With a crazy stock market, very low interest rate and competition among banks and brokers rising; many individuals are shopping around and select the best offer for a single with one institution. What is the end result? You have an ING savings account, 1 Visa, 1 Mastercard and 1 Amex, you have your bank account at one bank but you got your mortgage through a mortgage broker and you don’t even know where your actual loan is held. You also have a online brokerage account for your own trades, a part of it is manage with a broker or a financial planner and your RRSP is with your best friend.
By going from one institution to another in order to get the best deals possible each time, you end up with dealing with 5 to 10 financial institutions and you will only get what you are looking for: cheap deals. However, there is a way where you can get much more than deals and you will still have good financial conditions.
#1 Savings fees by consolidating
Since new clients are not growing in trees, banks are now trying to increase their product per client. Therefore, they are more than willing to offer good lending conditions, paying down the notary, decreasing investment management fees or offering a better interest rate on your checking account in order to keep your business within their doors. I recently met with a client that would save more than $2,000 simply by consolidating his business with one institution. Since we can’t guarantee investment returns, we can at least play on what is certain: fees! Another point is that your power of negotiation for future product will increase accordingly.
#2 Better understanding of your financial situation
A good financial advisor should not only be there to do a quick sale but also to provide his clients with solid and personalized service. By knowing your entire financial picture, he will be in a better situation to make you save on taxes or to manage your money differently. For example, if you hold $30,000 in your ING account for emergency purposes and you still owe 30K on your mortgage, a good advisor will suggest that you pay down your mortgage (since you are probably paying 5% compared to 3% (taxable) on your ING account) and you setup a home equity line of credit form emergency purposes. However, he will never be able to suggest this strategy if he doesn’t know that you have the ING account!
Even if you receive your financial statement by emails, you still receive 5 to 10 of them every month. If you have a financial question, you might not even know who to call! Having one advisor make things much easier to understand you own situation. If you are able to have only one contact point for all your questions, this would help you out in your retirement planning for example.
#4 Getting a real plan done
If you are interested of having a retirement plan, the best solution is to consolidate all your assets with one institution. The major flaw of plans is the fact that you have to work with expected returns. However, if you hold your investment with two to three different firms, they may duplicate your stocks or funds and decrease your diversification. Therefore, your expected return is even harder to assess.
#5 Avoid duplication
This is a major point that I see all the time. What is the point of having 3 different mutual funds (or ETF or stock portfolio) that tries to beat the same index? Duplication will increase your risk by decreasing your diversification and will probably increase your management fees as well. Chances are that the 3 funds don’t have the same MER’s and therefore, two of them are unnecessary. However, if you receive your statement separately, you might never realize that!
In the end, the key factor if to find a reliable financial advisor that will help you out reaching your goals. Once it is done, you should definitely consolidate your assets with this person.
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