TD Waterhouse - Private Investment Counsel

[if.i.had.$1m.cad]

Custody fees dont exist...they are part of the overall management fee.

Depending on the institution, custody fees may be integrated into the management fee or may be separate. I provided a table above (it didn't format very well) that shows that many Investment Council services don't include custody fees as part of the managment fee (the No/Yes column in the table). As I mentioned, I can't verify the accuracy of the content, but I have no reason to doubt it. It was provided with the marketing literature.

[notnormal]

I'm scheduling an appointment with TD for next week. In the meantime I'm hoping to continue receiving everyone's input so that I can make a better informed decision.

After all is said and done, I hope to educate myself through this forum so that I can ultimately manage our funds on my own.

May I suggest that you also look at Private Investment Advice in addition to Private Investment Counsel? They have the same rates, but lower fees for advice. To sum them up in a sentence . . .

Private Investment Advice - Full brokerage service offering custom tailored investment advice and planning. However, you make all the decisions in the end, and have to approve every step.

Private Investment Counsel - "Leave your money to us, we'll handle everything for you and you don't have to worry about it". They make all the decisions in the end, abiding some broad guideline/profile .

You'll quickly outgrow Private Investment Counsel if you want manage your own funds. Whereas, with Private Investment Advice, you can start out at the Private Investment Counsel level, where the portfolio advisor does most of the managing/planning (though each step requires your approval) and then evolve to the point where you manage everything but can still get "professional" advice. Also you can link a non-advice discount brokerage account, which will offer even lower fees.

One word of caution, if your setting up appointments via the bank they tend to steer you towards Private Investment Counsel. Insists on also setting up an appointment with the Private Investment Advice. Tell the Private Investment Counsel/Advice exactly what you've told us and see how they respond. Do they try to steer you in another direction, or will they match your needs?

Can someone speak to . . . foreign currency fees:
- how are they typically handled: flat fee, percent of assets, ...?
- What would be typical in the industry, e.g .1%, $5000, ...?

Depends on the currency, but anything more than 0.5 cents on the dollar, and your being ripped off. Mind you most transactions tend to be much greater than $5000.

What exactly was the info that you were looking for?

Where they plan to put my money . . . I don't care about the charts/graphs and what they can do with my money. I want to see the specific details and non-template plan.

I dont think thats true. In fact, it seems their marketing almost doesnt exist. They seem to target high-net worth clients that can understand the exact plus's and minuse's and then hopefully see the value added.

Horse pucky! The first person you'll meet from PIC is a sales rep who knows nothing about investing. They'll also give you a bunch of pretty charts and pamphlets. Also they target high-net clients that don't know what they're doing or don't have the time to invest themselves. They'll always tell you that you can leave all the work and worry to them. If that's what you want or need then fine. Otherwise, look elsewhere.

[kcowan]

Pluses
- lower fees than mutual fund option

We had one of these with Merrill Lynch and their MER was very high. Things may have changed because we escaped in 2000, but I would suggest
- potentially lower fees than mutual fund option

Also we found them very dense, trying their best to avoid any knowledge transfer. Their results charts were designed to confuse and not impart any true performance data.

And they wanted all contact to be through the marketing guy, a glorified CSR, i.e
- too marketing-oriented

BTW great summary!

[DavidR]

Their results charts were designed to confuse and not impart any true performance data.

Isn't that the truth! My discount brokerage monthly statement shows book value, market value, and last month market value.
Yet a friend's 'full service' statement shows current month market value only. I guess they don't want him to know how he's doing...

[blonde]

What exactly was the info that you were looking for?

TRANSPARENCY.

BTW, trust me, believe me.

[kcowan]

I guess they don't want him to know how he's doing...

Pie charts - that was one of their favourites. Having had a stint in business planning, I knew all the tricks. Eventually I just fired them with great delight. Talk about financial pornography. Reminded me of PT Barnum.

[Bylo Selhi]

Speaking of which...

OSC targets shady marketing claims

Many investment counsels and fund managers are misleading potential clients, securities watchdogs say. Marketing materials for wealthy individuals, charities and pension plans sometimes make selective, unsubstantiated or baseless claims, the regulators say. So, the Ontario Securities Commission has spelled out new guidelines. If the recommended changes are not made "within a reasonable period of time," the result could be prosecutions or conditions on registration, the commission warns...

The commission tested marketing claims against the general principle that registered sellers of securities and investment advice must deal "fairly, honestly and in good faith with their clients."

Staff found:

Almost all that relied on hypothetical performance data, by testing a strategy against historical data or presenting returns of a model portfolio no client had held, did so in a way that was misleading.

More than half did not compare performance with a relevant or recognizable benchmark.

Two-thirds used terms like "superior performance" and "leading expert" without evidence.

One-third did not have written policies or procedures for reviewing marketing materials.

More than one-third quoted performance data that were no longer current...

That doesn't go far enough for Kelley Rodgers of Rodgers Investment Consulting, who helps groups and individuals choose counsel. "Hypothetical performance should be absolutely banned," she said.

[if.i.had.$1m.cad]

re: marketing-oriented, charts and graphs, sales reps., process, etc...

Here's a summary of choice phrases from each section of "the proposal" that was provided to me after my initial meetings. It was was 35 pages in all

The opener: sound judgement .... proven investment knowledge ... success... over 100 years
The relationship: carefully worded not to sound too much like the Certified Financial Planning process, but it is the CFP process, no distinguishing characteristics because they all follow a similar process
The service: comfort... safety... leave it to the professionals...
The philosophy: balance... commitment... superior returns... minimize risk... achieve goals... dynamic....
The expertise: research... management... fiduciary... world class... investment objectives...
The process: alignment... interaction... assessment... dynamics... long-range... tactical shifts... balance needs... diversification... economic dynamics... plus a nice diagram with "your objectives" in the center
The team approach: collaborative... judicious balance ... active and prudent... agile and deliberate... comparative advantage... disciplined manner
Meet the team: over 25 people dedicated to research/analysis... pictures of people with nice-sounding titles who I will likely never meet...
The why: superior returns... objective advice... tailored solutions... your priorities....
The approach: bottom-up approach... top-down review... blended...
The selection process: total universe... quality... attractive characteristics...
The fees - FINALLY,SOME MEAT : and a fairly straightforward explanation at that!
The financial consultant (the salesman): 15 years in the business and has only completed the CSC (Canadian Securities Course)...: NOT GOOD!
The portfolio manager: 15 yrs in the business, CIM (Canadian Investment Manager), CFP (Certified Financial Planner), working on CFA (Chartered Financial Analyst), Credentials seem OK, might be worth talking to
The outlook: a summary of current events with a financial slant, graphs and charts aplenty...
The performance: "balanced composite" comparisons with benchmarks broken down by cdn/us/foreign/bonds 1-2-3-4-5-10 year history and total return against benchmark. Not applicable to me since I'm not a "balanced composite". But the returns did seem acceptable for a balanced portfolio
The sample portfolio: a choice array of 55 stocks and bonds...
The guide (to reading your statment): fairly comprehensive with comparisons to benchmarks 3/6/9/12 months, 2/3/4/5/10 years, line items for fees charged, transaction details, percentage allocations by sector, asset class. Readable, useful reporting.

All in all, 35 pages of soothing, actioned-oriented phrases meant to increase the comfort level. Also, it's likely meant to increase confusion and dependency, and make comparisons difficult.
It all could have be summed up in a paragraph or two by answering the following questions:
- What are the Costs?
- What are the Services?
- What are the Returns?
- What are the Qualifications?

The only "hard data" in the entire proposal was the cost structure, but the report hinted at a number of potential pluses that warranted further investigation (e.g. the portfolio manager, the returns).

In the end, that's probably exactly what it was designed to do - to get you to the next meeting. That's not necessarily a bad thing: the portfolio manager attended the next one, actual portfolios matching my risk tolerance were reviewed, questions that I prepared beforehand were answered with accuracy, negotiation began, etc.

The marketing type who was the initial contact eventually gracefully exited, and now I deal only with the "techs" - the Portfolio Manager, the Financial Planner, the Estate Planner, etc.

If anyone's interested, I'll post more about the process, the pitfalls, and the "cast of characters"' that were encountered along the way.

[notnormal]

If anyone's interested, I'll post more about the process, the pitfalls, and the "cast of characters"' that were encountered along the way.

That can be summed up in two words "@ss kissing", until you meet the assigned portfolio manager one on one. Though, in my opinion, there are much better routes for those wanting to become DIY investors.

[blonde]

there are much better routes for those wanting to become DIY investors.

A DIYer has a choice...mega choices. Design/Develop a PROCESS...Meaningful METRICS and BENCHMARKING will dictate whether the decision is GO/NO-GO.

A DIYer using a defined process will be able to address and correct any flaws within the process thus continuous improvement has no choice but add dollars vs cents to the bottom line. DO NOT tinker with the process. The PDCA process must be taken seriously.

The longest time cycle is to make the first C$1000K, thereafter the cycle time is reduced mega for each and every C$1000K. WHY is THIS not a good thing?

STUDY the SYSTEM...do not be surprised to learn that a 'third-party' is most interested in transfering money to the 'third-party'. Why are there so many 'experts' in the business?...what is the trend? Who sets the rules to their processes? How does the work get done? Why is mega money devoted toward (R&D) developing a 'hand' which is quicker than the clients eye? Why are so many 90%ers motivated by slogans?...just to list a few questions...

BUYER BEWARE.

BTW, trust me, believe me.

[My Dream]

Ummmm...banker, you still have not answered the question of if you work for the bank in question. It is hard to consider your advise from all angles without this knowledge, please.

I agree. Although the information is very valuable, it's still important to know where it's coming from since it may be biased.

A DIYer has a choice...mega choices. Design/Develop a PROCESS...Meaningful METRICS and BENCHMARKING will dictate whether the decision is GO/NO-GO.

Sorry for repeating myself but I don't understand the lingo.

The longest time cycle is to make the first C$1000K, thereafter the cycle time is reduced mega for each and every C$1000K. WHY is THIS not a good thing?

Am I to understand that you're basically saying after you make the first million, the rest is easier to make if invested wisely? If that's the case, wouldn't that all be contingent on the rate of return...which is what this entire thread is about. Who can manage my money the best (ie. get me the greatest net return) until I am able to manage my own portfolio?

Though, in my opinion, there are much better routes for those wanting to become DIY investors.

Then please tell a person who barely understands the majority of acronyms in this thread what those routes are.

It all could have be summed up in a paragraph or two by answering the following questions:
- What are the Costs?
- What are the Services?
- What are the Returns?
- What are the Qualifications?

They will never tell you their costs until your portfolio has been developed, especially since there are always variables, and at that point you've basically signed over your money.

What are the returns? That's the million dollar question. There's no one out there that will guarantee a rate of return unless it's a GIC or a Canada Savings Bond etc.

You'll quickly outgrow Private Investment Counsel if you want manage your own funds.

That's always been the plan and will depend on how fast I can educate myself. Hopefully I can do it within a year and then I won't need them anymore.

Given that you've been with IG for 10 years, there may be some capital gains on disposition of your mutual funds that will attract tax.

That's a very good point and we've already received the numbers from IG. There will be a considerable amount of capital gains tax so we've already determined that the most likely path will be to divide the gains between this year and next year. We don't know of any other options.

I've tried to answer the questions that I thought were relevant and that I actually understood. We're scheduled for a meeting on Wednesday so I'll check back several times before then to see if anyone has additional information I can use to prepare myself.

[notnormal]

Though, in my opinion, there are much better routes for those wanting to become DIY investors.

Then please tell a person who barely understands the majority of acronyms in this thread what those routes are.

You'll quickly outgrow Private Investment Counsel if you want manage your own funds.

That's always been the plan and will depend on how fast I can educate myself. Hopefully I can do it within a year and then I won't need them anymore.

I've already listed one alternative, based on the given information, that would provide a smoother transition.

Reading Shakespeare's Primer would also be a good start.
http://www.shakesprimer.com/

[blonde]

Anyone wanting to prepare themself for the financial system, esp in this day and age with the Global Economy driving the System/s, wud do well by investing some time here:

http://www.gummy-stuff.org

BTW, trust me, believe me.

[if.i.had.$1m.cad]

They will never tell you their costs...

But isn't it your costs that you should be concerned about? Here's the line of reasoning:

Calculating the value proposition of the Private Investment Council option, assuming a $1M portfolio (makes the calculatin' easier).

INVESTMENT COUNCIL OPTION
Assuming 1% fee, all in
Year 1 Fee: $10,000 ($1m * 1%)
Value of Tax Deductability in my case: $2500
Year 1 Cost: $10,000 - $2500 = $7500

ALTERNATIVE DIY ETF OPTION
Assuming MER + costs of .4% on the portfolio (just a ballpark estimate, after reviewing iShares MERs, discount brokerage fees, etc.)
Year 1 Cost: $1m * .4% = $4,000

Year 1 Cost of Investment Council vs DIY ETF Portfolio
$7500 - $4000 = $3500 extra that I paid for Investment Council Option

So the question is:
Is the value received via the Investment Council option (IPS + Financial Plan + Estate Plan + access to "the team") greater than the $3500 in extra fees that I paid.

In my case, YES. And it is buying me the time needed to explore/assess my options, to determine if DIY investing is for me, etc. For others, maybe NO.

The giant leap of faith here is whether their active management style will beat the passive ETF approach. Their historical returns seemed to indicate that it could, and so far so good.

All this being said, Year 2 will be a whole different scenario with respect to the cost/value proposition, and will be more difficult to justify...

[adrian2]

Value of Tax Deductability in my case: $2500

Don't forget that you're not exactly apples to apples if you just deduct the tax savings on one side of the comparison; MER's, mutual fund costs, brokerage fees are all future tax deductions, meaning they all make future capital gains taxes smaller. The more correct way would be to adjust MER's et al by the present value of future tax savings.

I know this is the wrong forum to discuss this, but wanted to make the point.

[if.i.had.$1m.cad]

MER's, mutual fund costs, brokerage fees are all future tax deductions...

Thanks for that input, Adrian.
I think you're referring to the Adjusted Cost Base(that's a little beyond my depth currently), correct? Do you think it changes the value proposition substantially?
Is the MER extracted by an ETF each year added into the cost base?

[yielder]

Their historical returns seemed to indicate that it could, and so far so good.

Be sure that you know what you are looking at. Are these returns for model portfolios? Or are they actual returns for client accounts? If so, do they include clients who have left? Are the returns net of all expenses?

[adrian2]

MER's, mutual fund costs, brokerage fees are all future tax deductions...

Thanks for that input, Adrian.
I think you're referring to the Adjusted Cost Base(that's a little beyond my depth currently), correct? Do you think it changes the value proposition substantially?
Is the MER extracted by an ETF each year added into the cost base?

All the costs I've listed make the current value of your holdings smaller. If you were to liquidate your position today (or at any future day), your capital gains tax will be smaller than the hypothetical situation of none of the listed costs existing.

OTOH, it's not a "tax saving" I'd be actively pursuing.

To answer your question whether the value proposition is changed substantially: it all depends on your holding period. Many investors say that'll hold for the long term, if that's true and they hold "forever", the present value of future tax deductions is relatively small. OTOH, if you're more like the typical investor which sells after 1 or 2 years, the present value of the future tax deduction is more like 90-95% of it.

[DavidR]

Is the MER extracted by an ETF each year added into the cost base?

Not exactly.
If the ETF holds bonds, the MER is deducted from the interest income. The investor receives (for example) $3.50 of taxable income instead of $4.00. So effectively you are getting a tax deduction for the $0.50 of MER.

For an equity fund, the MER is deducted from dividend income and realized capital gains. If the MER is larger than those amounts, then they take it out of the NAV of the ETF.

[My Dream]

It would appear that we've decided to go with TD Waterhouse, for a couple of reasons.

We feel that the fees will be a lot lower then Investors group since they were not only charging there fees but we were also paying MER fees on the mutual funds. TD will have no MER charges at all.

Based on the fact that we are constantly getting lost and confused within this thread we are in no position to do our own investing at this point in time.

In conclusion, we have decided to try them out for one year and base there returns against something like the TSX. In the mean time it will be my mission in life to become as educated as I possibly can with the help of this forum and in one year decide at that point whether we will withdraw all or a portion of our portfolio with no redemption fee and do our own investing.
I truly appreciate everyone's input in this thread.


How does that sound to everyone?

[if.i.had.$1m.cad]

Be sure that you know what you are looking at. Are these returns for model portfolios? Or are they actual returns for client accounts? If so, do they include clients who have left? Are the returns net of all expenses?

No the returns that I examined were from client accounts with a risk profile similar to mine, I didn't think of asking for ones of clients that left, very good point. The returns are reported before fees, but I specifically had to ask this question. To their credit, it was noted in the "Guide to reading the report".

[if.i.had.$1m.cad]

How does that sound to everyone?

All in all, a prudent decision I think.
Perhaps I was drawn to your thread because my circumstance is so similar to yours.
After much soul searching, I simply realized that I didn't know what I didn't know. Hence some caution was in order, even at a price.
As for the future, I'll continue to prowl the boards in the elusive quest for blond's PROCESS.

[yielder]

No the returns that I examined were from client accounts with a risk profile similar to mine, I didn't think of asking for ones of clients that left, very good point.

You don't want the returns of the clients who left separated out; you wanted the combined returns of all clients including those who left. That avoids any survivorship bias.

[Dennis]

KNOW YOUR EXIT COSTS. I got burned a number of years ago by one of the big banks.

[if.i.had.$1m.cad]

KNOW YOUR EXIT COSTS. I got burned a number of years ago by one of the big banks.

Could you elaborate a bit?
Was the service similar to an investment council?
How did the bank justify the exit costs?
What types of exit costs were there?
Did they amount to much?