Finances are a hassle. With CRA deadlines looming, it can be easy to get bogged down in jargon and paperwork, particularly if you’re focused on maximizing your returns. If you happen to also have multiple RRSP or other investment accounts, the headache is made so much worse.
Take Christine. Christine is an entrepreneur from Calgary who left a job in the public service to pursue her dreams of launching a startup. She paid into a group RRSP while working for the government, opened a self-directed RRSP account when she began freelancing and recently began contributions to a group RRSP through a coworking program. Christine now has three separate RRSPs at three separate institutions. And that’s just her RRSPs.
In today’s economy, this ‘story’ is becoming the norm, and the Christines of the world are too busy, disinterested or overwhelmed to sit down and sort out the best next steps for their financial future. So what’s the low hanging fruit that could ease her (and likely your) mind?
One word: Consolidation. Consolidating your investments is a small change you can make to simplify your finances. It might sound complicated, and there are many myths around the benefits of having multiple advisors, so let’s break it down. What does consolidating your accounts really mean for you?
One trusted point of contact
An obvious benefit of consolidating your accounts is that it allows you to have one trusted investment advisor as your single point of contact. This gives you the advantage of a unified personal wealth strategy, rather than dealing with conflicting advice or overlapping investment styles from two or more advisors.
The point where most people get stuck is in finding that one person. It’s not going to happen overnight, and chances are that you’re going to interview a few different advisors before settling on ‘the one’. But with the proper due diligence, it’s much less painful to find one quality financial advisor than to deal with a handful of mediocre ones.
When it comes to investing, diversification is the go-to answer for creating a low risk portfolio. It’s a way to level the playing field and protect yourself against an ill-timed decision or sudden obsession with a product or company. Thing is, what’s good for investing isn’t necessarily good for investment accounts.
A common argument for multiple advisors is that it ensures a more diversified portfolio. Fun fact: if you’re working with multiple advisors, chances are that you’re duplicating your investments in popular assets and industries without even realizing it. On the flipside, if you work with one quality advisor, they have can diversify your portfolio without duplication, to the extent that you want, with only one set of fees. Win, win, win.
Low fees, low stress
Speaking of fees, financial advisors charge an annual fee to manage your investments, based on a percentage of your assets. This annual fee is typically based on a sliding scale, with higher investments yielding lower annual fees.
Say you pay $100 annually with three different financial institutions; consolidating your assets would mean a cost savings of $200 per year in annual fees alone, not to mention the decreased transactional fees incurred if your advisor is trading stocks inside your investments. So really, it’s a simple math problem dressed up in complex accounting clothes.
Simplified financial life
We all lead busy lives. At the end of the day, we just want to know that our money is in safe hands. The last thing we want to do is keep track of several accounts and advisors, all with different strategies, emails, paperwork and passwords piled on.
Combining your accounts brings simplicity to your life, saving you valuable time and energy, and providing a clearer picture of your investments for tax planning purposes. What’s more, if you’re thinking about beneficiaries, consolidation is one way to simplify the process of adding or changing names to your accounts and will make life much easier should something happen to you.
More profit share
Servus Credit Union offers a unique loyalty program called Profit Share Rewards. The basic concept is the more banking products and services you have with them, the more cash back you’ll receive from Profit Share Rewards. Consolidating your investments can maximize the cash back you receive. This is money over and above the regular interest you earn on your investments.
Consolidating your accounts is relatively quick and painless. It does require up-front due diligence and paperwork to shift things around, but once you find your trusted advisor, they will help you through the steps.
At the end of the day, you need to do what’s right for you. While some people prefer to know their money is in multiple hands, others prefer a clean and comprehensive portfolio that they can track with ease. The key is to do the research and feel confident in your decision.
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