When most people think of costs, the first thing that usually comes to mind is a management fee. While we agree that this is one of the costs, in many cases, it may not be the highest.
At Assante, a key part of our service is integrated wealth management. We do not believe you can review and create your investment strategy in isolation of the other components of your wealth, including tax planning, estate planning and risk management.
We believe these additional services can result in significant tax savings which in turn can put more dollars in your pocket. A comprehensive approach will provide you and your family with the peace of mind that all your wealth related issues have been considered.
There are two other costs that you need to look at closely when choosing an advisor – the tax cost and the opportunity cost.
Taxes can eat up ~50% of your income earnings and anywhere from ~25% - 50% on your investment earnings. Over time, without proper planning and without taking advantage of tax effective investment structures such as corporate class, this cost can be significant.
As advisors who focus on maximizing the after-tax return, we believe we can add a lot of value to our clients. Supported by an in-house team of accountants and lawyers we work proactively with your professionals to ensure that any relevant tax planning is addressed. This is not a one-time event, but rather is ongoing as tax laws and personal circumstances are always changing.
The third cost is the potential opportunity cost from having chosen the wrong advisor; one with lesser skill who may in turn implement strategies that result in your sustaining greater financial loss. This could be as a result of this advisor recommending investments that do not meet your risk profile, or by him or her following a market-timing strategy. Worse yet, he or she could be more of a facilitator than advisor and therefore will make quick reactions and change a portfolio in a down market - when in most cases the best (and usually least expensive) strategy would have been to stay with the plan.
How high could this opportunity cost be? If you look at the Dalbar studies from December 2011, investors (and sometimes advisor behaviour) trailed the market by 4.32% per year. Put another way, an investment of $500,000 over the past 20 years would be worth only $992,974 based on the average investor return - versus $2,249,836 with the index, or with a disciplined advisor. That’s a cost of $1,256,863. Ouch.
As a client of Assante you can have confidence that you went through a refined process that resulted in an Investment Policy Statement. As a result of our defined processes for investing and monitoring your portfolio you can be confident that this plan is also one which is specific to your risk profile and long term goals, and over time should achieve the returns you need.
Yes, cost matters. Our role as your advisor is to ensure we minimize all your costs and ensure you ultimately receive good value for what you pay.