A reader recently asked for suggestions on how to invest in an ETF behind her adviser's back.
The problem is that she has lost faith in her adviser. "I don't feel sure about my investments or the adviser," she wrote. "I feel I just get some papers to sign about purchasing yet another investment, and I don't know why."
This reader has $30,000 saved and wants to "invest it in an ETF or something with lower fees." She wants to do this investing solo and asked for suggestions on how to proceed.
OK, here's one. Find a new adviser. Her current adviser seems to be acting more like an investment sales person than an actual adviser. A better adviser would be able to explain the process for choosing investments so the client understands. Exchange-traded funds might be used, or maybe mutual funds, direct holdings in stocks or mixes of all of these securities. The point is that the adviser takes the time to explain in a way that satisfies the client.
To many investors, ETFs sound like the answer to their problems with an adviser. ETFs are low cost, and the best ones are transparent in how they track a recognized stock or bond index. But many investors will find it overwhelming to jump directly from having an adviser to managing a portfolio of ETFs. The reason why it costs more to have an adviser is that you're getting the work of building a portfolio done for you.
Robo-advisers are a middle ground between being a DIY investor in ETFs and having a human adviser. A robo-adviser will manage an ETF portfolio for an all-in cost of roughly 0.75 per cent. Fees for an account run by a conventional adviser selling mutual funds might be in the 2- to 2.5-per-cent range. The Globe and Mail robo-adviser guide can help you see what options are available.
The reader with the $30,000 might want to invest that money with a robo-adviser to see how things go. If she's happy, she can transfer the account with her adviser. If not, she can search for a new adviser. The one sure thing is that the status quo isn't working.
Rob Carrick