone about avoiding a fee that you don't even know will be rendered.
Keep in mind that regulatory rules require a pamphlet of all fees MUST be given before any investment accounts are open. I doubt group RRSPs would supersede that rule. Also any fees upon purchase of an investment MUST also be disclosed before the investment is made. This would include any deferred sales charges if they were applicable.
In any case, it is kind of difficult to advise someone about avoiding a fee that you don't even know will be rendered.
I can't open a discount brokerage account for group RRSP. The company force me to go through financial adviser.
I don't know what will be advisor fee on "no load, no trailing fee" Mawer mutual fund. I assume that fee will be hidden somewhere in the fine print of paperwork I will be forced to sign in order to open RRSP. The Mawer web site says that one can purchase their funds through financial advisor and the fee will be set up by advisor, potentially wiping out all benefit of Mawer funds.
The pamphlet I got just states that there are fees, no specifics are provided.
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... ok, first things first.
The "group RRSP" is sponsored by your employer, administered by either a bank or an insurance company and they provide a/their financial advisor to assist you (the employees) with the selection of the mutual funds available in their group RRSP. The banks/insurance company want the business. The mutual fund company (Mawer) wants the business so they pay him/her the financial advisor.
There should be no charge for that financial advisor's selection advice as it's going to minimum "investment" advice. H/she is most likely to get you fill in a multiple-choice questionnaire (likely online as a DIY) to determine which mutual funds (that available through your group RRSP plan) will fit your risk profile / appetite. It's also expected that the advisor is available to take any questions that the employees have ... such as help with filling out the forms, RRSP contributions receipts, etc.
Now with the "no load, no trailing fee", that is what is expected from the Mawer's family of mutual funds. Any associated investment fees (such as the MERs/IMFs) are not charged directly to you but will come off from the mutual funds performance. This is expected.
In summary here, there is nothing for you to worry, especially "fees" about other than understand that "mutual funds" are not guaranteed, including Mawers although the Mawer's family of funds have pretty good performance.
Hope this somewhat long explanation helps a little bit.
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Don't necessarily be too gun shy. The company GRSP holdings I used to be part of was a pretty big collective pot of money, so the employee reps could apply some pressure that the mutual fund offerings were not all too expensive with the MER's. Not sure that this is your situation. My deal was 4% and company matched. It was run though first GWL then SunLife.
Seek the quotes on fees for all MF's on offer available in this plan. I found that for me the bond index fund was not too expensive, and the global mutual fund was not too unreasonable. Then I spent my own planning and strategizing energy doing self directed investment in my Itrade rrsp and tfsa and non registered, focusing on filling them with Canadian and US investment vehicles.
I was lucky enough to pay of my relatively small mortgage early on by buying a house at age 35, after saving for it seriously for about 12 years. So once mortgage was done the RRSP and TFSA funding were maxed.
Seek the quotes on fees for all MF's on offer available in this plan. I found that for me the bond index fund was not too expensive, and the global mutual fund was not too unreasonable. Then I spent my own planning and strategizing energy doing self directed investment in my Itrade rrsp and tfsa and non registered, focusing on filling them with Canadian and US investment vehicles.
I was lucky enough to pay of my relatively small mortgage early on by buying a house at age 35, after saving for it seriously for about 12 years. So once mortgage was done the RRSP and TFSA funding were maxed.
I understand what is MER and that fund performance will be reduced by MER. However there is some contradictions in your explanation. Mawer doesn't pay anything to financial advisor. I "don't pay" according to you to financial advisor. Who will pay to him then? Besides that the paperwork I got to sign up for RRSP include section about how I wish to pay fees ...
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As @MrMatt said, you are almost certainly going to win by doing this (no matter the fees) since the company match is so huge. This is, quite literally, free money and a great deal, up to your 6% maximum.
I understand your hesitation due to the financial advisor, and you're right that there will be some tricky fees involved, but you still should start sooner than later to get that free money.
One way to get a handle of the fees involved is to start by investing the money into a money market mutual fund (which is like cash) to start with. So if $1,000 comes in from your paycheque, you can look next month to see how much money actually exists in your account. Is it $1,000 or did some of it disappear?
You should ask the advisor this. Maybe they will say that the company is paying their fees.
It's a good question though. Who is paying the advisor? You have the right to understand all the fees you are paying. Try using the cash/money market technique above to test what's going on with the fees.
In the best case scenario, the company is paying the fees to the advisor. Worst case scenario, the advisor takes other fees, but you will still be better off with the free company match.
At the end of the day the goal is to make money, and just by being in this plan, you're going to collect free money. The fees are a secondary and lesser concern, in this case.
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Who is the financial services company that is providing this Group RRSP? Knowing that might help a little here.
A lot of supposition here but it is possible that the Mawer group of funds is simply being offered as a loss leader. It is possible that someone in charge of this decision, at your company, really wanted Mawer funds, and that is the reason and probably the only reason they have been added to the group of offerings within this group RRSP. Your problem with the advisor may not be so much about them adding a new fee but more desperately attempting to get you to choose some other investments within the other choices that do pay an advisor fee. In any case a little pro bono business will not make much difference when the advisor reviews the overall Group RRSP income stream.
It certainly would not be administratively easy to simply add a separate fee and as I said, regulations demand that these fees be explained to you, in writing. Either a pamphlet or an email before investment. These are industry regulations. If he/she has not done that, it would be a little concerning. Just keep in mind that since you have not opened an account yet or made an investment, the advisor has not actually violated those rules. As I said before, fees on accounts, like admin and transfer out, etc., MUST be provided to the owner BEFORE the account is opened. Fees on the investments, like DSCs etc, MUST be provided to the investor BEFORE the investments are made.
My guess. The fund MERs is all you will ever end up paying. Perhaps a transfer out fee later. That part I can't guess.
A lot of supposition here but it is possible that the Mawer group of funds is simply being offered as a loss leader. It is possible that someone in charge of this decision, at your company, really wanted Mawer funds, and that is the reason and probably the only reason they have been added to the group of offerings within this group RRSP. Your problem with the advisor may not be so much about them adding a new fee but more desperately attempting to get you to choose some other investments within the other choices that do pay an advisor fee. In any case a little pro bono business will not make much difference when the advisor reviews the overall Group RRSP income stream.
It certainly would not be administratively easy to simply add a separate fee and as I said, regulations demand that these fees be explained to you, in writing. Either a pamphlet or an email before investment. These are industry regulations. If he/she has not done that, it would be a little concerning. Just keep in mind that since you have not opened an account yet or made an investment, the advisor has not actually violated those rules. As I said before, fees on accounts, like admin and transfer out, etc., MUST be provided to the owner BEFORE the account is opened. Fees on the investments, like DSCs etc, MUST be provided to the investor BEFORE the investments are made.
My guess. The fund MERs is all you will ever end up paying. Perhaps a transfer out fee later. That part I can't guess.
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... J4B in post #4 pretty well answered your question with:
If the advisor will not answer this, then ask your company or the part where you said "
.
At this point, I'm hard-pressed to believe you (as an employee) will have to pay a "seperate" fee (for what? administration, custodial, online questionnaire?) for the assigned advisor hired by the bank/insurance company to participate in a "group RRSP".
Imagine there're 100 employees in your company, each having to pay a "seperate unknown" fee ... no wonder employees will be hesitant to join despite the match ... I would.
You are 100% right. However my question was not whether this is good deal or bad deal, whether I am going to make money or not, whether to participate in group RRSP or not. Of course I understand that I am getting "free" money from company and I will participate in group RRSP.
My concern was that I don't have freedom of choice whether to go with advisor or DIY and company forces me to go with advisor. Honestly speaking I don't understand why but this is another question.
I also understand that nothing is free in this world and advisor will be paid one way or another. My question was about whether I have anything to say about fees and whether I can do anything about that or not?
Here I completely disagree. The fact that company adds 50% could be used to hide even higher than usual fee. From my point of view the statement "Why would you care/worry/ask about fees when company adds 50%, you gonna win anyway" used to deflect attention from fees.
Anyway thanks to everyone who responded to my question!
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What company is this advisor with? You say 'you' want to invest with Mawer, but is that even being offered under the group plan?
Nobody offered to me Mawer group funds, it was my choice. Advisor initially offered another fund with 2% fee + all what comes together load, trailing etc. He however said that I can choose whatever other fund/company I wish.
According to advisor I can invest in any fund/company in Canada I wish.
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