Not happy with Sovereign program

I’m at the point of converting my RRSPs as I reach 69. I have been in the Sovereign Investment Program handled by RBC Dominion for a number of years, sticking with my adviser through thick and thin (mostly thin). I haven’t been overly happy with my returns and wonder if you could give me some advice with respect to the Sovereign Program and if it would be a good RRIF investment. Also, where could I check out the program? – J.M.

Gordon’s answer: All the major brokerage firms offer plans like the RBC Sovereign Program. The details may vary but in general here’s how they work. You complete an investor profile which is designed to determine your priorities, risk tolerance, etc. On the basis of the results, your assets are distributed among several pooled funds which cover all the major investment categories: Canadian equities, U.S. equities, international equities, fixed-income, money market, etc. You pay an annual fee which will vary depending on the asset mix that is selected. The higher the percentage that is invested in equities, the higher the fee charged and this could be seen as a built-in bias towards encouraging investors to put more money into stocks than is tru appropriate, although the profile report should correct this.

I have had personal experience with the Sovereign program and did not find it to be satisfactory. A parallel portfolio that consisted of securities chosen by me and my broker did much better and eventually we pulled all the money out of Sovereign. I have no way of knowing how similar plans offered by other firms shape up because the performance numbers of all the pools are not published anywhere for the public to see and compare. This to my mind is one of the great drawbacks of these programs; they lack transparency.

If you are unhappy with Sovereign, I suggest you arrange a face-to-face meeting with your advisor. Discuss your concerns and explore alternative approaches with him that would be more suitable for your RRIF. Remember that in a RRIF, safety and income are the top priorities. The portfolio should be constructed with that in mind.