Q&A: DIY Money Management

A reader is paying 1.75 per cent to his financial adviser and wonders if he should save that money and do it himself.

Q – When I retire in three years should I manage my own portfolio? Right now I pay 1.75 per cent to my RBC financial adviser. If my portfolio gets less risky I believe I will need less advice. Paying $8,750 a year on a $500,000 portfolio seems like a lot of money if there is not much risk. Could I have your thoughts on this? I feel my financial knowledge would be medium. – C.S.

A – For starters, check to see what you’ve been getting for your money. What has been the average annual net return (after deducting the 1.75 per cent) on your portfolio over the past five years? If it has been better than 6 per cent, your adviser has been doing a reasonable job and you should think twice about dumping him.

Unless you plan to invest all your money in GICs, even running a low-risk portfolio takes time and knowledge. For example, do you know what percentage of assets will be held in each of the key groups: cash, fixed income, and growth? Do you know what stocks to buy? What bonds or bond funds? Can you set up the portfolio to generate the cash flow you need? If you can’t answer these questions, then you may wish to leave the decisions to the adviser.

One option is to leave half the money with the adviser and manage the rest yourself. See which portfolio performs better over the next three years and then make a final decision. – G.P.

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