A new way for high net worth investors to assess their adviser’s work

We're part of the way there in helping investors fully understand how their portfolios are performing.

Disclosure rules now require investment firms to provide personalized rates of return to clients, as well as the dollar amount of fees paid for advice. What's missing from the return disclosures in many cases is context. Great, you made 10 per cent over a one-year period. But how does that return compare to what everyone else made?

One approach is to use benchmarks like the S&P/TSX composite index or the FTSE TMX Canada Universe Bond Index to evaluate the components of your portfolio. But what if your Canadian stock market holdings don't match the TSX, with its two-thirds weighting in financial and commodity stocks?

For high net worth investors, one alternative is the no-cost Performance QuickCheck from Suggestus, which is part of a global investment consulting firm called Asset Risk Consultants. The QuickCheck allows you to compare your returns against those of similar portfolios managed by high net worth advisory firms. In total, Suggestus has collected over 130,000 portfolios in five major currencies, including about 7,000 in Canada. The portfolios employ all kinds of different investment approaches and securities, but there is frequently a bias toward Canadian stocks.

Using the QuickCheck is a simple matter of clicking on the CAD button – CAD is the financial industry term for the Canadian dollar – and indicating what percentage of your portfolio is in stocks. This information is then used to match your holdings against comparable portfolios. Next, pick the time frame you want to compare and add in your portfolio's cumulative return.

QuickCheck's performance reports tell you whether your returns are above the average for your peer group, at the average or below. If you're below average, QuickCheck suggests having a chat with your adviser or portfolio manager. Comparing returns to a peer group is just one way of assessing results, QuickCheck notes.

One further thing to note about the QuickCheck report is that it shows time-weighted returns, while the new disclosure rules require that investment firms show what's called a money-weighted return. The money-weighted view accounts for money you contribute or withdraw from your account. If your account is fairly stable, then there shouldn't be much difference between time- and money-weighted returns.