Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

The questions continue to pour in so let’s tackle some of the most interesting.

Dump our adviser?

Q - For the past 20 years, my husband and I have had a financial planner at a private company, Aligned Capital Partners, Inc. He has taken care of all of our investments, including RRSPs. He charges a management fee of 1.13 per cent. When I calculated this over the 20 years we have been with him, I was aghast! I blame us for not learning enough about investing before we made the decision to go with this him.

Story continues below advertisement

The returns on our investments have been good as far as I know, but I’m embarrassed to say that I do not know for sure, and currently simply don’t have the time to go through all of our records.

My question is: if we “break up” with this adviser (and we would have no desire to go with any other independent financial investment company) and move all our investments to our bank (CIBC) to work with a financial adviser there, who doesn’t charge a management fee, what might the penalty be? Would the bank possibly pay this fee in order to get our money?

We have about 10 years left before we retire, and I am getting rather nervous that we might be making a big mistake by sticking with this adviser.

I’d really appreciate your advice on this because I would find it very awkward to broach this subject with him, especially as we have a good rapport with him and, silly as it sounds, I wouldn’t want him to feel bad! On the other hand, it IS our money! I would be very grateful to get your opinion on this. – Katherine F.

A – For starters, a management fee of 1.13 per cent is not out of line, presuming he does not charge you for trades and is buying F-series mutual funds. The key question is the net return you are receiving. This should be on the reports you’re getting. If not, ask him for the net return for 2019, the average annual rate of return for the past five years, and the average annual return since you started doing business with him. He should have those numbers readily available. That will give you a much better insight into how you’re doing.

What about switching to the bank? For starters, a CIBC adviser cannot buy you stocks, ETFs, etc. A bank is not a brokerage and is limited in the number of products it can offer. Their adviser will be pushing mutual funds, especially CIBC’s own brand, which will come with a much higher management expense ratio than the 1.13 per cent you have been paying. The adviser will probably earn a commission on those sales. If you’re not paying one way, you’ll pay another.

So, I suggest your first step is a meeting with your present adviser. Since you have a good rapport with him, he should be willing to answer all your questions honestly. Then, if you wish, have a meeting with CIBC. Ask exactly what investment products would be available to you and how the adviser is paid. You’ll then have enough information to make an informed decision. – G.P.

Story continues below advertisement

A safer investment

Q - I have a US$40,000 investment account. Right now, 40 per cent is sitting in cash, and I would like to put into something safer for a couple of years. What would you recommend for an ETF? Bonds, T-bills, high interest account? Thank you for all you do to let the average “Jill” understand investing and money better. – Marjorie B.

A – First, let me point out that there is nothing safer than cash, so I assume your question is really about getting a slightly better return at minimal risk. The first question is to ask your broker is whether the firm offers U.S. dollar high interest accounts and, if so, what rate they are paying.

Compare that with the results of a low-risk U.S.-based ETF, such as the iShares Short Treasury Bond ETF (SHV-Q). It invests in U.S. Treasury bonds with a term to maturity of less than one year. That’s about as safe as you can get in an ETF. This fund gained 2.33 per cent in 2019, but that was an outlier year. The average annual gain of 1.03 per cent over the past five years is more in line with what you might expect. There a management fee of 0.15 per cent.

If your cash is earning nothing now, these options will give you a slightly better return. But your account is not going to increase in value very quickly if you stay with this plan. – G.P.

Investing TFSA dividends

Story continues below advertisement

Q - If I reinvest a dividend in my TFSA, does that count as a withdrawal? – L.M.

A – It’s neither a withdrawal nor a contribution. It’s simply a transaction within a registered account, with no tax consequences. – G.P.

REITs and utilities

Q - Recently REITs and utility stocks have not performed well. I’d like to understand why this has happened.

What is the relation between the interest rates and their impact on stocks such as banks, insurers, REITs, and utilities.

What sectors are going to be the most hurt when interest rate start going up again? And what sectors will benefit? – Marcel B.

Story continues below advertisement

A - REITs and utilities are interest-sensitive securities. That means the market price will tend to rise as interest rates fall, and vice-versa. We saw this in 2019 when we experienced a big jump in the prices of those sectors after the U.S. Federal Reserve Board first put rates on hold and then cut three times.

Recently, the Fed has signalled that no further rate cuts are contemplated in the near future so prices of interest-sensitive securities have pulled back somewhat. I would not be too concerned about these price movements. These securities are normally held for income purposes. As long as the company is sound and is maintaining or raising its dividends, don’t worry about price fluctuations.

When interest rates rise, it’s a signal of a strong economy so economically-sensitive stocks will perform well. These would include railroads, airlines, manufacturing, and resource stocks. – G.P.

Why not use TFSAs?

Q - When you advised a young couple considering a home purchase in the next few years, you didn’t suggest putting as much as allowable into a TFSA. Why not protect any income from taxes while they accumulate savings securely for a home? – Scott F.

A – My advice at the time was to put the money into a high-interest savings account. If it can be tax-sheltered in a TFSA, so much the better.

Story continues below advertisement

However, the rates you see advertised for high interest accounts are not always available for TFSAs. For example, Laurentian Bank’s digital site is promoting 3.3 per cent on their high interest account on balances up to $500,000. But when I called to ask if this applied to TFSAs, I was told no, TFSAs are not available. EQ Bank, which is paying 2.45 per cent on their high interest account also does not offer TFSAs.

Motive Financial does offer TFSAs but the rate is 2.4 per cent, which is forty basis points lower than the 2.8 per cent they’re paying on their Savvy Savings Account.

What it all boils down to is that the best-paying high interest accounts don’t offer TFSAs or discount the rate they pay if you go that route. – G.P.

That’s all we have room for this week. If you have a money question you’d like me to consider, send it to gpape@rogers.com and write Globe Question in the subject line. I can’t guarantee a personal response, but I’ll answer as many as possible in this space.

Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies