Father’s portfolio a concern

Question: I am concerned about my father’s portfolio weighting. When I encouraged him to invest about 10 years ago, he had a balance of money market funds, strip bonds, Canadian, U.S., and international equity funds, all within his RRSP. He is in his late 60s, with a full military pension.

However, when he visited us during Christmas he informed me that he took heavy loses in the last couple of years. I was shocked to find out that over the last few years he had moved into a 100 per cent equity position including 15 per cent in science and technology. To say the least, I am disappointed with his financial advisor. How can a person in a situation like this rebalance a portfolio keeping in mind that interest rates are already at very low levels? – W.L.


For starters, it seems to me that a serious discussion with the financial advisor and his/her supervisor is in order. A 100 per cent equity portfolio for someone of your father’s age does not appear to represent responsible financial planning. I think that your father (or you) needs to ask hard questions. If the account has been mishandled, you may find that the brokerage firm is willing to make some stitution.

^Going forward, it’s clear the account has to be rebalanced. That has to be done within the context of today’s realities, low interest rates and all. However, there are still opportunities available on the income side of the portfolio.

Normally for someone of your father’s age I would not recommend that the equity side exceed 40 per cent of the total portfolio. Generally, the focus should be on conservative stocks or mutual funds. Value-oriented equity funds with a history of low volatility would be a logical fit.

The science and technology sector has been strong in the past year and he may have recouped some of those losses. But such a heavy weighting does not appear to be appropriate going forward.

That said, the person in the best position to restructure the portfolio is a competent financial advisor who will take into account your father’s age, income needs, and risk tolerance. If his current brokerage firm can’t offer that, he may want to consider moving the account elsewhere. – G.P.