Q&A: RRSP frustration

Question: About 10 years ago I had about $110,000 in my RRSP. I became a single mom and my finances changed considerably. I have not contributed any more than a few thousand dollars max per year since then.

I had expected that the interest from my funds would reinvest itself and although I wasn’t contributing I would see an increase over a ten-year period. (I understand the long term ups and downs.) Today, 10 years later, my RRSP is worth $87,000.

The first five years after I stopped contributing my advisor and I rearranged my portfolio a couple of times a year. The last three years I haven’t touched it I am not sure if my advisor gets paid each time we rearrange the portfolio. There is no statement that specifies how he gets paid and I don’t really understand front and rear end loads. I don’t know if his suggestions to redistribute my portfolio are for his benefit or mine. It doesn’t seem to be working in my favour. I have all the statements for the last 15 years and it seems that any growth I have gained was equal to what I contributed myself (a shoe box under the bed would have had the same result, maybe better). It seems that once you stop contribution to RRSPs they stop growing.

My home and RRSPs are the only big assets I have so I am eager to get some good counsel. I need to know what questions to ask. Is my advisor working in my best interest? Is there a better way to invest that money in other funds or real estate without penalty? – Susan C.

Gordon Pape answers: It may be time to switch to a new advisor. Certainly the current one hasn’t done you any favours. A net loss of that magnitude over a decade is more than enough to justify a move. You could have simply put the money into GICs and done much better.

I don’t know what was in your portfolio but based on the results it appears it was overweighted in higher-risk stocks or equity funds. A balanced portfolio that included a decent bond weighting would likely have done much better.

I suggest you interview three or four prospective new advisors. Be up-front with them. Show them the results over the past decade and ask what they could have done differently. Then ask how they would reconfigure the portfolio going forward. Also, be sure to find out how they are compensated. Make your selection after you’ve heard all the answers. Good luck.

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