My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Wednesday, February 1, 2012

Multiple Accounts, Multiple Advisors, Minimal Returns

I recently read an excellent post by the Canadian Investor on the blog How To Invest Online titled ETF Allocation across RRSP, TFSA and Taxable Accounts.

In the introduction to this blog, the Canadian Investor provides a very insightful and important message: “The wise investor diversifies across different types of investments to maintain a portfolio asset allocation with the percentage breakdown specified to meet investment objectives. A fundamental principle is that though the portfolio may span many accounts it should be managed as a whole, not as independent pieces.”

What the Canadian Investor is implying above is, that many Canadians have multiple investment accounts from non-registered accounts to RESPs, to RRSPs to TFSAs and often these accounts are not managed as a whole, which can result in less than desired investment returns.

Effectively managing your assets across various accounts becomes a far more arduous task when you muddle the issue by having multiple investment advisors managing the various accounts. Many people seem to "accumulate" multiple investment advisors over time, for a plethora of reasons. The three main reasons I typically hear are:

1. This advisor is a relative (friend); I had no choice but to use him/her.

2. I need to spread my advisor risk around. I am concerned if I have all my eggs in one basket with one advisor and they screw-up, my portfolio returns will be disastrous.

3. I really have not paid attention. I have just accumulated different advisors as I purchased different investments and never gave much thought to the fact I now have multiple advisors.

Whatever the reason for people having multiple advisors, the situation is almost always dysfunctional. Many advisors work in their own silos oblivious to their clients’ other investments and, in many cases, there is no co-ordination or attempt to properly allocate and balance investments across all accounts, by the advisors.

If you find yourself in this situation, I suggest you consolidate your various accounts with one or two advisors. Alternatively, you can provide full disclosure to one of your advisors and have him or her inform your other advisors of their mandates within your overall portfolio allocation. This approach will put one advisor in charge and assist you in achieving proper diversification of your assets across multiple accounts and advisors.

In summation, you should review all your investment accounts to ensure you are managing them as a whole and in accordance with your overall asset allocation and portfolio strategy. In addition, if you are one of those people with multiple advisors, consider whether you should fire one or more of those advisors, and at a minimum, ensure one advisor oversees and quarterbacks your other advisors.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.