Let s Talk About Fees Bryan Deviney, CFP, CIM Senior Financial Advisor Assante Capital Management Ltd. 1 Yorkdale Road, Suite 310 Toronto, Ontario M6A 3A1 T: 416-939-2000 x 210 F: 416-785-8000 E: bdeviney@assante.com www.devineygoodman.ca financial advice
Table of Contents Let s Talk About Fees Reduce the Fee By Doing It Yourself Comparing Rates of Return Bulk Buying To Reduce the Fee The Benefits The Benefits of Being a Client With The Deviney Goodman Team A Team of Professionals The Value of Advice The Value Coaching Makes It More Likely That You will Achieve Your Goals Individual Components or Managed Portfolios The Fees Know What You Are Paying For How the MER Is Calculated Fee based advisors TRustee Fees
Let s Talk About Fees There has been a lot of talk in the media about fees and their impact on your retirement savings. The basic point they make is that the lower the fee, the larger your savings will be when you reach retirement. Of course, this is true, just as it is in every other aspect of your life. The media points out that there are two ways to reduce the fees you pay: reduce the fee by doing it yourself, or use bulk buying. Reduce the fee by doing it yourself Like anything in life, if you do it yourself and you do it competently, it will cost less. Doing your own car repairs or house renovations will save you thousands over a 20 30 year period. The question is whether you want to do the tasks and are you competent? Do you have the expertise and equipment to do the job right? There is a big difference between patching some drywall and fixing an electrical problem. Similarly, you may be able to save for a vacation by yourself but you may want professional advice on how best to achieve your financial goals and plan your estate, taking into account all the tax and legal implications involved and applying them to your specific situation. A mistake could have repercussions from which you cannot recover. Bulk buying to reduce the fee As with your other purchases, buying in bulk can reduce your cost. With financial assets, consolidating your investments and reaching milestones such as $500,000, $1 million or $2 million allows one to pay less in fees. We offer a competitive fee structure with discounts as one reaches these savings milestones. Comparing rates of return When comparing rates of return, you have to make sure you are comparing apples to apples, not apples to oranges. Often, the media does not make it clear that the higher rate of return was achieved by not paying anything to an advisor or professional counsel, in short, by the investor doing it themselves and not paying for advice, trades and taxes. Once these extra costs are factored in, there is very little difference in the rate of return.
The Benefits A team of professionals The benefits of being a client with The Deviney Goodman Team We at The Deviney Goodman Team pride ourselves on the total wealth management services we provide. The fees you pay are for more than just investment advice. Our commitment is to do as much as possible to make sure that all of our clients have financial security. We want to make sure that your financial well-being is protected during your working years and your income is secure during your retirement years. Toward this end, we use the Financial Health Checklist and provide the following: written financial plan retirement income stress test personalized investment policy statement customized portfolio solutions guaranteed lifetime retirement income solutions tax planning and minimization insurance, trust and estate planning government enriched education and disability savings plans quarterly consolidated statements educational seminars and newsletters updates on your investments on-going contact including face-to-face meetings, phone calls, e-mails and skyping referral network for accounting and legal services. helping your accountant, when requested, to receive your correct information In addition to the services that we provide, Assante maintains client accounts, prepares consolidated statements, and supervises the advisors who work with Assante to ensure all client accounts and advisors are in compliance with applicable laws and regulations. It takes a team of professionals to be able to offer these services. While many work in the background and do not generally interact directly with our clients, it is their involvement that helps produce the reports and advice that we give to you. It is this infrastructure that makes our practice so successful. We also severely limit the number of client families so we can give timely and comprehensive advice to each and every one of our clients. The value of advice Many Canadians find that they lack the financial knowledge or the time required to research all the options available to them in order to make important financial decisions. Those without financial and investment advice may find themselves ill-prepared for some of the most important financial decisions they will encounter in their lifetimes. Others may miss the opportunity to make a good decision. Advised Canadians are shown to have substantially higher amounts of investable assets than non-advised Canadians in both registered and non-registered forms, and across all levels of income and age groups. 1 A recent whitepaper by Vanguard suggests that the discipline and guidance that an advisor provides through behavioural coaching adds an estimated 1.5% per annum net return, when compared to an average do-it-yourself investor. 2 Morningstar research shows there is a growing performance gap between the return of a fund and the return an average investor in the fund actually gets. Morningstar s research shows that this gap has ballooned to 2.49% per annum. 3
The Value Coaching makes it more likely that you will achieve your goals It is well-established, across many different fields of human endeavour, that those who use coaches or mentors are more successful. We believe this also applies to our clients. We take our coaching seriously and believe in forming a partnership with our clients with the aim of helping them achieve their goals. Personal relationships also tend to do better when a qualified and competent financial advisor is involved. Having a financial advisor listen to you and develop a financial plan based on your specific situation and needs allows you to have confidence that you are on the right track. It allows a couple to work together towards realizing their common goals. Each partner is encouraged to articulate their thoughts and differences can be sorted out. The annual financial review provides for an opportunity to review the past year and reaffirm the goals for the next year. This process helps reduce stress and provides for a much more harmonious relationship between the spouses and their finances. This is a very important consideration as financial disagreements are a major cause of marriage breakdowns. Individual components or managed portfolios As with many of the things we buy, you can either purchase the individual components or you can buy the finished product. For example, if you want a cake, you could look up a recipe, buy the individual ingredients, mix them yourself and bake them in an oven. Of course, the larger the number of ingredients and the better their quality, the more they will cost. You also have to provide all the necessary equipment. This approach will cost the least amount of money but will require the most time and expertise. Or, you could buy a cake that meets all of your specific requirements. With investments, it is pretty much the same. You can buy the individual components, mix them yourself, put them into a portfolio and manage that portfolio. Or you could pay more and purchase a managed portfolio constructed to your specific needs and have someone manage it on your behalf.
The Fees Know what you are paying for When looking at fees, you have to know what you are paying for. In this discussion, we will not be discussing individual stocks and bonds, but rather collections of stocks and bonds known as mutual funds and ETFs (exchange-traded funds). The least expensive approach is to purchase individual mutual funds or ETFs, put together your own portfolio and manage the investments yourself. This means you need to know how to construct the portfolio that would best suit your own situation. You need to know about the different asset classes, what the appropriate mix of asset class is for your situation, and how to rebalance the individual components back to their original percentages as they change over time. Of course, there are trading costs (fees) involved in every buy and sell of these components. The more plain vanilla the investment, the lower the fee. Fees Our advisory fee for both our services and the services of Assante are charged according to the following fee schedule. The total of your fee-earning assets determines your fee (i.e. if your total fee-earning assets are between $500,000 $999,999, your fee on the total amount is 1%). Fee Earning Assets Fee $2,000,000+ 0.50% $1,000,000 - $1,999,999 0.75% $500,000 - $999,999 1.00% $250,000 - $499,999 1.25% <$250,000 1.50% For example, the market cap weighted S&P 500 may be the least expensive. But what if you did your research and learned that an equally-weighted portfolio would do better the price goes up. Or suppose you wanted to focus on dividend-paying equities the price goes up. For every extra tweak, the price goes up. How about currency hedging? The price goes up. How the MER is calculated The fees associated with a particular investment are grouped together and are known as the MER (Management Expense Ratio). The MER includes the fund s or ETF s management fee and operating expenses. They are paid by the fund or ETF, and are expressed as an annual percentage of the total value of the fund. The management fee is paid to the investment management company for overseeing the fund or ETF. Operating expenses include such things as bookkeeping and administrative fees, marketing costs, custodial fees, filings with the provincial securities commissions, legal fees, audit fees, and the HST. Obviously, the more responsibility that is given to the investment management company, the larger the fee. For example, if you want a managed portfolio composed of both stock and bond mutual funds or ETFs including Canadian, U.S., developed international and emerging market equities as well as income sources including government bonds, corporate bonds, high yield bonds, emerging market debt, real estate investment trusts and infrastructure including asset allocation, rebalancing and consolidated statements, you will pay more. Fees that are not included in the MER are the fees charged by the government-required trustee (not Assante) for RRSP & RRIF accounts, and the trading costs that the fund or ETF incurs.
Fee-based advisors All investment returns that you see on your statements are always net of fees unless you have chosen to have the fee paid directly from your bank account. As your investments grow in value, so does our compensation. However, the reverse is also true. When your investments decline in value, so does our compensation. We are fee-based advisors. We do not charge commissions, sales charges (loads) whether front end or back end or switch fees. All of our services, along with Assante s, are covered by the fee. For non-registered accounts, the fee is often tax-deductible. Insurance-based products such as life, critical illness, long-term care, and disability insurance have our fee embedded in the price. We offer insurance products from 15 different companies and look for the best solution at the lowest cost. Guaranteed lifetime income solutions have our fee embedded in their MER. Trustee Fees For client accounts held on the nominee platform, there is an annual trustee fee for RRSPs/RRIFs/LIFs. $125 + HST for the first account, $45 + HST for additional accounts. We pay the fees for those clients in the top two tiers. There are no account fees for TFSAs, RESPs, RDSPs and non-registered (open) accounts. There are other fees listed in the Assante fee schedule that are applied infrequently or in special circumstances. References 1. The Value of Advice Report, IFIC 2. Putting A Value On Your Value, 2014, Vanguard 3. Mind the Gap, Russel Kinnel, 2014, Morningstar
Yorkdale Rd. Bryan Deviney, CFP, CIM Senior Financial Advisor Assante Capital Management Ltd. Dufferin St Yorkdale Shopping Centre Yorkdale Rd. Allen Rd Assante office 1 Yorkdale Road, Suite 310 Toronto, Ontario M6A 3A1 T: 416-939-2000 x 210 F: 416-785-8000 E: bdeviney@assante.com Free parrking available www.devineygoodman.ca Founded in 1995, Assante Wealth Management has a long history of providing complete wealth management solutions to meet the needs and goals of Canadian families and businesses. We are one of the country s largest wealth management firms with over 750 professional advisors located in communities throughout the country overseeing more than $28 billion of assets under administration. Assante Wealth Management is a fully owned subsidiary of CI Financial, a leading national investment company with approximately $125 billion in total assets. Our advisors and their clients are at the centre of our business and are supported by the exceptional investment management team and wealth planning resources available through our sister-company CI Investments Inc. and United Financial, a division of CI Private Counsel LP. Be well-advised is our promise to you. This document is intended only as a general guide for the clients and prospects of The Deviney Goodman Team to help them understand the fees that are charged when they invest. Commissions, trailing commissions, management fees and expenses, may all be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the simplified prospectus and consult a professional advisor to discuss your particular circumstances before acting on any of the information above. Please also discuss the deductibility fees with your professional tax advisor and note that fees paid for, or on behalf of, registered accounts (including RESPs and TFSAs) are not tax deductible. Insurance products and services are provided through Assante Estate and Insurance Services Inc. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and is registered with the Investment Industry Regulatory Organization of Canada. Copyright 2014 Jeffrey D. Goodman and Bryan Deviney. All rights reserved 1407-1135 E (08/14)