A New Service for Do-It-Yourself Investors

In the June issue of MoneySense, I wrote a feature that profiled three Canadian families who wanted to overhaul their investments and start fresh with low-cost ETF portfolios they could manage on their own. The idea for the story came about after Justin Bender and Shannon Dalziel of PWL Capital in Toronto approached me last December with an offer for charity: in exchange for a donation to the Centre for Addiction and Mental Health, they offered to help budding Couch Potatoes put together an investment plan and build ETF portfolios in a discount brokerage account.

The idea turned out to be hugely popular with readers—not only did Justin and Shannon get more inquires than they could handle in December, they received another wave of requests after my MoneySense article appeared. This isn’t too surprising, since very few fee-based investment advisors offer services for DIY investors. And while financial planners are happy to put do-it-yourselfers on the right track, many are not licensed to even recommend specific funds, let alone help you actually build your portfolio.

Now Justin and Shannon have decided to offer their DIY service to other index investors. For a one-time fee, they will:

  • clarify your short-term and long-term financial goals
  • determine an appropriate asset allocation, based on your required rate of return and risk tolerance
  • assist you in reducing or avoiding deferred sales charges on your current mutual funds
  • suggest the most tax-efficient accounts for your investments (RRSPs, TFSAs, non-registered)
  • design a custom ETF portfolio and assist you in  making the necessary trades to implement it in your online brokerage accounts (including currency conversion)
  • provide a rebalancing schedule you can use to maintain the portfolio

The service is available to investors across Canada, as most of the work can be done by phone and email. However, please keep in mind the following limitations:

  • Investors should be in the accumulation stage of life—that is, building their wealth rather than drawing it down in retirement.
  • They must have no more than $500,000 in investable assets.
  • Investors must have relatively uncomplicated situations: business owners, US citizens, or others in special circumstances require additional planning that is outside the scope of this service.
  • The planning advice will pertain to liquid assets only (stocks, bonds, cash) and not rental properties, cottages, or similar investments.
  • Clients are responsible for collecting and supplying their personal financial information (assets, liabilities, pension details, RRSP contribution room, etc.). Justin and Shannon will provide downloadable forms and checklists to help.

The cost for the service is $2,750 (plus HST or GST). That assumes you already have a discount brokerage account and any funds you want to transfer from other investment advisors have already been moved there. If you need help with this step, too, Shannon will set up the new accounts and handle the transfers if the client agrees to make a tax-deductible $500 donation to the Centre for Addiction and Mental Health.

I suspect that some potential DIYers will think the fee sounds high. For what it’s worth, while I was working on the MoneySense feature I saw first-hand the extraordinary amount of effort it takes to do this properly. All of the families who worked with Justin and Shannon agreed they could not have done it on their own. One of them wrote the following:

“I was feeling overwhelmed and intimidated with the DIY process by the time I found Justin and Shannon. They broke the transition down into manageable chunks, provided frequent contact and encouragement, offered understandable explanations to all my questions, never made me feel pushed or hurried into anything, and left me feeling confident that I will be able to maintain my new portfolio on my own. Their service was invaluable to me.”

Think about this way: if you have as little as $150,000 in high-cost mutual funds, you’ll recover the cost of this service in one year or less, and you’ll save thousands of dollars going forward. You’ll also avoid the costly mistakes that many new DIY investors make and get the confidence that your Couch Potato plan is on solid footing.

To learn more, contact Justin Bender at jbender@pwlcapital.com, or (416) 203-0067.

Disclosure: PWL Capital is an advertiser on Canadian Couch Potato. However, I do not receive referral fees from any financial advisor.

25 Responses to A New Service for Do-It-Yourself Investors

  1. Slacker July 9, 2012 at 8:57 am #

    As a former newbie DIY, I lost over $1500 in foreign conversion fees with TD Waterhouse. I sure wish someone had pointed me to the right direction.

  2. Justin Bender July 9, 2012 at 9:05 am #

    @Slacker – great point – also a great reason for using RBC Direct Investing when trading U.S.-listed ETFs – you can easily buy DLR on the CAD side of the account, immediately sell DLR.U on the US dollar side, and consecutively purchase your U.S.-listed ETF (i.e. VTI or VXUS) – without the need to call RBC, journal securities, or wait until settlement.

  3. Francis July 9, 2012 at 9:39 am #

    That look like a great service but think the price is probably out of reach for most of the people that need it. Almost 3000$ that a hard sell for me. Maybe I am wrong but I think most of the advice you get for this can be all found in this blog for free.

  4. Canadian Couch Potato July 9, 2012 at 10:19 am #

    @Francis: There’s no question the service is not right for everyone. But I think what many avid blog readers forget is that not everyone has the same level of interest or skill when it comes to making the switch to being a DIY investor. I have encountered dozens of readers who enjoy the blog and understand most of the theory, but they have neither the time nor the confidence to actually pull the trigger and implement the strategy. If you have been working with an advisor for many years, it can be very intimidating, and mistakes can be expensive.

  5. tony de thomasis July 9, 2012 at 11:36 am #

    Hi Dan,
    RE DIY and getting advice and paying for it etc
    First of all please ask an advisor if the fee is tax deductible as to me it may not be investment counsel fees – if ADVSIORS are not doing the actual investing what deduction would invetsor claim it under?
    if an investor requires very little work, there are many advisors who would charge 0.5% or less per year – after tax that might be around say 0.35% net
    on $100,000 that is net $350/yr
    so a DIY investor might save say 0.10% to 0.35% re difference on trading fees, etc
    so are DIY doing it themselves because they like it (then ok) or becasue they are actually outperforming (do they kep records?)? Consider:
    S&P500 20 yr returns are approx 8%
    average investor returns are approx 4%
    add back in any fees of say 2%/yr which brings it up to 6%
    where has the other 2% gone??
    like in driving, WE ALL THINK WE ARE ABOVE AVERAGE DRIVERS

  6. Jon Evan July 9, 2012 at 12:08 pm #

    “left me feeling confident that I will be able to maintain my new portfolio on my own.”
    It has been my experience with DIYs that this is the most difficult part (especially with the CP strategy and it’s inherent weakness of relatively high volatility). Assessing risk tolerance is the most difficult part because of its dynamic nature and its why when left on their own many DIYs abandon the strategy when their portfolios tank. I’d be in favour of continuing with an annual fee to guide rebalancing and handholding in times like these :)!

  7. Canadian Couch Potato July 9, 2012 at 12:14 pm #

    @Tony: I do not believe that the fee for the DIY service would be tax-deductible, as it is for planning rather than investment counsel.

    As you know, I think many (probably most) investors would be best off using an advisor who followed a disciplined passive strategy and charged a reasonable annual fee. This service is not designed for people who are thinking about using an advisor. It’s for people who are convinced they want to put in the required effort to be DIYers, but just need some hand-holding at the beginning. That’s why it is aimed at people with relatively small, uncomplicated accounts, not retirees who are drawing down large portfolios and have significant tax issues to deal with, etc.

    I’ve always been impressed that your practice accepts accounts of as little as $100K for a 1% annual fee. Unfortunately, most other fee-only advisers have much higher minimums and/or higher costs.

  8. Justin Bender July 9, 2012 at 1:07 pm #

    @Tony – as an advisor myself, I clearly see a huge benefit of working with a professional. For investors with more modest sized accounts, your firm seems like a reasonable place to start (your investment philosophy seems very similar to my own).
    I have thoroughly enjoyed the time I have spent working with do-it-yourself investors. I don’t feel the investment industry gives them enough credit. With the right process, tools and education (and a helping hand), I think they would surprise most advisors.

  9. Justin Bender July 9, 2012 at 1:12 pm #

    @Jon Evan – thank you for your comments. I agree that assessing an investors’ “willingness” to take risk is an extremely important aspect of the process. Their “need” to take risk is also an important consideration – the ultimate goal is to reduce their equity allocation as much as possible (so that they are less likely to panic during downturns). This was one of the hardest (and most time-consuming) aspects of the service when we were working with the MoneySense investors.

  10. Michael James July 9, 2012 at 5:10 pm #

    I’m curious about the upper limit of $500k. Is it that they don’t want to talk to anyone with more than half a million dollars, or is it that the fee is higher in this case?

  11. Andrew July 9, 2012 at 5:48 pm #

    This is a great idea. The fee is not too high. Its a big deal to take very large sums of hard saved money and invest it entirely DIY even having done a lot of research so I can see how this kind of service could be a bridge toward more DIY. Consider a $250K balanced ETF index account (half way to 500K). All in the ETF fees and trading are probably 0.5% a year, maybe a bit less in some instances. This is $1250. Upfront holder pays $2750 for consultation. After 5 years a checkup is done for $1500.
    Advice fees are then averaging only about (or less than) $500 a year so total fees are just $1750 a year. This is just 0.7% overall in fees – a bit less really if you have a tax advantage from it. An advisor may want 1.5 to 1.75% a year to manage even an ETF portfolio this size these days or about twice as much (3750 to 4375). Makes the most sense the larger the account but still is cost effective because advisors seem to want even more than this with a smaller account. I was surprised to learn an advisor might want at least 1% in addition to the ETF annual management fees considering the amount of work involved in the CP strategy.

    If anyone knows an advisor who would charge considerably less (less than 0.5%) please indicate who because I know someone who is not comfortable doing their own trades and might use the service at this rate.
    That 0.8 to 1% of additional performance adds up, esp. over long periods of compounding. A 4% return over 20 years is 128%. With the 1% fee its just 86%.

  12. Justin Bender July 9, 2012 at 7:00 pm #

    @Michael James – the offering was intended to help investors with more modest sized portfolios (who we would normally not be able to assist because of our relatively high minimum). Having said that, we have already started working with some larger investors in a “hybrid” arrangement – normally we would help them set up discount brokerage accounts for their registered assets (usually holding fixed income), while managing their non-registered assets through discretionary PWL accounts. This helps to reduce their overall fee and makes the majority of their PWL management fee tax-deductible. It also allows them to have access to DFA funds (which aren’t available through discount brokerages) while allowing us to add value through year-round tax-loss harvesting and rebalancing (and continuing to hold their hand through the downturns). Anyone interested in this type of arrangement may contact me as well if they’d like.

  13. Canadian Couch Potato July 9, 2012 at 7:01 pm #

    @Mike: PWL Capital’s usual minimum account size in $500K, so this service targets people who would not otherwise be eligible clients.

    @Andrew: Glad you agree that implementing a DIY strategy is, for a great money people, not as easy as it may sound. It obviously makes no sense for someone to use this service with a five-figure portfolio, but for a mid-life investor who is tied up in overpriced mutual funds and unsure where to go from here, the benefit can be huge.

    I am not aware of any advisor who charges less than 1% unless you get into the millions. And as you point out, that 1% is on top of the fund MERs, so the full cost of using an advisor can be 1.5% or more. But I would be careful about saying that fee is high “considering the amount of work involved in the CP strategy.” That’s making the mistake of assuming that you are paying an advisor to pick investments and actively manage your portfolio. Advisors who use passive strategies have a very different value proposition:
    http://canadiancouchpotato.com/2011/09/30/when-should-you-use-an-advisor/
    http://canadiancouchpotato.com/2011/05/09/do-indexers-need-an-advisor/
    http://www.moneyville.ca/article/977647–what-should-you-expect-from-your-advisor

  14. Joe July 9, 2012 at 11:04 pm #

    “I am not aware of any advisor who charges less than 1% unless you get into the millions”

    According to the following article, John DeGoey, associate portfolio manager with Burgeonvest Bick Securities in Toronto, is charging 1.4% of the first 250k, and then 0.6% for assets over 250k. I’m not aware of any other advisor with fee less than 1% for the first million.

    http://www.theglobeandmail.com/globe-investor/personal-finance/etfs-spurring-shift-to-fee-based-advice/article545003/

  15. SterlingF July 10, 2012 at 10:42 am #

    I put lots of time and effort (probably over 4-5 months straight) into reading this blog and some of your recommended books before I was able to work up the courage to set up my accounts and switch over to DIY investing. This service isn’t for me because I’m past that stage as I have figured out my asset allocation and am comfortable with making online trades. I’m also under $100K so the price is too high but in a few years when I have $250K+ I think it would be worth having somebody go over everything with me again.

    Right now I’m in “set it and forget it mode”. I’m making bi-weekly contributions and that’s about it. I want to make some changes but I’m saving them for a the future. I want to move from Global CP towards Complete CP, make my taxable account more tax efficient with swap type funds, and have a shift towards dividend investing as I get closer to retirement. These things I still want help with but I don’t have the time right now and I’m pretty sure I’ll just be posting lots of questions on here when that time comes.

  16. Andrew July 10, 2012 at 1:07 pm #

    For a 500K account a 1% fee is $5000. For a 1000K, 1% it is $10,000. How can the larger account require $5000 more work in a year – especially if it is index funds.

    If 1% is a good deal then the advisor is working 50 hours a year at a whopping $200 an hour. If an advisor is spending that much time on a couch potato portfolio with custom research their internet connection must still be dial up.

    The solution above where the client opens a discount broker account and manages fixed income on their own makes a lot of sense because lots of older people are mostly fixed income. I know an elderly person in her 80s who was offered to manage just a portfolio of GICs in her RIF for a 1% fee by a big bank investment management arm! This is gouging people who do not realize the implications.

    In a low return world the future for the investment advice industry is probably hourly fee based. If the returns were 10% plus then 1% has more of a marginal effect on bottom line. 1% fees in a 4% world hurts performance over long periods when it may not be necessary for many. An hourly fee puts the value proposition front and centre without ambiguity. People will start to expect value as is happening in real estate. Certain industries used to have access to proprietary information to create imperfect markets for their services which resulted in very high fees. But now some companies in the US are now able to offer financial advice, and management, for far less because they are using info tech to drive down overhead costs and balance a lower fee with the ability to access and manage more clients, combined with simple rules based portfolios built of index ETFs. The iPad with Facetime is the new client meeting room.

  17. Oldie July 12, 2012 at 11:25 pm #

    @StirlingF: I am interested in your experience; you say you put in 4-5 months of dedicated reading of this blog and recommended books, but now you’re past that stage and are in the “set it and forget it part”. Were you a rank novice before the 4-5 months?

    I was a complete novice 1 month ago, believing that my past 35 years of depending on my mutual fund advisors was the rational decision for a “know-nothing” kinda guy. Now, having discovered the theory and information behind Passive Index Investing, I have been intensively following this blog and reading recommended and associated texts and references, and I feel I am totally committed to the process, but I haven’t yet got to the stage of opening direct trading accounts and buying ETF’s. But I’m close, and confident I can do it when I’m ready, and feel readier every week.

    My interest in your disdain for the advisor service is out of personal self interest. My understanding of the difficulties that “Most Investors” have is firstly the belief that it is possible to beat the market either by individual stock picking or diving in and out of asset categories hoping to time the market; and secondly, if they have any belief in the first point, to sustain that belief through the scary times when asset values crash. Well, all of us following this blogsite should have got past the first problem, but I also understand, as a reality concerning human emotion, the second problem is a huge practical problem. The advisor obviously is not needed to help you through the first problem, but we’re not crashing yet — are you confident you won’t need any hand holding then? As I said, I’m just comparing notes; I think I will be confident enough to bear up against market crashes, indeed my understanding of the theory is that it will happen, just that we don’t know exactly when. But can anyone ever be totally certain that he/she won’t panic just like every one else? Obviously I’m rooting for you, as I’m trying to follow in your footsteps!

  18. Oldie July 12, 2012 at 11:39 pm #

    @Andrew:

    Following your math, I see you make a good point. I think if you’re paying for good advice and the hours that are put in by your advisor, you should not begrudge the professional his fee. So, as a percentage of a small portfolio, the somewhat high percentage may look high, but translated into dollars and hours of work (hopefully knowledgable work), is probably worth it.

    However, as the value of the portfolio goes up. The actual amount of work does not. Perhaps there is the intangible pressure of being partly responsible for the higher funds in play, but, really, the work is the same, and being a Couch Potato Portfolio, actually is trivial, once you have analyzed the Client’s needs and life trajectory, which you should not charge again for reviewing the same facts annually. So, as a percentage, the percentage should really drop, and I mean really really drop, to reflect the minimal amount of additional work, if any, and perhaps a percentage allocation seems inappropriate from my perspective, as the dollar or hour/year figure will stay static, or even drop for a large portfolio.

  19. SterlingF July 13, 2012 at 1:31 am #

    @Oldie: Before the 4-5 months of reading I wasn’t a complete novice. The 3 advisor’s I had spoken with had all said that I knew more than most clients they deal with and so they went into more depth with me b/c I wanted to learn. I would read up on articles and I used to have a work friend that I would chat a LOT with about money and investing (we shared an advisor) and that was largely were I learnt most of my stuff back then. On a scale of beginner to expert, I put myself in the middle under “knowledgeable”.

    I thought that my advisor was doing a really good job with me but once I found out about Dan’s blog and kept reading and reading it was VERY clear to me that I knew more than my advisor did…about diversification specifically. Even before I found the blog I was reading articles that talked about diversification and I attempted to switch some things up with my advisor. I felt better for the time but looking back with what I know now…we weren’t even close. I invested with him into 100% equities in 5 mutual funds (@ 2.74% MER ehhk!). After we “diversified” I was 88/12. I was very lucky that I invested with him in March 2009, just 3 weeks after the lowest, so that allocation proved to be very profitable but I wouldn’t do it that way again if I had to go back.

    The whole “beat the market” mantra I hear lots of people say advisor’s promise was never the case for me. I don’t recall that being said and it never really crossed my mind to “beat the market”…just to do well.

    Now that I am in “set it and forget it” mode, I do feel confident that I will be able to make it through a market slump. I have too….b/c I fully expect there to be a few. I’m 30 so my investing horizon is 25-60 years! Plus, I know the asset allocation I’ve decided on and that’s it….I will force myself to stick with it.

    I think the best advice I can give (or more so Dan’s advice) is to start simple. That is way easier said than done though. I wanted to start out with the core4 in my RSP and taxable account but even with that there were more decisions that I had to make than I thought. For instance:
    – Asset allocation: My risk tolerance was moderate/high so I went with 70/30.
    – ETF’s or Index funds? I was investing large enough lumps sums to make the commission worth while so that was an easy one…ETF’s (I also use index funds for my biweekly contributions).
    – Hedged vs Non-hedged vs US ETF’s? This was a big one, but reading Dan’s blog and the Canadian Capitalist really helped. I ended up going with US ETF’s and non-hedged.
    – Since I chose US ETF’s that lead me to learn about Norbert’s Gambit for currency conversion.

    Just in those alone there is enough reading. I find bonds to be the most confusing/complex things on here so I’m choosing to ignore all the extra chatter for now and I’m sticking with XBB.

    PS…read Dan’s book (updated version coming soon I believe) “The Guide to the Perfect Portfolio”.

  20. Oldie July 13, 2012 at 2:54 am #

    @StirlingF:

    Thanks for your reply and your candid self-appraisal. It really helps to me put things in perspective, and gives me confidence that if I pay attention, I’ll get there — it’s all about following the sum total of specific, rational advice, going for the long haul (or at least defining your time horizon, and planning for that) and not getting stirred up in emotionally driven behaviour.

    Just a clarification, please — you made the point in an earlier post that you would like to move to the swap funds in the future in your taxable account. You have recently described investing in US ETFs that you specifically said were NOT USDollar-hedged. I wasn’t clear if this was in your RRSP or Taxable account. If it were the Non-taxable account, what ETF did you get? As has been mentioned recently in this blog, the HXS ETF is a swap fund — it is the only US one I am aware of, and despite the rather high MER of 0.45%, it seems to me it could be very useful for avoiding dividend income if you don’t want it now. But unfortunately, it is hedged against the US dollar. So what did you buy instead?

  21. SterlingF July 13, 2012 at 9:46 am #

    @Oldie: Swap funds in my taxable account aren’t part of my “keep it simple” approach for now, so I don’t currently have any like HXS, HXT etc.

    I have the same funds in my RRSP and taxable account. XIC, VTI (US$), VEA (US$), XBB. One thing to be clear on is “US ETF’s” and “US listed ETF’s” aren’t the same thing. VTI and VEA are both “US listed ETF’s” so that means they are in US$, listed and on the NYSE instead of being in Canadian$ and bought and sold on the TSX (hedged or non-hedged).

    My taxable account is further complicated by the fact that I took out an investment loan. If I were to switch to swap funds I wouldn’t be able to claim the loan interest on my taxes. You’re only allowed to claim on investments that can make interest or dividends (not just capital gains). So the dividends allow me to do that even though my taxable account isn’t a tax friendly as it could be.

    My plan is to leave everything as it is for a year (Jan 2013) and then re-evaluate. If the loan interest I’m claiming can be offset+ by the tax advantages of swap funds I’ll make the switch then. I may have to go with a hedged swap fund if that is all that is available. I’ll also probably switch VEA to VXUS to gain emerging markets exposure and add in real return bonds and reits if I can figure out a cost effective way to do it. If not, that is a plan for another year.

  22. Index Investor August 1, 2012 at 12:47 pm #

    Hi Justin/CCP,

    At the beginning of the comments section you mentioned that with RBC DI you could buy DLR with Canadian funds and then immediately sell DLR.U and deposit US funds into the US side of your RRSP. However, when I try to sell DLR.U I get an error message that states “We are unable to accept an electronic order for this symbol at this time”. When I phoned RBC DI, the guy I was dealing with had no experience dealing with either DLR and DLR.U and simply told me to resell my DLR holdings and settle it in USD.

    Am I doing something wrong or has RBC changed something in their system?

    Thanks for the info.

  23. Index Investor August 1, 2012 at 5:48 pm #

    Hi Justin/CCP,

    I think the problem may be that I am using the RBC practice account. I managed to speak with a RBC representative that tried a trade on his own system that was live and it worked. When he tried it on the practice account he wasn’t able to complete the transaction.

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