Expert advice for your RRIF

Many people find they don’t have the time, inclination, or ability to manage the assets in their RRIFs. Yet, especially if a RRIF is worth more than $200,000, this is no reason to let it languish in a low-return account or to switch to an annuity. The larger a RRIF, the more important expert preparation and implementation of an investment plan tends to be. The variety and complexity of today’s investment opportunities, combined with the explosion in information technology, require expertise and specialized knowledge. Even the most keenly interested person will find it impossible to keep current with all investment events and options.

Most financial institutions provide an excellent service that takes the task of managing your RRIF off your shoulders and shifts it to a professional money manager. This process, known as “discretionary investment management,” can be most useful. Unfortunately, this concept is not widely recognized or understood, and even those investors who are intrigued by the idea hesitate to act because of concerns about costs and loss of control. However, these fears are groundless for the most part, and they should not prevent you from investigatg this option further.

Think of it this way: Discretionary investment management is exactly the opposite of a self-directed RRIF, in which you are entirely on your own in making investment decisions. Under a discretionary management arrangement, those responsibilities are taken over by a professional who adjusts your account as circumstances warrant, based on overall objectives you set in advance during one or more planning sessions. These sessions are intended to explore in depth such factors as time frame, your tolerance for risk, and your need for income.

The portfolio manager will also be available for further discussion at any time, ready to change your investment strategy whenever you or circumstances dictate. In fact, if you enrol in such a service, you should certainly keep in touch on a regular basis to make sure the manager knows about pertinent changes in your life or needs.

Most institutions offering this service provide a high level of personal attention, as well as access to the expertise of their international team should you wish your portfolio to be invested in global securities. All investments are guided by the agreed-upon terms set out during the planning sessions. Your advisor will not consult (or bother) you about every transaction because you have given blanket approval for investment decisions within the specific parameters set out in advance.

A mutual fund RRIF is a form of managed portfolio that lies between a self-directed and a fully managed RRIF. The mutual fund managers run the fund, setting the asset mix and making all the investment decisions within the fund’s portfolio. Still, you or your investment advisor must pick the fund or funds for your portfolio.

With a fully managed RRIF, your personal money manager builds a custom-tailored portfolio that fits with your goals and circumstances. The portfolio is usually administered daily, and you receive quarterly reports showing your current asset mix and the market value of your holdings.

You will need to ask about costs, of course, but they are generally comparable to the administration fees charged by mutual fund companies and have the added advantage of being tax-deductible. (The fees on such managed accounts are considered by the CCRA to be carrying charges and thus are deductible for tax purposes. In contrast, administration fees on self-directed RRIFs are not included in this definition.) The fees are structured as a percentage of your portfolio’s market value, rather than per transaction, so the manager shares your interest in increasing your assets.

The amount of money you need to have in your RRIF (or, for that matter, in non-registered portfolios) in order to qualify for discretionary management varies among institutions. However, a minimum of $100,000 will often entitle you to receive at least a simplified version of management. Portfolios consisting of $200,000 or more usually entitle you to a full discretionary management account.