Thursday, October 23, 2008

Nice idea, but....

When you read as much as I do about personal finance, you see a few constants. The first is that you should never buy loaded mutual funds from a financial 'advisor' because they have an inherent conflict of interest. In fact, the constant advice you hear is that if you are going to buy mutual funds at all, they should be no load mutual funds with low management expense ratios, purchased from either an online discount brokerage or through a fee-based financial planner, one with a certified financial planner designation if possible.

So when my Edward Jones advisor contacted me this week to tell me he could not keep us on as clients due to not having an Alberta licence (we met him in Ontario), I was kind of excited. I had signed on with this gentleman because I felt I could trust him as a person. And don't get me wrong. He did well. But he did have me in all service charge mutual funds and they were lagging the index. Besides, being as far away as he is, it wasn't really working out. Here was my opportunity to start fresh. My idea was to find a fee-based financial planner and purchase my funds through QTrade, the top ranked online discount brokerage that charges nothing for buying mutual funds.

Easier said than done. In Peace River, there are no certified financial planners except one that only does tax planning. In Grande Prairie there are some, but they all work for full service brokerages, that is, they're paid by the commissions they receive from selling you loaded mutual funds. OK, broaden search. There are some nationwide that will service clients in Alberta. But here's the kicker. I think I'd rather pay the high management expense ratios on my funds than pay the kind of fees these guys want. $2000-4000 a year was the range of quotes I got for a full financial management arrangement.

Holy moly. Not that it would not be worth the money, but for someone that only invests $8400 a year, that is like 50% of my investment. The highest MER I had in any of my funds was 2.35%. I have one last lead with a lady in Grande Prairie so we'll see. But for now, it looks like I might have to go it alone. It looks like fee-only financial planning is only for the big boys with millions of dollars in assets. What a shame.

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