Chris, Scott and I have had ample opportunity to see what’s going on out there in investor land as we’ve each had a chance to work with a number of our new clients.

We have done enough portfolio reviews and account setups now that we can make a few general observations about what we’ve seen (without betraying any client confidences). As you’d expect, there are a few of my opinions mixed in for good measure.

• Asset mix is OK. We’ve been pleasantly surprised that the asset allocation in most of our new clients’ portfolios has been reasonably appropriate. All the portfolios we’ve seen have had solid exposure to foreign equities.
• Portfolios are structured to defer taxes. With a few exceptions, we’ve also been pleased to see that the fixed income investments have been put in registered accounts. When clients have a separate investment account, it has usually been focused on equities.
• Yes, too many funds. With some clients, Chris and I have had to sort through numerous funds, many of which do the same thing. We haven’t seen 29 funds yet (RRSP Nightmare: Too Many Funds in Your Basket), but needless duplication is still common. We’ve suggested that the client focus their holdings on fewer funds or products.
• Fees...as clear as mud. I won’t say that clients are oblivious to the impact fees have on their returns, but in many cases they couldn’t tell you what they are paying to their other providers. Also, having gone through a number of different brokerage statements now, I don’t blame them. It doesn’t say anywhere what they are paying. To find out, they have to ask that awkward question – What fees do I pay you?
• Redemption fees? What redemption fees? Nothing makes investors more mad than finding out they hold mutual funds with a ‘deferred service charge’ (DSC). Some of them know the drill and accept it, but a majority of the people we’ve talked to weren’t aware of potential charges if they wanted to move their money. We end up being the bearer of bad news. So far, it’s the thing that makes investors most angry and serves to undermine the advisor relationship.
• You’re too big a client to be buying DSC funds. The other observation we’d make on this topic is that many of the clients we see are too large to ever have been put in a DSC product. These are accounts that pay the advisor very well because they’re big. Even so, the advisor has put the client into DSC funds. I think it’s just greedy. In these cases, I’ve reminded the investor that he/she is a big client of the advisor and should not accept this practice. When they buy funds, they should be buying the cheaper front-end load versions and in most cases, should insist that the load be waved.
• Indifferent attitude towards advisors. Some of the people we sit down with need an advisor. We can provide some of what they require, but they still need more help beyond that. What we have seen so far is an indifference towards advisors. In our skewed sample (they’re seeing us for a reason after all), the client isn’t getting attentive, well-rounded advice. This isn’t surprising – there won’t always be a fit – but I feel very strongly that if an investor needs advice and is paying for it, they’d better be very happy with what they’re getting.

I recognize that these observations don’t come from a statistically sound research project. But it’s not anecdotal either. There were lots of one of’s that came up in these meetings that I haven’t noted. As I said at the beginning, we now have a broad enough experience such that we’re seeing some trends develop.