Meet a few advisers before picking one

The stock market environment remains volatile and many people have sent me comments and questions about how to move their portfolios to a new adviser.

I would caution investors on making any quick changes and selling stock at this time. Remember the key is to maintain a well-diversified portfolio, which includes bonds, cash and high quality stocks. Having a good adviser who has your best interests at heart is definitely the key to weathering future market uncertainties.

If you are looking to make a change, please make sure to do your homework and find out what the firm and the new adviser’s value proposition is. It goes without saying that you should interview more than one and make sure you find a good fit.

Now let’s talk about fees. There are two types of fee structures — transactional or fee-based.

Many people use direct investing options these days to avoid high adviser’s fees and we are seeing an increased shift with millennials who simply don’t see the value in having an investment adviser. As more funds transfer into the hands of these new investors, advisers and brokerage firms may need to shift their thinking about their future fee structures. Many bank financial planners typically are paid a base salary with a commission matrix based on how they grow their book of business and bring on new clients. Typically, fees are preset based on the mutual fund you choose for your portfolio, ranging from one to 2.5 per cent.

Investment advisers are generally paid differently and on straight commission making them highly motivated to ensure you make a profit for which they, in turn, are compensated.

I have seen adviser fee-based services range from 0.75 per cent all the way up to three per cent.

Some advisers act as personal bankers for ultrarich clients. Hence I can see the higher fee structure. But for most of us we do not need someone to pay our bills and handle our budgets, so if you are paying more than 1.5 per cent for a fee-based portfolio, you may be paying too much. If you have different separately managed accounts, your adviser may increase their fee up to 1.8 per cent.

Bottom line, fees are all over the map and vary from one adviser to another.

Do you feel that you are getting your money’s worth on your fee-based portfolio or would you prefer a transaction-based portfolio? Is your adviser a valued partner that you are willing to pay for, and most importantly are you satisfied with their services?

It is always a good idea to periodically check out the competition, talk to your friends and see what they pay. Only you will know what feels comfortable to pay for investment advice. Christine Ibbotson is author of Don’t Panic: How to Manage Your Finances and Financial Anxieties During and After the Coronavirus and the bestselling book How To Retire Debt Free & Wealthy. askthemoneylady.ca