The Number One Rule is Never Assume Anything

When you’re investing, the number one rule is never assume anything. This caveat applies specifically to the status of your portfolio and the performance of your investment advisor. For example, if your advisor hasn’t called you in quite some time, it is hard to imagine that he is losing sleep over your portfolio — especially if your portfolio is valued at under $100,000.

If your advisor isn’t calling you, you should call him.

If the two of you aren’t communicating, how can you really know if things are going well? Account statements are fine, but they reveal nothing about “your” investing strategy, how and if your financial goals are being met, and even less about how your

portfolio performance measures up to a benchmark. If all you have to account for your portfolio are your account statements, perhaps your portfolio needs someone else to look after it.

Account statements are good for something — they provide a detailed list of your holdings. Check out your domestic versus foreign content. It is true that the Canadian market has had an extraordinary three years, rising in value almost 50%. However, it is also likely that the market has peaked. Meaning, advisors that are on top of things have been cashing in on this fantastic run for quite some time now. If yours hasn’t, well, you get it — it’s time for that serious conversation.

While you’re at it, check out your mutual funds and what kind of sales charges they have attached to them. I know from my broker days that advisors really liked funds with deferred sales charges (DSC) because of hefty trailers paid by mutual fund companies. True, our clients didn’t have to pay upfront commissions, and they would be fully invested from the onset.

However, if things in their lives would change, as they often had, the clients would also have no freedom to dispose of their holdings, at least not cheaply. But, DSC charges appear to be things of the past these days. More and more advisors charge upfront commissions of one or two percent. There are also more and more no-load funds out there.

Also, check your fixed income holdings. If your advisor has put you in bond mutual funds under the guise of diversification, well, that’s not enough. The reason is simple; most bond mutual funds are poorly performing rejects. Make sure you’re not stuck with them.

One last thing, if your account is fee-based, have your advisor calculate how much would you pay for all of your transactions had you been paying your commissions “as you go.” If that total ends up being much less than what you’re paying for your “all-in-one” account, then you obviously ended up with the shorter end of the bargain.

When you talk to your advisor about your portfolio and the service charges you are paying, ask him what his other services are, if he offers them. Many respectable advisors offer a palette of services, including retirement, tax and estate planning. If you are not getting those services, but still are paying an arm and a leg, then you’re burning your capital for nothing. If you don’t like what you see, perhaps it’s time to take your business elsewhere.