PUTTING THE PLAN IN MOTION
We see a lot of inefficiencies when reviewing portfolios elsewhere. Some examples are:
- Fee too high – and more than investor thought they were
- Asset mix inconsistent with plan
- Every separate account looks the same regardless of tax treatment, cash needs or time frame
- Taxes not taken into consideration
- Overall portfolio always looks the same regardless of current economic outlook or changes to personal situation
“The Portfolio Approach”
All of your accounts are viewed as one big portfolio and managed in a similar fashion to a pension plan or large endowment fund. TFSAs, RRSPs, corporate accounts, regular investment accounts can all make up part of your portfolio but you need to know that what is good for one account type is not necessarily good for the other.
It is also interesting that more often than not, we see all these various accounts managed in the exact same way. Same asset allocation and same exact holdings. Let’s look at an example:
$2mm portfolio. 5 separate accounts. 25% exposure to US equity is deemed appropriate as per risk and objectives.
$2mm x 25% = $500 000 / 5 = $100 000 to US equities in each of the 5 accounts OR
The same overall $500 000 to US equities is managed in the one account where it makes the most sense based on taxes, cash flows, etc.
Which is likely to be more efficient and get better results in the end?
$100 000 managed in 5 separate places or $500 000 managed in 1 place?