Q&A: Should I Dump My Financial Adviser?

Gordon Pape offers his advice to a reader who’s contemplating a split with her financial adviser.

Q – For the past 20 years, my husband and I have had a financial planner at a private company, Aligned Capital Partners, Inc. He has taken care of all of our investments, including RRSPs. He charges a management fee of 1.13 per cent. When I calculated this over the 20 years we have been with him, I was aghast! I blame us for not learning enough about investing before we made the decision to go with him.

The returns on our investments have been good as far as I know, but I’m
embarrassed to say that I do not know for sure and currently simply
don’t have the time to go through all of our records.

My question is: if we “break up” with this adviser (and we would have
no desire to go with any other independent financial investment
company) and move all our investments to our bank (CIBC) to work
with a financial adviser there who doesn’t charge a management fee,
what might the penalty be? Would the bank possibly pay this fee in
order to get our money?

We have about 10 years left before we retire, and I am getting rather
nervous that we might be making a big mistake by sticking with this
adviser.

I’d really appreciate your advice on this because I would find it very
awkward to broach this subject with him, especially as we have a good
rapport with him and, silly as it sounds, I wouldn’t want him to feel bad!
On the other hand, it IS our money!

I would be very grateful to get your opinion on this.  —Katherine F.

A – For starters, a management fee of 1.13 per cent is not out of line,
presuming he does not charge you for trades and is buying F-series
mutual funds. The key question is the net return you are receiving. This
should be on the reports you’re getting. If not, ask him for the net return
for 2019, the average annual rate of return for the past five years, and the
average annual return since you started doing business with him. He
should have those numbers readily available. That will give you a much
better insight into how you’re doing.

What about switching to the bank? For starters, a CIBC adviser cannot
buy you stocks, ETFs, etc. A bank is not a brokerage and is limited in
the number of products it can offer. Their adviser will be pushing mutual
funds, especially CIBC’s own brand, which will come with a much
higher management expense ratio than the 1.13 per cent you have been
paying. The adviser will probably earn a commission on those sales. If
you’re not paying one way, you’ll pay another.

So, I suggest your first step is a meeting with your present adviser. Since
you have a good rapport with him, he should be willing to answer all
your questions honestly. Then, if you wish, have a meeting with CIBC.
Ask exactly what investment products would be available to you and
how the adviser is paid. You’ll then have enough information to make
an informed decision.  —G.P.

Do you have a money question you’d like to ask Gordon? Find out how to submit it here and then check out our Money section regularly to see if it was chosen for a response. Sorry, we cannot send personal answers.

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