In our last article, we wrote about the recent changes that have been made to your statements regarding the reporting of performance and fees.
We think these additions are very important because they ensure that you fully understand the returns you’re getting and the fees you’re paying for advice. That transparency improves our relationship.
Given this new focus on transparency, we wanted to address a concern we have that centres around mixed messages you may be receiving from the bank you deal with. We understand that it’s quite common to hear that the bank’s investment management fees are cheaper than the ones charged by independent advisors like ourselves.
In today’s article, we’re going to look at the similarities and differences between what we offer at LGK Wealth Management, versus what you might receive when dealing with one of the banks. In that comparison, we’ll look at the following:
- The investment management fees that you pay
- The breadth of investment opportunities available to you, and
- The level of personal attention that you receive
First, when considering the investment management fees that you pay, consider a typical mutual fund that gets purchased for your account. Let’s say, as an example, you own a mutual fund that has an MER of 1.8%.You’ll recall from our last article that MER stands for management expense ratio, and it is simply the cost for an investment company to run a mutual fund. It is calculated as a percentage of the money that the mutual fund is managing on behalf of its fund holders. Regardless of where you purchase that mutual fund from, the MER will always be the same. For example, if you have a $250,000 investment with LGK Wealth Management and you invest in the fund example above, then your annual cost will be $4,500. Of that $4,500, Manulife/LGK would typically share $2500 (1% of $250,000) while the fund management company would receive $2,000 (0.8% of $250,000).
Of note, if you were to buy that same fund at your local bank branch, the MER of the fund does not change. The way the advisor at the bank is compensated may be different; however, there is no reduction in MER.
The second area we’d like to look at is in the breadth of investments available to you. The bank you are dealing with will always offer you their bank’s product. Typically, those products are fine; however, at LGK Wealth, we are agnostic to which product we recommend. We only care about the best product for you and your financial needs, and we are 100% objective about it. We are also under no pressure to recommend a particular product to you.
Lastly, let’s look at the level of personal attention that you receive. We love what we do, and we take great pride in personalizing your portfolio. As events occur and markets grow or contract, we’ll often recommend small adjustments or rebalances to ensure your portfolio a) stays current, and b) remains well positioned to ensure that you meet your long term goals. At our competition, that personalization is often replaced by simplicity through the use of ‘wrap’ style solutions that package your portfolio up into an all-in-one solution. That approach embeds the rebalancing and adjustment process directly into the ‘wrap’ program and as a result, takes away from the personalized attention you receive.In other words, your portfolio is no longer ‘unique’ to you.
In conclusion, we are constantly evaluating the strategies we recommend, and the fees you’re paying for those strategies. Our approach is highly customized. We don’t cut corners and we don’t accept mediocrity. Given, our personalized approach to managing your investments, you’d think that our fees might be higher. But they’re not, and that’s not going to change. And you can take that to the bank.