Have you been thinking about your investment accounts and wondering if things are managed the way you want them to be?
An important first step is to decide if you want to invest on your own or with an advisor.
The following are some things to think about in determining the best investment approach and if you should hire financial professionals to assist you.
Time
An important first step is to decide how much time and interest you have in managing your investment account(s) in addition to your other financial responsibilities, including running your business.
The investment strategy that requires the least amount of time is a passive one. This approach is one where you can select broad market Exchange Traded Funds (ETFs) that are widely diversified. These are investments that you can set and forget! Well not quite, but you certainly don’t have to monitor them constantly (but at least annually). This is the lowest time commitment option.
The investment strategy that requires the most amount of time is an active one. An active strategy is one that involves the ongoing buying and selling of securities. To be successful using this strategy sufficient time must be allocated to researching and evaluating the securities to be invested in, including (but not limited to) the long-term outlook for the investment, the financial information provided by the company you are looking to invest in and determining the right price to buy the security.
If you have an interest and enough time to commit to selecting individual stocks, remember you are looking to invest in good companies with a long-term horizon. If you do not have the time to commit to researching companies to invest in but want to own individual securities and not broad market funds, consider an investment advisor.
Cost
While your time carries a cost, this section covers the financial cost of investing.
A self-directed, passive strategy is usually the lowest cost option. The fees may vary between financial institutions, but usually carry the lowest account and per-transaction costs.
A self-directed, active strategy is likely to be the next in the fee hierarchy. Depending on your account size, fees can be reduced.
A managed, passive strategy usually carries a higher cost as you are engaging someone to give you some advice on your account and who will assist with selecting what they think are the best passive investments for you.
A fully managed, active strategy with a full-service firm brings tends to be come with the highest price tag.
When speaking with a potential advisor be sure to get a full breakdown on costs (trading fees, management fees, custodial costs, etc.) so you have a transparent picture to evaluate the value for money you are receiving.
Personal Temperament
Financial markets are volatile and this can impact individual decision making when emotions set in.
If you feel you may panic sell when markets are down or suffer from FOMO (fear of missing out) when a hot stock is in the news, then an advisor can help you to avoid knee jerk reactions to short term fluctuations and help keep you on focused on the long term.
Additional Services
This is the area where many advisors can add a lot of value and the type of additional services can range widely, however the three most common are financial planning, insurance and tax and estate planning.
Financial planning. An advisor will take a snapshot of your current financial situation, work with you to plan out your goals and recommend steps on how to reach those goals using your financial resources and where best to deploy them. The advisor can answer questions on your mind such as ‘should you invest via an RRSP or TFSA?’. The plan should be reviewed on a regular basis and anytime there is a big life change. This a very important element as it can determine factors like time horizon and required returns to meet goals which can impact your investment portfolio composition.
Insurance advice. Insurance professionals can identify risks in your life and how best to ensure any adverse events don’t have a negative long-term impact to you and your family. This can cover life insurance, long-term disability, investing using insurance products and insurance tax planning.
Tax and estate planning. This service can range from simple tax advice such as ‘don’t forget to make your RRSP contribution’, to complex tax planning including completion of tax returns for individuals, corporations and trusts as well as working with lawyers to draft wills. This service is typically only offered to those who have financial accounts to be managed worth more than $1,000,000.
If you can, find a firm that can you provide you with some or all of the above so that they can create a cohesive financial picture for you. If you decide to you use separate professionals, be sure that information is properly shared so that you are receiving the best advice from each professional who can understand and advise you based on your entire financial picture.
If you do decide to pursue working with a financial professional, knowing what services you are looking for as well as your investment style will help you find the right person.
As your investable assets grow so do your options. This also means that as your investments and the complexity of your financial life increase, so does the value in having an advisor. There are many great financial professionals at CAWEE who can assist you with your investments, financial planning, and insurance. Have a well-defined plan that includes some or all of these elements will build towards your financial success.
Jennifer A. Dewling, CIM®, CFP®
Principal
90 Adelaide St. West, Suite 800,
Toronto, ON M5H 3V9
t. 416.361.2807 c. 416.301.3832
genovaprivate.com
* This does not represent personalized investment, insurance, legal or tax advice and does not constitute an offer to sell or solicitation to purchase any products or services. If you need assistance prior to making any investment, insurance, legal or tax decision you should see advice from a qualified advisor*