Investing

Investing Advice for In-laws - 5-6 years from retirement

  • Last Updated:
  • Mar 20th, 2019 7:25 pm
Newbie
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Feb 27, 2011
37 posts
13 upvotes
Ontraio
At the moment an account worth 100K, will get you up to $500 as a transfer in bonus to a self directed Firm. 100k account will have no annual admin fee and likely the transfer fee will be covered as well. If the securities are "transferable" they can be done "in kind" If not they would have to liquidated and that could cost you depending on the product types. To build up a 10 security portfolio will cost you about $100 tops and annual balancing, say the same as an example.

So overall you go from $2000 annual to $100 annual. An extra 1.9% return over what is being made today assuming a similar portfolio. The question is whether you want to actively/passively manage this. Even switching to Wealthsimple gets you .4% management fees under their Black service for a $1600 savings. The savings will decline over time as the balance drops due to the mandatory payments.

5-6 years from retirement doesn't mean they are drawing down the portfolio to zero, this portfolio may still exist in another 30 years. That is a lot of fees in the long run.
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Sep 1, 2013
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CdnMobi wrote:
Mar 17th, 2019 10:16 am
At the moment an account worth 100K, will get you up to $500 as a transfer in bonus to a self directed Firm. 100k account will have no annual admin fee and likely the transfer fee will be covered as well. If the securities are "transferable" they can be done "in kind" If not they would have to liquidated and that could cost you depending on the product types. To build up a 10 security portfolio will cost you about $100 tops and annual balancing, say the same as an example.

So overall you go from $2000 annual to $100 annual. An extra 1.9% return over what is being made today assuming a similar portfolio. The question is whether you want to actively/passively manage this. Even switching to Wealthsimple gets you .4% management fees under their Black service for a $1600 savings. The savings will decline over time as the balance drops due to the mandatory payments.

5-6 years from retirement doesn't mean they are drawing down the portfolio to zero, this portfolio may still exist in another 30 years. That is a lot of fees in the long run.
I agree with the numbers you put out - clearly the OP's father in law should move his money to a self-directed account to get the 1.6K to 1.9K annual savings.

As for the active/passive management question, I think it comes down to how much time the father in law wants to put into learning to be a DIY investor. I would encourage anyone to learn enough about couch potato portfolios so they could manage the money themselves and minimize fees. It really doesn't take much of an "investment" in time to do this. But human nature being what it is, I am realistic enough to understand that there are some people who will need to use Wealthsimple or similar services.
[OP]
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Feb 26, 2012
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Thanks for the input all, I will take this information back to the inlaws and present them with some options and see how they want to proceed.
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Feb 19, 2014
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5 years away from retirement, I wouldn't be more than 20-30% in equities or ETF's. They should be majority in fixed income. I wouldn't want to gamble with it right now, especially in this uncertain economy and in this jacked up market.

edit; Also, just wanted to add, if you're asking for this kind of investment advice, then I really don't think you're experienced enough to be giving them advice, i'm not trying to put you down, it's like another member said, you don't want to be responsible for their retirement fund when this market takes a big hit. Most people shouldn't even consider a self directed account because they will freak out when the next recession hits. The 2% you pay to an advisor is so they can calm you down when you're freaking out. It's easy for everyone to be a financial guru in this crazy bull market we've been experiencing.

Their portfolio allocation should definitely be more fixed income, especially considering their risk profile should be low.
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Aug 2, 2010
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BrianWS6 wrote:
Mar 16th, 2019 7:59 pm
I'd be all cash/fixed income/gold 5-6 years from retirement, with such a small retirement fund. In 5-6 years the equity markets may not have recovered in the event of a recession.
Exactly. There are not candidates for risk at all!
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eonibm wrote:
Mar 18th, 2019 10:30 am
Exactly. There are not candidates for risk at all!
That isn't necessarily the case. As OP has stated, they have a DB pension and other resources. Depending on their plans and needs, they may already have enough guaranteed pay outs that these funds are "extra." It may very well be appropriate to have these funds invested in higher risk equities depending on the needs of the inlaws

The main problem is that we have only the limited information OP has given us. We can only speculate as to what is appropriate. Hence why all the answers here are general.
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Apr 2, 2016
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OP, I would advise you to seek advice from a professional rather than from strangers on the internet.
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Jun 3, 2009
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CdnMobi wrote:
Mar 17th, 2019 10:16 am
At the moment an account worth 100K, will get you up to $500 as a transfer in bonus to a self directed Firm. 100k account will have no annual admin fee and likely the transfer fee will be covered as well. If the securities are "transferable" they can be done "in kind" If not they would have to liquidated and that could cost you depending on the product types. To build up a 10 security portfolio will cost you about $100 tops and annual balancing, say the same as an example.

So overall you go from $2000 annual to $100 annual. An extra 1.9% return over what is being made today assuming a similar portfolio. The question is whether you want to actively/passively manage this. Even switching to Wealthsimple gets you .4% management fees under their Black service for a $1600 savings. The savings will decline over time as the balance drops due to the mandatory payments.

5-6 years from retirement doesn't mean they are drawing down the portfolio to zero, this portfolio may still exist in another 30 years. That is a lot of fees in the long run.
nesburf wrote:
Mar 17th, 2019 4:29 pm
Thanks for the input all, I will take this information back to the inlaws and present them with some options and see how they want to proceed.
Sorry to break it up to you but some brokers like BMO IL don't count a locked in account as eligible for the cashback promotions. It is still better to transfer out to a self directed brokers to save on the management fees though.
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Feb 27, 2011
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cn_habs wrote:
Mar 18th, 2019 5:48 pm
Sorry to break it up to you but some brokers like BMO IL don't count a locked in account as eligible for the cashback promotions. It is still better to transfer out to a self directed brokers to save on the management fees though.
Some firms don't pay for all accounts, some firms do - It pays to read the fine print. No one says you have to choose one the that doesn't pay for your account type. BMO's transfer offers tend to be lower than some of the other banks anyways. At the moment for 100K they are offering $300, Itrade is offering $500 and no restriction on Account type in iTrades terms except cash optimizer. Other banks also are offering higher than BMO with little restrictions on type.

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