Bank fees, monthly fees and management fees. Oh my! Over the last few years, fees have become a hot topic in the financial industry and rightly so. The situation reached its boiling point in March of this year, when Canada’s five big banks admitted to overcharging investor clients excess fees for more than a decade (http://www.cbc.ca/news/business/big-banks-osc-excess-fees-1.4180732). Some commentators gave the banks the benefit of the doubt, as the rest of the major Canadian banks came forward after the TD story broke. Great! The banks are attempting to fix the problem by providing clarity on client fees while at the same time, new regulations in the financial advice industry have been proposed. Except this isn’t enough! Greater awareness is positive however there needs to be immediate action.

This is where you, the consumer, come in.

The foundation for success with investments and personal finances in general, is to pursue fees. Whether you’re already investing or thinking of buying the products your bank teller is flogging, you have the right to a disclosure of fees. This is the ideal time to have a conversation with your investment/financial advisor that you may have been putting off for such a long time. Why am I paying so much?

To help guide your conversation, here are some tips:

1. Pay careful attention to the dollar amounts not the percentages

1.5% may seem like a small percentage but it is $7500 per year on a $500,000 portfolio. Seems like a lot of money right? Well, 1.5% is the usual fee for Fee Based accounts at many independent and bank brokerages.

In the US, there are plenty of articles which advocate for paying no more than 0.5% or $2500 for the same size portfolio. Even here in Canada, 1% is the maximum you should be willing to pay for investment management services.  We think less than one percent should be your target.

2. Beware of embedded fees

As a result of the recent news, many advisors are proactively moving from high cost mutual funds to low costs Exchange Traded Funds (ETFs) in Fee Based accounts. Sounds great, BUT a well designed portfolio of ETFs still has embedded expenses averaging 0.2% to 0.3% at best with custodial and trading costs added on. Your investment advisor is taking you in the right direction.  Help him or her get you there by not agreeing to pay more than one percent for the advisory services.

3. Press for additional services

Many advisors state that they offer valuable services which are included in their monthly fees. Services might include ongoing cash flow management, ongoing tax planning, tax return preparation, estate plans, insurance evaluations, pension calculations and so on. These are extremely useful when they are ACTUALLY provided. But many advisors do not provide them and just as importantly, many clients do not press for them. Ideally you want your monthly fees to include customized portfolios designed around your financial plan as well as services such as tax planning. Why should you be paying $7500 for regular calls to see if you have more money to invest?

You know exactly where your money is going when you purchase groceries or other essentials, so why should your personal finances be any different? Use these points when talking with your advisor or bank and NEGOTIATE!

For guaranteed unbiased financial advice, check out XY Planning Network Canada to find a fee-only financial planner in your area: www.xyplanningnetwork.ca