Questions for financial experts and their RRSP game plans

A few weeks ago on a flight, I read an article in The Globe and Mail entitled Four experts offer their RRSP game plans.   The premise of the article was to disclose the RRSPs of four certified financial planners; strategies that Canadian investors might consider for their own portfolios.  To be honest, I was a little surprised by the personal strategies of some of these financial planners.  Maybe that’s why personal finance is personal.

In any event let’s review what they told us (in quotes from the article) with my questions and comments for these planners that follow (in italics).  Maybe you have some questions for them as well?

Profile # 1 – Mark Coutts, President, Coutts Financial Services Inc.

is “…almost exclusively mutual-fund based in this portfolio….”

Mark Coutts, why mostly mutual funds in your portfolio?  In the article you highlighted the CI Signature High Income Fund (with a management expense ratio of 1.60%).  I don’t dispute this has been a star performer since inception (9.83% return) but out of the thousands of mutual funds Canadian investors have available to them, who could have selected this one and foreseen that success?

Profile # 2 – Teresa Black Hughes, Financial Advisor, Rogers Group Financial

“Working with a financial adviser, she has added some U.S. stocks that now account for about 20 per cent of the equity portion, with 20 per cent from Canada (including some exchange-traded fund), 10 per cent in emerging markets (especially in Asia) and 10 per cent in gold and precious metals mutual funds.”

Teresa, why work with another financial advisor?  Maybe for unbiased help?  Also, I wonder if you’d advise most Canadians to hold 10% in precious metals?

Profile # 3 – Dean Owen, Partner, Cherry Financial Services Inc.

“70 per cent equities (mostly segregated funds and some mutual funds); 5 to 10 per cent fixed income and the balance in real estate funds.”

Dean, why hold segregated funds at all?  These are high-prices products.

Profile # 4 – Susan St. Amand, President and founder, Sirius Financial Services

“She holds no equity mutual funds, preferring to work with her adviser in selecting a diverse mix of stocks, including dividend-producing banks stocks, to achieve her goal of an annual return of 6 per cent, including inflation.”

Susan, like my question to Teresa, why work with another financial advisor?  For unbiased help?  Also, why keep your dividend-paying bank stocks in your RRSP?  (You are investing in a tax-advantaged securities in a tax-deferred account).

I wouldn’t necessarily follow some of these strategies above which is why personal finance should be tailored to the individual; as defined by their financial plan.  Maybe that’s the hidden message here from the experts all along.

I’m sure some experts would not agree with my portfolio, holding broad-market Exchange Traded Funds (ETFs) and mainly U.S. stocks in my RRSP.  Or would they?

Do you have any thoughts on the RRSP strategies of these experts?  What do you agree with or disagree with?  I look forward to your comments including any comments from the CFPs to share more details about their strategies with me.

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22 Responses to "Questions for financial experts and their RRSP game plans"

  1. I prefer where your money is allocated.

    I also think that if I were a Ford salesman who owned a couple of Toyotas instead, I’d keep quiet about it.

    As for the advisors needing advisors…well…if they want to drum up business for themselves, they couldn’t do much more damage.

  2. @My Own Advisor
    Found it, over at the passive income earner:

    In the scenario I ran:
    after 15 years, mutual fund beats seg fund with no market crash.
    After 15 years mutual fund the same as seg fund with a market crash of -35%.
    After 15 years seg fund beats mutual fund with a 40% market crash, but the mutual fund recovers and beats the seg fund again only 4 years after that.

    I should consider running a variety of scenarios and graphing them.

  3. The seg fund benefit is that after a period of time your initial capital is guaranteed. Which sounds cool except that these guarantees normally come at the cost of higher fees.

    So, are the guarantees worth the fees? The answer is almost certainly NO – even for the elderly or risk adverse.

    I ran the numbers – they’re in a guest blog post somewhere out there – and the savings you generate with lower fees on mutual funds beat the guarantees in everything other than very extreme cases.

    1. I hear ya Glenn. While your capital is guaranteed (the insurance part of the product) the capital growth is limited because of the high money management fees. I don’t get why a young financial advisor would ever consider such products, but I guess some advisors know better than I do and are willing to open up their portfolios to the Globe and Mail to prove it.

      Let me know if you find your blogpost Glenn, I would be happy to share it!

  4. @My Own Advisor
    Thanks for having me. I always enjoy reading your posts 🙂

    I guess I should’ve read the original article. It was my impression from your comment on seg funds that they should not be used under any circumstances, which I disagree with. If you meant it isn’t suitable for Dean, then I agree.

  5. I also read the same article last month and I was surprised at the “expert” choices as well. I think I have an explanation: If you were a financial advisor that recommended mutual funds and seg funds to your clients, would you announce in a national newspaper that your RRSP is full of ETFs and individual stocks? I don’t think so. I think you would have to eat your own cooking.

    1. @Smithson,

      Ha, uh, ya, I thought about that as well.

      If your thesis is correct then the G&M article is full BS and has mislead people. Not good but yes, it’s possible that might have happened but I’d like to think they were are truthful.

  6. Segregated funds have a place in people’s portfolios, especially the elderly and risk averse. Sure they have fees even higher than mutual funds, but they provide guarantees that is unavailable on all other investments that many people find valuable. For example, maturity and death benefit guarantees

    1. Hey Brian,

      Thanks for the comment, nice to have you here!

      I recognize the elderly, I know some elderly folks use these products, but Dean Owen is age 44. Not 84 🙂

      Dean also sees the need for “growth and value” using his words from the article. I don’t see how segregated funds provide either with such high fees over time.

  7. I see nothing wrong with holding dividend paying stocks in an RRSP assuming there is no non-registered account investments occurring.

    If there is, however, them yes, that’s dumb.


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