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Portfolio Strategy

A free checkup for low-cost investors Add to ...

Here's some free advice for you.

If you're interested in building a portfolio with low-cost mutual funds, you can sometimes get ongoing investment advice at no extra charge.

Wondering how much you should invest in stocks and bonds, or how much global diversification you should have? This is exactly the kind of free advice that is available when you buy funds directly from Leith Wheeler Investment Counsel, Matco Financial, Mawer Investment Management, Phillips, Hager & North and Steadyhand Investment Funds.

In no way is the help available from these firms a substitute for the full financial planning and investment guidance available from a quality adviser. The people providing assistance to clients at these firms have varying levels of training and accreditation, and you'll quite likely be dealing with them by phone without ever meeting in person.

But if you just want some assistance in building and maintaining a portfolio with some of the cheapest mutual funds around, then give these firms a look.

If you don't recognize these fund companies, it's because they're mostly independent players who in some cases focus on managing money for pension funds, foundations and such. They're all in the "no-load" category, which means clients can buy and sell with no upfront commissions or deferred sales charges.

A downside of dealing with companies like these is that they have higher upfront minimum investments than mainstream fund companies, especially when you buy directly from them instead of through an investment dealer. For example, PH&N asks for a minimum of $5,000 if you buy through an online broker; buy direct from the firm and you need to invest $25,000, although it can be spread through a number of different funds or through members of a household.

Mark Neill, head of PH&N Investment Services, describes the firm's advisory offering as being a compromise between do-it-yourself investing through an online broker and having a full-service adviser.

"We're in the middle," Mr. Neill said. "We're a blend of the two."

As with the other firms, full portfolio reviews are available from PH&N. And like most, but not all, PH&N will help you project your retirement income. You can deal with the firm's team of advisers by phone, face to face (at offices in Vancouver, Calgary, Montreal and Toronto), or by e-mail.

Mr. Neill said a typical client of PH&N's advice business would be a retiree who is taking more control of his or her investments. "This kind of person is saying, 'I want to get more involved here, but I know my limits.'"

Whoever provides you with investment advice, you should always ask about their credentials and whether their compensation is tied to products they sell.

Expect to see the term "investment fund adviser" used to describe the people at a mutual fund company who provide advice. This means they're licensed to sell funds and have completed a basic level of training about investing and financial markets. Beyond that, credentials vary.

At Leith Wheeler, the staff of four investment fund advisers all have business degrees and at least three years of experience with an investment firm. Two have the prestigious Chartered Financial Analyst designation, one is a CFA candidate and one has the respected Certified Financial Planner, or CFP.

PH&N's 25 advisory people range in qualifications from the Canadian Securities Course (CSC), an entry level designation in the investment industry, to much more substantial designations such as the CFP and CFA, the Personal Financial Planner (PFP) and the Canadian Investment Manager (CIM).

Advisers at Leith Wheeler, Matco, Mawer, PH&N and Steadyhand are, for the most part, on salary and receive no commissions or fees from the sale of their company's products. This suggests you'll get objective advice, although of course you'll only be discussing the fund company's own products.

The cost-conscious investor will find particular value in getting advice directly from these fund companies. At a big, mainstream mutual fund firm, the fees charged to clients include a big component that is channelled to advisers and their firms to cover ongoing service. Even while they're offering advice, the five firms we're looking at here basically don't have these so-called trailing commissions built into their fees.

If you use a PH&N adviser, you'll invest in the firm's ultra-cheap D series of funds and not a more expensive C series that pays trailing commissions to third-party advisers who sell it. The D series of PH&N Bond has a management expense ratio of 0.59 per cent, which compares to 1.14 per cent for the C version.

PH&N is owned by Royal Bank of Canada and it allows clients to buy RBC funds through its advisory staff. Not the mass-market version of RBC funds, but a D-series with reduced fees.

Matco Financial, a new Calgary-based company, makes F-class funds available to clients who buy funds directly from the firm through its advisers. F-class funds have trailing commissions stripped out and are generally available only through third-party advisers who charge a flat fee for their services. At Matco, though, you get advice and the F-class fund without an advice fee tacked on.

Use Globeinvestor.com to check out the funds offered by these companies, many of which are very solid. Some examples:

-Steadyhand Income: This balanced fund with a skew toward bonds has a management expense ratio of 1 per cent. The average MER for its peers is an utterly ridiculous 2.23 per cent. This fund has only been around since January, 2007, but its returns have been consistently well above average so far.

-Mawer Canadian Balanced RSP: A global balanced fund that contains all the parts of a fully diversified portfolio and has an MER of just 0.98 per cent. Low fees, consistently above-average returns.

-Leith Wheeler Canadian Equity B: A steady blue-chip Canadian equity fund that has beat the S&P/TSX composite index over the past one-, three-, 10- and 15-year periods; the MER is 1.52 per cent.

Exchange-traded funds are an obvious choice for cost-conscious investors, but mutual funds from Leith Wheeler, Matco, Mawer, PH&N and Steadyhand are not a ton more expensive to own. Throw in some free advice and you have a true investing bargain.

Would You Like Advice With That?

A small group of mutual fund companies that sell direct to the public offer basic assistance in building an investment portfolio. Here's a rundown:

Firm

Min. Account Size

No. of advisers

Compensation of advisers

Deal with the same adviser?

Can I view my account online?

Funds to choose from

Leith Wheeler Inv. Counsel

$25,000

4

Salary

Yes

Yes

8

Mawer Investment Management

$300,000

3

Salary

Yes

Upon request

10

Matco Financial

$5,000

6

Salary, bonus

Yes

Yes

4

Phillips, Hager & North

$25,000

25

Salary, bonus

Possibly

Yes

88

Steadyhand Investment Funds

$10,000

4

Salary

Possibly

Yes

5

Notes:

-Leith Wheeler, Mawer and PH&N allow you to spread the minimum account size among several funds, while Steadyhand's minimum is a per-fund amount.

-PH&N staff can receive bonuses based on exception client service, while Matco bonuses are based on sales, service and other factors.

-PH&N offers its own funds plus D-series funds from the RBC family as well (they have much reducted trailing commissions).

 

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